Administrative Law

Cases
Atty. Victoriano D. Alabastro

Jessiel R. Diamante

Admin. Law | 1

G.R. No. L-12859

November 18, 1959

CEBU
UNITED
ENTERPRISES, plaintiffappellee,
vs.
JOSE GALLOFIN, Collector of Customs, Cebu
Port, defendant-appellant.
Manuel
A.
Zoza
for
appellee.
First Assistant Solicitor General Guillermo E.
Torres and Solicitors Frine C. Zaballero and
Pedro Ocampo for appellant.
REYES, J.B.L., J.:
This suit for mandatory injunction was instituted in
the Court of First Instance of Cebu United
Enterprise to compel Jose Gallofin, as collector of
Customs, Cebu Port, to release and deliver to the
plaintiff two imported shipments of 7,834 bales of
over issue newspapers purchased by the latter from
the United States. As ancillary relief during the
pendency of the action, the plaintiff prayed for the
issuance of a writ of preliminary mandatory
injunction, which was granted by the court after the
plaintiff posted a bond in the amount of P60,000.00
in favor of the defendant. Thereafter, the goods
were released to the plaintiff, it appearing further
that the advance sales tax due on the same had
been duly paid upon arrival of the merchandise at
port.
The importation of the aforesaid shipments was
made under and by virtue of an Import Control
Commission License No. 1225, issued by the
defunct Import Control Commission. Under the
terms of the license, the plaintiff could import, on a
no-dollar remittance basis, over issue newspapers
up to the amount or value of $118,000.00.
The refusal of the defendant to deliver the
imported items is premised on his contention that
while the five bills of lading covering the two
shipments of the over issue newspapers were all
dated at Los Angeles, U.S.A. December 17, 1953,
or one day before the expiration of the import
license in question, the vessels M/S VENTURA

and M/S BATAAN, carrying on board the said

merchandise, actually left the ports of embarkation,
Los Angeles, and San Francisco, on January 12 and
January 16, 1954 respectively. Hence, according to
the defendant, the importation must be considered
as having been made without a valid import
license, because under the regulations issued by the
Central Bank and the Monetary Board, "all
shipments that left the port of origin after June 30,
1953, and are covered by ICC licenses, may be
released by the Bureau of Customs without the
need of a Central Bank release certificate; provided
they left the port of origin within the period of
validity of the licenses". No Central Bank
certificate for the release of the goods having been
shown or presented to the defendant, the latter
refused to make the delivery.
The lower court was thus conformed with the issue
of determining whether the valid period of the
license in question should be counted up to the
time when the vessels carrying the imported
items left the ports of origin on January 12 and
January 16, 1954, or when the corresponding bills
of lading were dated, or December 17, 1953. The
court chose the latter date, and held:
In view therefore, this Court pronounces judgment
making writ of preliminary mandatory injunction
issued against defendant permanent, with orders
for the cancellation of plaintiff's bond, this after
whatever advance sales tax or any taxes,
surcharges and so forth might be due on the goods
shall have been paid, without costs.
The defendant appealed to the Court of Appeals.
The question raised, however, being purely one of
law, the appeal was certified to us pursuant to a
resolution of said court dated July 19, 1957. The
appeal has no merit.
The authority of the appellee to import was
contained in the Import Control Commission
License No. 17225, validated on June 18, 1953,
and under Resolution 70 of the Commission
(adopted March 27, 1952), the same had a sixmonth period of validity counted from the said date
Admin. Law | 2

June 18, 1953. This license states, among other

conditions, that
Commodities covered by this license must be
shipped from the country of origin before the
expiry date of the license, and are subject to sec. 13
of Republic Act. No. 650.

plaintiff had any knowledge that the vessel M/S

VENTURA and M/S BATAAN were not to depart
soon after he placed his cargo on board and the
corresponding bills of lading issued to him. From
this latter time, the goods in contemplation of law,
are deemed already in transit (New Civil Code,
Arts. 1531 and 1736).

Although Republic Act No. 650, creating the

Import Control Commission, expired on July 31,
1953, it is to be conceded that its duly executed
acts can have valid effects even beyond the life
span of said governmental agency.

It should also be considered that it is entirely

outside the shipper's hands to fix the dates of
departure, route or arrival of a vessel (unless he
charters the whole ship [see Art. 656, Code of
Commerce]).

What is important to consider only is the legal

connotation of the word "shipped" as the term was
used in the license. Defendant maintains that it is
when the vessel leaves the port of embarkation,
while plaintiff holds that it is the dates of the bills
of lading, which are usually issued after the cargo
is placed on board the vessel. The date of the
shipment is the date when the goods for dispatch
are loaded on board the vessel, and not necessarily
when the ship puts to sea, is clearly implied from
our ruling in the case of U.S Tobacco Corporation
vs. Rufino Luna, et al., (87 Phil., 4), wherein we
said:

Defendant's reliance upon Central Bank regulations

that the shipment licensed must have "left the port
of origin within the period of validity of the
"license" is not maintainable in the present case,
because the regulations came onto effect only on
July 1, 1953 already after issuance of the appellee'
license and cannot be read into the same.

By section 6 of Act No. 426, all goods including

leaf tobacco have been placed under control.
Petitioner's merchandise left the port of departure
before the passage of that Act but arrived in Manila
after its approval. For the purpose of enforcing or
applying said section 6, there can only be one date
of importation. Which was the date? The date the
goods were ordered, the date they were put on
board vessel, or the date they reached the port of
destination? We are of the opinion that the date of
importation is the date of shipment and not the date
of Arrival in Manila. (Emphasis supplied)
The issuance of the bill of lading, furthermore,
presupposes or carries the presumption that the
goods were delivered to the carrier for immediate
shipment (13 C.J.S. sec. 123 (2), p. 235, and cases
cited therein). It does not appear here that the bill
of lading specified any designated day on which
the vessel were to lift anchor, nor was it shown that

The Solicitor General's contention that, assuming

the six months are counted up to the date the
imports goods were placed on board the vessels for
shipment the period of validity had likewise
already elapsed because, legally six months mean
180 days, which in this case expired on December
15, cannot now be entertained because the
defendant-appellant, under paragraph 3 of his
answer to the Complaint, expressly admitted that
the date appearing on the bills of lading (December
17, 1953) as the date of loading on board the
vessels "is one day before the expiration of the
validity of the import license". What he only
questioned in the court below is the legal
connotation of the word "shipped" under the
import license.
In the light of the resolution we have taken on the
main issue, it becomes unnecessary for us to dwell
further upon the other questions raised by the
parties.
Wherefore, the appeal should be dismissed and the
judgment of the lower court affirmed. So rendered.

Admin. Law | 3

G.R. No. 106296. July 5, 1996

ISABELO
T.
CRISOSTOMO, petitioner,
vs. THE COURT OF APPEALS and the
PEOPLE
OF
THE
PHILIPPINES, respondents.*
DECISION
MENDOZA, J.:
This is a petition to review the decision of the
Court of Appeals dated July 15, 1992, the
dispositive portion of which reads:
WHEREFORE, the present petition is partially
granted. The questioned Orders and writs directing
(1) reinstatement of respondent Isabelo T.
Crisostomo to the position of President of the
Polytechnic University of the Philippines, and (2)
payment of salaries and benefits which said
respondent failed to receive during his suspension
insofar as such payment includes those accruing
after the abolition of the PCC and its transfer to the
PUP, are hereby set aside. Accordingly, further
proceedings consistent with this decision may be
taken by the court a quo to determine the correct
amounts due and payable to said respondent by the
said university.

Charges of violations of R.A. No. 3019, 3 (e) and

R.A. No. 992, 20-21 and R.A. No. 733, 14 were
likewise filed against him with the Office of
Tanodbayan.
On June 14, 1976, three (3) informations for
violation of Sec. 3 (e) of the Anti-Graft and
Corrupt Practices Act (R.A. No. 3019, as amended)
were filed against him. The informations alleged
that he appropriated for himself a bahay kubo,
which was intended for the College, and
construction materials worth P250,000.00, more or
less. Petitioner was also accused of using a driver
of the College as his personal and family driver.[1]
On October 22, 1976, petitioner was preventively
suspended from office pursuant to R.A. No. 3019,
13, as amended. In his place Dr. Pablo T. Mateo, Jr.
was designated as officer-in-charge on November
10, 1976, and then as Acting President on May 13,
1977.

The background of this case is as follows:

On April 1, 1978, P.D. No. 1341 was issued by

then
President
Ferdinand
E.
Marcos,
CONVERTING THE PHILIPPINE COLLEGE OF
COMMERCE
INTO
A
POLYTECHNIC
UNIVERSITY, DEFINING ITS OBJECTIVES,
ORGANIZATIONAL
STRUCTURE
AND
FUNCTIONS,
AND
EXPANDING
ITS
CURRICULAR OFFERINGS.

Petitioner Isabelo Crisostomo was President of the

Philippine College of Commerce (PCC), having
been appointed to that position by the President of
the Philippines on July 17, 1974.

Mateo continued as the head of the new

University. On April 3, 1979, he was appointed
Acting President and on March 28, 1980, as
President for a term of six (6) years.

During his incumbency as president of the PCC,

two administrative cases were filed against
petitioner for illegal use of government vehicles,
misappropriation of construction materials
belonging to the college, oppression and
harassment, grave misconduct, nepotism and
dishonesty. The administrative cases, which were
filed with the Office of the President, were
subsequently referred to the Office of the Solicitor
General for investigation.

On July 11, 1980, the Circuit Criminal Court of

Manila rendered judgment acquitting petitioner of
the charges against him. The dispositive portion of
the decision reads:
WHEREFORE, the Court finds the accused,
Isabelo T. Crisostomo, not guilty of the violations
charged in all these three cases and hereby acquits
him therefrom, with costs de oficio. The bail bonds
filed by said accused for his provisional liberty are
hereby cancelled and released.

Admin. Law | 4

Pursuant to the provisions of Section 13, R.A. No.

3019, as amended, otherwise known as The AntiGraft and Corrupt Practices Act, and under which
the accused has been suspended by this Court in an
Order dated October 22, 1976, said accused is
hereby ordered reinstated to the position of
President of the Philippine College of Commerce,
now known as the Polytechnic University of the
Philippines, from which he has been suspended. By
virtue of said reinstatement, he is entitled to
receive the salaries and other benefits which he
failed to receive during suspension, unless in the
meantime administrative proceedings have been
filed against him.
The bail bonds filed by the accused for his
provisional liberty in these cases are hereby
cancelled and released.
SO ORDERED.
The cases filed before the Tanodbayan (now the
Ombudsman) were likewise dismissed on August
8, 1991 on the ground that they had become moot
and academic. On the other hand, the
administrative cases were dismissed for failure of
the complainants to prosecute them.
On February 12, 1992, petitioner filed with the
Regional Trial Court a motion for execution of the
judgment, particularly the part ordering his
reinstatement to the position of president of the
PUP and the payment of his salaries and other
benefits during the period of suspension.

order for the reinstatement of petitioner to the

position of PUP president. A writ of execution,
ordering the sheriff to implement the order of
reinstatement, was issued.
In his return dated April 28, 1992, the sheriff stated
that he had executed the writ by installing
petitioner as President of the PUP, although Dr.
Gellor did not vacate the office as he wanted to
consult with the President of the Philippines
first. This led to a contempt citation against Dr.
Gellor. A hearing was set on May 7, 1992. On May
5, 1992, petitioner also moved to cite Department
of Education, Culture and Sports Secretary Isidro
Cario in contempt of court. Petitioner assumed the
office of president of the PUP.
On May 18, 1992, therefore, the People of the
Philippines filed a petition for certiorari and
prohibition (CA G.R. No. 27931), assailing the two
orders and the writs of execution issued by the trial
court. It also asked for a temporary restraining
order.
On June 25, 1992, the Court of Appeals issued a
temporary restraining order, enjoining petitioner to
cease and desist from acting as president of the
PUP pursuant to the reinstatement orders of the
trial court, and enjoining further proceedings in
Criminal Cases Nos. VI-2329-2331.

The motion was granted and a partial writ of

execution was issued by the trial court on March 6,
1992. On March 26, 1992, however, President
Corazon C. Aquino appointed Dr. Jaime Gellor as
acting president of the PUP, following the
expiration of the term of office of Dr. Nemesio
Prudente, who had succeeded Dr. Mateo. Petitioner
was one of the five nominees considered by the
President of the Philippines for the position.

On July 15, 1992, the Seventh Division of the

Court of Appeals rendered a decision, [2] the
dispositive portion of which is set forth at the
beginning of this opinion. Said decision set aside
the orders and writ of reinstatement issued by the
trial court. The payment of salaries and benefits to
petitioner accruing after the conversion of the PCC
to the PUP was disallowed. Recovery of salaries
and benefits was limited to those accruing from the
time of petitioners suspension until the conversion
of the PCC to the PUP.The case was remanded to
the trial court for a determination of the amounts
due and payable to petitioner.

On April 24, 1992, the Regional Trial Court,

through respondent Judge Teresita Dy-Liaco
Flores, issued another order, reiterating her earlier

Hence this petition. Petitioner argues that P.D. No.

1341, which converted the PCC into the PUP, did
not abolish the PCC. He contends that if the law
Admin. Law | 5

had intended the PCC to lose its existence, it would

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

1. There is hereby created a Ministry of Public

Works and Highways, hereinafter referred to as the
Ministry. The existing Ministry of Public Works
established pursuant to Executive Order No. 546 as
amended, and the existing Ministry of Public
Highways established pursuant to Presidential
Decree No. 458 as amended, are abolished together
with their services, bureaus and similar agencies,
regional offices, and all other entities within their
supervision and control. . . .
R.A. No. 6975:
13. Creation and Composition. - A National Police
Commission, hereinafter referred to as the
Commission, is hereby created for the purpose of
effectively discharging the functions prescribed in
the Constitution and provided in this Act. The
Commission shall be a collegial body within the
Department. It shall be composed of a Chairman
and four (4) regular commissioners, one (1) of
whom shall be designated as Vice-Chairman by the
President. The Secretary of the Department shall
be the ex-officio Chairman of the Commission,
while the Vice-Chairman shall act as the executive
officer of the Commission.
xxx xxx xxx
90. Status of Present NAPOLCOM, PC-INP. Upon the effectivity of this Act, the present
National Police Commission, and the Philippine
Constabulary-Integrated National Police shall
cease to exist. The Philippine Constabulary, which
is the nucleus of the integrated Philippine
Constabulary-Integrated National Police, shall
cease to be a major service of the Armed Forces of
the Philippines. The Integrated National Police,
which is the civilian component of the Philippine
Constabulary-Integrated National Police, shall
cease to be the national police force and in lieu
thereof, a new police force shall be established and
constituted pursuant to this Act.
In contrast, P.D. No. 1341, provides:
1. The present Philippine College of Commerce is
hereby converted into a university to be known as
Admin. Law | 6

the Polytechnic University of the Philippines,

hereinafter referred to in this Decree as the
University.
As already noted, R.A. No. 778 earlier provided:
1. The present Philippine School of Commerce,
located in the City of Manila, Philippines, is hereby
granted full college status and converted into the
Philippine College of Commerce, which will offer
not only its present one-year and two-year
vocational commercial curricula, the latter leading
to the titles of Associate in Business Education
and/or Associate in Commerce, but also four-year
courses leading to the degrees of Bachelor of
Science in Business in Education and Bachelor of
Science in Commerce, and five-year courses
leading to the degrees of Master of Arts in
Business Education and Master of Arts in
Commerce, respectively.
The appellate court ruled, however, that the PUP
and the PCC are not one and the same institution
but two different entities and that since petitioner
Crisostomos term was coterminous with the legal
existence of the PCC, petitioners term expired
upon the abolition of the PCC. In reaching this
conclusion, the Court of Appeals took into account
the following:
a) After respondent Crisostomos suspension, P.D.
No. 1341 (entitled CONVERTING THE
PHILIPPINE COLLEGE OF COMMERCE INTO
A POLYTECHNIC UNIVERSITY, DEFINING
ITS
OBJECTIVES,
ORGANIZATIONAL
STRUCTURE
AND
FUNCTIONS,
AND
EXPANDING ITS CURRICULAR OFFERINGS)
was issued on April 1, 1978. This decree explicitly
provides that PUPs objectives and purposes cover
not only PCCs offering of programs in the field of
commerce and business administration but also
programs in other polytechnic areas and in other
fields such as agriculture, arts and trades and
fisheries . . . (section 2). Being a university, PUP
was conceived as a bigger institution absorbing,
merging and integrating the entire PCC and other
national schools as may be transferred to this new
state university.

b) The manner of selection and appointment of the

university head is substantially different from that
provided by the PCC Charter. The PUP President
shall be appointed by the President of the
Philippines upon recommendation of the Secretary
of Education and Culture after consultation with
the University Board of Regents (section 4, P.D.
1341). The President of PCC, on the other hand,
was appointed by the President of the
Philippines upon recommendation of the Board of
Trustees (Section 4, R.A. 778).
c) The composition of the new universitys Board of
Regents is likewise different from that of the PCC
Board of Trustees (which included the chairman of
the Senate Committee on Education and the
chairman of the House Committee on Education,
the President of the PCC Alumni Association as
well as the President of the Chamber of Commerce
of the Philippines). Whereas, among others, the
NEDA Director-General, the Secretary of Industry
and the Secretary of Labor are members of the
PUP Board of Regents. (Section 6, P.D. 1341).
d) The decree moreover transferred to the new
university all the properties including equipment
and facilities:
. . . owned by the Philippine College of
Commerce and such other National Schools as may
be
integrated
.
.
.
including
their obligations and appropriations . . . (Sec. 12;
Italics supplied).[3]
But these are hardly indicia of an intent to abolish
an existing institution and to create a new
one. New course offerings can be added to the
curriculum of a school without affecting its legal
existence. Nor will changes in its existing structure
and organization bring about its abolition and the
creation of a new one. Only an express declaration
to that effect by the lawmaking authority will.
The Court of Appeals also cites the provision of
P.D. No. 1341 as allegedly implying the abolition
of the PCC and the creation of a new one the PUP
in its stead:

Admin. Law | 7

12. All parcels of land, buildings, equipment and

facilities owned by the Philippine College of
Commerce and such other national schools as may
be integrated by virtue of this decree, including
their obligations and appropriations thereof, shall
stand transferred to the Polytechnic University of
the Philippines, provided, however, that said
national schools shall continue to receive their
corresponding shares from the special education
fund of the municipal/provincial/city government
concerned as are now enjoyed by them in
accordance with existing laws and/or decrees.

specifically provided for in this Decree shall be

those usually pertaining to the office of the
president of a university or college.

The law does not state that the lands, buildings and
equipment owned by the PCC were being
transferred to the PUP but only that they stand
transferred to it. Stand transferred simply means,
for example, that lands transferred to the PCC were
to be understood as transferred to the PUP as the
new name of the institution.

In this case, Dr. Pablo T. Mateo Jr., who had been

acting president of the university since April 3,
1979, was appointed president of PUP for a term of
six (6) years on March 28, 1980, with the result
that petitioners term was cut short. In accordance
with 7 of the law, therefore, petitioner became
entitled only to retirement benefits or the payment
of separation pay. Petitioner must have recognized
this fact, that is why in 1992 he asked then
President Aquino to consider him for appointment
to the same position after it had become vacant in
consequence of the retirement of Dr. Prudente.

But the reinstatement of petitioner to the position

of president of the PUP could not be ordered by the
trial court because on June 10, 1978, P.D. No. 1437
had been promulgated fixing the term of office of
presidents of state universities and colleges at six
(6) years, renewable for another term of six (6)
years, and authorizing the President of the
Philippines to terminate the terms of incumbents
who were not reappointed. P.D. No. 1437 provides:
6. The head of the university or college shall be
known as the President of the university or
college. He shall be qualified for the position and
appointed for a term of six (6) years by the
President of the Philippines upon recommendation
of the Secretary of Education and Culture after
consulting with the Board which may be renewed
for another term upon recommendation of the
Secretary of Education and Culture after consulting
the Board. In case of vacancy by reason of death,
absence or resignation, the Secretary of Education
and Culture shall have the authority to designate an
officer in charge of the college or university
pending the appointment of the President.

7. The incumbent president of a chartered state

college or university whose term may be
terminated according to this Decree, shall be
entitled to full retirement benefits: provided that he
has served the government for at least twenty (20)
years; and provided, further that in case the number
of years served is less than 20 years, he shall be
entitled to one month pay for every year of service.

WHEREFORE, the decision of the Court of

Appeals is MODIFIED by SETTING ASIDE the
questioned orders of the Regional Trial Court
directing the reinstatement of the petitioner Isabelo
T. Crisostomo to the position of president of the
Polytechnic University of the Philippines and the
payment to him of salaries and benefits which he
failed to receive during his suspension in so far as
such payment would include salaries accruing after
March 28, 1980 when petitioner Crisostomos term
was terminated. Further proceedings in accordance
with this decision may be taken by the trial court to
determine the amount due and payable to petitioner
by the university up to March 28, 1980.
SO ORDERED.

G.R. No. 112745. October 16, 1997

The powers and duties of the President of the

university or college, in addition to those
Admin. Law | 8

AQUILINO T. LARIN, petitioner, vs. THE

EXECUTIVE SECRETARY, SECRETARY OF
FINANCE, COMMISSIONER OF THE
BUREAU OF INTERNAL REVENUE AND
THE COMMITTEE CREATED TO
INVESTIGATE THE ADMINISTRATIVE
COMPLAINT AGAINST AQUILINO T.
LARIN, COMPOSED OF FRUMENCIO A.
LAGUSTAN, JOSE B. ALEJANDRINO and
JAIME M. MAZA, respondents.
DECISION
TORRES, JR., J.:
Challenge in this petition is the validity of
petitioners removal from service as Assistant
Commissioner of the Excise Tax Service of the
Bureau of Internal Revenue. Incidentally, he
questions Memorandum order no. 164 issued by
the Office of the President, which provides for the
creation of A Committee to Investigate the
Administrative Complaint Against Aquilino T.
Larin, Assistant Commissioner, Bureau of Internal
Revenue as well as the investigation made in
pursuance thereto and Administrative Order No.
101 dated December 2, 1993 which found him
guilty of grave misconduct in the administrative
charge and imposed upon him the penalty of
dismissal from office.
Likewise, petitioner seeks to assail the legality of
Executive Order No. 132, issued by President
Ramos on October 26, 1993, which provides for
the Streamlining of theBureau of Internal Revenue,
and of its implementing rules issued by the Bureau
of Internal Revenue, namely: a) Administrative
Order
No.
4-93,
which
provides
for
theOrganizational Structure and Statement of
General Functions of Offices in the National Office
and b) Administrative Order No. 5-93, which
provides for Redefining the Areas of Jurisdiction
and Renumbering of Regional And District
Offices.
The antecedent facts of the instant case as
succinctly related by the Solicitor General are as
follows:

On September 18, 1992, [1] a decision was rendered

by the Sandiganbayan convicting herein petitioner
Aquilino T. Larin, Revenue Specific Tax Officer,
then Assistant Commisioner of the Bureau of
Internal Revenue and his co-accused (except
Justino E. Galban, Jr.) of the crimes of violation of
Section 268 (4) of the National Internal Revenue
Code and Section 3 (e) of R.A. 3019 in Criminal
Cases Nos. 14208-14209, entitled People of the
Philippines, Plaintiff vs. Aquilino T. Larin, Teodoro
T. Pareno, Justino E. Galban, Jr. and Potenciana N.
Evangelista, Accused, the dispositive portion of the
judgment reads:
"WHEREFORE, judgment is now rendered in
Criminal Cases Nos. 14208 and 14209 convicting
accused Assistant Commissioner for Specific Tax
Aquilino T. Larin, Chief of the Alcohol tax
Division TEODORO P. PARENO, and Chief of the
Revenue accounting Division POTENCIANA M.
EVANGELISTA:
xxx
SO ORDERED.
The fact of petitioners conviction was reported to
the President of the Philippines by the then Acting
Finance Secretary Leong through a memorandum
dated June 4, 1993. The memorandum states, inter
alia:
This is a report in the case of Assistant
Commissioner AQUILINO T. LARIN of the
Excise tax Service, Bureau of Internal Revenue, a
presidential appointee, one of those convicted in
the Criminal Case Nos. 14208-14209, entitled
People of the Philippines vs. Aquilino T. Larin, et.
al. Referred to the Department of Finace by the
Commissioner of Internal Revenue.
The cases against Pareno and Evangelista are being
acted upon by the Bureau of Internal revenue as
they non-presidential appointees.
xxx
It is clear from the foregoing that Mr. Larin has
found beyond reasonable doubt to have committed
Admin. Law | 9

acts constituting grave misconduct. Under the Civil

Service Laws and Rules which require only
preponderance of evidence, grave misconduct is
punishable by dismissal.

Consequently,
the
Committee
directed
the petitioner to respond to the administrative
charge leveled against him through a letter dated
September 17, 1993, thus:

Acting by authority of the President, Sr. Deputy

Executive Secretary Leonardo A. Quisumbing
issued Memorandum Order No. 164 dated August
25, 1993 which provides for the creation of an
Executive Committee to investigate the
administrative charge against herein petitioner
Aquilino T. Larin. It states thus:

Presidential Memorandum Order No. 164 dated

August 25, 1993, a xerox copy of which is hereto
attached for your ready reference, created an
Investigation Committee to look into the charges
against you which are also the subject of the
Criminal Cases No. 14208 and 14209 entitled
People of the Philippines vs. Aquilino T. Larin, et.
al.

A Committee is hereby created to investigate the

administrative complaint filed against Aquilino T.
Larin, Assistant Commissioner, Bureau of Internal
Revenue, to be composed of:
Atty. Frumencio A. Lagustan Chairman
Assistant Executive Secretary for Legislation
Mr. Jose B. Alejandro Member
Presidential Assistant
Atty. Jaime M. Maza Member
Assistant commissioner of Inspector services
Bureau of Internal Revenue
The Committee shall have the powers and
prerogatives of (an) investigating committee under
the administrative Code of 1987 including the
power to summon witnesses, administer oath or
take testimony or evidence relevant to the
investigation by subpoena ad testificandum and
subpoena duces tecum:
xxx
The Committee shall convene immediately,
conduct the investigation in the most expeditious
manner, and terminate the same as soon as
practicable from its first scheduled date of hearing.
xxx

The committee has its possession a certified true

copy of the Decision of the Sandiganbayan in the
above-mentioned cases.
Pursuant to Presidential Memorandum Order No.
164, you are hereby directed to file your position
paper on the aforementioned charges within seven
(7) days from receipt hereof xxx.
Failure to file the required position paper shall be
considered as a waiver on your part to submit such
paper or to be heard, in which case, the Committee
shall deem the case submitted on the basis of the
documents and records at hand.
In compliance, petitioner submitted a letter dated
September 30, 1993 which was addressed to Atty.
Frumencio A. Lagustan , the Chairman of the
Investigating Committee.In said latter, he asserts
that,
The case being sub-judice, I may not , therefore,
comment on the merits of issues involved for fear
of being cited in contempt of Court. This position
paper is thus limited to furnishing the Committee
pertinent documents submitted with the Supreme
Court and other tribunal which took cognizance of
the case in the past, as follows:
xxx
The foregoing documents readily show that I am
not administratively liable or criminally culpable of
the charges leveled against me, and that the
aforesaid cases are mere prosecutions caused to be
Admin. Law | 10

filed and are being orchestrated by taxpayers who

were prejudiced by multi-million peso assessments
I caused to be issued against them in my official
capacity as Assistant Commissioner, Excise Tax
office of Bureau of Internal Revenue.
In the same letter, petitioner claims that the
administrative complaint against him is already
barred: a) on jurisdictional ground as the Office of
the Ombudsman had already taken cognizance of
the case and had caused the filing only of the
criminal charges against him, b) by res judicata, c)
double jeopardy, and d) because to proceed with
the case would be redundant, oppressive and a
plain persecution against him.
Meanwhile, the President issued the challenged
Executive order No. 132 dated October 26, 1993
which mandates for the streamlining of the Bureau
of Internal Revenue. Under said order, some
positions and functions are either abolished,
renamed, decentralized or transferred to other
offices, while other offices are also created. The
Excise Tax Service or the Specific Tax Service, of
which petitioner was the Assistant Commissioner,
was one of those offices that was abolished by said
executive order.
The corresponding implementing rules of
Executive Order No. 132, namely, revenue
Administrative Orders Nos. 4-93 and 5-93, were
subsequently issued .by the Bureau of Internal
Revenue.
On October 27, 1993, or one day after the
promulgation of Executive Order No.132, the
President appointed the following as BIR Assistant
Commissioners:
1. Bernardo A. Frianeza
2. Dominador L. Galura
3. Jaime D. Gonzales
4. Lilia C. Guillermo
5. Rizalina S. Magalona

6. Victorino C. Mamalateo
7. Jaime M. Masa
8. Antonio N. Pangilinan
9. Melchor S. Ramos
10. Joel L. Tan-Torres
Consequently, the president, in the assailed
Administrative Order No. 101 dated December 2,
1993, found petitioner guilty of grave misconduct
in the administrative charge and imposed upon him
the penalty of dismissal with forfeiture of his leave
credits and retirement benefits including
disqualification for reappointment in the
government service.
Aggrieved, petitioner filed directly with this Court
the instant petition on December 13, 1993 to
question basically his alleged unlawful removal
from office.
On April 17, 1996 and while the instant petition is
pending, this Court set aside the conviction of the
petitioner in Criminal Case Nos. 14208 and 14209.
In his petition, petitioner challenged the authority
of the President to dismiss him from office. He
argued that in so far as presidential appointees who
are Career Executive Service Officers are
concerned, the President exercises only the power
of control not the power to remove. He also
averred that the administrative investigation
conducted under Memorandum Order No. 164 is
void as it violated his right to due process.
According to him, the letter of the Committee
dated September 17, 1993 and his position paper
dated September 30, 1993 are not sufficient for
purposes of complying with the requirements of
due process. He alleged that he was not informed
of the administrative charges leveled against him
nor was he given official notice of his dismissal.
Petitioner likewise claimed that he was removed as
a result of the reorganization made by the
Executive Department in the BIR pursuant to
Executive Order No. 132. Thus, he assailed said
Admin. Law | 11

Executive Order No. 132 and its implementing

rules, namely, Revenue Administrative Orders 4-93
and 5-93 for being ultra vires. He claimed that
there is yet no law enacted by Congress which
authorizes the reorganization by the Executive
Department of executive agencies, particularly the
Bureau of Internal revenue. He said that the
reorganization sought to be effected by the
Executive Department on the basis of E.O. No. 132
is tainted with bad faith in apparent violation of
Section 2 of R.A. 6656, otherwise known as the
Act Protecting the Security of Tenure of Civil
Service Officers and Employees in the
Implementation of Government Reorganization.
On the other hand, respondents contended that
since petitioner is the presidential appointee, he
falls under the disciplining authority of the
President. They also contended that E.O. No. 132
and its implementing rules were validly issued
pursuant to Sections 48 and 62 of Republic Act No.
7645. Apart from this, the other legal bases of E.O.
No. 132 as stated in its preamble are Section 63 of
E.O No.127 (Reorganizing the Ministry of
Finance), and Section 20, Book III of E.O. No.
292, otherwise known as the Administrative Code
of 1987. In addition, it is clear that in Section 11 of
R.A No.6656 future reorganization is expressly
contemplated and nothing in said law that prohibits
subsequent reorganization through an executive
order. Significantly, respondents clarified that
petitioner was not dismissed by virtue of EO 132.
Respondents claimed that he was removed from
office because he was found guilty of grave
misconduct in the administrative cases filed against
him.
The ultimate issue to be resolved in the instant case
falls on the determination of the validity of
petitioners dismissal from office. Incidentally, in
order to resolve this matter, it is imperative that We
consider these questions : a) Who has the power to
discipline the petitioner?, b) Were the proceedings
taken pursuant to Memorandum Order No. 164 in
accord with due process?, c) What is the effect of
petitioners acquittal in the criminal case to his
administrative charge? d) Does the President have

the power to reorganize the BIR or to issue the

questioned E.O. NO. 132?, e) Is the reorganization
of BIR pursuant to E.O. No. 132 tainted with bad
faith?
At the outset, it is worthy to note that the position
of the Assistant Commissioner of the BIR is part of
the Career Executive Service.[2] Under the law,
[3]
Career Executive Service officers, namely
Undersecretary, Assistant Secretary, Bureau
director, Assistant Bureau Director, Regional
Director, Assistant Regional Director, Chief of
Department Service and other officers of
equivalent rank as may be identified by the Career
Executive Service Board, are all appointed by the
President. Concededly, petitioner was appointed as
Assistant Commissioner in January, 1987 by then
President Aquino. Thus, petitioner is a presidential
appointee who belongs to career service of the
Civil Service. Being a presidential appointee, he
comes under the direct diciplining authority of the
President. This is in line with the well settled
principle that the power to remove is inherent in
the power to appoint conferred to the President by
Section 16, Article VII of the Constitution. Thus, it
is ineluctably clear that Memorandum Order No.
164, which created a committee to investigate the
administrative charge against petitioner, was issued
pursuant to the power of removal of the President.
This power of removal, however, is not an absolute
one which accepts no reservation. It must be
pointed out that petitioner is a career service
officer. Under the Administrative Code of 1987,
career service is characterized by the existence of
security of tenure, as contra-distinguished from
non-career service whose tenure is co-terminus
with that of the appointing or subject to his
pleasure, or limited to a period specified by law or
to the duration of a particular project for which
purpose the employment was made. As a career
service officer, petitioner enjoys the right to
security of tenure. No less than the 1987
Constitution guarantees the right of security of
tenure of the employees of the civil service.
Specifically, Section 36 of P.D. No. 807, as
amended, otherwise known as Civil Service Decree
of the Philippines, is emphatic that career service
Admin. Law | 12

officers and employees who enjoy security of

tenure may be removed only for any of the causes
enumerated in said law. In other words, the fact
that the petitioner is a presidential appointee does
not give the appointing authority the license to
remove him at will or at his pleasure for it is an
admitted fact that he is likewise a career service
officer who under the law is the recipient of
tenurial protection, thus, may only be removed for
a cause and in accordance with procedural due
process.
Was petitioner then removed from office for a legal
cause under a valid proceeding?
Although the proceedings taken complied with the
requirements of procedural due process, this Court,
however, considers that petitioner was not
dismissed for a valid cause.
It should be noted that what precipitated the
creation of the investigative committee to look into
the administrative charge against petitioner is his
conviction by the Sandiganbayan in criminal Case
Nos. 14208 and 14209. As admitted by the
respondents, the administrative case against
petitioner is based on the Sandiganbayan Decision
of September 18, 1992. Thus, in the Administrative
Order No. 101 issued by Senior Deputy Executive
Secretary Quisumbing which found petitioner
guilty of grave misconduct, it clearly states that:
"This pertains to the administrative charge against
Assistant Commissioner Aquilino T. Larin of the
Bureau of Internal Revenue, for grave misconduct
by virtue of a Memorandum signed by Acting
Secretary Leong of the Department of Finance, on
the basis of decision handed down by the Hon.
Sandiganbayan convicting Larin, et. al. in Criminal
Cases No. 14208 and 14209."[4]
In a nutshell, the criminal cases against petitioner
refer to his alleged violation of Section 268 (4) of
the National Internal Revenue Code and of section
3(e) of R.A. No.3019 as a consequence of his act
of favorably recommending the grant of tax credit
to Tanduay Distillery, Inc.. The pertinent portion of
the judgment of the Sandiganbayan reads:

"As above pointed out, the accused had conspired

in knowingly preparing false memoranda and
certification in order to effect a fraud upon taxes
due to the government. By their separate acts
which had resulted in an appropriate tax credit
of P180,701,682.00 in favor of Tanduay. The
government had been defrauded of a tax revenue for the full amount, if one is to look at the
availments or utilization thereof (Exhibits 'AA' to
'AA-31-a'), or for a substantial portion thereof
(P73,000,000.00) if we are to rely on the letter of
Deputy Commissioner Eufracio D. Santos
(Exhibits '21' for all the accused).
As pointed out above, the confluence of acts and
omissions committed by accused Larin, Pareno and
Evangelista adequately prove conspiracy among
them for no other purpose than to bring about a tax
credit which Tanduay did not deserve. These
misrepresentations as to how much Tanduay had
paid in ad valorem taxes obviously constituted a
fraud of tax revenue of the government xxx.' [5]
However, it must be stressed at this juncture that
the conviction of petitioner by the Sandiganbayan
was set aside by this court in our decision
promulgated on April 17, 1996 in G.R. Nos.
108037-38 and 107119-20. We specifically ruled in
no uncertain terms that : a) petitioner cannot be
held negligent in relying on the certification of a
co-equal unit in the BIR, b) it is not incumbent
upon Larin to go beyond the certification made by
the Revenue Accounting Division that Tanduay
Distillery, Inc. had paid the ad valorem taxes, c)
there is nothing irregular or anything false in
Larin's marginal note on the memorandum
addressed to Pareno, the Chief of Alcohol Tax
Division who was also one of the accused, but
eventually acquitted, in the said criminal cases, and
d) there is no proof of actual agreement between
the accused, including petitioner, to commit the
illegal acts charged. We are emphatic in our
resolution in said cases that there is nothing "illegal
with the acts committed by the petitioner(s)." We
also declare that "there is no showing that
petitioner(s) had acted irregularly, or performed
acts outside of his (their) official functions."
Admin. Law | 13

Significantly, these acts which We categorically

declare to be not unlawful and improper in G.R.
Nos. 108037-38 and G.R. Nos. 107119-20 are the
very same acts for which petitioner is held to be
administratively responsible. Any charge of
malfeasance or misfeasance on the part of the
petitioner is clearly belied by our conclusion in
said cases. In the light of this decisive
pronouncement, We see no reason for the
administrative charge to continue - it must, thus, be
dismissed.
We are not unaware of the rule that since
administrative cases are independent from criminal
actions for the same act or omission, the dismissal
or acquittal of the criminal charge does not
foreclose the institution of administrative action
nor carry with it the relief from administrative
liability.[6] However, the circumstantial setting of
the instant case sets it miles apart from the
foregoing rule and placed it well within the
exception. Corollarily, where the very basis of the
administrative case against petitioner is his
conviction in the criminal action which was later
on set aside by this court upon a categorical and
clear findings that the acts for which he was
administratively held liable are not unlawful and
irregular, the acquittal of the petitioner in the
criminal case necessarily entails the dismissal of
the administrative action against him, because in
such a case, there is no basis nor justifiable reason
to maintain the administrative suit.
On the aspect of procedural due process, suffice it
to say that petitioner was given every chance to
present his side. The rule is well settled that the
essence of due process in administrative
proceedings is that a party be afforded a reasonable
opportunity to be heard and to submit any evidence
he may have in support of his defense. [7] The
records clearly show that on October 1, 1993
petitioner submitted his letter-response dated
September 30, 1993 to the administrative charged
filed against him. Aside from his letter, he also
submitted various documents attached as annexes
to his letter, all of which are evidences supporting
his defense. Prior to this, he received a letter dated

September 17, 1993 from the Investigation

Committee requiring him to explain his side
concerning the charge. It cannot therefore be
argued that petitioner was denied of due process.
Let us now examine Executive Order No. 132.
As stated earlier, with the issuance of Executive
Order No. 132, some of the positions and offices,
including the office of Excise Tax Services of
which petitioner was the Assistant Commissioner,
were abolished or otherwise decentralized.
Consequently, the President released the list of
appointed Assistant Commissioners of the BIR.
Apparently, petitioner was not included.
Initially, it is argued that there is no law yet which
empowers the President to issue E.O. No. 132 or to
reorganize the BIR.
We do not agree.
Under its Preamble, E.O. No. 132 lays down the
legal basis of its issuance, namely: a) Section 48
and 62 of R.A. No. 7645, b) Section 63 of E.O. No.
127, and c) Section 20, Book III of E.O. No. 292.
Section 48 of R.A. 7645 provides that:
"Sec. 48. Scaling Down and Phase Out of
Activities of Agencies Within the Executive
Branch. -- The heads of departments, bureaus and
offices and agencies are hereby directed to identify
their respective activities which are no longer
essential in the delivery of public services and
which may be scaled down, phased out or
abolished, subject to civil rules and regulations.
xxx. Actual scaling down, phasing out or
abolition of the activities shall be effective
pursuant to Circulars or Orders issued for the
purpose by the Office of the President." (italics
ours)
Said provision clearly mentions the acts of "scaling
down, phasing out and abolition" of offices only
and does not cover the creation of offices or
transfer of functions. Nevertheless, the act of
creating and decentralizing is included in the
Admin. Law | 14

subsequent provision of Section 62, which

provides that:
"Sec. 62, Unauthorized Organizational Charges. -Unless otherwise created by law or directed by the
President of the Philippines, no organizational unit
or changes in key positions in any department or
agency shall be authorized in their respective
organization structures and be funded from
appropriations by this Act." (italics ours)
The foregoing provision evidently shows that the
President is authorized to effect organizational
changes including the creation of offices in the
department or agency concerned.

clearly provides that "all laws, decrees, executive

orders, proclamations, letters of instructions and
other executive issuances not inconsistent with this
Constitution shall remain operative until amended,
repealed or revoked."[10] So far, there is yet no law
amending or repealing said decrees. Significantly,
the Constitution itself recognizes future
reorganizations in the government as what is
revealed in Section 16 of Article XVIII, thus:
"Sec. 16. Career civil service employees separated
from service not for cause but as a result of the xxx
reorganization following the ratification of this
Constitution shall be entitled to appropriate
separation pay xxx."

The contention of petitioner that the two provisions

are riders deserves scant consideration. Well settled
is the rule that every law has in its favor the
presumption of constitutionality.[8] Unless and until
a specific provision of the law is declared invalid
and unconstitutional, the same is valid and binding
for all intents and purposes.

However, We can not consider E.O. No. 127 signed

on January 30, 1987 as a legal basis for the
reorganization of the BIR. E.O. No. 127 should be
related to the second paragraph of Section 11 of
Republic Act No. 6656.

Another legal basis of E.O. No. 132 is Section 20,

Book III of E.O. No. 292 which states:

"xxx

"Sec.20. Residual Powers. -- Unless Congress

provides
otherwise,
the
President
shall
exercise such other powers and functions vested
in the President which are provided for under the
laws and which are not specifically enumerated
above or which are not delegated by the President
in accordance with law." (italics ours)
This provision speaks of such other powers vested
in the President under the law. What law then
which gives him the power to reorganize? It is
Presidential Decree No. 1772[9] which amended
Presidential Decree No. 1416. These decrees
expressly grant the President of the Philippines the
continuing authority to reorganize the national
government, which includes the power to group,
consolidate bureaus and agencies, to abolish
offices, to transfer functions, to create and classify
functions, services and activities and to standardize
salaries and materials. The validity of these two
decrees are unquestionable. The 1987 Constitution

Section 11 provides inter alia:

In the case of the 1987 reorganization of the

executive branch, all departments and agencies
which are authorized by executive orders
promulgated by the President to reorganize shall
have ninety days from the approval of this act
within which to implement their respective
reorganization plans in accordance with the
provisions of this Act." (italics ours)
Executive Order No. 127 was part of the 1987
reorganization contemplated under said provision.
Obviously, it had become stale by virtue of the
expiration of the ninety day deadline period. It can
not thus be used as a proper basis for the
reorganization of the BIR. Nevertheless, as shown
earlier, there are other legal bases to sustain the
authority of the President to issue the questioned
E.O. No. 132.
While the President's power to reorganize can not
be denied, this does not mean however that the
reorganization itself is properly made in
Admin. Law | 15

accordance with law. Well-settled is the rule that

reorganization is regarded as valid provided it is
pursued in good faith. Thus, in Dario vs. Mison,
this court has had the occasion to clarify that:
"As a general rule, a reorganization is carried out
in good faith if it is for the purpose of economy or
to make bureaucracy more efficient. In that event
no dismissal or separation actually occurs because
the position itself ceases to exist. And in that case
the security of tenure would not be a Chinese Wall.
Be that as it may, if the abolition which is nothing
else but a separation or removal, is done for
political reasons or purposely to defeat security of
tenure, or otherwise not in good faith, no valid
abolition takes place and whatever abolition is
done is void ab initio. There is an invalid abolition
as where there is merely a change of nomenclature
of positions or where claims of economy are belied
by the existence of ample funds."[11]
In this regard, it is worth mentioning that Section 2
of R.A. No. 6656 lists down the circumstances
evidencing bad faith in the removal of employees
as a result of the reorganization, thus:
Sec. 2. No officer or employee in the career service
shall be removed except for a valid cause and after
due notice and hearing. A valid cause for removal
exist when, pursuant to a bona fide reorganization,
a position has been abolished or rendered
redundant or there is a need to merge, divide, or
consolidate positions in order to meet the
exigencies of the service, or other lawful causes
allowed by the Civil Service Law. The existence of
any or some of the following circumstances may
be considered as evidence of bad faith in the
removals made as a result of the reorganization,
giving rise to a claim for reinstatement or
reappointment by an aggrieved party:
a) Where there is a significant increase in the
number of positions in the new staffing pattern of
the department or agency concerned;
b) Where an office is abolished and another
performing substantially the same functions is
created;

c) Where incumbents are replaced by those less

qualified in terms of status of appointment,
performance and merit;
d) Where there is a reclassification of offices in the
department or agency concerned and the
reclassified offices perform substantially the same
functions as the original offices;
e) Where the removal violates the order of
separation provided in Section 3 hereof."
A reading of some of the provisions of the
questioned E.O. No. 132 clearly leads us to an
inescapable conclusion that there are circumstances
considered as evidences of bad faith in the
reorganization of the BIR.
Section 1.1.2 of said executive order provides that:
"1.1.2 The Intelligence and Investigation Office
and the Inspection Service are abolished. An
Intelligence and Investigation Service is hereby
created to absorb the same functions of the
abolished office and service. xxx" (italics ours)
This provision is a clear illustration of the
circumstance mentioned in Section 2 (b) of R.A.
No. 6656 that an office is abolished and another
one performing substantially the same function is
created.
Another circumstance is the creation of services
and divisions in the BIR resulting to a significant
increase in the number of positions in the said
bureau as contemplated in paragraph (a) of section
2 of R.A. No. 6656. Under Section 1.3 of E.O. No.
132, the Information Systems Group has two
newly created Systems Services. Aside from this,
six new divisions are also created. Under Section
1.2.1, three more divisions of the Assessment
Service are formed. With this newly created
offices, there is no doubt that a significant increase
of positions will correspondingly follow.
Furthermore, it is perceivable that the nonreappointment of the petitioner as Assistant
Commissioner violates Section 4 of R.A. No. 6656.
Under said provision, officers holding permanent
Admin. Law | 16

appointments are given preference for appointment

to the new positions in the approved staffing
pattern comparable to their former position or in
case there are not enough comparable positions to
positions next lower in rank. It is undeniable that
petitioner is a career executive officer who is
holding a permanent position. Hence, he should
have given preference for appointment in the
position of Assistant Commissioner. As claimed by
petitioner, Antonio Pangilinan who was one of
those appointed as Assistant Commissioner, "is an
outsider of sorts to the bureau, not having been an
incumbent officer of the bureau at the time of the
reorganization." We should not lose sight of the
second paragraph of Section 4 of R.A. No. 6656
which explicitly states that no new employees shall
be taken in until all permanent officers shall have
been appointed for permanent position.
IN VIEW OF THE FOREGOING, the petition is
granted, and petitioner is hereby reinstated to his
position as Assistant Commissioner without loss of
seniority rights and shall be entitled to full
backwages from the time of his separation from
service until actual reinstatement unless, in the
meanwhile, he would have reached the compulsory
retirement age of sixty-five years in which case, he
shall be deemed to have retired at such age and
entitled thereafter to the corresponding retirement
benefits.
SO ORDERED.
G.R. No. 81954

August 8, 1989

CESAR
Z.
DARIO, petitioner,
vs.
HON. SALVADOR M. MISON, HON.
VICENTE JAYME and HON. CATALINO
MACARAIG, JR., in their respective capacities
as Commissioner of Customs, Secretary of
Finance, and Executive Secretary,respondents.
G.R. No. 81967

August 8, 1989

VICENTE
A.
FERIA
JR., petitioner,
vs.
HON. SALVADOR M. MISON, HON.

VICENTE JAYME, and HON. CATALINO

MACARAIG, JR., in their respective capacities
as Commissioner of Customs, Secretary of
Finance, and Executive Secretary,respondents.
G.R. No. 82023

August 8, 1989

ADOLFO
CASARENO,
PACIFICO
LAGLEVA, JULIAN C. ESPIRITU, DENNIS
A. AZARRAGA, RENATO DE JESUS,
NICASIO C. GAMBOA, CORAZON RALLOS
NIEVES,
FELICITACION
R.
GELUZ,
LEODEGARIO H. FLORESCA, SUBAER
PACASUM, ZENAIDA LANARIA, JOSE B.
ORTIZ, GLICERIO R. DOLAR, CORNELIO
NAPA, PABLO B. SANTOS, FERMIN
RODRIGUEZ,
DALISAY
BAUTISTA,
LEONARDO JOSE, ALBERTO LONTOK,
PORFIRIO TABINO, JOSE BARREDO,
ROBERTO ARNALDO, ESTER TAN, PEDRO
BAKAL, ROSARIO DAVID, RODOLFO
AFUANG, LORENZO CATRE, LEONCIA
CATRE, ROBERTO ABADA, petitioners,
vs.
COMMISSIONER SALVADOR M. MISON,
COMMISSIONER,
BUREAU
OF
CUSTOMS, respondent.
G.R. No. 83737

August 8, 1989

BENEDICTO L. AMASA and WILLIAM S.

DIONISIO, petitioners,
vs.
PATRICIA A. STO. TOMAS, in her capacity as
Chairman of the Civil Service Commission and
SALVADOR MISON, in his capacity as
Commissioner
of
the
Bureau
of
Customs, respondents.
G.R. No. 85310

August 8, 1989

SALVADOR M. MISON, in his capacity as

Commissioner
of
Customs, petitioner,
vs.
CIVIL SERVICE COMMISSION, ABACA,
SISINIO
T.,
ABAD,
ROGELIO
C.,
ABADIANO, JOSE P., ABCEDE, NEMECIO
C., ABIOG, ELY F., ABLAZA, AURORA M.,
Admin. Law | 17

AGBAYANI, NELSON I., AGRES ANICETO,

AGUILAR,
FLOR, AGUILUCHO
MA.
TERESA R., AGUSTIN, BONIFACIO T.,
ALANO, ALEX P., ALBA, MAXIMO F. JR.,
ALBANO, ROBERT B., ALCANTARA, JOSE
G., ALMARIO, RODOLFO F., ALVEZ,
ROMUALDO R., AMISTAD RUDY M., AMOS,
FRANCIS F., ANDRES, RODRIGO V.,
ANGELES,
RICARDO
S.,
ANOLIN,
MILAGROS H., AQUINO, PASCASIO E.,
ARABE,
MELINDA
M.,
ARCANGEL,
AGUSTIN S., JR., ARPON, ULPLIANO U.,
JR., ARREZA, ARTEMIO M., JR., ARROJO,
ANTONIO P., ARVISU, ALEXANDER S.,
ASCA;O,
ANTONIO
T.,
ASLAHON,
JULAHON P., ASUNCION, VICTOR R.,
ATANGAN,
LORNA
S.,
ATIENZA,
ALEXANDER R., BACAL, URSULINO C.,
BA;AGA,
MARLOWE,
Z.,
BANTA,
ALBERTO T., BARREDO, JOSE B., BARROS,
VICTOR C., BARTOLOME, FELIPE A.,
BAYSAC,
REYNALDO
S.,
BELENO,
ANTONIO B., BERNARDO, ROMEO D.,
BERNAS,
MARCIANO
S.,
BOHOL,
AUXILIADOR G., BRAVO, VICTOR M.,
BULEG, BALILIS R., CALNEA, MERCEDES
M., CALVO, HONESTO G., CAMACHO,
CARLOS V., CAMPOS, RODOLFO C.,
CAPULONG, RODRIGO G., CARINGAL,
GRACIA Z., CARLOS, LORENZO B.,
CARRANTO, FIDEL U., CARUNGCONG,
ALFREDO M., CASTRO, PATRICIA J.,
CATELO,
ROGELIO
B.,
CATURLA,
MANUEL B., CENIZAL, JOSEFINA F.,
CINCO, LUISITO, CONDE0, JOSE C., JR.,
CORCUERA,
FIDEL
S.,
CORNETA,
VICENTE S., CORONADO, RICARDO S.,
CRUZ, EDUARDO S., CRUZ, EDILBERTO A.,
CRUZ, EFIGENIA B., CRUZADO, MARCIAL
C., CUSTODIO, RODOLFO M., DABON,
NORMA M., DALINDIN, EDNA MAE D.,
DANDAL, EDEN F., DATUHARON, SATA A.,
DAZO, GODOFREDO L., DE CASTRO,
LEOPAPA, DE GUZMAN, ANTONIO A., DE
GUZMAN, RENATO E., DE LA CRUZ,
AMADO A., JR., DE LA CRUZ, FRANCISCO
C., DE LA PE;A, LEONARDO, DEL

CAMPO, ORLANDO, DEL RIO, MAMERTO

P., JR., DEMESA, WILHELMINA T.,
DIMAKUTA, SALIC L., DIZON, FELICITAS
A.,
DOCTOR,
HEIDY
M.,
DOLAR,
GLICERIO R., DOMINGO, NICANOR J.,
DOMINGO, PERFECTO V., JR., DUAY,
JUANA G., DYSANGCO, RENATO F.,
EDILLOR,
ALFREDO
P.,
ELEVAZO,
LEONARDO A., ESCUYOS, MANUEL M.,
JR., ESMERIA, ANTONIO E., ESPALDON,
MA. LOURDES H., ESPINA, FRANCO A.,
ESTURCO, RODOLFO C., EVANGELINO,
FERMIN
I.,
FELIX,
ERNESTO
G.,
FERNANDEZ, ANDREW M., FERRAREN,
ANTONIO C., FERRERA, WENCESLAO A.,
FRANCISCO, PELAGIO S., JR., FUENTES,
RUDY L., GAGALANG, RENATO V.,
GALANG,
EDGARDO
R.,
GAMBOA,
ANTONIO C., GAN, ALBERTO R., GARCIA,
GILBERT M., GARCIA, EDNA V., GARCIA,
JUAN L., GAVIOLA, LILIAN V., GEMPARO,
SEGUNDINA
G.,
GOBENCIONG,
FLORDELIZ B., GRATE, FREDERICK R.,
GREGORIO, LAURO P., GUARTICO,
AMMON H., GUIANG, MYRNA N., GUINTO,
DELFIN C., HERNANDEZ, LUCAS A.,
HONRALES,
LORETO
N.,
HUERTO,
LEOPOLDO H., HULAR , LANNYROSS E.,
IBA;EZ, ESTER C., ILAGAN, HONORATO
C., INFANTE, REYNALDO C., ISAIS, RAY C.,
ISMAEL, HADJI AKRAM B., JANOLO,
VIRGILIO M., JAVIER, AMADOR L.,
JAVIER, ROBERTO S., JAVIER, WILLIAM
R., JOVEN, MEMIA A., JULIAN, REYNALDO
V., JUMAMOY, ABUNDIO A., JUMAQUIAO,
DOMINGO F., KAINDOY, PASCUAL B., JR.,
KOH, NANIE G., LABILLES, ERNESTO S.,
LABRADOR,
WILFREDO
M.,
LAGA,
BIENVENIDO M., LAGLEVA, PACIFICO Z.,
LAGMAN, EVANGELINE G., LAMPONG,
WILFREDO G., LANDICHO, RESTITUTO A.,
LAPITAN,
CAMILO M.,
LAURENTE,
REYNALDO A., LICARTE, EVARISTO R.,
LIPIO, VICTOR O., LITTAUA, FRANKLIN
Z., LOPEZ, MELENCIO L., LUMBA,
OLIVIA., MACAISA, BENITO T., MACAISA,
ERLINDA C., MAGAT, ELPIDIO, MAGLAYA,
Admin. Law | 18

FERNANDO P., MALABANAN, ALFREDO C.,

MALIBIRAN,
ROSITA D.,
MALIJAN,
LAZARO
V.,
MALLI,
JAVIER
M.,
MANAHAN, RAMON S., MANUEL, ELPIDIO
R., MARAVILLA, GIL B., MARCELO, GIL C.,
MARI;AS, RODOLFO V., MAROKET,
JESUS C., MARTIN, NEMENCIO A.,
MARTINEZ, ROMEO M., MARTINEZ,
ROSELINA M., MATIBAG, ANGELINA G.,
MATUGAS, ERNESTO T., MATUGAS,
FRANCISCO T., MAYUGA, PORTIA E.,
MEDINA, NESTOR M., MEDINA, ROLANDO
S., MENDAVIA, AVELINO I., MENDOZA,
POTENCIANO
G.,
MIL,
RAY
M.,
MIRAVALLES, ANASTACIA L., MONFORTE,
EUGENIO, JR., G., MONTANO, ERNESTO F.,
MONTERO, JUAN M. III., MORALDE,
ESMERALDO
B.,
JR.,
MORALES,
CONCHITA D.L., MORALES, NESTOR P.,
MORALES, SHIRLEY S., MUNAR, JUANITA
L., MU;OZ, VICENTE R., MURILLO,
MANUEL M., NACION, PEDRO R., NAGAL,
HENRY
N.,
NAPA,
CORNELIO
B.,
NAVARRO, HENRY L., NEJAL, FREDRICK
E., NICOLAS, REYNALDO S., NIEVES,
RUFINO A., OLAIVAR, SEBASTIAN T.,
OLEGARIO, LEO Q., ORTEGA, ARLENE R.,
ORTEGA, JESUS R., OSORIO, ABNER S.,
PAPIO, FLORENTINO T. II, PASCUA,
ARNULFO A., PASTOR, ROSARIO, PELAYO,
ROSARIO L., PE;A, AIDA C., PEREZ,
ESPERIDION B., PEREZ, JESUS BAYANI M.,
PRE, ISIDRO A., PRUDENCIADO, EULOGIA
S., PUNZALAN, LAMBERTO N., PURA,
ARNOLD T., QUINONES, EDGARDO I.,
QUINTOS, AMADEO C., JR., QUIRAY,
NICOLAS C., RAMIREZ, ROBERTO P.,
RA;ADA, RODRIGO C., RARAS, ANTONIO
A., RAVAL, VIOLETA V., RAZAL, BETTY R.,
REGALA, PONCE F., REYES, LIBERATO R.,
REYES, MANUEL E., REYES, NORMA Z.,
REYES, TELESFORO F., RIVERA, ROSITA
L., ROCES, ROBERTO V., ROQUE,
TERESITA S., ROSANES, MARILOU M.,
ROSETE, ADAN I., RUANTO, REY, CRISTO
C., JR., SABLADA, PASCASIO G., SALAZAR,
SILVERIA S., SALAZAR, VICTORIA A.,

SALIMBACOD, PERLITA C., SALMINGO,

LOURDES M., SANTIAGO, EMELITA B.,
SATINA, PORFIRIO C., SEKITO, COSME B.,
JR., SIMON, RAMON P., SINGSON,
MELECIO C., SORIANO, ANGELO L.,
SORIANO, MAGDALENA R., SUMULONG,
ISIDRO L., JR., SUNICO, ABELARDO T.,
TABIJE, EMMA B., TAN, RUDY, GOROSPE,
TAN, ESTER S., TAN, JULITA S., TECSON,
BEATRIZ B., TOLENTINO, BENIGNO A.,
TURINGAN, ENRICO T., JR., UMPA, ALI A.,
VALIC, LUCIO E., VASQUEZ, NICANOR B.,
VELARDE, EDGARDO C., VERA, AVELINO
A., VERAME, OSCAR E., VIADO, LILIAN T.,
VIERNES, NAPOLEON K., VILLALON,
DENNIS A., VILLAR, LUZ L., VILLALUZ,
EMELITO V., ZATA, ANGEL A., JR.,
ACHARON, CRISTETO, ALBA, RENATO B.,
AMON, JULITA C., AUSTRIA, ERNESTO C.,
CALO,
RAYMUNDO
M.,
CENTENO,
BENJAMIN R., DE CASTRO, LEOPAPA C .,
DONATO, ESTELITA P., DONATO, FELIPE
S., FLORES, PEDRITO S., GALAROSA,
RENATO,
MALAWI,
MAUYAG,
MONTENEGRO, FRANCISCO M., OMEGA,
PETRONILO T., SANTOS, GUILLERMO F.,
TEMPLO, CELSO, VALDERAMA, JAIME B.,
and VALDEZ, NORA M., respondents.
G.R. No. 85335

August 8, 1989

FRANKLIN Z. LITTAUA, ADAN I. ROSETE,

FRANCISCO T. MATUGAS, MA. J.
ANGELINA G. MATIBAG, LEODEGARDIO
H. FLORESCA, LEONARDO A. DELA
PE;A, ABELARDO T. SUNICO, MELENCIO
L. LOPEZ, NEMENCIO A. MARTIN, RUDY
M. AMISTAD, ERNESTO T. MATUGAS,
SILVERIA S. SALAZAR, LILLIAN V.
GAVIOLA, MILAGROS ANOLIN, JOSE B.
ORTIZ, ARTEMIO ARREZA, JR., GILVERTO
M. GARCIA, ANTONIO A. RARAS,
FLORDELINA B. GOBENCIONG, ANICETO
AGRES, EDGAR Y. QUINONES, MANUEL B.
CATURLA, ELY F. ABIOG, RODRIGO C.
RANADA, LAURO GREGORIO, ALBERTO I.
GAN, EDGARDO GALANG, RAY C. ISAIS,
Admin. Law | 19

NICANOR
B.
VASQUEZ,
MANUEL
ESCUYOS, JR., ANTONIO B. BELENO,
ELPIO R. MANUEL, AUXILIADOR C.
BOHOL, LEONARDO ELEVAZO, VICENTE
S.
CORNETA, petitioners,
vs.
COM. SALVADOR M. MISON/BUREAU OF
CUSTOMS and the CIVIL SERVICE
COMMISSION, respondents.
G.R. No. 86241

August 8, 1989

SALVADOR M. MISON, in his capacity as

Commissioner
of
Customs, petitioner,
vs.
CIVIL SERVICE COMMISSION, SENEN S.
DIMAGUILA,
ROMEO
P.
ARABE
BERNARDO S. QUINTONG, GREGORIO P.
REYES,
and
ROMULO
C.
BADILLO respondents

SARMIENTO, J.:

The Court writes finis to this contreversy that has

raged bitterly for the several months. It does so out
of ligitimate presentement of more suits reaching it
as a consequence of the government reorganization
and the instability it has wrought on the
performance and efficiency of the bureaucracy. The
Court is apprehensive that unless the final word is
given and the ground rules are settled, the issue
will fester, and likely foment on the constitutional
crisis for the nation, itself biset with grave and
serious problems.
The facts are not in dispute.
On March 25, 1986, President Corazon Aquino
promulgated Proclamation No. 3, "DECLARING
A NATIONAL POLICY TO IMPLEMENT THE
REFORMS MANDATED BY THE PEOPLE,
PROTECTING
THEIR
BASIC
RIGHTS,
ADOPTING
A
PROVISIONAL

CONSTITUTION, AND PROVIDING FOR AN

ORDERLY TRANSITION TO A GOVERNMENT
UNDER A NEW CONSTITUTION." Among other
things, Proclamation No. 3 provided:
SECTION 1. ...
The President shall give priority to measures to
achieve the mandate of the people to:
(a) Completely reorganize the government,
eradicate unjust and oppressive structures, and all
iniquitous vestiges of the previous regime; 1
...
Pursuant thereto, it was also provided:
SECTION 1. In the reorganization of the
government, priority shall be given to measures to
promote economy, efficiency, and the eradication
of graft and corruption.
SECTION 2. All elective and appointive officials
and employees under the 1973 Constitution shall
continue in office until otherwise provided by
proclamation or executive order or upon the
appointment and qualification of their successors,
if such is made within a period of one year from
February 25, 1986.
SECTION 3. Any public officer or employee
separated from the service as a result of the
organization effected under this Proclamation shall,
if entitled under the laws then in force, receive the
retirement and other benefits accruing thereunder.
SECTION 4. The records, equipment, buildings,
facilities and other properties of all government
offices shall be carefully preserved. In case any
office or body is abolished or reorganized pursuant
to this Proclamation, its FUNDS and properties
shall be transferred to the office or body to which
its powers, functions and responsibilities
substantially pertain. 2
Actually, the reorganization process started as early
as February 25, 1986, when the President, in her
first act in office, called upon "all appointive public
Admin. Law | 20

officials to submit their courtesy resignation(s)

beginning with the members of the Supreme
Court."3 Later on, she abolished the Batasang
Pambansa4 and the positions of Prime Minister and
Cabinet 5 under the 1973 Constitution.
Since then, the President has issued a number of
executive orders and directives reorganizing
various other government offices, a number of
which, with respect to elected local officials, has
been challenged in this Court, 6and two of which,
with respect to appointed functionaries, have
likewise been questioned herein. 7
On May 28, 1986, the President enacted Executive
Order No. 17, "PRESCRIBING RULES AND
REGULATIONS FOR THE IMPLEMENTATION
OF SECTION 2, ARTICLE III OF THE
FREEDOM CONSTITUTION." Executive Order
No. 17 recognized the "unnecessary anxiety and
demoralization among the deserving officials and
employees"
the
ongoing
government
reorganization had generated, and prescribed as
"grounds for the separation/replacement of
personnel," the following:
SECTION 3. The following shall be the grounds
for separation replacement of personnel:
1) Existence of a case for summary dismissal
pursuant to Section 40 of the Civil Service Law;
2) Existence of a probable cause for violation of
the Anti-Graft and Corrupt Practices Act as
determined by the Mnistry Head concerned;
3) Gross incompetence or inefficiency in the
discharge of functions;
4) Misuse of public office for partisan political
purposes;
5) Any other analogous ground showing that the
incumbent is unfit to remain in the service or his
separation/replacement is in the interest of the
service.8
On January 30, 1987, the President promulgated
Executive Order No. 127, "REORGANIZING

THE MINISTRY OF FINANCE." 9 Among other

offices, Executive Order No. 127 provided for the
reorganization of the Bureau of Customs 10 and
prescribed a new staffing pattern therefor.
Three days later, on February 2, 1987, 11 the
Filipino people adopted the new Constitution.
On January 6, 1988, incumbent Commissioner of
Customs Salvador Mison issued a Memorandum,
in the nature of "Guidelines on the Implementation
of Reorganization Executive Orders," 12 prescribing
the procedure in personnel placement. It also
provided:
1. By February 28, 1988, the employees covered
by Executive Order 127 and the grace period
extended to the Bureau of Customs by the
President of the Philippines on reorganization shall
be:
a) informed of their re-appointment, or
b) offered another position in the same department
or agency or
c) informed of their termination. 13
On the same date, Commissioner Mison
constituted a Reorganization Appeals Board
charged with adjudicating appeals from removals
under the above Memorandum. 14 On January 26,
1988, Commissioner Mison addressed several
notices to various Customs officials, in the tenor as
follows:
Sir:
Please be informed that the Bureau is now in the
process of implementing the Reorganization
Program under Executive Order No. 127.
Pursuant to Section 59 of the same Executive
Order, all officers and employees of the
Department of Finance, or the Bureau of Customs
in particular, shall continue to perform their
respective duties and responsibilities in a hold-over
capacity, and that those incumbents whose
positions are not carried in the new reorganization
Admin. Law | 21

pattern, or who are not re- appointed, shall be

deemed separated from the service.
In this connection, we regret to inform you that
your services are hereby terminated as of February
28, 1988. Subject to the normal clearances, you
may receive the retirement benefits to which you
may be entitled under existing laws, rules and
regulations.
In the meantime, your name will be included in the
consolidated list compiled by the Civil Service
Commission so that you may be given priority for
future employment with the Government as the
need arises.
Sincerely
(Sgd)
SALVADOR
Commissioner15

M.

yours,
MISON

As far as the records will yield, the following were

recipients of these notices:

Admin. Law | 22

1. CESAR DARIO
2. VICENTE FERIA, JR.
3. ADOLFO CASARENO
4. PACIFICO LAGLEVA
5. JULIAN C. ESPIRITU
6. DENNIS A. AZARRAGA
7. RENATO DE JESUS
8. NICASIO C. GAMBOA
9. CORAZON RALLOS NIEVES
10. FELICITACION R. GELUZ
11. LEODEGARIO H. FLORESCA
12. SUBAER PACASUM
13. ZENAIDA LANARIA
14. JOSE B. ORTIZ
15. GLICERIO R. DOLAR
16. CORNELIO NAPA
17. PABLO B. SANTOS
18. FERMIN RODRIGUEZ
19. DALISAY BAUTISTA
20. LEONARDO JOSE
21. ALBERTO LONTOK
22. PORFIRIO TABINO
23. JOSE BARREDO
24. ROBERTO ARNALDO
25. ESTER TAN
26. PEDRO BAKAL
Admin. Law | 23

27. ROSARIO DAVID

28. RODOLFO AFUANG
29. LORENZO CATRE
30. LEONCIA CATRE
31. ROBERTO ABADA
32. ABACA, SISINIO T.
33. ABAD, ROGELIO C.
34. ABADIANO, JOSE P
35. ABCEDE, NEMECIO C.
36. ABIOG, ELY F.
37. ABLAZA, AURORA M.
38. AGBAYANI, NELSON I.
39. AGRES, ANICETO
40. AGUILAR, FLOR
41. AGUILUCHO, MA. TERESA R.
42. AGUSTIN, BONIFACIO T.
43. ALANO, ALEX P.
44. ALBA, MAXIMO F. JR.
45. ALBANO, ROBERT B.
46. ALCANTARA, JOSE G.
47. ALMARIO, RODOLFO F.
48. ALVEZ, ROMUALDO R.
49. AMISTAD, RUDY M.
50. AMOS, FRANCIS F.
51. ANDRES, RODRIGO V.
52. ANGELES, RICARDO S.
Admin. Law | 24

53. ANOLIN, MILAGROS H.

54. AQUINO, PASCASIO E. L.
55. ARABE, MELINDA M.
56. ARCANGEL, AGUSTIN S, JR.
57. ARPON, ULPIANO U., JR.
58. ARREZA, ARTEMIO M, JR.
59. ARROJO, ANTONIO P.
60. ARVISU, ALEXANDER S.
61. ASCA;O, ANTONIO T.
62. ASLAHON, JULAHON P.
63. ASUNCION, VICTOR R.
64. ATANGAN, LORNA S.
65. ANTIENZA, ALEXANDER R.
66. BACAL URSULINO C.
67. BA;AGA, MARLOWE Z.
68. BANTA, ALBERTO T.
69. BARROS, VICTOR C.
70. BARTOLOME, FELIPE A.
71. BAYSAC, REYNALDO S.
72. BELENO, ANTONIO B.
73. BERNARDO, ROMEO D.
74. BERNAS, MARCIANO S.
75. BOHOL, AUXILIADOR G.
76. BRAVO, VICTOR M.
77. BULEG, BALILIS R.
78. CALNEA, MERCEDES M.
Admin. Law | 25

79. CALVO, HONESTO G.

80. CAMACHO, CARLOS V.
81. CAMPOS, RODOLFO C.
82. CAPULONG, RODRIGO G.
83. CARINGAL, GRACIA Z.
84. CARLOS, LORENZO B.
85. CARRANTO, FIDEL U.
86. CARUNGCONG, ALFREDO M.
87. CASTRO, PATRICIA J.
88. CATELO, ROGELIO B.
89. CATURLA, MANUEL B.
90. CENIZAL, JOSEFINA F.
91. CINCO, LUISITO
92. CONDE, JOSE C., JR.
93. CORCUERA, FIDEL S.
94. CORNETA, VICENTE S.
95. CORONADO, RICARDO S.
96. CRUZ, EDUARDO S.
97. CRUZ, EDILBERTO A,
98. CRUZ, EFIGENIA B.
99. CRUZADO,NORMA M.
100. CUSTODIO, RODOLFO M.
101. DABON, NORMA M.
102. DALINDIN, EDNA MAE D.
103. DANDAL, EDEN F.
104. DATUHARON, SATA A.
Admin. Law | 26

105. DAZO, GODOFREDO L.

106. DE CASTRO, LEOPAPA
107. DE GUZMAN, ANTONIO A.
108. DE GUZMAN, RENATO E.
109. DE LA CRUZ, AMADO A., JR.
110. DE LA CRUZ, FRANCISCO C.
111. DE LA PE;A, LEONARDO
112. DEL CAMPO, ORLANDO
113. DEL RIO, MAMERTO P., JR.
114. DEMESA, WILHELMINA T.
115. DIMAKUTA, SALIC L.
116. DIZON, FELICITAS A.
117. DOCTOR, HEIDY M.
118. DOMINGO, NICANOR J.
119. DOMINGO, PERFECTO V., JR.
120. DUAY, JUANA G.
121. DYSANGCO, RENATO F.
122. EDILLOR, ALFREDO P.
123. ELEVAZO, LEONARDO A
124. ESCUYOS, MANUEL M., JR.
125. ESMERIA, ANTONIO E.
126. ESPALDON, MA. LOURDES H.
127. ESPINA, FRANCO A.
128. ESTURCO, RODOLFO C.
129. EVANGELINO, FERMIN I.
130. FELIX, ERNESTO G.
Admin. Law | 27

131. FERNANDEZ, ANDREW M.

132. FERRAREN, ANTONIO C.
133. FERRERA, WENCESLAO A.
134. FRANCISCO, PELAGIO S, JR.
135. FUENTES, RUDY L.
136. GAGALANG, RENATO V.
137. GALANG, EDGARDO R.
138. GAMBOA, ANTONIO C.
139. GAN, ALBERTO P
140. GARCIA, GILBERT M.
141. GARCIA, EDNA V.
142. GARCIA, JUAN L.
143. GAVIOIA, LILIAN V.
144. GEMPARO, SEGUNDINA G.
145. GOBENCIONG, FLORDELIZ B.
146. GRATE, FREDERICK R.
147. GREGORIO, LAURO P.
148. GUARTICO, AMMON H.
149. GUIANG, MYRNA N.
150. GUINTO, DELFIN C.
151. HERNANDEZ, LUCAS A.
152. HONRALES, LORETO N.
153. HUERTO, LEOPOLDO H.
154. HULAR, LANNYROSS E.
155. IBA;EZ, ESTER C.
156. ILAGAN, HONORATO C.
Admin. Law | 28

157. INFANTE, REYNALDO C.

158. ISAIS, RAY C.
159. ISMAEL, HADJI AKRAM B.
160. JANOLO, VIRGILIO M.
161. JAVIER, AMADOR L.
162. JAVIER, ROBERTO S.
163. JAVIER, WILLIAM R.
164. JOVEN, MEMIA A.
165. JULIAN, REYNALDO V.
166. JUMAMOY, ABUNDIO A.
167. JUMAQUIAO, DOMINGO F.
168. KAINDOY, PASCUAL B., JR.
169. KOH, NANIE G.
170. LABILLES, ERNESTO S.
171. LABRADOR, WILFREDO M.
172. LAGA, BIENVENIDO M.
173. LAGMAN, EVANGELINE G.
174. LAMPONG, WILFREDO G.
175. LANDICHO, RESTITUTO A.
176. LAPITAN, CAMILO M.
177. LAURENTE, REYNALDO A.
178. LICARTE, EVARISTO R.
179. LIPIO, VICTOR O.
180. LITTAUA, FRANKLIN Z.
181. LOPEZ, MELENCIO L.
182. LUMBA, OLIVIA R.
Admin. Law | 29

183. MACAISA, BENITO T.

184. MACAISA, ERLINDA C.
185. MAGAT, ELPIDIO
186. MAGLAYA, FERNANDO P.
187. MALABANAN, ALFREDO C.
188. MALIBIRAN, ROSITA D.
189. MALIJAN, LAZARO V.
190. MALLI, JAVIER M.
191. MANAHAN, RAMON S.
192. MANUEL, ELPIDIO R.
193. MARAVILLA, GIL B.
194. MARCELO, GIL C.
195. MARI;AS, RODOLFO V.
196. MAROKET ,JESUS C.
197. MARTIN, NEMENCIO A.
198. MARTINEZ, ROMEO M.
199. MARTINEZ, ROSELINA M.
200. MATIBAG, ANGELINA G.
201. MATUGAS, ERNESTO T.
202. MATUGAS, FRANCISCO T.
203. MAYUGA, PORTIA E.
204. MEDINA, NESTOR M.
205. MEDINA, ROLANDO S.
206. MENDAVIA, AVELINO
207. MENDOZA, POTENCIANO G.
208. MIL, RAY M.
Admin. Law | 30

209. MIRAVALLES, ANASTACIA L.

210. MONFORTE, EUGENIO, JR. G.
211. MONTANO, ERNESTO F.
212. MONTERO, JUAN M. III
213. MORALDE, ESMERALDO B., JR.
214. MORALES, CONCHITA D. L
215. MORALES, NESTOR P.
216. MORALES, SHIRLEY S.
217. MUNAR, JUANITA L.
218. MU;OZ, VICENTE R.
219. MURILLO, MANUEL M.
220. NACION, PEDRO R.
221. NAGAL, HENRY N.
222. NAVARRO, HENRY L.
223. NEJAL FREDRICK E.
224. NICOLAS, REYNALDO S.
225. NIEVES, RUFINO A.
226. OLAIVAR, SEBASTIAN T.
227. OLEGARIO, LEO Q.
228. ORTEGA, ARLENE R.
229. ORTEGA, JESUS R.
230. OSORIO, ABNER S.
231. PAPIO FLORENTINO T. II
232. PASCUA, ARNULFO A.
233. PASTOR, ROSARIO
234. PELAYO, ROSARIO L.
Admin. Law | 31

235. PE;A, AIDA C.

236. PEREZ, ESPERIDION B.
237. PEREZ, JESUS BAYANI M.
238. PRE, ISIDRO A.
239. PRUDENCIADO, EULOGIA S.
240. PUNZALAN, LAMBERTO N.
241. PURA, ARNOLD T.
242. QUINONES, EDGARDO I.
243. QUINTOS, AMADEO C., JR.
244. QUIRAY, NICOLAS C.
245. RAMIREZ, ROBERTO P.
246. RANADA, RODRIGO C.
247. RARAS, ANTONIO A.
248. RAVAL, VIOLETA V.
249. RAZAL, BETTY R.
250. REGALA, PONCE F.
251. REYES, LIBERATO R.
252. REYES, MANUEL E.
253. REYES, NORMA Z.
254. REYES, TELESPORO F.
255. RIVERA, ROSITA L.
256. ROCES, ROBERTO V.
257. ROQUE, TERESITA S.
258. ROSANES, MARILOU M.
259. ROSETE, ADAN I.
260. RUANTO, REY CRISTO C., JR.
Admin. Law | 32

261. SABLADA, PASCASIO G.

262. SALAZAR, SILVERIA S.
263. SALAZAR, VICTORIA A.
264. SALIMBACOD, PERLITA C.
265. SALMINGO, LOURDES M.
266. SANTIAGO, EMELITA B.
267. SATINA, PORFIRIO C.
268. SEKITO, COSME B JR.
269. SIMON, RAMON P.
270. SINGSON, MELENCIO C.
271. SORIANO, ANGELO L.
272. SORIANO, MAGDALENA R.
273. SUNICO, ABELARDO T .
274. TABIJE, EMMA B.
275. TAN, RUDY GOROSPE
276. TAN, ESTER S.
277. TAN, JULITA S.
278. TECSON, BEATRIZ B.
279. TOLENTINO, BENIGNO A.
280. TURINGAN, ENRICO T JR.
281. UMPA, ALI A.
282. VALIC, LUCIO E.
283. VASQUEZ, NICANOR B.
284. VELARDE, EDGARDO C.
285. VERA, AVELINO A.
286. VERAME, OSCAR E.
Admin. Law | 33

287. VIADO, LILIAN T.

288. VIERNES, NAPOLEON K
289. VILLALON, DENNIS A.
290. VILLAR, LUZ L.
291. VILLALUZ, EMELITO V.
292. VILLAR, LUZ L.
293. ZATA, ANGELA JR.
294. ACHARON, CRISTETO
295. ALBA, RENATO B.
296. AMON, JULITA C.
297. AUSTRIA, ERNESTO C.
298. CALO, RAYMUNDO M.
299. CENTENO, BENJAMIN R.
300. DONATO, ESTELITA P.
301. DONATO, FELIPE S
302. FLORES, PEDRITO S.
303. GALAROSA, RENATO
304. MALAWI, MAUYAG
305. MONTENEGRO, FRANSISCO M.
306. OMEGA, PETRONILO T.
307. SANTOS, GUILLERMO P.
308. TEMPLO, CELSO
309. VALDERAMA, JAIME B.
310. VALDEZ, NORA M.
Cesar Dario is the petitioner in G.R. No. 81954;
Vicente Feria, Jr., is the petitioner in G.R. No.
81967; Messrs. Adolfo Caserano Pacifico Lagleva

Julian C. Espiritu, Dennis A. Azarraga Renato de

Jesus, Nicasio C. Gamboa, Mesdames Corazon
Rallos Nieves and Felicitacion R. Geluz Messrs.
Admin. Law | 34

Leodegario H. Floresca, Subaer Pacasum Ms.

Zenaida Lanaria Mr. Jose B. Ortiz, Ms. Gliceria R.
Dolar, Ms. Cornelia Napa, Pablo B. Santos, Fermin
Rodriguez, Ms. Daligay Bautista, Messrs.
Leonardo Jose, Alberto Lontok, Porfirio Tabino
Jose Barredo, Roberto Arnaldo, Ms. Ester Tan,
Messrs. Pedro Bakal, Rosario David, Rodolfo
Afuang, Lorenzo Catre,, Ms. Leoncia Catre, and
Roberto Abaca, are the petitioners in G.R. No.
82023; the last 279 16 individuals mentioned are the
private respondents in G.R. No. 85310.
As far as the records will likewise reveal, 17 a total
of 394 officials and employees of the Bureau of
Customs were given individual notices of
separation. A number supposedly sought
reinstatement with the Reorganization Appeals
Board while others went to the Civil Service
Commission. The first thirty-one mentioned above
came directly to this Court.
On June 30, 1988, the Civil Service Commission
promulgated its ruling ordering the reinstatement
of the 279 employees, the 279 private respondents
in G.R. No. 85310, the dispositive portion of which
reads as follows:
WHEREFORE, it is hereby ordered that:
1. Appellants be immediately reappointed to
positions of comparable or equivalent rank in the
Bureau of Customs without loss of seniority rights;
2. Appellants be paid their back salaries reckoned
from the dates of their illegal termination based on
the rates under the approved new staffing pattern
but not lower than their former salaries.
This action of the Commission should not,
however, be interpreted as an exoneration of the
appellants from any accusation of wrongdoing and,
therefore, their reappointments are without
prejudice to:
1. Proceeding with investigation of appellants with
pending administrative cases, and where
investigations have been finished, to promptly,
render the appropriate decisions;

2. The filing of appropriate administrative

complaints against appellants with derogatory
reports or information if evidence so warrants.
SO ORDERED. 18
On July 15, 1988, Commissioner Mison,
represented by the Solicitor General, filed a motion
for reconsideration Acting on the motion, the Civil
Service Commission, on September 20, 1988,
denied reconsideration. 19
On October 20, 1988, Commissioner Mison
instituted certiorari proceedings with this Court,
docketed, as above-stated, as G.R. No. 85310 of
this Court.
On November 16,1988, the Civil Service
Commission further disposed the appeal (from the
resolution of the Reorganization Appeals Board) of
five more employees, holding as follows:
WHEREFORE, it is hereby ordered that:
1. Appellants be immediately reappointed to
positions of comparable or equivalent rank in the
Bureau of Customs without loss of seniority rights;
and
2. Appellants be paid their back salaries to be
reckoned from the date of their illegal termination
based on the rates under the approved new staffing
pattern but not lower than their former salaries.
This action of the Commission should not,
however, be interpreted as an exoneration of the
herein appellants from any accusation of any
wrongdoing and therefore, their reappointments are
without prejudice to:
1. Proceeding with investigation of appellants with
pending administrative cases, if any, and where
investigations have been finished, to promptly,
render the appropriate decisions; and
2. The filing of appropriate administrative
complaints against appellant with derogatory
reports or information, if any, and if evidence so
warrants.
Admin. Law | 35

SO ORDERED. 20
On January 6, 1989, Commissioner Mison
challenged the Civil Service Commission's
Resolution in this Court; his petitioner has been
docketed herein as G.R. No. 86241. The employees
ordered to be reinstated are Senen Dimaguila,
Romeo Arabe, Bemardo Quintong,Gregorio Reyes,
and Romulo Badillo. 21
On June 10, 1988, Republic Act No. 6656, "AN
ACT TO PROTECT THE SECURITY OF
TENURE OF CIVIL SERVICE OFFICERS AND
EMPLOYEES IN THE IMPLEMENTATION OF
GOVERNMENT
REORGANIZATION," 22was
signed into law. Under Section 7, thereof:
Sec. 9. All officers and employees who are found
by the Civil Service Commission to have been
separated in violation of the provisions of this Act,
shall be ordered reinstated or reappointed as the
case may be without loss of seniority and shall be
entitled to full pay for the period of separation.
Unless also separated for cause, all officers and
employees, including casuals and temporary
employees, who have been separated pursuant to
reorganization shall, if entitled thereto, be paid the
appropriate separation pay and retirement and
other benefits under existing laws within ninety
(90) days from the date of the effectivity of their
separation or from the date of the receipt of the
resolution of their appeals as the case may be:
Provided, That application for clearance has been
filed and no action thereon has been made by the
corresponding department or agency. Those who
are not entitled to said benefits shall be paid a
separation gratuity in the amount equivalent to one
(1) month salary for every year of service. Such
separation pay and retirement benefits shall have
priority of payment out of the savings of the
department or agency concerned. 23
On June 23, 1988, Benedicto Amasa and William
Dionisio, customs examiners appointed by
Commissioner Mison pursuant to the ostensible
reorganization subject of this controversy,
petitioned the Court to contest the validity of the

statute. The petition is docketed as G.R. No.

83737.
On October 21, 1988, thirty-five more Customs
officials whom the Civil Service Commission had
ordered reinstated by its June 30,1988 Resolution
filed their own petition to compel the
Commissioner of Customs to comply with the said
Resolution. The petition is docketed as G.R. No.
85335.
On November 29, 1988, we resolved to consolidate
all seven petitions.
On the same date, we resolved to set the matter for
hearing on January 12, 1989. At the said hearing,
the parties, represented by their counsels (a) retired
Justice Ruperto Martin; (b) retired Justice Lino
Patajo. (c) former Dean Froilan Bacungan (d) Atty.
Lester Escobar (e) Atty. Faustino Tugade and (f)
Atty. Alexander Padilla, presented their arguments.
Solicitor General Francisco Chavez argued on
behalf of the Commissioner of Customs (except in
G.R. 85335, in which he represented the Bureau of
Customs
and
the
Civil
Service
Commission).lwph1.t Former
Senator
Ambrosio Padilla also appeared and argued
as amicus curiae Thereafter, we resolved to require
the parties to submit their respective memoranda
which they did in due time.
There is no question that the administration may
validly carry out a government reorganization
insofar as these cases are concerned, the
reorganization of the Bureau of Customs by
mandate
not
only
of
the
Provisional
Constitution, supra, but also of the various
Executive Orders decreed by the Chief Executive
in her capacity as sole lawmaking authority under
the 1986-1987 revolutionary government. It should
also be noted that under the present Constitution,
there is a recognition, albeit implied, that a
government reorganization may be legitimately
undertaken, subject to certain conditions. 24
The Court understands that the parties are agreed
on the validity of a reorganization per se the only
question being, as shall be later seen: What is the
Admin. Law | 36

nature and extent

reorganization?

of

this

government

The Court disregards the questions raised as to

procedure, failure to exhaust administrative
remedies, the standing of certain parties to
sue, 25 and other technical objections, for two
reasons, "[b]ecause of the demands of public
interest, including the need for stability in the
public service,"26 and because of the serious
implications of these cases on the administration of
the Philippine civil service and the rights of public
servants.
The urgings in G.R. Nos. 85335 and 85310, that
the Civil Service Commission's Resolution dated
June 30, 1988 had attained a character of finality
for failure of Commissioner Mison to apply for
judicial review or ask for reconsideration
seasonalbly under Presidential Decree No.
807, 27 or under Republic Act No. 6656, 28 or under
the Constitution, 29 are likewise rejected. The
records show that the Bureau of Customs had until
July 15, 1988 to ask for reconsideration or come to
this Court pursuant to Section 39 of Presidential
Decree No. 807. The records likewise show that
the Solicitor General filed a motion for
reconsideration on July 15, 1988.30 The Civil
Service Commission issued its Resolution denying
reconsideration on September 20, 1988; a copy of
this Resolution was received by the Bureau on
September 23, 1988.31 Hence the Bureau had until
October 23, 1988 to elevate the matter
on certiorari to this Court.32 Since the Bureau's
petition was filed on October 20, 1988, it was filed
on time.
We reject, finally, contentions that the Bureau's
petition (in G.R. 85310) raises no jurisdictional
questions, and is therefore bereft of any basis as a
petition for certiorari under Rule 65 of the Rules
of Court. 33 We find that the questions raised in
Commissioner Mison's petition (in G.R. 85310)
are, indeed, proper for certiorari, if by
"jurisdictional questions" we mean questions
having to do with "an indifferent disregard of the
law, arbitrariness and caprice, or omission to weigh
pertinent considerations, a decision arrived at

without rational deliberation, 34 as distinguished

from questions that require "digging into the merits
and unearthing errors of judgment 35 which is the
office, on the other hand, of review under Rule 45
of the said Rules. What cannot be denied is the fact
that the act of the Civil Service Commission of
reinstating hundreds of Customs employees
Commissioner Mison had separated, has
implications not only on the entire reorganization
process decreed no less than by the Provisional
Constitution, but on the Philippine bureaucracy in
general; these implications are of such a magnitude
that it cannot be said that assuming that the
Civil Service Commission erred the
Commission committed a plain "error of judgment"
that Aratuc says cannot be corrected by the
extraordinary remedy of certiorari or any special
civil action. We reaffirm the teaching of Aratuc
as regards recourse to this Court with respect to
rulings of the Civil Service Commission which
is that judgments of the Commission may be
brought
to
the
Supreme
Court
through certiorari alone, under Rule 65 of the
Rules of Court.
In Aratuc we declared:
It is once evident from these constitutional and
statutory modifications that there is a definite
tendency to enhance and invigorate the role of the
Commission on Elections as the independent
constitutional body charged with the safeguarding
of free, peaceful and honest elections. The framers
of the new Constitution must be presumed to have
definite knowledge of what it means to make the
decisions, orders and rulings of the Commission
"subject to review by the Supreme Court'. And
since instead of maintaining that provision intact, it
ordained that the Commission's actuations be
instead 'brought to the Supreme Court
on certiorari", We cannot insist that there was no
intent to change the nature of the remedy,
considering that the limited scope of certiorari,
compared to a review, is well known in remedial
law.36
We observe no fundamental difference between the
Commission on Elections and the Civil Service
Admin. Law | 37

Commission (or the Commission on Audit for that

matter) in terms of the constitutional intent to leave
the constitutional bodies alone in the enforcement
of laws relative to elections, with respect to the
former, and the civil service, with respect to the
latter (or the audit of government accounts, with
respect to the Commission on Audit). As the poll
body is the "sole judge" 37 of all election cases, so
is the Civil Service Commission the single arbiter
of all controversies pertaining to the civil service.
It should also be noted that under the new
Constitution, as under the 1973 Charter, "any
decision, order, or ruling of each Commission may
be
brought
to
the
Supreme
Court
on certiorari," 38 which,
as Aratuc tells
us,
"technically connotes something less than saying
that the same 'shall be subject to review by the
Supreme Court,' " 39 which in turn suggests an
appeal by petition for review under Rule 45.
Therefore, our jurisdiction over cases emanating
from the Civil Service Commission is limited to
complaints of lack or excess of jurisdiction or
grave abuse of discretion tantamount to lack or
excess
of
jurisdiction,
complaints
that
justify certiorari under Rule 65.
While Republic Act No. 6656 states that judgments
of the Commission are "final and executory"40 and
hence,
unappealable,
under
Rule
65, certiorari precisely lies in the absence of an
appeal. 41
Accordingly, we accept Commissioner Mison
petition (G.R. No. 85310) which clearly charges
the Civil Service Commission with grave abuse of
discretion, a proper subject of certiorari, although
it may not have so stated in explicit terms.
As to charges that the said petition has been filed
out of time, we reiterate that it has been filed
seasonably. It is to be stressed that the Solicitor
General had thirty days from September 23, 1988
(the date the Resolution, dated September 20,1988,
of the Civil Service Commission, denying
reconsideration, was received) to commence the
instant certiorari proceedings. As we stated, under
the Constitution, an aggrieved party has thirty days

within which to challenge "any decision, order, or

ruling" 42 of the Commission. To say that the period
should be counted from the Solicitor's receipt of
the main Resolution, dated June 30, 1988, is to say
that he should not have asked for reconsideration
But to say that is to deny him the right to contest
(by a motion for reconsideration) any ruling, other
than the main decision, when, precisely, the
Constitution gives him such a right. That is also to
place him at a "no-win" situation because if he did
not move for a reconsideration, he would have
been faulted for demanding certioraritoo early,
under the general rule that a motion for
reconsideration should preface a resort to a special
civil action. 43Hence, we must reckon the thirty-day
period from receipt of the order of denial.
We come to the merits of these cases.
G.R. Nos. 81954, 81967, 82023, and 85335:
The Case for the Employees
The petitioner in G.R. No. 81954, Cesar Dario was
one of the Deputy Commissioners of the Bureau of
Customs until his relief on orders of Commissioner
Mison on January 26, 1988. In essence, he
questions the legality of his dismiss, which he
alleges was upon the authority of Section 59 of
Executive Order No. 127, supra, hereinbelow
reproduced as follows:
SEC. 59. New Structure and Pattern. Upon
approval of this Executive Order, the officers and
employees of the Ministry shall, in a holdover
capacity, continue to perform their respective
duties and responsibilities and receive the
corresponding salaries and benefits unless in the
meantime they are separated from government
service pursuant to Executive Order No. 17 (1986)
or Article III of the Freedom Constitution.
The new position structure and staffing pattern of
the Ministry shall be approved and prescribed by
the Minister within one hundred twenty (120) days
from the approval of this Executive Order and the
authorized positions created hereunder shall be
filled with regular appointments by him or by the
Admin. Law | 38

President, as the case may be. Those incumbents

whose positions are not included therein or who
are not reappointed shall be deemed separated from
the service. Those separated from the service shall
receive the retirement benefits to which they may
be entitled under existing laws, rules and
regulations. Otherwise, they shall be paid the
equivalent of one month basic salary for every year
of service, or the equivalent nearest fraction
thereof favorable to them on the basis of highest
salary received but in no case shall such payment
exceed the equivalent of 12 months salary.

Section 59 of Executive Order No. 127, having

been appointed on April 22, 1986 during the
effectivity of the Provisional Constitution. He adds
that under Executive Order No. 39, "ENLARGING
THE POWERS AND FUNCTIONS OF THE
COMMISSIONER
OF
CUSTOMS,"52 the
Commissioner of Customs has the power "[t]o
appoint all Bureau personnel, except those
appointed by the President," 53 and that his
position, which is that of a Presidential appointee,
is beyond the control of Commissioner Mison for
purposes of reorganization.

No court or administrative body shall issue any

writ of preliminary injunction or restraining order
to enjoin the separation/replacement of any officer
or employee effected under this Executive Order.44

The petitioners in G.R. No. 82023, collectors and

examiners in venous ports of the Philippines, say,
on the other hand, that the purpose of
reorganization is to end corruption at the Bureau of
Customs and that since there is no finding that they
are guilty of corruption, they cannot be validly
dismissed from the service.

a provision he claims the Commissioner could not

have legally invoked. He avers that he could not
have been legally deemed to be an "[incumbent]
whose [position] [is] not included therein or who
[is] not reappointed"45 to justify his separation from
the service. He contends that neither the Executive
Order (under the second paragraph of the section)
nor the staffing pattern proposed by the Secretary
of Finance 46 abolished the office of Deputy
Commissioner of Customs, but, rather, increased it
to three. 47 Nor can it be said, so he further
maintains,
that
he
had
not
been
48
"reappointed" (under the second paragraph of the
section) because "[[r]eappointment therein
presupposes that the position to which it refers is a
new one in lieu of that which has been abolished or
although an existing one, has absorbed that which
has been abolished." 49 He claims, finally, that
under the Provisional Constitution, the power to
dismiss public officials without cause ended on
February 25, 1987,50 and that thereafter, public
officials enjoyed security of tenure under the
provisions of the 1987 Constitution.51
Like Dario Vicente Feria, the petitioner in G.R. No.
81967, was a Deputy Commissioner at the Bureau
until his separation directed by Commissioner
Mison. And like Dario he claims that under the
1987 Constitution, he has acquired security of
tenure and that he cannot be said to be covered by

The Case for Commissioner Mison

In his comments, the Commissioner relies on this
Court's resolution in Jose v. Arroyo54 in which the
following statement appears in the last paragraph
thereof:
The contention of petitioner that Executive Order
No. 127 is violative of the provision of the 1987
Constitution guaranteeing career civil service
employees security of tenure overlooks the
provisions of Section 16, Article XVIII (Transitory
Provisions) which explicitly authorize the removal
of career civil service employees "not for cause but
as a result of the reorganization pursuant to
Proclamation No. 3 dated March 25, 1986 and the
reorganization following the ratification of this
Constitution." By virtue of said provision, the
reorganization of the Bureau of Customs under
Executive Order No. 127 may continue even after
the ratification of the Constitution, and career civil
service employees may be separated from the
service without cause as a result of such
reorganization.55
For this reason, Mison posits, claims of violation
of security of tenure are allegedly no defense. He
Admin. Law | 39

further states that the deadline prescribed by the

Provisional Constitution (February 25, 1987) has
been superseded by the 1987 Constitution,
specifically,
the
transitory
provisions
thereof, 56 which allows a reorganization thereafter
(after February 25, 1987) as this very Court has so
declared in Jose v. Arroyo. Mison submits that
contrary to the employees' argument, Section 59 of
Executive Order No. 127 is applicable (in
particular, to Dario and Feria in the sense that
retention in the Bureau, under the Executive Order,
depends on either retention of the position in the
new staffing pattern or reappointment of the
incumbent, and since the dismissed employees had
not been reappointed, they had been considered
legally separated. Moreover, Mison proffers that
under Section 59 incumbents are considered on
holdover status, "which means that all those
positions were considered vacant." 57 The Solicitor
General denies the applicability of PalmaFernandez v. De la Paz 58 because that case
supposedly involved a mere transfer and not a
separation. He rejects, finally, the force and effect
of Executive Order Nos. 17 and 39 for the reason
that Executive Order No. 17, which was meant to
implement the Provisional Constitution, 59 had
ceased to have force and effect upon the
ratification of the 1987 Constitution, and that,
under Executive Order No. 39, the dismissals
contemplated were "for cause" while the
separations now under question were "not for
cause" and were a result of government reorganize
organization decreed by Executive Order No. 127.
Anent Republic Act No. 6656, he expresses doubts
on the constitutionality of the grant of retroactivity
therein (as regards the reinforcement of security of
tenure) since the new Constitution clearly allows
reorganization after its effectivity.
G.R. Nos. 85310 and 86241
The Position of Commissioner Mison
Commissioner's twin petitions are direct challenges
to three rulings of the Civil Service Commission:
(1) the Resolution, dated June 30, 1988, reinstating
the 265 customs employees above-stated; (2) the
Resolution, dated September 20, 1988, denying

reconsideration; and (3) the Resolution, dated

November 16, 1988, reinstating five employees.
The Commissioner's arguments are as follows:
1. The ongoing government reorganization is in the
nature
of
a
"progressive" 60 reorganization
"impelled by the need to overhaul the entire
government bureaucracy" 61 following the people
power revolution of 1986;
2. There was faithful compliance by the Bureau of
the various guidelines issued by the President, in
particular, as to deliberation, and selection of
personnel for appointment under the new staffing
pattern;
3. The separated employees have been, under
Section 59 of Executive Order No. 127, on mere
holdover standing, "which means that all positions
are declared vacant;" 62
4. Jose v. Arroyo has declared the validity of
Executive Order No. 127 under the transitory
provisions of the 1987 Constitution;
5. Republic Act No. 6656 is of doubtful
constitutionality.
The Ruling of the Civil Service Commission
The position of the Civil Service Commission is as
follows:
1. Reorganizations occur where there has been a
reduction in personnel or redundancy of functions;
there is no showing that the reorganization in
question has been carried out for either purpose
on the contrary, the dismissals now disputed were
carried out by mere service of notices;
2. The current Customs reorganization has not been
made according to Malaca;ang guidelines;
information on file with the Commission shows
that Commissioner Mison has been appointing
unqualified personnel;
3. Jose v. Arroyo, in validating Executive Order
No. 127, did not countenance illegal removals;

Admin. Law | 40

4. Republic Act No. 6656 protects security of

tenure in the course of reorganizations.

30,1987, prior to the adoption of the Constitution

on February 2, 1987].64

The Court's ruling

It is also to be observed that unlike the grants of

power to effect reorganizations under the past
Constitutions, the above provision comes as a mere
recognition of the right of the Government to
reorganize
its
offices,
bureaus,
and
instrumentalities. Under Section 4, Article XVI, of
the 1935 Constitution:

Reorganization, Fundamental Principles of.

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

Section 4. All officers and employees in the

existing Government of the Philippine Islands shall
continue in office until the Congress shall provide
otherwise, but all officers whose appointments are
by this Constitution vested in the President shall
vacate their respective office(s) upon the
appointment and qualification of their successors,
if such appointment is made within a period of one
year from the date of the inauguration of the
Commonwealth of the Philippines. 65
Under Section 9, Article XVII, of the 1973
Charter:
Section 9. All officials and employees in the
existing Government of the Republic of the
Philippines shall continue in office until otherwise
provided by law or decreed by the incumbent
President of the Philippines, but all officials whose
appointments are by this Constitution vested in the
Prime Minister shall vacate their respective offices
upon the appointment and qualification of their
successors. 66
The Freedom Constitution is, as earlier seen,
couched in similar language:
SECTION 2. All elective and appointive officials
and employees under the 1973 Constitution shall
continue in office until otherwise provided by
proclamation or executive order or upon the
appointment and qualification of their successors,
if such is made within a period of one year from
February 25, 1986.67
Other than references to "reorganization following
the ratification of this Constitution," there is no
Admin. Law | 41

provision for "automatic" vacancies under the 1987

Constitution.
Invariably, transition periods are characterized by
provisions for "automatic" vacancies. They are
dictated by the need to hasten the passage from the
old to the new Constitution free from the "fetters"
of due process and security of tenure.
At this point, we must distinguish removals from
separations arising from abolition of office (not by
virtue of the Constitution) as a result of
reorganization carried out by reason of economy or
to remove redundancy of functions. In the latter
case, the Government is obliged to prove good
faith.68 In case of removals undertaken to comply
with clear and explicit constitutional mandates, the
Government is not hard put to prove anything,
plainly and simply because the Constitution allows
it.
Evidently, the question is whether or not Section
16 of Article XVIII of the 1987 Constitution is a
grant of a license upon the Government to remove
career public officials it could have validly done
under an "automatic" vacancy-authority and to
remove them without rhyme or reason.
As we have seen, since 1935, transition periods
have been characterized by provisions for
"automatic" vacancies. We take the silence of the
1987 Constitution on this matter as a restraint upon
the Government to dismiss public servants at a
moment's notice.
What is, indeed, apparent is the fact that if the
present Charter envisioned an "automatic" vacancy,
it should have said so in clearer terms, as its 1935,
1973, and 1986 counterparts had so stated.
The constitutional "lapse" means either one of two
things: (1) The Constitution meant to continue the
reorganization under the prior Charter (of the
Revolutionary Government), in the sense that the
latter provides for "automatic" vacancies, or (2) It
meant to put a stop to those 'automatic" vacancies.
By itself, however, it is ambiguous, referring as it
does to two stages of reorganization the first, to

its conferment or authorization under Proclamation

No. 3 (Freedom Charter) and the second, to its
implementation on its effectivity date (February 2,
1987).lwph1.t But as we asserted, if the intent
of Section 16 of Article XVIII of the 1987
Constitution were to extend the effects of
reorganize tion under the Freedom Constitution, it
should have said so in clear terms. It is illogical
why it should talk of two phases of reorganization
when it could have simply acknowledged the
continuing effect of the first reorganization.
Second, plainly the concern of Section 16 is to
ensure compensation for victims" of constitutional
revamps whether under the Freedom or existing
Constitution and only secondarily and
impliedly, to allow reorganization. We turn to the
records of the Constitutional Commission:
INQUIRY OF MR. PADILLA
On the query of Mr. Padilla whether there is a need
for a specific reference to Proclamation No. 3 and
not merely state "result of the reorganization
following the ratification of this Constitution', Mr.
Suarez, on behalf of the Committee, replied that it
is necessary, inasmuch as there are two stages of
reorganization covered by the Section.
Mr. Padilla pointed out that since the proposal of
the Commission on Government Reorganization
have not been implemented yet, it would be better
to use the phrase "reorganization before or after the
ratification of the Constitution' to simplify the
Section. Mr. Suarez instead suggested the phrase
"as a result of the reorganization effected before or
after the ratification of the Constitution' on the
understanding that the provision would apply to
employees
terminated
because
of
the
reorganization pursuant to Proclamation No. 3 and
even those affected by the reorganization during
the Marcos regime. Additionally, Mr. Suarez
pointed out that it is also for this reason that the
Committee specified the two Constitutions the
Freedom Constitution and the 1986 [1987]
Constitution. 69

Admin. Law | 42

Simply, the provision benefits career civil service

employees separated from the service. And the
separation contemplated must be due to or the
result of (1) the reorganization pursuant to
Proclamation No. 3 dated March 25, 1986, (2) the
reorganization from February 2, 1987, and (3) the
resignations of career officers tendered in line with
the existing policy and which resignations have
been accepted. The phrase "not for cause" is clearly
and primarily exclusionary, to exclude those career
civil service employees separated "for cause." In
other words, in order to be entitled to the benefits
granted under Section 16 of Article XVIII of the
Constitution of 1987, two requisites, one negative
and the other positive, must concur, to wit:
1. the separation must not be for cause, and
2. the separation must be due to any of the three
situations mentioned above.
By its terms, the authority to remove public
officials under the Provisional Constitution ended
on February 25, 1987, advanced by jurisprudence
to February 2, 1987. 70 It Can only mean, then, that
whatever reorganization is taking place is upon the
authority of the present Charter, and necessarily,
upon the mantle of its provisions and safeguards.
Hence, it can not be legitimately stated that we are
merely continuing what the revolutionary
Constitution of the Revolutionary Government had
started. We are through with reorganization under
the Freedom Constitution the first stage. We are
on the second stage that inferred from the
provisions of Section 16 of Article XVIII of the
permanent basic document.
This is confirmed not only by the deliberations of
the Constitutional Commission, supra, but is
apparent from the Charter's own words. It also
warrants our holding in Esguerra and PalmaFernandez, in which we categorically declared that
after February 2, 1987, incumbent officials and
employees have acquired security of tenure, which
is not a deterrent against separation by
reorganization under the quondam fundamental
law.

Finally, there is the concern of the State to ensure

that this reorganization is no "purge" like the
execrated reorganizations under martial rule. And,
of course, we also have the democratic character of
the Charter itself.
Commissioner Mison would have had a point,
insofar as he contends that the reorganization is
open-ended ("progressive"), had it been a
reorganization under the revolutionary authority,
specifically of the Provisional Constitution. For
then, the power to remove government employees
would have been truly wide ranging and limitless,
not only because Proclamation No. 3 permitted it,
but because of the nature of revolutionary authority
itself, its totalitarian tendencies, and the monopoly
of power in the men and women who wield it.
What must be understood, however, is that
notwithstanding her immense revolutionary
powers, the President was, nevertheless,
magnanimous in her rule. This is apparent from
Executive Order No. 17, which established
safeguards against the strong arm and ruthless
propensity that accompanies reorganizations
notwithstanding the fact that removals arising
therefrom were "not for cause," and in spite of the
fact that such removals would have been valid and
unquestionable. Despite that, the Chief Executive
saw, as we said, the "unnecessary anxiety and
demoralization" in the government rank and file
that reorganization was causing, and prescribed
guidelines for personnel action. Specifically, she
said on May 28, 1986:
WHEREAS, in order to obviate unnecessary
anxiety and demoralization among the deserving
officials and employees, particularly in the career
civil service, it is necessary to prescribe the rules
and regulations for implementing the said
constitutional provision to protect career civil
servants whose qualifications and performance
meet the standards of service demanded by the
New Government, and to ensure that only those
found corrupt, inefficient and undeserving are
separated from the government service; 71

Admin. Law | 43

Noteworthy is the injunction embodied in the

Executive Order that dismissals should be made on
the basis of findings of inefficiency, graft, and
unfitness to render public service.*
The President's Memorandum of October 14, 1987
should furthermore be considered. We quote, in
part:
Further to the Memorandum dated October 2, 1987
on the same subject, I have ordered that there will
be no further layoffs this year of personnel as a
result of the government reorganization. 72
Assuming, then, that this reorganization allows
removals "not for cause" in a manner that would
have been permissible in a revolutionary setting as
Commissioner Mison so purports, it would seem
that the Commissioner would have been powerless,
in any event, to order dismissals at the Customs
Bureau left and right. Hence, even if we accepted
his "progressive" reorganization theory, he would
still have to come to terms with the Chief
Executive's subsequent directives moderating the
revolutionary authority's plenary power to separate
government officials and employees.
Reorganization under the 1987 Constitution,
Nature, Extent, and Limitations of; Jose v. Arroyo,
clarified.
The controversy seems to be that we have,
ourselves, supposedly extended the effects of
government reorganization under the Provisional
Constitution to the regime of the 1987
Constitution. Jose v. Arroyo73 is said to be the
authority for this argument. Evidently, if Arroyo
indeed so ruled, Arroyo would be inconsistent with
the earlier pronouncement of Esguerra and the
later holding of Palma-Fernandez. The question,
however, is: Did Arroyo, in fact, extend the effects
of reorganization under the revolutionary Charter
to the era of the new Constitution?
There are a few points about Arroyo that have to be
explained. First, the opinion expressed therein that
"[b]y virtue of said provision the reorganization of
the Bureau of Customs under Executive Order No.

127 may continue even after the ratification of this

constitution and career civil service employees
may be separated from the service without cause as
a result of such reorganization" 74 is in the nature of
an obiter dictum. We dismissed Jose's
petition 75 primarily because it was "clearly
premature, speculative, and purely anticipatory,
based merely on newspaper reports which do not
show any direct or threatened injury," 76 it
appearing that the reorganization of the Bureau of
Customs had not been, then, set in motion. Jose
therefore had no cause for complaint, which was
enough basis to dismiss the petition. The remark
anent separation "without cause" was therefore not
necessary for the disposition of the case.
In Morales v. Parades,77 it was held that an obiter
dictum "lacks the force of an adjudication and
should not ordinarily be regarded as such." 78
Secondly, Arroyo is an unsigned resolution
while Palma Fernandez is a full-blown decision,
although both are en banc cases. While a resolution
of the Court is no less forceful than a decision, the
latter has a special weight.
Thirdly, Palma-Fernandez v. De la Paz comes as a
later doctrine. (Jose v. Arroyo was promulgated on
August 11, 1987 while Palma-Fernandez was
decided on August 31, 1987.) It is well-established
that a later judgment supersedes a prior one in case
of an inconsistency.
As we have suggested, the transitory provisions of
the 1987 Constitution allude to two stages of the
reorganization, the first stage being the
reorganization under Proclamation No. 3 which
had already been consummated the second stage
being that adverted to in the transitory provisions
themselves which is underway. Hence, when we
spoke, in Arroyo, of reorganization after the
effectivity of the new Constitution, we referred to
the second stage of the reorganization.
Accordingly, we cannot be said to have carried
over
reorganization
under
the
Freedom
Constitution to its 1987 counterpart.
Finally, Arroyo is not necessarily incompatible
with Palma-Fernandez (or Esguerra).
Admin. Law | 44

As we have demonstrated, reorganization under the

aegis of the 1987 Constitution is not as stern as
reorganization under the prior Charter. Whereas the
latter, sans the President's subsequently imposed
constraints, envisioned a purgation, the same
cannot be said of the reorganization inferred under
the new Constitution because, precisely, the new
Constitution seeks to usher in a democratic regime.
But even if we concede ex gratia argumenti that
Section 16 is an exception to due process and noremoval-"except for cause provided by law"
principles enshrined in the very same 1987
Constitution, 79 which may possibly justify
removals "not for cause," there is no contradiction
in terms here because, while the former
Constitution left the axe to fall where it might, the
present organic act requires that removals "not for
cause" must be as a result of reorganization. As we
observed, the Constitution does not provide for
"automatic" vacancies. It must also pass the test of
good faith a test not obviously required under
the revolutionary government formerly prevailing,
but a test well-established in democratic societies
and in this government under a democratic Charter.
When, therefore, Arroyo permitted a reorganization
under Executive Order No. 127 after the
ratification
of
the
1987
Constitution, Arroyo permitted a reorganization
provided that it is done in good faith. Otherwise,
security of tenure would be an insuperable
implement. 80
Reorganizations in this jurisdiction have been
regarded as valid provided they are pursued in
good faith. 81 As a general rule, a reorganization is
carried out in "good faith" if it is for the purpose of
economy or to make bureaucracy more efficient. In
that event, no dismissal (in case of a dismissal) or
separation actually occurs because the position
itself ceases to exist. And in that case, security of
tenure would not be a Chinese wall. Be that as it
may, if the "abolition," which is nothing else but a
separation or removal, is done for political reasons
or purposely to defeat sty of tenure, or otherwise
not in good faith, no valid "abolition' takes place
and whatever "abolition' is done, is void ab initio.

There is an invalid "abolition" as where there is

merely a change of nomenclature of positions, 82 or
where claims of economy are belied by the
existence of ample funds. 83
It is to be stressed that by predisposing a
reorganization to the yardstick of good faith, we
are not, as a consequence, imposing a "cause" for
restructuring. Retrenchment in the course of a
reorganization in good faith is still removal "not
for cause," if by "cause" we refer to "grounds" or
conditions that call for disciplinary action.**
Good faith, as a component of a reorganization
under a constitutional regime, is judged from the
facts of each case. However, under Republic Act
No. 6656, we are told:
SEC. 2. No officer or employee in the career
service shall be removed except for a valid cause
and after due notice and hearing. A valid cause for
removal exists when, pursuant to a bona
fide reorganization, a position has been abolished
or rendered redundant or there is a need to merge,
divide, or consolidate positions in order to meet the
exigencies of the service, or other lawful causes
allowed by the Civil Service Law. The existence of
any or some of the following circumstances may
be considered as evidence of bad faith in the
removals made as a result of reorganization, giving
rise to a claim for reinstatement or reappointment
by an aggrieved party: (a) Where there is a
significant increase in the number of positions in
the new staffing pattern of the department or
agency concerned; (b) Where an office is abolished
and another performing substantially the same
functions is created; (c) Where incumbents are
replaced by those less qualified in terms of status
of appointment, performance and merit; (d) Where
there is a reclassification of offices in the
department or agency concerned and the
reclassified offices perform substantially the same
functions as the original offices; (e) Where the
removal violates the order of separation provided
in Section 3 hereof. 84
It is in light hereof that we take up questions about
Commissioner Mison's good faith, or lack of it.
Admin. Law | 45

Reorganization of the Bureau

Lack of Good Faith in.

of

Customs,

The Court finds that after February 2, 1987 no

perceptible restructuring of the Customs hierarchy
except for the change of personnel has
occurred, which would have justified (an things
being equal) the contested dismisses. The
contention that the staffing pattern at the Bureau
(which would have furnished a justification for a
personnel movement) is the same s pattern
prescribed by Section 34 of Executive Order No.
127 already prevailing when Commissioner Mison
took over the Customs helm, has not been
successfully contradicted 85 There is no showing
that legitimate structural changes have been made
or a reorganization actually undertaken, for that
matter at the Bureau since Commissioner Mison
assumed office, which would have validly
prompted him to hire and fire employees. There
can therefore be no actual reorganization to speak
of, in the sense, say, of reduction of personnel,
consolidation of offices, or abolition thereof by
reason of economy or redundancy of functions, but
a revamp of personnel pure and simple.
The records indeed show that Commissioner
Mison separated about 394 Customs personnel but
replaced them with 522 as of August 18,
1988. 86 This betrays a clear intent to "pack" the
Bureau of Customs. He did so, furthermore, in
defiance of the President's directive to halt further
layoffs
as
a
consequence
of
87
reorganization. Finally, he was aware that layoffs
should observe the procedure laid down by
Executive Order No. 17.
We are not, of course, striking down Executive
Order No. 127 for repugnancy to the Constitution.
While the act is valid, still and all, the means with
which it was implemented is not. 88
Executive Order No. 127, Specific Case of.
With respect to Executive Order No. 127,
Commissioner Mison submits that under Section
59 thereof, "[t]hose incumbents whose positions
are not included therein or who are not reappointed

shall be deemed separated from the service." He

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

Admin. Law | 46

Resume.
In resume, we restate as follows:
1. The President could have validly removed
government employees, elected or appointed,
without cause but only before the effectivity of the
1987 Constitution on February 2, 1987 (De Leon v.
Esguerra, supra; Palma-Fernandez vs. De la
Paz, supra); in this connection, Section 59 (on nonreappointment of incumbents) of Executive Order
No. 127 cannot be a basis for termination;
2. In such a case, dismissed employees shall be
paid separation and retirement benefits or upon
their option be given reemployment opportunities
(CONST. [1987], art. XVIII, sec. 16; Rep. Act No.
6656, sec. 9);
3. From February 2, 1987, the State does not lose
the right to reorganize the Government resulting in
the separation of career civil service employees
[CONST. (1987), supra] provided, that such a
reorganization is made in good faith. (Rep. Act No.
6656, supra.)
G.R. No. 83737
This disposition also resolves G.R. No. 83737. As
we have indicated, G.R. No. 83737 is a challenge
to the validity of Republic Act No. 6656. In brief, it
is argued that the Act, insofar as it strengthens
security of tenure 91 and as far as it provides for a
retroactive effect, 92 runs counter to the transitory
provisions of the new Constitution on removals not
for cause.
It can be seen that the Act, insofar as it provides for
reinstatament of employees separated without "a
valid cause and after due notice and hearing" 93 is
not contrary to the transitory provisions of the new
Constitution. The Court reiterates that although the
Charter's transitory provisions mention separations
"not for cause," separations thereunder must
nevertheless be on account of a valid
reorganization and which do not come about
automatically. Otherwise, security of tenure may be
invoked. Moreover, it can be seen that the statute

itself recognizes removals without cause. However,

it also acknowledges the possibility of the
leadership using the artifice of reorganization to
frustrate security of tenure. For this reason, it has
installed
safeguards.
There
is
nothing
unconstitutional about the Act.
We recognize the injury Commissioner Mison's
replacements would sustain. We also commisserate
with them. But our concern is the greater wrong
inflicted on the dismissed employees on account of
their regal separation from the civil service.
WHEREFORE, THE RESOLUTIONS OF THE
CIVIL SERVICE COMMISSION, DATED JUNE
30, 1988, SEPTEMBER 20, 1988, NOVEMBER
16, 1988, INVOLVED IN G.R. NOS. 85310,
85335, AND 86241, AND MAY 8, 1989,
INVOLVED IN G.R. NO. 85310, ARE
AFFIRMED.
THE PETITIONS IN G.R. NOS. 81954, 81967,
82023, AND 85335 ARE GRANTED. THE
PETITIONS IN G.R. NOS. 83737, 85310 AND
86241 ARE DISMISSED.
THE COMMISSIONER OF CUSTOMS IS
ORDERED TO REINSTATE THE EMPLOYEES
SEPARATED AS A RESULT OF HIS NOTICES
DATED JANUARY 26, 1988.
THE EMPLOYEES WHOM COMMISSIONER
MISON MAY HAVE APPOINTED AS
REPLACEMENTS ARE ORDERED TO VACATE
THEIR POSTS SUBJECT TO THE PAYMENT
OF WHATEVER BENEFITS THAT MAY BE
PROVIDED BY LAW.
NO COSTS.
IT IS SO ORDERED.
TONDO
MEDICAL
CENTER
EMPLOYEES
ASSOCIATION,
RESEARCH
INSTITUTE
FOR
TROPICAL MEDICINE EMPLOYEES
ASSOCIATION,
NATIONAL
ORTHOPEDIC WORKERS UNION, DR.
Admin. Law | 47

G.R

JOSE
R.
REYES
MEMORIAL
HOSPITAL EMPLOYEES UNION, SAN
LAZARO HOSPITAL EMPLOYEES
ASSOCIATION,
ALLIANCE
OF
HEALTH WORKERS, INC., HEALTH
ALLIANCE
FOR
DEMOCRACY,
COUNCIL
FOR
HEALTH
DEVELOPMENT,
NETWORK
OPPOSED
TO
PRIVATIZATION,
COMMUNITY
MEDICINE
DEVELOPMENT FOUNDATION INC.,
PHILIPPINE SOCIETY OF SANITARY
ENGINEERS INC., KILUSANG MAYO
UNO,
GABRIELA,
KILUSANG
MAGBUBUKID
NG
PILIPINAS,
KALIPUNAN NG DAMAYAN NG MGA
MARALITA, ELSA O. GUEVARRA,
ARCADIO B. GONZALES, JOSE G.
GALANG, DOMINGO P. MANAY, TITO
P. ESTEVES, EDUARDO P. GALOPE,
REMEDIOS M. YSMAEL, ALFREDO
BACUATA, EDGARDO J. DAMICOG,
REMEDIOS M. MALTU AND REMEGIO
S. MERCADO,

Present:

Petitioners,

VELASCO, JR., and

PUNO,
QUISUMBING,
YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
AZCUNA,
TINGA,
CHICO-NAZARIO,
GARCIA,

NACHURA,
- versus -

Pro

THE
COURT
OF
APPEALS,
EXECUTIVE SECRETARY ALBERTO
G.
ROMULO,
SECRETARY
OF
HEALTH
MANUEL M.
DAYRIT,
SECRETARY
OF
BUDGET
AND
MANAGEMENT
EMILIA
T.
BONCODIN,

Jul
x-------------------------------------------------x

Respondents.
DECISION

Admin. Law | 48

of the National Health Insurance Program (NHIP).

[2]

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari, under

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

HEALTH
(HSRA)

SECTOR

REFORM

AGENDA

In 1999, the DOH launched the HSRA, a reform

agenda developed by the HSRA Technical Working
Group after a series of workshops and analyses
with inputs from several consultants, program
managers and technical staff possessing the
adequate expertise and experience in the health
sector. It provided for five general areas of reform:
(1) to provide fiscal autonomy to government
hospitals; (2) secure funding for priority public
health programs; (3) promote the development of
local health systems and ensure its effective
performance; (4) strengthen the capacities of health
regulatory agencies; and (5) expand the coverage

Petitioners questioned the first reform agenda

involving the fiscal autonomy of government
hospitals, particularly the collection of socialized
user fees and the corporate restructuring of
government hospitals. The said provision under the
HSRA reads:

Provide fiscal autonomy to government

hospitals. Government hospitals must be allowed
to collect socialized user fees so they can reduce
the dependence on direct subsidies from the
government. Their
critical
capacities
like
diagnostic equipment, laboratory facilities and
medical staff capability must be upgraded to
effectively
exercise
fiscal
autonomy.Such
investment must be cognizant of complimentary
capacity
provided
by
public-private
networks. Moreover such capacities will allow
government hospitals to supplement priority public
health
programs. Appropriate
institutional
arrangement must be introduced such as allowing
them autonomy towards converting them into
government corporations without compromising
their social responsibilities. As a result,
government hospitals are expected to be more
competitive and responsive to health needs.

Petitioners also assailed the issuance of a draft

administrative order issued by the DOH, dated 5
January 2001, entitled Guidelines and Procedure in
the Implementation of the Corporate Restructuring
of Selected DOH Hospitals to Achieve Fiscal
Autonomy, and Managerial Flexibility to Start by
January 2001;[3] and Administrative Order No. 172
of the DOH, entitled Policies and Guidelines on the
Private Practice of Medical and Paramedical
Professionals in Government Health Facilities,
[4]
dated 9 January 2001, for imposing an added

Admin. Law | 49

burden to indigent Filipinos, who cannot afford to

pay for medicine and medical services.[5]

Petitioners alleged that the implementation of the

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

ART. III, SEC. 1. No person shall be deprived of

life, liberty or property without due process of law,
nor shall any person be denied the equal protection
of the law.

ART II, SEC. 13. The State recognizes the vital

role of the youth in nation-building and shall
promote and protect their physical, moral, spiritual,
intellectual and social well-being x x x.

ART II, SEC. 18. The State affirms labor as a

primary social economic force. It shall protect the
rights of workers and promote their welfare.

ART XV, SEC. 1. The State recognizes the Filipino

family
as
the
foundation
of
the
nation. Accordingly, it shall strengthen its
solidarity and actively promote its total
development.

ART XV, SEC. 3. The State shall defend:

ART II, SEC. 5. The maintenance of peace and
order, the protection of life, liberty, and property,
and the promotion of the general welfare are
essential for the enjoyment of all the people of the
blessings of democracy.

ART II, SEC. 9. The State shall promote a just and

dynamic social order that will ensure the prosperity
and independence of the nation and free the people
from poverty through policies that provide
adequate social services, promote full employment,
a rising standard of living and an improved quality
of life for all.

ART II, SEC. 10. The State shall promote social

justice in all phases of national development.

ART II, SEC. 11. The State values the dignity of

every human person and guarantees full respect for
human rights.

xxxx
(2) the right of children to assistance, including
proper care and nutrition, and special protection
from all forms of neglect, abuse, cruelty,
exploitation and other conditions prejudicial to
their development.

xxxx

ART XIII, SEC. 14. The State shall protect

working women by providing safe and healthful
working conditions, taking into account their
maternal functions, and such facilities and
opportunities that will enhance their welfare and
enable them to realize their full potential in the
service of the nation.

Admin. Law | 50

ART II, SEC. 15. The State shall protect and

promote the right to health of the people and instill
health consciousness among them.

ART XIII, SEC. 11. The State shall adopt an

integrated and comprehensive approach to health
development which shall endeavor to make
essential goods, health and other social services
available to all people at affordable cost. There
shall be priority for the needs of the
underprivileged sick, elderly, disabled, women, and
children. The State shall endeavor to provide free
medical care to paupers.

of the intended changes. The RSP shall contain the

following:

a)
the specific shift in policy directions,
functions, programs and activities/strategies;
b)
the structural and organizational shift,
stating the specific functions and activities by
organizational unit and the relationship of each
units;
c)
the staffing shift, highlighting and
itemizing the existing filled and unfilled positions;
and
d)
the resource
allocation
shift,
specifying the effects of the streamline set-up on
the agency budgetary allocation and indicating
where possible, savings have been generated.

EXECUTIVE ORDER NO. 102

On 24
May
1999,
then
President
Joseph Ejercito Estrada issued Executive Order
No. 102, entitled Redirecting the Functions and
Operations of the Department of Health, which
provided for the changes in the roles, functions,
and organizational processes of the DOH. Under
the assailed executive order, the DOH refocused its
mandate from being the sole provider of health
services to being a provider of specific health
services and technical assistance, as a result of the
devolution of basic services to local government
units. The provisions for the streamlining of the
DOH and the deployment of DOH personnel to
regional offices and hospitals read:

Sec. 4. Preparation of a Rationalization and

Streamlining Plan. In view of the functional and
operational redirection in the DOH, and to effect
efficiency and effectiveness in its activities, the
Department shall prepare a Rationalization and
Streamlining Plan (RSP) which shall be the basis

The RSP shall [be] submitted to the Department of

Budget and Management for approval before the
corresponding shifts shall be affected (sic) by the
DOH Secretary.

Sec.
5. Redeployment
of
Personnel. The
redeployment of officials and other personnel on
the basis of the approved RSP shall not result in
diminution in rank and compensation of existing
personnel. It shall take into account all pertinent
Civil Service laws and rules.

Section 6. Funding. The financial resources needed

to implement the Rationalization and Streamlining
Plan shall be taken from funds available in the
DOH, provided that the total requirements for the
implementation of the revised staffing pattern shall
not exceed available funds for Personnel Services.

Admin. Law | 51

Section 7. Separation Benefits. Personnel who opt

to be separated from the service as a consequence
of the implementation of this Executive Order shall
be entitled to the benefits under existing laws. In
the case of those who are not covered by existing
laws, they shall be entitled to separation benefits
equivalent to one month basic salary for every year
of service or proportionate share thereof in addition
to the terminal fee benefits to which he/she is
entitled under existing laws.

Executive Order No. 102 was enacted pursuant to

Section 17 of the Local Government Code
(Republic Act No. 7160), which provided for the
devolution to the local government units of basic
services and facilities, as well as specific healthrelated functions and responsibilities. [7]

Petitioners contended that a law, such as Executive

Order No. 102, which effects the reorganization of
the DOH, should be enacted by Congress in the
exercise of its legislative function. They argued
that Executive Order No. 102 is void, having been
issued in excess of the Presidents authority.[8]
Moreover,
petitioners
averred
that
the
implementation of the Rationalization and
Streamlining Plan (RSP) was not in accordance
with law. The RSP was allegedly implemented
even before the Department of Budget and
Management (DBM) approved it. They also
maintained that the Office of the President should
have issued an administrative order to carry out the
streamlining, but that it failed to do so. [9]

Furthermore,
petitioners
Elsa
O. Guevarra, Arcadio B. Gonzales, Jose G. Galang,
Domingo
P. Manay,
Eduardo
P. Galope, Remedios M. Ysmael,
Alfredo
U. Bacuata and Edgardo J. Damicog, all DOH
employees, assailed the validity of Executive Order

No. 102 on the ground that they were likely to lose

their jobs, and that some of them were suffering
from the inconvenience of having to travel a longer
distance to get to their new place of work, while
other DOH employees had to relocate to far-flung
areas.[10]

Petitioners also pointed out several errors in the

implementation of the RSP. Certain employees
allegedly suffered diminution of compensation,
[11]
while others were supposedly assigned to
positions for which they were neither qualified nor
suited.[12] In addition, new employees were
purportedly hired by the DOH and appointed to
positions for which they were not qualified, despite
the fact that the objective of the ongoing
streamlining was to cut back on costs. [13] It was
also averred that DOH employees were deployed
or transferred even during the three-month period
before the national and local elections in May
2001,[14] in violation of Section 2 of the Republic
Act No. 7305, also known as Magna Carta for
Public Health Workers.[15] Petitioners, however,
failed to identify the DOH employees referred to
above, much less include them as parties to the
petition.
The Court of Appeals denied the petition due to a
number of procedural defects, which proved
fatal: 1) Petitioners failed to show capacity or
authority to sign the certification of non-forum
shopping and the verification; 2) Petitioners failed
to show any particularized interest for bringing the
suit, nor any direct or personal injury sustained or
were in the immediate danger of sustaining; 3) the
Petition, brought before the Supreme Court on 15
August 1999, was filed out of time, or beyond 60
days from the time the reorganization methods
were implemented in 2000; and 4) certiorari,
Prohibition and Mandamus will not lie where
the President, in issuing the assailed Executive
Order, was not acting as a tribunal, board or officer
exercising judicial or quasi-judicial functions.

Admin. Law | 52

In resolving the substantial issues of the case, the

Court of Appeals ruled that the HSRA cannot be
declared void for violating Sections 5, 9, 10, 11,
13, 15, 18 of Article II; Section 1 of Article III;
Sections 11 and 14 of Article XIII; and Sections 1
and 3(2) of Article XV, all of the 1987
Constitution, which directly or indirectly pertain to
the duty of the State to protect and promote the
peoples right to health and well-being. It reasoned
that the aforementioned provisions of the
Constitution are not self-executing; they are not
judicially enforceable constitutional rights and can
only provide guidelines for legislation.

Moreover, the Court of Appeals held that the

petitioners assertion that Executive Order No. 102
is detrimental to the health of the people cannot be
made a justiciable issue. The question of whether
the HSRA will bring about the development or
disintegration of the health sector is within the
realm of the political department.

Furthermore, the Court of Appeals decreed that the

President was empowered to issue Executive Order
No. 102, in accordance with Section 17 Article VII
of the 1987 Constitution. It also declared that the
DOH did not implement Executive Order No. 102
in bad faith or with grave abuse of discretion, as
alleged by the petitioners, as the DOH issued
Department Circular No. 275-C, Series of 2000,
which created the different committees tasked with
the implementation of the RSP, only after both the
DBM and Presidential Committee on Effective
Governance (PCEG) approved the RSP on 8 July
2000 and 17 July 2000, respectively.

Petitioners filed with the Court of Appeals a

Motion for Reconsideration of the Decision
rendered on 26 November 2004, but the same was
denied in a Resolution dated 7 March 2005.

Hence, the present petition, where the following

issues are raised:

I.

THE HONORABLE COURT OF APPEALS

COMMITTED MANIFEST ERROR IN RULING
THAT ANY QUESTION ON THE WISDOM
AND EFFICACY OF THE HEALTH SECTOR
REFORM AGENDA IS NOT A JUSTICIABLE
CONTROVERSY
AND
THAT
THE
CONSTITUTIONAL
PROVISIONS
PROTECTING THE HEALTH OF THE
FILIPINO PEOPLE ARE NOT JUDICIALLY
ENFORCEABLE;

II.

THE HONORABLE COURT OF APPEALS

COMMITTED MANIFEST ERROR IN RULING
THAT PETITIONERS COMPLAINT THAT
EXECUTIVE
ORDER
NO.
102
IS
DETRIMENTAL TO THE FILIPINO IS
LIKEWISE
NOT
A
JUSTICIABLE
CONTROVERSY AND THAT THE PRESIDENT
HAS THE AUTHORITY TO ISSUE SAID
ORDER; AND

III.
THE HONORABLE COURT OF APPEALS
COMMITTED
MANIFEST
ERROR
IN
UPHOLDING TECHNICALITIES OVER AND
ABOVE THE ISSUES OF TRANSCENDENTAL
IMPORTANCE RAISED IN THE PETITION
BELOW. [16]

Admin. Law | 53

The Court finds the present petition to be without

merit.

its power of judicial review, and by the legislature

in its enactment of laws.

Petitioners allege that the HSRA should be

declared void, since it runs counter to the
aspiration and ideals of the Filipino people as
embodied in the Constitution.[17] They claim that
the HSRAs policies of fiscal autonomy, income
generation, and revenue enhancement violate
Sections 5, 9, 10, 11, 13, 15 and 18 of Article II,
Section 1 of Article III; Sections 11 and 14 of
Article XIII; and Sections 1 and 3 of Article XV of
the 1987 Constitution. Such policies allegedly
resulted in making inaccessible free medicine and
free medical services. This contention is
unfounded.

In Basco v. Philippine Amusement and Gaming

Corporation,[20] this Court declared that Sections
11, 12, and 13 of Article II; Section 13 of Article
XIII; and Section 2 of Article XIV of the 1987
Constitution
are
not
self-executing
provisions. In Tolentino v. Secretary of Finance,
[21]
the Court referred to Section 1 of Article XIII
and Section 2 of Article XIV of the Constitution as
moral incentives to legislation, not as judicially
enforceable rights. These provisions, which merely
lay down a general principle, are distinguished
from other constitutional provisions as non selfexecuting and, therefore, cannot give rise to a
cause of action in the courts; they do not embody
judicially enforceable constitutional rights. [22]

As a general rule, the provisions of the

Constitution are considered self-executing, and do
not require future legislation for their
enforcement. For if they are not treated as selfexecuting, the mandate of the fundamental law can
be easily nullified by the inaction of Congress.
[18]
However, some provisions have already been
categorically declared by this Court as non selfexecuting.

[19]

In Tanada v. Angara, the Court specifically set

apart the sections found under Article II of the
1987 Constitution as non self-executing and ruled
that such broad principles need legislative
enactments before they can be implemented:

By its very title, Article II of the Constitution is a

declaration of principles and state policies.
x x x. These principles in Article II are not
intended to be self-executing principles ready for
enforcement through the courts. They are used by
the judiciary as aids or as guides in the exercise of

Some of the constitutional provisions invoked in

the present case were taken from Article II of the
Constitution -- specifically, Sections 5, 9, 10, 11,
13, 15 and 18 -- the provisions of which the Court
categorically ruled to be non self-executing in
the aforecited case of Taada v. Angara.[23]

Moreover, the records are devoid of any

explanation of how the HSRA supposedly violated
the equal protection and due process clauses that
are embodied in Section 1 of Article III of the
Constitution. There were no allegations of
discrimination or of the lack of due process in
connection with the HSRA. Since they failed to
substantiate how these constitutional guarantees
were breached, petitioners are unsuccessful in
establishing the relevance of this provision to the
petition, and consequently, in annulling the HSRA.

Admin. Law | 54

In the remaining provisions, Sections 11 and 14 of

Article XIII and Sections 1 and 3 of Article XV, the
State accords recognition to the protection of
working women and the provision for safe and
healthful working conditions; to the adoption of an
integrated and comprehensive approach to health;
to the Filipino family; and to the right of children
to assistance and special protection, including
proper care and nutrition. Like the provisions that
were declared as non self-executory in the cases
of Basco v. Philippine Amusement and Gaming
Corporation[24] and Tolentino v.
Secretary
of
[25]
Finance, they are mere statements of principles
and policies.As such, they are mere directives
addressed to the executive and the legislative
departments. If unheeded, the remedy will not lie
with the courts; but rather, the electorates
displeasure may be manifested in their votes.

The rationale for this is given by Justice

Dante Tinga in his Separate Opinion in the case
of Agabon v.
National
Labor
Relations
[26]
Commission :

x x x However, to declare that the constitutional

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

executing provisions they cite herein. There are

two reasons for denying a cause of action to an
alleged infringement of broad constitutional
principles: basic considerations of due process and
the limitations of judicial power.[27]

Petitioners also claim that Executive Order No.

102 is void on the ground that it was issued by the
President in excess of his authority. They maintain
that the structural and functional reorganization of
the DOH is an exercise of legislative functions,
which the President usurped when he issued
Executive Order No. 102.[28]This line of argument
is without basis.

This Court has already ruled in a number of cases

that the President may, by executive or
administrative order, direct the reorganization of
government entities under the Executive
Department.[29] This is also sanctioned under the
Constitution, as well as other statutes.

Section 17, Article VII of the 1987 Constitution,

clearly states: [T]he president shall have control of
all
executive
departments,
bureaus
and
offices. Section 31, Book III, Chapter 10 of
Executive Order No. 292, also known as the
Administrative Code of 1987 reads:

SEC. 31. Continuing Authority of the President

to Reorganize his Office - The President, subject to
the policy in the Executive Office and in order to
achieve simplicity, economy and efficiency, shall
have continuing authority to reorganize the
administrative structure of the Office of the
President. For this purpose, he may take any of the
following actions:

The HSRA cannot be nullified based solely on

petitioners bare allegations that it violates the
general principles expressed in the non selfAdmin. Law | 55

(1)
Restructure the internal organization of
the Office of the President Proper, including the
immediate offices, the Presidential Special
Assistants/Advisers System and the Common Staff
Support System, by abolishing consolidating or
merging units thereof or transferring functions
from one unit to another;

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

(3)
Transfer any agency under the Office
of the President to any other department or agency
as well as transfer agencies to the Office of the
President from other Departments or agencies.

In Domingo v. Zamora,[30] this Court explained the

rationale behind the Presidents continuing
authority under the Administrative Code to
reorganize the administrative structure of the
Office of the President. The law grants the
President the power to reorganize the Office of the
President in recognition of the recurring need of
every President to reorganize his or her office to
achieve simplicity, economy and efficiency. To
remain effective and efficient, it must be capable of
being shaped and reshaped by the President in the
manner the Chief Executive deems fit to carry out
presidential directives and policies.

The Administrative Code provides that the Office

of the President consists of the Office of the
President Proper and the agencies under it. [31] The
agencies under the Office of the President are
identified in Section 23, Chapter 8, Title II of the
Administrative Code:

Sec. 23. The Agencies under the Office of the

President.The agencies under the Office of the
President refer to those offices placed under the
chairmanship of the President, those under the
supervision and control of the President, those
under the administrative supervision of the Office
of the President, those attached to it for policy and
program coordination, and those that are not placed
by law or order creating them under any specific
department. (Emphasis provided.)

Section 2(4) of the Introductory Provisions of the

Administrative Code defines the term agency of
the government as follows:

Agency of the Government refers to any of the

various units of the Government, including a
department, bureau, office, instrumentality, or
government-owned or controlled corporation, or a
local government or a distinct unit therein.

Furthermore, the DOH is among the cabinet-level

departments enumerated under Book IV of the
Administrative Code, mainly tasked with the
functional distribution of the work of the President.
[32]
Indubitably, the DOH is an agency which is
under the supervision and control of the President
and, thus, part of the Office of the
President. Consequently, Section 31, Book III,
Chapter 10 of the Administrative Code, granting
the President the continued authority to reorganize
the Office of the President, extends to the DOH.

The power of the President to reorganize the

executive department is likewise recognized in
Admin. Law | 56

general appropriations laws. As early as 1993,

Sections 48 and 62 of Republic Act No. 7645, the
General Appropriations Act for Fiscal Year 1993,
already contained a provision stating that:

organizational structures and funded

appropriations provided by this Act.

Sec. 48. Scaling Down and Phase Out of Activities

Within the Executive Branch.The heads of
departments, bureaus and offices and agencies are
hereby directed to identify their respective
activities which are no longer essential in the
delivery of public services and which may be
scaled down, phased out, or abolished, subject to
civil service rules and regulations. x x x. Actual
scaling down, phasing out, or abolition of
activities shall be effected pursuant to Circulars
or Orders issued for the purpose by the Office
of the President. (Emphasis provided.)

Clearly, Executive Order No. 102 is well within the

constitutional power of the President to issue. The
President did not usurp any legislative prerogative
in issuing Executive Order No. 102. It is an
exercise of the Presidents constitutional power of
control over the executive department, supported
by the provisions of the Administrative Code,
recognized by other statutes, and consistently
affirmed by this Court.

Sec.
62. Unauthorized
Organizational
Changes. Unless otherwise created by law or
directed by the President of the Philippines, no
organizational unit or changes in key positions in
any department or agency shall be authorized in
their respective organizational structures and be
funded form appropriations by this Act.

Again, in the year when Executive Order No. 102

was issued, The General Appropriations Act of
Fiscal Year 1999 (Republic Act No. 8745)
conceded to the President the power to make any
changes in any of the key positions and
organizational units in the executive department
thus:

Sec. 77. Organized Changes. Unless otherwise

provided by law or directed by the President of
the Philippines, no changes in key positions or
organizational units in any department or agency
shall be authorized in their respective

from

Petitioners also pointed out several flaws in the

implementation of Executive Order No. 102,
particularly the RSP. However, these contentions
are without merit and are insufficient to invalidate
the executive order.

The RSP was allegedly implemented even before

the DBM approved it. The facts show otherwise. It
was only after the DBM approved the Notice of
Organization, Staffing and Compensation Action
on 8 July 2000,[33] and after the Presidential
Committee on Effective Governance (PCEG)
issued on 17 July 2000 Memorandum Circular No.
62,[34] approving the RSP, that then DOH Secretary
Alberto G. Romualdez issued on 28 July 2000
Department Circular No. 275-C, Series of 2000,
[35]
creating the different committees to implement
the RSP.

Petitioners also maintain that the Office of the

President should have issued an administrative
order to carry out the streamlining, but that it failed
to do so. Such objection cannot be given any
weight considering that the acts of the DOH
Secretary, as an alter ego of the President, are
presumed to be the acts of the President. The
Admin. Law | 57

members of the Cabinet are subject at all times to

the disposition of the President since they are
merely his alter egos.[36] Thus, their acts, performed
and promulgated in the regular course of business,
are, unless disapproved by the President,
presumptively
acts
of
the
President.
[37]
Significantly, the acts of the DOH Secretary
were clearly authorized by the President, who, thru
the
PCEG,
issued
the
aforementioned
Memorandum Circular No. 62, sanctioning the
implementation of the RSP.

Petitioners
Elsa Odonzo Guevarra, Arcadio B.
Gonzales, Jose G. Galang, Domingo P. Manay,
Eduardo P. Galope, Remedios M. Ysmael, Alfredo
U. Bacuata, and Edgardo Damicog, all DOH
employees, assailed the validity of Executive Order
No. 102 on the ground that they were likely to lose
their jobs, and that some of them were suffering
from the inconvenience of having to travel a longer
distance to get to their new place of work, while
other DOH employees had to relocate to far-flung
areas.

In several cases, this Court regarded

reorganizations
of
government
units
or
departments as valid, for so long as they are
pursued in good faiththat is, for the purpose of
economy or to make bureaucracy more efficient.
[38]
On the other hand, if the reorganization is done
for the purpose of defeating security of tenure or
for ill-motivated political purposes, any abolition
of position would be invalid. None of these
circumstances are applicable since none of the
petitioners were removed from public service, nor
did they identify any action taken by the DOH that
would unquestionably result in their dismissal. The
reorganization that was pursued in the present case
was made in good faith. The RSP was clearly
designed to improve the efficiency of the
department and to implement the provisions of the
Local Government Code on the devolution of
health services to local governments. While this
Court recognizes the inconvenience suffered by

public servants in their deployment to distant areas,

the executive departments finding of a need to
make health services available to these areas and to
make delivery of health services more efficient and
more compelling is far from being unreasonable or
arbitrary, a determination which is well within its
authority. In all, this Court finds petitioners
contentions to be insufficient to invalidate
Executive Order No. 102.

Without identifying the DOH employees

concerned, much less including them as parties to
the petition, petitioners went on identifying several
errors in the implementation of Executive Order
No. 102. First, they alleged that unidentified DOH
employees suffered from a diminution of
compensation by virtue of the provision on Salaries
and Benefits found in Department Circular No.
312, Series of 2000, issued on 23 October 2000,
which reads:

2. Any employee who was matched to a position

with lower salary grade (SG) shall not suffer a
reduction in salary except where his/her current
salary is higher than the maximum step of the SG
of the new position, in which case he/she shall be
paid the salary corresponding to the maximum step
of the SG of the new position. RATA shall no
longer be received, if employee was matched to a
Non-Division Chief Position.

Incidentally, the petition shows that none of the

petitioners, who are working in the DOH, were
entitled to receive RATA at the time the petition
was filed. Nor was it alleged that they suffered any
diminution of compensation. Secondly, it was
claimed that certain unnamed DOH employees
were matched with unidentified positions for
which they were supposedly neither qualified nor
suited. New employees, again unnamed and not
Admin. Law | 58

included as parties, were hired by the DOH and

appointed to unidentified positions for which they
were purportedly not qualified, despite the fact that
the objective of the ongoing streamlining was to
cut back on costs. Lastly, unspecified DOH
employees were deployed or transferred during the
three-month period before the national and local
elections in May 2001, in violation of Section 2 of
the Republic Act No. 7305, also known as
Magna Carta for Public Health Workers.

Petitioners allegations are too general and

unsubstantiated by the records for the Court to pass
upon. The persons involved are not identified,
details of their appointments and transfers such as
position, salary grade, and the date they were
appointed - are not given; and the circumstances
which attended the alleged violations are not
specified.

Even granting that these alleged errors were

adequately proven by the petitioners, they would
still not invalidate Executive Order No. 102. Any
serious legal errors in laying down the
compensation of the DOH employees concerned
can only invalidate the pertinent provisions
of Department Circular No. 312, Series of
2000. Likewise, any questionable appointments or
transfers are properly addressed by an appeal
process provided under Administrative Order No.
94, series of 2000;[39] and if the appeal is
meritorious, such appointment or transfer may be
invalidated. The validity of Executive Order No.
102
would,
nevertheless,
remain
unaffected. Settled is the rule that courts are not at
liberty to declare statutes invalid, although they
may be abused or misabused, and may afford an
opportunity for abuse in the manner of
application. The validity of a statute or ordinance is
to be determined from its general purpose and its
efficiency to accomplish the end desired, not from
its effects in a particular case.[40]

In a number of cases,[41] the Court upheld the

standing of citizens who filed suits, wherein the
transcendental importance of the constitutional
question justified the granting of relief. In spite of
these rulings, the Court, in Domingo v. Carague,
[42]
dismissed the petition when petitioners therein
failed to show any present substantial interest. It
demonstrated how even in the cases in which the
Court declared that the matter of the case was of
transcendental importance, the petitioners must be
able to assert substantial interest. Present
substantial interest, which will enable a party to
question the validity of the law, requires that a
party sustained or will sustain direct injury as a
result of its enforcement.[43] It is distinguished from
a mere expectancy or future, contingent,
subordinate, or inconsequential interest. [44]

In the same way, the Court, in Telecommunications

& Broadcast Attorneys of the Philippines, Inc.
v. Comelec,[45] ruled that a citizen is allowed to
raise a constitutional question only when he can
show that he has personally suffered some actual or
threatened injury as a result of the allegedly illegal
conduct of the government; the injury is fairly
traceable to the challenged action; and the injury is
likely to be redressed by a favorable action. This
case likewise stressed that the rule on
constitutional
questions
which
are
of
transcendental importance cannot be invoked
where a partys substantive claim is without
merit. Thus, a partys standing is determined by the
substantive merit of his case or a preliminary
estimate thereof. After a careful scrutiny of the
petitioners substantive claims, this Court finds that
the petitioners miserably failed to show any merit
to their claims.

IN VIEW OF THE FOREGOING, the instant

Petition is DENIED. This Court AFFIRMS the
assailed Decision of the Court of Appeals,
promulgated on 26 November 2004, declaring both
the HSRA and Executive Order No. 102 as
valid. No costs.
Admin. Law | 59

SO ORDERED.

YLVIA BANDA, CONSORICIA O.

N, RADITO V. PADRIGANO,
R. DE MESA, LEAH P. DELA
ANDY V. MACASAQUIT, SENEN
DOBA, ALBERT BRILLANTES,
A
BISDA,
JOVITA
V.
PCION,
TERESITA
G.
JAL, ROSANNA T. MALIWANAG,
RD
ODERON,
CECILIA
NON, BENEDICTO CABRAL, MA.
RIA E. LAROCO, CESAR ANDRA,
SIMO GALACIO, ELSA R.
, FILOMENA A. GALANG, JEAN
MELEGRITO,
CLARO
G.
GO, JR., EDUARDO FRIAS,
LDO O. ANDAL, NEPHTALIE
O, RUEL BALAGTAS, VICTOR
IZ, FRANCISCO P. REYES, JR.,
M. BALAGOT, JR., JOSE C.
LVE, JR., ARTURO ADSUARA,
DRERO, JR., NELSON PADUA,
LA C. SAYAO, ANGELITO
AS,
GLORIA
RAMENTO,
A
SUPLEO,
MANUEL
IQUE, E. TAYLAN, CARMELA
DANILO VARGAS, ROY-LEO C.
ALLAN
VILLANUEVA,
E R. VELASCO, JR., IMELDA
FLORIZA M. CATIIS, RANIEL
CO, E. JALIJALI, MARIO C.
N, DOLORES M. AVIADO,
EL P. LAPLANA, GUILLERMO
ANO, ALICE E. SOJO, ARTHUR
ARNE,
LETICIA
SORIANO,
CO RAMOS, JR., PETERSON
UED, RODELIO L. GOMEZ,
IO D. GARCIA, JR., ANTONIO
A. SANCHEZ, SOL E. TAMAYO,
INE A.M. COCJIN, DAMIAN
O, JR., EDLYN MARIANO, M.A.
UM, ALFREDO S. ESTRELLA,
US MEL SAYO,

G.R. No. 166620

EDUARDO R. ERMITA, in his capacity as

Executive Secretary, THE DIRECTOR
GENERAL
OF
THE
PHILIPPINE
INFORMATION
AGENCY and THE
NATIONAL TREASURER,

Present:

PUNO, C.J.,
CARPIO,
CORONA,
CARPIO MORALES,
VELASCO, JR.,
NACHURA,

LEONARDO-DE CASTRO
BRION,
PERALTA,
BERSAMIN,
DEL CASTILLO,
ABAD,*
VILLARAMA, JR.,
Admin. Law | 60

PEREZ, and
MENDOZA, JJ.

constitutionality of Executive Order No. 378

dated October 25, 2004, issued by President Gloria
Macapagal Arroyo (President Arroyo). Petitioners
characterize their action as a class suit filed on
their own behalf and on behalf of all their coemployees at the National Printing Office (NPO).

The NPO was formed on July 25, 1987, during the

term of former President Corazon C. Aquino
(President Aquino), by virtue of Executive Order
No. 285[1]which provided, among others, the
creation of the NPO from the merger of the
Government Printing Office and the relevant
printing units of the Philippine Information Agency
(PIA). Section 6 of Executive Order No. 285 reads:

Promulgated:

SECTION 6. Creation of the National Printing

Office. There is hereby created a National Printing
Office out of the merger of the Government
Printing Office and the relevant printing units of
the Philippine Information Agency. The Office
shall have exclusive printing jurisdiction over the
following:

April 20, 2010

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

DECISION

LEONARDO-DE CASTRO, J.:

The present controversy arose from a Petition

for Certiorari and prohibition challenging the

a. Printing, binding and distribution of all standard

and accountable forms of national, provincial, city
and municipal governments, including government
corporations;

b.

Printing of officials ballots;

c.
Printing of public documents such as
the Official Gazette, General Appropriations Act,
Philippine Reports, and development information
materials of the Philippine Information Agency.

The Office may also accept other government

printing jobs, including government publications,
Admin. Law | 61

aside from those enumerated above, but not in an

exclusive basis.

The details of the organization, powers, functions,

authorities, and related management aspects of the
Office shall be provided in the implementing
details which shall be prepared and promulgated in
accordance with Section II of this Executive Order.

The Office shall be attached to the Philippine

Information Agency.

On October 25, 2004, President Arroyo issued the

herein assailed Executive Order No. 378,
amending Section 6 of Executive Order No. 285
by, inter alia, removing the exclusive jurisdiction
of the NPO over the printing services requirements
of government agencies and instrumentalities. The
pertinent portions of Executive Order No. 378, in
turn, provide:

SECTION 1. The NPO shall continue to provide

printing services to government agencies and
instrumentalities as mandated by law. However,
it shall no longer enjoy exclusive jurisdiction
over the printing services requirements of the
government over standard and accountable
forms. It shall have to compete with the private
sector, except in the printing of election
paraphernalia which could be shared with the
Bangko Sentral ng Pilipinas, upon the discretion of
the Commission on Elections consistent with the
provisions of the Election Code of 1987.

SECTION
2. Government
agencies/instrumentalities may source printing
services outside NPO provided that:

2.1 The printing services to be provided by the

private sector is superior in quality and at a lower
cost than what is offered by the NPO; and

2.2 The private printing provider is flexible in

terms of meeting the target completion time of the
government agency.

SECTION 3. In the exercise of its functions, the

amount to be appropriated for the programs,
projects and activities of the NPO in the
General Appropriations Act (GAA) shall be
limited to its income without additional
financial
support
from
the
government. (Emphases
and
underscoring
supplied.)

Pursuant to Executive Order No. 378, government

agencies and instrumentalities are allowed to
source their printing services from the private
sector through competitive bidding, subject to the
condition that the services offered by the private
supplier be of superior quality and lower in cost
compared to what was offered by the
NPO. Executive Order No. 378 also limited NPOs
appropriation in the General Appropriations Act to
its income.

Perceiving Executive Order No. 378 as a threat to

their security of tenure as employees of the NPO,
petitioners now challenge its constitutionality,
contending that: (1) it is beyond the executive
powers of President Arroyo to amend or repeal
Executive Order No. 285 issued by former
President Aquino when the latter still exercised
legislative powers; and (2) Executive Order No.
378 violates petitioners security of tenure, because
Admin. Law | 62

it paves the way for the gradual abolition of the

NPO.

and 3) the parties bringing the class suit are

sufficiently numerous or representative of the class
and can fully protect the interests of all concerned.

We dismiss the petition.

In Mathay v. The Consolidated Bank and Trust
Company,[3] the Court held that:
Before proceeding to resolve the substantive
issues, the Court must first delve into a procedural
matter. Since petitioners instituted this case as a
class suit, the Court, thus, must first determine if
the petition indeed qualifies as one. In Board of
Optometry v. Colet,[2] we held that [c]ourts must
exercise utmost caution before allowing a class
suit, which is the exception to the requirement of
joinder of all indispensable parties. For while no
difficulty may arise if the decision secured is
favorable to the plaintiffs, a quandary would result
if the decision were otherwise as those who were
deemed impleaded by their self-appointed
representatives would certainly claim denial of due
process.

Section 12, Rule 3 of the Rules of Court defines a

class suit, as follows:

Sec. 12. Class suit. When the subject matter of the

controversy is one of common or general interest
to many persons so numerous that it is
impracticable to join all as parties, a number of
them which the court finds to be sufficiently
numerous and representative as to fully protect the
interests of all concerned may sue or defend for the
benefit of all. Any party in interest shall have the
right to intervene to protect his individual interest.

From the foregoing definition, the requisites of a

class suit are: 1) the subject matter of controversy
is one of common or general interest to many
persons; 2) the parties affected are so numerous
that it is impracticable to bring them all to court;

An action does not become a class suit merely

because it is designated as such in the pleadings.
Whether the suit is or is not a class suit depends
upon the attending facts, and the complaint, or
other pleading initiating the class action should
allege the existence of the necessary facts, to wit,
the existence of a subject matter of common
interest, and the existence of a class and the
number of persons in the alleged class, in order
that the court might be enabled to determine
whether the members of the class are so
numerous as to make it impracticable to bring
them all before the court, to contrast the
number appearing on the record with the
number in the class and to determine whether
claimants on record adequately represent the
class and the subject matter of general or
common interest. (Emphases ours.)
Here, the petition failed to state the number of
NPO employees who would be affected by the
assailed Executive Order and who were allegedly
represented by petitioners. It was the Solicitor
General, as counsel for respondents, who pointed
out that there were about 549 employees in the
NPO.[4] The 67 petitioners undeniably comprised a
small fraction of the NPO employees whom they
claimed to represent. Subsequently, 32 of the
original petitioners executed an Affidavit of
Desistance, while one signed a letter denying ever
signing the petition,[5] ostensibly reducing the
number of petitioners to 34. We note that counsel
for the petitioners challenged the validity of the
desistance or withdrawal of some of the petitioners
and insinuated that such desistance was due to
pressure from people close to the seat of power.
[6]
Still, even if we were to disregard the affidavit of
Admin. Law | 63

desistance filed by some of the petitioners, it is

highly doubtful that a sufficient, representative
number of NPO employees have instituted this
purported class suit. A perusal of the petition itself
would show that of the 67 petitioners who signed
the Verification/Certification of Non-Forum
Shopping, only 20 petitioners were in fact
mentioned in the jurat as having duly subscribed
the petition before the notary public. In other
words, only 20 petitioners effectively instituted the
present case.
Indeed, in MVRS Publications, Inc. v. Islamic
Dawah Council of the Philippines, Inc.,[7] we
observed that an element of a class suit or
representative
suit
is
the adequacy
of
representation. In determining the question of fair
and adequate representation of members of a class,
the court must consider (a) whether the interest of
the named party is coextensive with the interest of
the other members of the class; (b) the proportion
of those made a party, as it so bears, to the total
membership of the class; and (c) any other factor
bearing on the ability of the named party to speak
for the rest of the class.

Previously, we held in Ibaes v. Roman Catholic

Church[8] that where the interests of the plaintiffs
and the other members of the class they seek to
represent are diametrically opposed, the class suit
will not prosper.

It is worth mentioning that a Manifestation of

Desistance,[9] to which the previously mentioned
Affidavit of Desistance[10] was attached, was filed
by the President of the National Printing Office
Workers Association (NAPOWA). The said
manifestation expressed NAPOWAs opposition to
the filing of the instant petition in any court. Even
if we take into account the contention of petitioners
counsel that the NAPOWA President had no legal
standing to file such manifestation, the said
pleading is a clear indication that there is a
divergence of opinions and views among the

members of the class sought to be represented, and

not all are in favor of filing the present suit. There
is here an apparent conflict between petitioners
interests and those of the persons whom they claim
to represent. Since it cannot be said that petitioners
sufficiently represent the interests of the entire
class, the instant case cannot be properly treated as
a class suit.

As to the merits of the case, the petition raises two

main grounds to assail the constitutionality of
Executive Order No. 378:
First, it is contended that President Arroyo cannot
amend or repeal Executive Order No. 285 by the
mere issuance of another executive order
(Executive Order No. 378). Petitioners maintain
that former President Aquinos Executive Order No.
285 is a legislative enactment, as the same was
issued while President Aquino still had legislative
powers under the Freedom Constitution; [11] thus,
only Congress through legislation can validly
amend Executive Order No. 285.

Second, petitioners maintain that the issuance of

Executive Order No. 378 would lead to the
eventual abolition of the NPO and would violate
the security of tenure of NPO employees.

Anent the first ground raised in the petition, we

find the same patently without merit.

It is a well-settled principle in jurisprudence that

the President has the power to reorganize the
offices and agencies in the executive department in
line with the Presidents constitutionally granted
power of control over executive offices and by
virtue of previous delegation of the legislative
power to reorganize executive offices under
existing statutes.

Admin. Law | 64

In Buklod ng Kawaning EIIB v. Zamora,[12] the

Court pointed out that Executive Order No. 292 or
the Administrative Code of 1987 gives the
President continuing authority to reorganize and
redefine the functions of the Office of the
President. Section 31, Chapter 10, Title III, Book
III of the said Code, is explicit:

Sec. 31. Continuing Authority of the President to

Reorganize his Office. The President, subject to
the policy in the Executive Office and in order
to achieve simplicity, economy and efficiency,
shall have continuing authority to reorganize
the administrative structure of the Office of the
President. For this purpose, he may take any of the
following actions:

(1) Restructure the internal organization of the

Office of the President Proper, including the
immediate Offices, the President Special
Assistants/Advisers System and the Common Staff
Support System, by abolishing, consolidating or
merging units thereof or transferring functions
from one unit to another;

(2) Transfer any function under the Office of the

President to any other Department or Agency as
well as transfer functions to the Office of the
President from other Departments and Agencies;
and

(3) Transfer any agency under the Office of the

President to any other department or agency as
well as transfer agencies to the Office of the
President from other Departments or agencies.
(Emphases ours.)
Interpreting the foregoing provision, we held
in Buklod ng Kawaning EIIB, thus:

But of course, the list of legal basis authorizing the

President to reorganize any department or agency
in the executive branch does not have to end
here. We must not lose sight of the very source of
the power that which constitutes an express grant
of power. Under Section 31, Book III of Executive
Order No. 292 (otherwise known as the
Administrative Code of 1987), the President,
subject to the policy in the Executive Office and in
order to achieve simplicity, economy and
efficiency, shall have the continuing authority to
reorganize the administrative structure of the
Office of the President. For this purpose, he may
transfer the functions of other Departments or
Agencies
to
the
Office
of
the
President. In Canonizado v. Aguirre [323 SCRA
312
(2000)], we
ruled
that
reorganization involves
the
reduction
of
personnel, consolidation of offices, or abolition
thereof by reason of economy or redundancy of
functions. It takes place when there is an
alteration of the existing structure of
government offices or units therein, including
the lines of control, authority and responsibility
between them. The EIIB is a bureau attached to
the Department of Finance. It falls under the Office
of the President. Hence, it is subject to the
Presidents continuing authority to reorganize.
[13]
(Emphasis ours.)

It is undisputed that the NPO, as an agency that is

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

Pertinent to the case at bar, Section 31 of the

Administrative Code of 1987 quoted above
authorizes the President (a) to restructure the
internal organization of the Office of the President
Proper, including the immediate Offices, the
Admin. Law | 65

President Special Assistants/Advisers System and

the Common Staff Support System, by abolishing,
consolidating or merging units thereof or
transferring functions from one unit to another, and
(b) to transfer functions or offices from the Office
of the President to any other Department or
Agency in the Executive Branch, and vice versa.

Concomitant to such power to abolish, merge or

consolidate offices in the Office of the President
Proper and to transfer functions/offices not only
among the offices in the Office of President Proper
but also the rest of the Office of the President and
the Executive Branch, the President implicitly has
the power to effect less radical or less substantive
changes to the functional and internal structure of
the Office of the President, including the
modification of functions of such executive
agencies as the exigencies of the service may
require.

In the case at bar, there was neither an abolition of

the NPO nor a removal of any of its functions to be
transferred to another agency. Under the assailed
Executive Order No. 378, the NPO remains the
main printing arm of the government for all kinds
of government forms and publications but in the
interest of greater economy and encouraging
efficiency and profitability, it must now compete
with the private sector for certain government
printing jobs, with the exception of election
paraphernalia which remains the exclusive
responsibility of the NPO, together with the
Bangko Sentral ng Pilipinas, as the Commission on
Elections may determine.At most, there was a mere
alteration of the main function of the NPO by
limiting the exclusivity of its printing responsibility
to election forms.[15]

There is a view that the reorganization actions that

the President may take with respect to agencies in
the Office of the President are strictly limited to

transfer of functions and offices as seemingly

provided in Section 31 of the Administrative Code
of 1987.

However, Section 20, Chapter 7, Title I, Book III

of the same Code significantly provides:
Sec. 20. Residual Powers. Unless Congress
provides
otherwise,
the
President
shall
exercise such other powers and functions vested
in the President which are provided for under
the laws and which are not specifically enumerated
above, or which are not delegated by the President
in accordance with law. (Emphasis ours.)
Pursuant to Section 20, the power of the President
to reorganize the Executive Branch under Section
31 includes such powers and functions that may be
provided for under other laws. To be sure, an
inclusive and broad interpretation of the Presidents
power to reorganize executive offices has been
consistently supported by specific provisions
in general appropriations laws.

In the oft-cited Larin v. Executive Secretary,[16] the

Court likewise adverted to certain provisions of
Republic Act No. 7645, the general appropriations
law for 1993, as among the statutory bases for the
Presidents power to reorganize executive agencies,
to wit:

Section 48 of R.A. 7645 provides that:

Sec. 48. Scaling Down and Phase Out of Activities
of Agencies Within the Executive Branch. The
heads of departments, bureaus and offices and
agencies are hereby directed to identify their
respective activities which are no longer essential
in the delivery of public services and which may be
scaled down, phased out or abolished, subject to
civil [service] rules and regulations. x x x. Actual
scaling down, phasing out or abolition of the
activities shall be effected pursuant to Circulars
Admin. Law | 66

or Orders issued for the purpose by the Office of

the President.
Said provision clearly mentions the acts of
"scaling down, phasing out and abolition" of
offices only and does not cover the creation of
offices or transfer of functions. Nevertheless, the
act of creating and decentralizing is included in
the subsequent provision of Section 62, which
provides that:
Sec. 62. Unauthorized organizational changes.
Unless otherwise created by law or directed by the
President of the Philippines, no organizational unit
or changes in key positions in any department or
agency shall be authorized in their respective
organization structures and be funded from
appropriations by this Act.
The foregoing provision evidently shows that
the President is authorized to effect
organizational changes including the creation of
offices in the department or agency concerned.
The contention of petitioner that the two provisions
are riders deserves scant consideration. Well settled
is the rule that every law has in its favor the
presumption of constitutionality. Unless and until a
specific provision of the law is declared invalid
and unconstitutional, the same is valid and binding
for all intents and purposes.[17] (Emphases ours)
Buklod ng Kawaning EIIB v. Zamora,[18] where the
Court upheld as valid then President Joseph
Estradas Executive Order No. 191 deactivating the
Economic Intelligence and Investigation Bureau
(EIIB) of the Department of Finance, hewed
closely to the reasoning in Larin. The Court,
among others, also traced from the General
Appropriations Act[19] the Presidents authority to
effect organizational changes in the department or
agency under the executive structure, thus:

We adhere to the precedent or ruling in Larin that

this provision recognizes the authority of the
President to effect organizational changes in the

department or agency under the executive

structure. Such a ruling further finds support in
Section 78 of Republic Act No. 8760. Under this
law, the heads of departments, bureaus, offices and
agencies and other entities in the Executive Branch
are directed (a) to conduct a comprehensive review
of their respective mandates, missions, objectives,
functions, programs, projects, activities and
systems and procedures; (b) identify activities
which are no longer essential in the delivery of
public services and which may be scaled down,
phased-out or abolished; and (c) adopt measures
that will result in the streamlined organization
and improved overall performance of their
respective agencies. Section 78 ends up with the
mandate that the actual streamlining and
productivity improvement in agency organization
and operation shall be effected pursuant to
Circulars or Orders issued for the purpose by the
Office of the President. x x x.[20] (Emphasis ours)
Notably, in the present case, the 2003 General
Appropriations Act, which was reenacted in 2004
(the year of the issuance of Executive Order No.
378), likewise gave the President the authority to
effect a wide variety of organizational changes in
any department or agency in the Executive Branch.
Sections 77 and 78 of said Act provides:

Section 77. Organized Changes. Unless otherwise

provided by law or directed by the President of
the Philippines, no changes in key positions or
organizational units in any department or agency
shall be authorized in their respective
organizational structures and funded from
appropriations provided by this Act.

Section 78.
Institutional Strengthening and
Productivity Improvement in Agency Organization
and
Operations
and
Implementation
of
Organization/Reorganization
Mandated
by
Law. The Government shall adopt institutional
strengthening
and
productivity
improvement measures to improve service
Admin. Law | 67

delivery and enhance productivity in the

government, as directed by the President of
the Philippines. The heads of departments, bureaus,
offices, agencies, and other entities of the
Executive Branch shall accordingly conduct a
comprehensive review of their respective
mandates,
missions,
objectives,
functions,
programs, projects, activities and systems and
procedures; identify areas where improvements are
necessary;
and implement
corresponding
structural,
functional
and
operational
adjustments that will result in streamlined
organization and operations and improved
performance and productivity: PROVIDED,
That actual streamlining and productivity
improvements in agency organization and
operations, as authorized by the President of the
Philippines for the purpose, including the
utilization of savings generated from such
activities, shall be in accordance with the rules and
regulations to be issued by the DBM, upon
consultation with the Presidential Committee on
Effective Governance: PROVIDED, FURTHER,
That in
the
implementation
of
organizations/reorganizations,
or
specific
changes in agency structure, functions and
operations as a result of institutional
strengthening or as mandated by law, the
appropriation, including the functions, projects,
purposes and activities of agencies concerned
may be realigned as may be necessary:
PROVIDED, FINALLY, That any unexpended
balances or savings in appropriations may be made
available for payment of retirement gratuities and
separation benefits to affected personnel, as
authorized under existing laws. (Emphases and
underscoring ours.)
Implicitly, the aforequoted provisions in the
appropriations law recognize the power of the
President to reorganize even executive offices
already funded by the said appropriations act,
including the power to implement structural,
functional, and operational adjustments in the
executive bureaucracy and, in so doing, modify or
realign appropriations of funds as may be
necessary under such reorganization. Thus, insofar

as petitioners protest the limitation of the NPOs

appropriations to its own income under Executive
Order No. 378, the same is statutorily authorized
by the above provisions.
In the 2003 case of Bagaoisan v. National Tobacco
Administration,[21] we upheld the streamlining of
the National Tobacco Administration through a
reduction of its personnel and deemed the same as
included in the power of the President to
reorganize executive offices granted under the
laws, notwithstanding that such streamlining
neither involved an abolition nor a transfer of
functions of an office. To quote the relevant portion
of that decision:
In the recent case of Rosa Ligaya C. Domingo, et
al. vs. Hon. Ronaldo D. Zamora, in his capacity as
the Executive Secretary, et al., this Court has had
occasion to also delve on the Presidents power to
reorganize the Office of the President under
Section 31(2) and (3) of Executive Order No. 292
and the power to reorganize the Office of the
President Proper. x x x
xxxx
The first sentence of the law is an express grant to
the President of a continuing authority to
reorganize the administrative structure of the
Office of the President. The succeeding
numbered paragraphs are not in the nature
of provisos that unduly limit the aim and scope
of the grant to the President of the power to
reorganize but are to be viewed in consonance
therewith. Section 31(1) of Executive Order No.
292 specifically refers to the Presidents power to
restructure the internal organization of the Office
of
the
President Proper,
by
abolishing,
consolidating or merging units hereof or
transferring functions from one unit to another,
while Section 31(2) and (3) concern executive
offices
outside
the
Office
of
the
President Proper allowing the President to transfer
any function under the Office of the President to
any other Department or Agency and vice-versa,
and the transfer of any agency under the Office of

Admin. Law | 68

the President to any other department or agency

and vice-versa.
In the present instance, involving neither an
abolition nor transfer of offices, the assailed
action is a mere reorganization under the
general provisions of the law consisting mainly
of streamlining the NTA in the interest of
simplicity, economy and efficiency. It is an act
well
within
the
authority
of
the
President motivated and carried out, according to
the findings of the appellate court, in good faith, a
factual assessment that this Court could only but
accept.[22] (Emphases and underscoring supplied.)
In the more recent case of Tondo Medical Center
Employees Association v. Court of Appeals,
[23]
which involved a structural and functional
reorganization of the Department of Health
under an executive order, we reiterated the
principle that the power of the President to
reorganize agencies under the executive
department by executive or administrative order is
constitutionally and statutorily recognized. We held
in that case:

This Court has already ruled in a number of

cases that the President may, by executive or
administrative order, direct the reorganization
of government entities under the Executive
Department. This is also sanctioned under the
Constitution, as well as other statutes.

Section 17, Article VII

of the
1987
Constitution, clearly states: [T]he president shall
have control of all
executive
departments,
bureaus and offices. Section 31, Book III,
Chapter 10 of Executive Order No. 292, also
known as the Administrative Code of 1987 reads:
SEC. 31. Continuing Authority of the President
to Reorganize his Office - The President, subject to
the policy in the Executive Office and in order to
achieve simplicity, economy and efficiency, shall

have continuing authority to reorganize the

administrative structure of the Office of the
President. For this purpose, he may take any of the
following actions:
xxxx
In Domingo v. Zamora [445 Phil. 7 (2003)], this
Court explained the rationale behind the Presidents
continuing authority under the Administrative
Code to reorganize the administrative structure of
the Office of the President. The law grants the
President the power to reorganize the Office of
the President in recognition of the recurring
need of every President to reorganize his or her
office to achieve simplicity, economy and
efficiency. To remain effective and efficient, it
must be capable of being shaped and reshaped by
the President in the manner the Chief Executive
deems fit to carry out presidential directives and
policies.
The Administrative Code provides that the Office
of the President consists of the Office of the
President Proper and the agencies under it. The
agencies under the Office of the President are
identified in Section 23, Chapter 8, Title II of the
Administrative Code:

Sec. 23. The Agencies under the Office of

the President.The agencies under the Office of the
President refer to those offices placed under the
chairmanship of the President, those under the
supervision and control of the President, those
under the administrative supervision of the Office
of the President, those attached to it for policy and
program coordination, and those that are not placed
by law or order creating them under any specific
department.
xxxx
The power of the President to reorganize the
executive department is likewise recognized in
general appropriations laws. x x x.
xxx
Admin. Law | 69

Clearly, Executive Order No. 102 is well within

the constitutional power of the President to
issue. The President did not usurp any
legislative prerogative in issuing Executive Order
No. 102. It is an exercise of the Presidents
constitutional power of control over the
executive department, supported by the
provisions of the Administrative Code,
recognized by other statutes, and consistently
affirmed by this Court.[24] (Emphases supplied.)
Subsequently, we ruled in Anak Mindanao PartyList Group v. Executive Secretary[25] that:
The Constitutions express grant of the power of
control in the President justifies an executive
action to carry out reorganization measures under a
broad authority of law.

In enacting a statute, the legislature is

presumed to have deliberated with full knowledge
of all existing laws and jurisprudence on the
subject. It is thus reasonable to conclude that in
passing a statute which places an agency under the
Office of the President, it was in accordance with
existing laws and jurisprudence on the Presidents
power to reorganize.
In establishing an executive department, bureau or
office, the legislature necessarily ordains an
executive agencys position in the scheme of
administrative structure. Such determination is
primary, but subject to the Presidents continuing
authority to reorganize the administrative
structure. As far as bureaus, agencies or offices in
the executive department are concerned, the power
of control may justify the President to deactivate
the functions of a particular office. Or a law may
expressly grant the President the broad authority to
carry out reorganization measures.
The
[26]
Administrative Code of 1987 is one such law.
The issuance of Executive Order No. 378 by
President Arroyo is an exercise of a delegated
legislative power granted by the aforementioned
Section 31, Chapter 10, Title III, Book III of the

Administrative Code of 1987, which provides for

the continuing authority of the President to
reorganize the Office of the President, in order to
achieve simplicity, economy and efficiency. This is
a
matter
already
well-entrenched
in
jurisprudence. The reorganization of such an office
through executive or administrative order is also
recognized in the Administrative Code of
1987. Sections 2 and 3, Chapter 2, Title I, Book III
of the said Code provide:

Sec. 2. Executive Orders. - Acts of the

President providing for rules of a general or
permanent character in implementation or
execution of constitutional or statutory
powersshall be promulgated in executive orders.
Sec. 3. Administrative Orders. - Acts of the
President which relate to particular aspects of
governmental operations in pursuance of his
duties as administrative head shall be
promulgated in administrative orders. (Emphases
supplied.)
To reiterate, we find nothing objectionable in the
provision in Executive Order No. 378 limiting the
appropriation of the NPO to its own
income. Beginning with Larin and in subsequent
cases, the Court has noted certain provisions in
the general appropriations laws as likewise
reflecting the power of the President to reorganize
executive offices or agencies even to the extent of
modifying and realigning appropriations for that
purpose.
Petitioners contention that the issuance of
Executive Order No. 378 is an invalid exercise of
legislative power on the part of the President has
no legal leg to stand on.
In all, Executive Order No. 378, which purports to
institute necessary reforms in government in order
to improve and upgrade efficiency in the delivery
of public services by redefining the functions of
the NPO and limiting its funding to its own income
and to transform it into a self-reliant agency able to
Admin. Law | 70

compete with the private sector, is well within the

prerogative of President Arroyo under her
continuing delegated legislative power to
reorganize her own office. As pointed out in the
separate concurring opinion of our learned
colleague, Associate Justice Antonio T. Carpio, the
objective behind Executive Order No. 378 is
wholly consistent with the state policy contained in
Republic Act No. 9184 or the Government
Procurement
Reform
Act
to
encourage
competitiveness by extending equal opportunity to
private contracting parties who are eligible and
qualified.[27]
To be very clear, this delegated legislative power to
reorganize pertains only to the Office of the
President and the departments, offices and agencies
of the executive branch and does not include the
Judiciary, the Legislature or the constitutionallycreated or mandated bodies. Moreover, it must be
stressed that the exercise by the President of the
power to reorganize the executive department must
be in accordance with the Constitution, relevant
laws and prevailing jurisprudence.

In this regard, we are mindful of the previous

pronouncement of this Court in Dario v.
Mison[28] that:
Reorganizations in this jurisdiction have been
regarded as valid provided they are pursued in
good faith. As a general rule, a reorganization is
carried out in good faith if it is for the purpose of
economy or to make bureaucracy more efficient. In
that event, no dismissal (in case of a dismissal) or
separation actually occurs because the position
itself ceases to exist. And in that case, security of
tenure would not be a Chinese wall. Be that as it
may, if the abolition, which is nothing else but a
separation or removal, is done for political reasons
or purposely to defeat security of tenure, or
otherwise not in good faith, no valid abolition takes
place and whatever abolition is done, is void ab
initio. There is an invalid abolition as where there
is merely a change of nomenclature of positions, or

where claims of economy are belied by the

existence of ample funds. (Emphasis ours.)
Stated alternatively, the presidential power to
reorganize
agencies
and
offices
in
the executive branch of government is subject to
the condition that such reorganization is carried out
in good faith.
If the reorganization is done in good faith, the
abolition of positions, which results in loss of
security of tenure of affected government
employees, would be valid. In Buklod ng
Kawaning EIIB v. Zamora,[29] we even observed
that there was no such thing as an absolute right to
hold office. Except those who hold constitutional
offices, which provide for special immunity as
regards salary and tenure, no one can be said to
have any vested right to an office or salary.[30]

This brings us to the second ground raised in the

petition that Executive Order No. 378, in allowing
government agencies to secure their printing
requirements from the private sector and in
limiting the budget of the NPO to its income, will
purportedly lead to the gradual abolition of the
NPO and the loss of security of tenure of its
present employees. In other words, petitioners
avow that the reorganization of the NPO under
Executive Order No. 378 is tainted with bad
faith. The basic evidentiary rule is that he who
asserts a fact or the affirmative of an issue has the
burden of proving it.[31]

A careful review of the records will show that

petitioners utterly failed to substantiate their
claim. They failed to allege, much less prove,
sufficient facts to show that the limitation of the
NPOs budget to its own income would indeed lead
to the abolition of the position, or removal from
office, of any employee. Neither did petitioners
present any shred of proof of their assertion that
the changes in the functions of the NPO were for
political considerations that had nothing to do with
Admin. Law | 71

improving the efficiency of, or encouraging

operational economy in, the said agency.
In sum, the Court finds that the petition failed to
show any constitutional infirmity or grave abuse of
discretion amounting to lack or excess of
jurisdiction in President Arroyos issuance of
Executive Order No. 378.

On March 18, 2009, the Secretary of Justice issued

Department of Justice (DOJ) Order No. 182 (DO
No. 182), directing all Regional State Prosecutors,
Provincial Prosecutors, and City Prosecutors to
forward all cases already filed against Delos
Angeles, Jr., et al. to the Secretariat of the DOJ
Special Panel in Manila for appropriate action.
DO No. 182 reads:2

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

All cases against Celso G. delos Angeles, Jr., et al.

under Legacy Group of Companies, may be filed
with the docket section of the National Prosecution
Service, Department of Justice, Padre Faura,
Manila and shall be forwarded to the Secretariat of
the Special Panel for assignment and distribution to
panel members, per Department Order No. 84
dated February 13, 2009.

SPOUSES AUGUSTO G. DACUDAO AND

OFELIA
R.
DACUDAO, Petitioners,
vs.
SECRETARY OF JUSTICE RAUL M.
GONZALES OF THE DEPARTMENT OF
JUSTICE, Respondent.

However, cases already filed against Celso G.

delos Angeles, Jr. et al. of Legacy group of
Companies in your respective offices with the
exemption of the cases filed in Cagayan de Oro
City which is covered by Memorandum dated
March 2, 2009, should be forwarded to the
Secretariat of the Special Panel at Room 149,
Department of Justice, Padre Faura, Manila, for
proper disposition.

DECISION

For information and guidance.

BERSAMIN, J.:

Pursuant to DO No. 182, the complaints of

petitioners were forwarded by the Office of the
City Prosecutor of Davao City to the Secretariat of
the Special Panel of the DOJ.3

G.R. No. 188056

January 8, 2013

Petitioners - residents of Bacaca Road, Davao City

- were among the investors whom Celso G. Delos
Angeles, Jr. and his associates in the Legacy Group
of Companies (Legacy Group) allegedly defrauded
through the Legacy Group's "buy back agreement"
that earned them check payments that were
dishonored. After their written demands for the
return of their investments went unheeded, they
initiated a number of charges for syndicated estafa
against Delos Angeles, Jr., et al. in the Office of the
City Prosecutor of Davao City on February 6,
2009. Three of the cases were docketed as NPS
Docket No. XI-02-INV.-09-A-00356, Docket No.
XI-02-INV.-09-C-00752, and Docket No. XI-02INV.-09-C-00753.1

Aggrieved by such turn of events, petitioners have

directly come to the Court via petition for
certiorari, prohibition and mandamus, ascribing to
respondent Secretary of Justice grave abuse of
discretion in issuing DO No. 182. They claim that
DO No. 182 violated their right to due process,
their right to the equal protection of the laws, and
their right to the speedy disposition of cases. They
insist that DO No. 182 was an obstruction of
justice and a violation of the rule against enactment
of laws with retroactive effect.

Admin. Law | 72

Petitioners also challenge as unconstitutional the

issuance of DOJ Memorandum dated March 2,
2009 exempting from the coverage of DO No. No.
182 all the cases for syndicated estafa already filed
and pending in the Office of the City Prosecutor of
Cagayan de Oro City. They aver that DOJ
Memorandum dated March 2, 2009 violated their
right to equal protection under the Constitution.
The Office of the Solicitor General (OSG),
representing respondent Secretary of Justice,
maintains the validity of DO No. 182 and DOJ
Memorandum dated March 2, 2009, and prays that
the petition be dismissed for its utter lack of merit.
Issues
The following issues are now to be resolved, to
wit:
1. Did petitioners properly bring their petition for
certiorari, prohibition and mandamus directly to
the Court?
2. Did respondent Secretary of Justice commit
grave abuse of discretion in issuing DO No. 182?
3. Did DO No. 182 and DOJ Memorandum dated
March 2, 2009 violate petitioners constitutionally
guaranteed rights?
Ruling
The petition for certiorari, prohibition and
mandamus, being bereft of substance and merit, is
dismissed.
Firstly, petitioners have unduly disregarded the
hierarchy of courts by coming directly to the Court
with their petition for certiorari, prohibition and
mandamus without tendering therein any special,
important or compelling reason to justify the direct
filing of the petition.
We emphasize that the concurrence of jurisdiction
among the Supreme Court, Court of Appeals and
the Regional Trial Courts to issue the writs of
certiorari, prohibition, mandamus, quo warranto,
habeas corpus and injunction did not give

petitioners the unrestricted freedom of choice of

court forum.4 An undue disregard of this policy
against direct resort to the Court will cause the
dismissal of the recourse. In Baez, Jr. v.
Concepcion,5 we explained why, to wit:
The Court must enjoin the observance of the policy
on the hierarchy of courts, and now affirms that the
policy is not to be ignored without serious
consequences. The strictness of the policy is
designed to shield the Court from having to deal
with causes that are also well within the
competence of the lower courts, and thus leave
time to the Court to deal with the more
fundamental and more essential tasks that the
Constitution has assigned to it. The Court may act
on petitions for the extraordinary writs of
certiorari, prohibition and mandamus only when
absolutely necessary or when serious and
important reasons exist to justify an exception to
the policy. This was why the Court stressed in
Vergara, Sr. v. Suelto:
x x x. The Supreme Court is a court of last resort,
and must so remain if it is to satisfactorily perform
the functions assigned to it by the fundamental
charter and immemorial tradition. It cannot and
should not be burdened with the task of dealing
with causes in the first instance. Its original
jurisdiction to issue the so-called extraordinary
writs should be exercised only where absolutely
necessary or where serious and important reasons
exist therefor. Hence, that jurisdiction should
generally be exercised relative to actions or
proceedings before the Court of Appeals, or before
constitutional or other tribunals, bodies or agencies
whose acts for some reason or another are not
controllable by the Court of Appeals. Where the
issuance of an extraordinary writ is also within the
competence of the Court of Appeals or a Regional
Trial Court, it is in either of these courts that the
specific action for the writs procurement must be
presented. This is and should continue to be the
policy in this regard, a policy that courts and
lawyers must strictly observe. (Emphasis supplied)
In People v. Cuaresma, the Court has also
amplified the need for strict adherence to the policy
Admin. Law | 73

of hierarchy of courts. There, noting "a growing

tendency on the part of litigants and lawyers to
have their applications for the so-called
extraordinary writs, and sometimes even their
appeals, passed upon and adjudicated directly and
immediately by the highest tribunal of the land,"
the Court has cautioned lawyers and litigants
against taking a direct resort to the highest tribunal,
viz:
x x x. This Courts original jurisdiction to issue
writs of certiorari (as well as prohibition,
mandamus, quo warranto, habeas corpus and
injunction) is not exclusive. It is shared by this
Court with Regional Trial Courts x x x, which may
issue the writ, enforceable in any part of their
respective regions. It is also shared by this Court,
and by the Regional Trial Court, with the Court of
Appeals x x x, although prior to the effectivity of
Batas Pambansa Bilang 129 on August 14, 1981,
the latter's competence to issue the extraordinary
writs was restricted to those "in aid of its appellate
jurisdiction." This concurrence of jurisdiction is
not, however, to be taken as according to parties
seeking any of the writs an absolute, unrestrained
freedom of choice of the court to which application
therefor will be directed. There is after all a
hierarchy of courts. That hierarchy is determinative
of the venue of appeals, and should also serve as a
general determinant of the appropriate forum for
petitions for the extraordinary writs. A becoming
regard for that judicial hierarchy most certainly
indicates that petitions for the issuance of
extraordinary writs against first level ("inferior")
courts should be filed with the Regional Trial
Court, and those against the latter, with the Court
of Appeals. A direct invocation of the Supreme
Court's original jurisdiction to issue these writs
should be allowed only when there are special and
important reasons therefor, clearly and specifically
set out in the petition. This is established policy. It
is a policy that is necessary to prevent inordinate
demands upon the Courts time and attention which
are better devoted to those matters within its
exclusive jurisdiction, and to prevent further overcrowding of the Court's docket. Indeed, the
removal of the restriction on the jurisdiction of the

Court of Appeals in this regard, supra resulting

from the deletion of the qualifying phrase, "in aid
of its appellate jurisdiction" was evidently
intended precisely to relieve this Court pro tanto of
the burden of dealing with applications for the
extraordinary writs which, but for the expansion of
the Appellate Court corresponding jurisdiction,
would have had to be filed with it.1wphi1
xxxx
The Court therefore closes this decision with the
declaration for the information and evidence of all
concerned, that it will not only continue to enforce
the policy, but will require a more strict observance
thereof. (Emphasis supplied)
Accordingly, every litigant must remember that the
Court is not the only judicial forum from which to
seek and obtain effective redress of their
grievances. As a rule, the Court is a court of last
resort, not a court of the first instance. Hence,
every litigant who brings the petitions for the
extraordinary writs of certiorari, prohibition and
mandamus should ever be mindful of the policy on
the hierarchy of courts, the observance of which is
explicitly defined and enjoined in Section 4 of
Rule 65, Rules of Court, viz:
Section 4. When and where petition filed. - The
petition shall be filed not later than sixty (60) days
from notice of the judgment, order or resolution. In
case a motion for reconsideration or new trial is
timely filed, whether such motion is required or
not, the sixty (60) day period shall be counted from
notice of the denial of the said motion.
The petition shall be filed in the Supreme Court or,
if it relates to the acts or omissions of a lower court
or of a corporation, board, officer or person, in the
Regional Trial Court exercising jurisdiction over
the territorial area as defined by the Supreme
Court. It may also be filed in the Court of Appeals
whether or not the same is in the aid of its appellate
jurisdiction, or in the Sandiganbayan if it is in aid
of its appellate jurisdiction. If it involves the acts
or omissions of a quasi-judicial agency, unless
otherwise provided by law or these rules, the
Admin. Law | 74

petition shall be filed in and cognizable only by the

Court of Appeals.
In election cases involving an act or an omission of
a municipal or a regional trial court, the petition
shall be filed exclusively with the Commission on
Elections, in aid of its appellate jurisdiction. 6
Secondly, even assuming arguendo that petitioners
direct resort to the Court was permissible, the
petition must still be dismissed.
The writ of certiorari is available only when any
tribunal, board or officer exercising judicial or
quasi-judicial functions has acted without or in
excess of its or his jurisdiction, or with grave abuse
of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, nor any plain,
speedy, and adequate remedy in the ordinary
course of law.7"The sole office of the writ of
certiorari," according to Delos Santos v.
Metropolitan Bank and Trust Company:8
x x x is the correction of errors of jurisdiction,
which includes the commission of grave abuse of
discretion amounting to lack of jurisdiction. In this
regard, mere abuse of discretion is not enough to
warrant the issuance of the writ. The abuse of
discretion must be grave, which means either that
the judicial or quasi-judicial power was exercised
in an arbitrary or despotic manner by reason of
passion or personal hostility, or that the respondent
judge, tribunal or board evaded a positive duty, or
virtually refused to perform the duty enjoined or to
act in contemplation of law, such as when such
judge, tribunal or board exercising judicial or
quasi-judicial powers acted in a capricious or
whimsical manner as to be equivalent to lack of
jurisdiction.
For a special civil action for certiorari to prosper,
therefore, the following requisites must concur,
namely: (a) it must be directed against a tribunal,
board or officer exercising judicial or quasi-judicial
functions; (b) the tribunal, board, or officer must
have acted without or in excess of jurisdiction or
with grave abuse of discretion amounting to lack or
excess of jurisdiction; and (c) there is no appeal

nor any plain, speedy, and adequate remedy in the

ordinary course of law.9 The burden of proof lies
on petitioners to demonstrate that the assailed order
was issued without or in excess of jurisdiction or
with grave abuse of discretion amounting to lack or
excess of jurisdiction.
Yet, petitioners have not shown a compliance with
the requisites. To start with, they merely alleged
that the Secretary of Justice had acted without or in
excess of his jurisdiction. Also, the petition did not
show that the Secretary of Justice was an officer
exercising judicial or quasi-judicial functions.
Instead, the Secretary of Justice would appear to be
not exercising any judicial or quasi-judicial
functions because his questioned issuances were
ostensibly intended to ensure his subordinates
efficiency and economy in the conduct of the
preliminary investigation of all the cases involving
the Legacy Group. The function involved was
purely executive or administrative.
The fact that the DOJ is the primary prosecution
arm of the Government does not make it a quasijudicial office or agency. Its preliminary
investigation of cases is not a quasi-judicial
proceeding. Nor does the DOJ exercise a quasijudicial function when it reviews the findings of a
public prosecutor on the finding of probable cause
in any case. Indeed, in Bautista v. Court of
Appeals,10 the Supreme Court has held that a
preliminary investigation is not a quasi-judicial
proceeding, stating:
x x x the prosecutor in a preliminary investigation
does not determine the guilt or innocence of the
accused. He does not exercise adjudication nor
rule-making functions. Preliminary investigation is
merely inquisitorial, and is often the only means of
discovering the persons who may be reasonably
charged with a crime and to enable the fiscal to
prepare his complaint or information. It is not a
trial of the case on the merits and has no purpose
except that of determining whether a crime has
been committed and whether there is probable
cause to believe that the accused is guilty thereof.
While the fiscal makes that determination, he
cannot be said to be acting as a quasi-court, for it is
Admin. Law | 75

the courts, ultimately, that pass judgment on the

accused, not the fiscal.11
There may be some decisions of the Court that
have characterized the public prosecutors power to
conduct a preliminary investigation as quasijudicial in nature. Still, this characterization is true
only to the extent that the public prosecutor, like a
quasi-judicial body, is an officer of the executive
department exercising powers akin to those of a
court of law.
But the limited similarity between the public
prosecutor and a quasi-judicial body quickly
endsthere. For sure, a quasi-judicial body is an
organ of government other than a court of law or a
legislative office that affects the rights of private
parties through either adjudication or rule-making;
it performs adjudicatory functions, and its awards
and adjudications determine the rights of the
parties coming before it; its decisions have the
same effect as the judgments of a court of law. In
contrast, that is not the effect whenever a public
prosecutor conducts a preliminary investigation to
determine probable cause in order to file a criminal
information against a person properly charged with
the offense, or whenever the Secretary of Justice
reviews the public prosecutors orders or
resolutions.
Petitioners have self-styled their petition to be also
for prohibition. However, we do not see how that
can be. They have not shown in their petition in
what manner and at what point the Secretary of
Justice, in handing out the assailed issuances, acted
without or in excess of his jurisdiction, or with
grave abuse of discretion amounting to lack or
excess of jurisdiction. On the other hand, we
already indicated why the issuances were not
infirmed by any defect of jurisdiction. Hence, the
blatant omissions of the petition transgressed
Section 2, Rule 65 of the Rules of Court, to wit:
Section 2. Petition for prohibition. When the
proceedings of any tribunal, corporation, board,
officer or person, whether exercising judicial,
quasi-judicial or ministerial functions, are without
or in excess of its or his jurisdiction, or with grave

abuse of discretion amounting to lack or excess of

jurisdiction, and there is no appeal or any other
plain, speedy, and adequate remedy in the ordinary
course of law, a person aggrieved thereby may file
a verified petition in the proper court, alleging the
facts with certainty and praying that judgment be
rendered commanding the respondent to desist
from further proceedings in the action or matter
specified therein, or otherwise granting such
incidental reliefs as law and justice may require.
The petition shall likewise be accompanied by a
certified true copy of the judgment, order or
resolution subject thereof, copies of all pleadings
and documents relevant and pertinent thereto, and
a sworn certification of non-forum shopping as
provided in the third paragraph of section 3, Rule
46. (2a) Similarly, the petition could not be one for
mandamus, which is a remedy available only when
"any tribunal, corporation, board, officer or person
unlawfully neglects the performance of an act
which the law specifically enjoins as a duty
resulting from an office, trust, or station, or
unlawfully excludes another from the use and
enjoyment of a right or office to which such other
is entitled, and there is no other plain, speedy and
adequate remedy in the ordinary course of law, the
person aggrieved thereby may file a verified
petition in the proper court." 12 The main objective
of mandamus is to compel the performance of a
ministerial duty on the part of the respondent.
Plainly enough, the writ of mandamus does not
issue to control or review the exercise of discretion
or to compel a course of conduct, 13 which, it
quickly seems to us, was what petitioners would
have the Secretary of Justice do in their favor.
Consequently, their petition has not indicated how
and where the Secretary of Justices assailed
issuances excluded them from the use and
enjoyment of a right or office to which they were
unquestionably entitled.
Thirdly, there is no question that DO No. 182
enjoyed a strong presumption of its validity. In
ABAKADA Guro Party List v. Purisima, 14 the
Court has extended the presumption of validity to
legislative issuances as well as to rules and
Admin. Law | 76

regulations issued by administrative agencies,

saying:
Administrative
regulations
enacted
by
administrative agencies to implement and interpret
the law which they are entrusted to enforce have
the force of law and are entitled to respect. Such
rules and regulations partake of the nature of a
statute and are just as binding as if they have been
written in the statute itself. As such, they have the
force and effect of law and enjoy the presumption
of constitutionality and legality until they are set
aside with finality in an appropriate case by a
competent court.15
DO No. 182 was issued pursuant to Department
Order No. 84 that the Secretary of Justice had
promulgated to govern the performance of the
mandate of the DOJ to "administer the criminal
justice system in accordance with the accepted
processes thereof"16 as expressed in Republic Act
No. 10071 (Prosecution Service Act of 2010) and
Section 3, Chapter I, Title III and Section 1,
Chapter I, Title III of Book IV of Executive Order
292 (Administrative Code of 1987).
To overcome this strong presumption of validity of
the questioned issuances, it became incumbent
upon petitioners to prove their unconstitutionality
and invalidity, either by showing that the
Administrative Code of 1987 did not authorize the
Secretary of Justice to issue DO No. 182, or by
demonstrating that DO No. 182 exceeded the
bounds of the Administrative Code of 1987 and
other pertinent laws. They did not do so. They must
further show that the performance of the DOJs
functions under the Administrative Code of 1987
and other pertinent laws did not call for the
impositions laid down by the assailed issuances.
That was not true here, for DO No 182 did not
deprive petitioners in any degree of their right to
seek redress for the alleged wrong done against
them by the Legacy Group. Instead, the issuances
were designed to assist petitioners and others like
them expedite the prosecution, if warranted under
the law, of all those responsible for the wrong
through the creation of the special panel of state
prosecutors and prosecution attorneys in order to

conduct a nationwide and comprehensive

preliminary investigation and prosecution of the
cases. Thereby, the Secretary of Justice did not act
arbitrarily or oppressively against petitioners.
Fourthly, petitioners attack the exemption from the
consolidation decreed in DO No. 182 of the cases
filed or pending in the Office of the City
Prosecutor of Cagayan de Oro City, claiming that
the exemption traversed the constitutional guaranty
in their favor of the equal protection of law.17
The exemption is covered by the assailed DOJ
Memorandum dated March 2, 2009, to wit:
It has come to the attention of the undersigned that
cases for syndicated estafa were filed with your
office against officers of the Legacy Group of
Companies. Considering the distance of the place
of complainants therein to Manila, your Office is
hereby exempted from the directive previously
issued by the undersigned requiring prosecution
offices to forward the records of all cases involving
Legacy Group of Companies to the Task Force.
Anent the foregoing, you are hereby directed to
conduct preliminary investigation of all cases
involving the Legacy Group of Companies filed in
your office with dispatch and to file the
corresponding informations if evidence warrants
and to prosecute the same in court.
Petitioners attack deserves no consideration. The
equal protection clause of the Constitution does not
require the universal application of the laws to all
persons or things without distinction; what it
requires is simply equality among equals as
determined
according
to
a
valid
18
classification. Hence, the Court has affirmed that
if a law neither burdens a fundamental right nor
targets a suspect class, the classification stands as
long as it bears a rational relationship to some
legitimate government end.19
That is the situation here. In issuing the assailed
DOJ Memorandum dated March 2, 2009, the
Secretary of Justice took into account the relative
distance between Cagayan de Oro, where many
Admin. Law | 77

complainants against the Legacy Group resided,

and Manila, where the preliminary investigations
would be conducted by the special panel. He also
took into account that the cases had already been
filed in the City Prosecutors Office of Cagayan de
Oro at the time he issued DO No. 182. Given the
considerable number of complainants residing in
Cagayan de Oro City, the Secretary of Justice was
fully justified in excluding the cases commenced in
Cagayan de Oro from the ambit of DO No. 182.
The classification taken into consideration by the
Secretary of Justice was really valid. Resultantly,
petitioners could not inquire into the wisdom
behind the exemption upon the ground that the
non-application of the exemption to them would
cause them some inconvenience.
Fifthly, petitioners contend that DO No. 182
violated their right to the speedy disposition of
cases guaranteed by the Constitution. They posit
that there would be considerable delay in the
resolution of their cases that would definitely be "a
flagrant transgression of petitioners constitutional
rights to speedy disposition of their cases." 20
We cannot favor their contention.
In The Ombudsman v. Jurado, 21 the Court has
clarified that although the Constitution guarantees
the right to the speedy disposition of cases, such
speedy disposition is a flexible concept. To
properly define that concept, the facts and
circumstances surrounding each case must be
evaluated and taken into account. There occurs a
violation of the right to a speedy disposition of a
case only when the proceedings are attended by
vexatious, capricious, and oppressive delays, or
when unjustified postponements of the trial are
sought and secured, or when, without cause or
justifiable motive, a long period of time is allowed
to elapse without the party having his case
tried.22 It is cogent to mention that a mere
mathematical reckoning of the time involved is not
determinant of the concept.23
The consolidation of the cases against Delos
Angeles, Jr., et al. was ordered obviously to obtain
expeditious justice for the parties with the least

cost and vexation to them. Inasmuch as the cases

filed involved similar or related questions to be
dealt with during the preliminary investigation, the
Secretary of Justice rightly found the consolidation
of the cases to be the most feasible means of
promoting the efficient use of public resources and
of having a comprehensive investigation of the
cases.
On the other hand, we do not ignore the possibility
that there would be more cases reaching the DOJ in
addition to those already brought by petitioners and
other parties. Yet, any delays in petitioners cases
occasioned by such other and subsequent cases
should not warrant the invalidation of DO No. 182.
The Constitution prohibits only the delays that are
unreasonable, arbitrary and oppressive, and tend to
render rights nugatory.24 In fine, we see neither
undue delays, nor any violation of the right of
petitioners to the speedy disposition of their cases.
Sixthly, petitioners assert that the assailed
issuances should cover only future cases against
Delos Angeles, Jr., et al., not those already being
investigated. They maintain that DO No. 182 was
issued in violation of the prohibition against
passing laws with retroactive effect.
Petitioners assertion is baseless.
As a general rule, laws shall have no retroactive
effect. However, exceptions exist, and one such
exception concerns a law that is procedural in
nature. The reason is that a remedial statute or a
statute relating to remedies or modes of procedure
does not create new rights or take away vested
rights but only operates in furtherance of the
remedy or the confirmation of already existing
rights.25 A statute or rule regulating the procedure
of the courts will be construed as applicable to
actions pending and undetermined at the time of its
passage. All procedural laws are retroactive in that
sense and to that extent. The retroactive application
is not violative of any right of a person who may
feel adversely affected, for, verily, no vested right
generally attaches to or arises from procedural
laws.

Admin. Law | 78

Finally, petitioners have averred but failed to

establish that DO No. 182 constituted obstruction
of justice. This ground of the petition, being
unsubstantiated, was unfounded.
THE HONORABLE COURT OF APPEALS,
SPECIAL
NINETEENTH
(19TH)
DIVISION,CEBU CITY & THE HONGKONG
AND SHANGHAI BANKING CORPORATION,
LTD.,

Nonetheless, it is not amiss to reiterate that the

authority of the Secretary of Justice to assume
jurisdiction
over
matters
involving
the
investigation of crimes and the prosecution of
offenders is fully sanctioned by law. Towards that
end, the Secretary of Justice exercises control and
supervision over all the regional, provincial, and
city prosecutors of the country; has broad
discretion in the discharge of the DOJs functions;
and administers the DOJ and its adjunct offices and
agencies by promulgating rules and regulations to
carry out their objectives, policies and functions.

Respondents.

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

Consequently, unless and until the Secretary of

Justice acts beyond the bounds of his authority, or
arbitrarily, or whimsically, or oppressively, any
person or entity who may feel to be thereby
aggrieved or adversely affected should have no
right to call for the invalidation or nullification of
the rules and regulations issued by, as well as other
actions taken by the Secretary of Justice.

DECISION
CHICO-NAZARIO, J.:

WHEREFORE, the Court DISMISSES the

omnibus petition for certiorari, prohibition, and
mandamus for lack of merit.
Petitioners shall pay the costs of suit.
SO ORDERED.

SPOUSES
BERNYL
BALANGAUAN
KATHERENE BALANGAUAN,
Petitioners,

- versus -

&

Before Us is a Petition for Certiorari under Rule

65 of the Revised Rules of Court assailing the 28
April 2006 Decision[1] and 29 June 2006
Resolution[2] of the Court of Appeals in CA-G.R.
CEB-SP No. 00068, which annulled and set aside
the 6
April
2004[3] and 30
August
[4]
2004 Resolutions of the Department of Justice
(DOJ) in I.S. No. 02-9230-I, entitled The
Hongkong and Shanghai Banking Corporation v.
Katherine Balangauan, et al. The twin resolutions
of the DOJ affirmed, in essence, the Resolution of
the Office of the City Prosecutor,[5] Cebu City,
which dismissed for lack of probable cause the
criminal complaint for Estafa and/or Qualified
Estafa, filed against petitioner-Spouses Bernyl
Balangauan (Bernyl) and Katherene Balangauan
(Katherene) by respondent Hong Kong and
Shanghai Banking Corporation, Ltd. (HSBC).

Admin. Law | 79

In this Petition for Certiorari, petitioners Bernyl

and Katherene urge this Court to reverse and set
aside the Decision of the Court of Appeals, Special
nineteenth (sic) [19th] division (sic), Cebu City
(sic) and accordingly, dismiss the complaint
against the [petitioners Bernyl and Katherene] in
view of the absence of probable cause to warrant
the filing of an information before the Court and
for utter lack of merit.[6]

As culled from the records, the antecedents of the

present case are as follows:

Petitioner Katherene was a Premier Customer

Services Representative (PCSR) of respondent
bank, HSBC. As a PCSR, she managed the
accounts of HSBC depositors with Premier
Status. One such client and/or depositor handled by
her was Roger Dwayne York (York).

York maintained several accounts with respondent

HSBC. Sometime in April 2002, he went to
respondent HSBCs Cebu Branch to transact with
petitioner Katherene respecting his Dollar and Peso
Accounts. Petitioner Katherene being on vacation
at the time, York was attended to by another
PCSR. While at the bank,York inquired about the
status of his time deposit in the amount
of P2,500,000.00. The PCSR representative who
attended to him, however, could not find any
record of said placement in the banks data base.

York adamantly insisted, though, that through

petitioner Katherene, he made a placement of the
aforementioned amount in a higher-earning time
deposit. Yorkfurther elaborated that petitioner
Katherene explained to him that the alleged higherearning time deposit scheme was supposedly being
offered to Premier clients only. Upon further
scrutiny and examination, respondent HSBCs bank
personnel discovered that: (1) on 18 January 2002,

York pre-terminated a P1,000,000.00 time deposit;

(2) there were cash movement tickets and
withdrawal slips all signed by York for the amount
of P1,000,000.00; and (3) there were regular
movements in Yorks accounts, i.e., beginning in
the month of January 2002, monthly deposits in the
amount of P12,500.00 and P8,333.33 were made,
which York denied ever making, but surmised were
the regular interest earnings from the placement of
the P2,500,000.00.

It was likewise discovered that the abovementioned deposits were transacted using
petitioner Katherenes computer and work station
using the code or personal password CEO8. The
significance of code CEO8, according to the bank
personnel of respondent HSBC, is that, [i]t is only
Ms. Balangauan who can transact from [the]
computer in the work station CEO-8, as she is
provided with a swipe card which she keeps sole
custody of and only she can use, and which she
utilizes for purposes of performing bank
transactions from that computer.[7]

Bank personnel of respondent HSBC likewise

recounted in their affidavits that prior to the filing
of the complaint for estafa and/or qualified estafa,
they were in contact with petitioners Bernyl and
Katherene. Petitioner Bernyl supposedly met with
them on two occasions. At first he disavowed any
knowledge regarding the whereabouts of Yorks
money but later on admitted that he knew that his
wife invested the funds with Shell Company. He
likewise admitted that he made the phone banking
deposit
to
credit Yorks
account
with
the P12,500.00 and the P8,333.33 using their
landline telephone. With respect to petitioner
Katherene, she allegedly spoke to the bank
personnel and York on several occasions and
admitted that the funds were indeed invested with
Shell Company but that York knew about this.

Admin. Law | 80

So as not to ruin its name and goodwill among its

clients,
respondent
HSBC
reimbursed York the P2,500,000.00.

Based on the foregoing factual circumstances,

respondent HSBC, through its personnel, filed a
criminal complaint for Estafa and/or Qualified
Estafa before the Office of the City
Prosecutor, Cebu City.

Petitioners Bernyl and Katherene submitted their

joint counter-affidavit basically denying the
allegations contained in the affidavits of the
aforenamed employees of respondent HSBC as
well as that made by York. They argued that the
allegations in the Complaint-Affidavits were pure
fabrications. Specifically, petitioner Katherene
denied 1) having spoken on the telephone with Dy
and York; and 2) having admitted to the personnel
of respondent HSBC and York that she took
the P2,500,000.00 of York and invested the same
with Shell Corporation. Petitioner Bernyl similarly
denied 1) having met with Dy, Iigo, Cortes and
Arcuri; and 2) having admitted to them
that York knew about petitioner Katherenes move
of investing the formers money with Shell
Corporation.

Respecting the P12,500.00 and P8,333.33 regular

monthly deposits to Yorks account made using the
code CEO8, petitioners Bernyl and Katherene, in
their defense, argued that since it was a deposit, it
was her duty to accept the funds for deposit. As
regards Yorks time deposit with respondent HSBC,
petitioners Bernyl and Katherene insisted that the
funds therein were never entrusted to Katherene in
the latters capacity as PCSR Employee of the
former because monies deposited at any bank
would not and will not be entrusted to specific
bank employee but to the bank as a whole.

Following the requisite preliminary investigation,

Assistant City Prosecutor (ACP) Victor C. Laborte,
Prosecutor II of the OCP, Cebu City, in
a Resolution[8]dated 21 February 2003, found no
probable cause to hold petitioners Bernyl and
Katherene liable to stand trial for the criminal
complaint of estafa and/or qualified estafa,
particularly Article 315 of the Revised Penal
Code. Accordingly, the ACP recommended the
dismissal of respondent HSBCs complaint.

The ACP explained his finding, viz:

As in any other cases, we may never know the

ultimate truth of this controversy. But on balance,
the evidence on record tend to be supportive of
respondents contention rather than that of
complaint.

xxxx

First of all, it is well to dwell on what Mr. York

said in his affidavit. Thus:

`18. For purposes of opening these two time

deposits (sic) accounts, Ms. Balangauan asked me
to sign several Bank documents on several
occasions, the nature of which I was unfamiliar
with.

`20. I discovered later that these were withdrawal

slips and cash movement tickets, with which
documents Ms. Balangauan apparently was able to
withdraw the amount from my accounts, and take
the same from the premises of the Bank.

Admin. Law | 81

In determining the credibility of an evidence, it is

well to consider the probability or improbability of
ones statements for it has been said that there is no
test of the truth of human testimony except its
conformity to our knowledge, observation and
experience.

Mr. York could not have been that unwary and

unknowingly innocent to claim unfamiliarity with
withdrawal slips and cash movement tickets which
Ms. Balangauan made him to sign on several
occasions. He is a premier client of HSBC
maintaining an account in millions of pesos. A
withdrawal slip and cash movement tickets could
not have had such intricate wordings or
terminology so as to render them nonunderstandable even to an ordinary account holder.
Mr. York admittedly is a long-standing client of the
bank. Within the period of long-standing he
certainly must have effected some withdrawals. It
goes without saying therefore that the occasions
that Ms. Balangauan caused him to sign
withdrawal slips are not his first encounter with
such kinds of documents.

The one ineluctable conclusion therefore that can

be drawn from the premises is that Mr. York freely
and knowingly knew what was going on with his
money, who has in possession of them and where it
was invested. These take out the elements of
deceit, fraud, abuse of confidence and without the
owners consent in the crimes charged.

The other leg on which complainants cause of

action stands rest on its claim for sum of money
against respondents allegedly after it reimbursed
Mr. York for his missing account supposedly
taken/withdrawn by Ms. Balangauan. The banks
action against respondents would be a civil suit
against them which apparently it already did after
the bank steps into the shoes of Mr. York and
becomes the creditor of Ms. Balangauan.[9]

The ACP then concluded that:

By and large, the evidence on record do (sic) not

engender enough bases to establish a probable
cause against respondents.[10]

On 1 July 2003, respondent HSBC appealed the

above-quoted resolution and foregoing comment to
the Secretary of the DOJ by means of a Petition for
Review.

In a Resolution dated 6 April 2004, the Chief State

Prosecutor, Jovencito R. Zuo, for the Secretary of
the DOJ, dismissed the petition. In denying
respondent HSBCs recourse, the Chief State
Prosecutor held that:

Sec. 12 (c) of Department Circular No. 70

dated July 2, 2000 provides that the Secretary of
Justice may, motu proprio, dismiss outright the
petition if there is no showing of any reversible
error in the questioned resolution.

We carefully examined the petition and its

attachments and found no reversible error that
would justify a reversal of the assailed resolution
which is in accord with the law and evidence on
the matter.

Admin. Law | 82

Respondent
HSBCs Motion
for
Reconsideration was likewise denied with finality
by the DOJ in a lengthier Resolution dated 30
August 2004.

The DOJ justified its ruling in this wise:

A perusal of the motion reveals no new matter or

argument which was not taken into consideration
in our review of the case. Hence, we find no cogent
reason to reconsider our resolution. Appellant
failed to present any iota of evidence directly
showing that respondent Katherene Balangauan
took the money and invested it somewhere else. All
it tried to establish was that Katherene unlawfully
took the money and fraudulently invested it
somewhere else x x x, because after the
withdrawals were made, the money never reached
Roger York as appellant adopted hook, line and
sinker the latters declaration, despite Yorks
signatures on the withdrawal slips covering the
total amount of P2,500,000.00 x x x. While
appellant has every reason to suspect Katherene for
the loss of the P2,500,000.00 as per Yorks bank
statements, the cash deposits were identified by the
numerals CEO8 and it was only Katherene who
could transact from the computer in the work
station CEO-8, plus alleged photographs showing
Katherene leaving her office at 5:28 p.m. with a
bulky plastic bag presumably containing cash since
a portion of the funds was withdrawn, we do not,
however, dwell on possibilities, suspicion and
speculation. We rule based on hard facts and solid
evidence.

Moreover, an examination of the petition for

review reveals that appellant failed to append
thereto all annexes to respondents urgent
manifestations
x
x
x
together
with supplemental affidavits of Melanie de

Ocampo and Rex B. Balucan x x x, which are

pertinent documents required under Section 5 of
Department Circular No. 70 dated July 3, 2000.[11]

Respondent HSBC then went to the Court of

Appeals
by
means
of
a
Petition
for Certiorari under Rule 65 of the Revised Rules
of Court.

On 28 April 2006, the Court of Appeals

promulgated its Decision granting respondent
HSBCs petition, thereby annulling and setting
aside the twin resolutions of the DOJ.

The fallo of the assailed decision reads:

WHEREFORE, in view of the foregoing premises,

judgment is hereby rendered by us GRANTING
the petition filed in this case. The assailed
Resolutions dated April 6, 2004 and August 30,
2004 are ANNULLED and SET ASIDE.

The City Prosecutor of Cebu City is hereby

ORDERED to file the appropriate Information
against the private respondents.[12]

Petitioners Bernyl and Katherenes motion for

reconsideration proved futile, as it was denied by
the appellate court in a Resolution dated 29 June
2006.

Admin. Law | 83

Hence, this petition for certiorari filed under Rule

65 of the Revised Rules of Court.

Petitioners Bernyl and Katherene filed the present

petition on the argument that the Court of Appeals
committed grave abuse of discretion in reversing
and setting aside the resolutions of the DOJ when:
(1) [i]t reversed the resolution of the Secretary of
Justice, Manila dated August 30, 2004 and
correspondingly, gave due course to the Petition
for Certiorari filed by HSBC on April 28, 2006
despite want of probable cause to warrant the filing
of
an
information
against
the
herein
[13]
petitioners ; (2) [i]t appreciated the dubious
evidence adduced by HSBC albeit the absence of
legal standing or personality of the latter [14]; (3) [i]t
denied the motions for reconsideration on June 29,
2006 notwithstanding the glaring evidence proving
the innocence of the petitioners [15]; (4) [i]t rebuffed
the evidence of the herein petitioners in spite of the
fact that, examining such evidence alone would
establish that the money in question was already
withdrawn by Mr. Roger Dwayne York[16]; and (5)
[i]t failed to dismiss outright the petition by HSBC
considering that the required affidavit of service
was not made part or attached in the said petition
pursuant to Section 13, Rule 13 in relation to
Section 3, Rule 46, and Section 2, Rule 56 of the
Rules of Court.[17]

Required to comment on the petition, respondent

HSBC remarked that the filing of the present
petition is improper and should be dismissed. It
argued that the correct remedy is an appeal
by certiorari under Rule 45 of the Revised Rules
of Court.

Petitioners Bernyl and Katherene, on the other

hand, asserted in their Reply[18] that the petition
filed under Rule 65 was rightfully filed considering
that not only questions of law were raised but
questions of fact and error of jurisdiction as

well. They insist that the Court of Appeals clearly

usurped into the jurisdiction and authority of the
Public Prosecutor/Secretary of justice (sic) x x x. [19]

Given the foregoing arguments, there is need to

address, first, the issue of the mode of appeal
resorted to by petitioners Bernyl and Katherene.
The present petition is one for certiorari under
Rule 65 of the Revised Rules of Court. Notice that
what is being assailed in this recourse is the
decision and resolution of the Court of Appeals
dated 28
April
2006 and 29
June
2006,
respectively. The Revised Rules of Court,
particularly Rule 45 thereof, specifically provides
that an appeal by certiorari from the judgments or
final orders or resolutions of the appellate court is
by verified petition for review on certiorari.[20]

In the present case, there is no question that the 28

April
2006 Decision and
29
June
2006 Resolution of the Court of Appeals granting
the respondent HSBCs petition in CA-G.R. CEB.
SP No. 00068 is already a disposition on the
merits. Therefore,
both
decision
and
resolution, issued by the Court of Appeals, are in
the nature of a final disposition of the case set
before it, and which, under Rule 45, are appealable
to this Court via a Petition for Review
on Certiorari, viz:

SECTION 1. Filing of petition with Supreme

Court. A
party
desiring
to
appeal
by certiorari from a judgment or final order or
resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other
courts whenever authorized by law, may file with
the Supreme Court a verified petition for review
on certiorari. The petition shall raise only
questions of law which must be distinctly set forth.
(Emphasis supplied.)

Admin. Law | 84

It is elementary in remedial law that a writ

of certiorari will not issue where the remedy of
appeal is available to an aggrieved party. A remedy
is considered "plain, speedy and adequate" if it will
promptly relieve the petitioners from the injurious
effects of the judgment and the acts of the lower
court or agency.[21] In this case, appeal was not only
available but also a speedy and adequate remedy.
[22]
And while it is true that in accordance with the
liberal spirit pervading the Rules of Court and in
the interest of substantial justice, [23] this Court has,
before,[24] treated a petition for certiorari as a
petition for review on certiorari, particularly if the
petition for certiorari was filed within the
reglementary period within which to file a petition
for review on certiorari;[25] this exception is not
applicable to the present factual milieu.

Pursuant to Sec. 2, Rule 45 of the Revised Rules of

Court:

SEC. 2. Time for filing; extension. The petition

shall be filed within fifteen (15) days from notice
of the judgment or final order or resolution
appealed from, or of the denial of the petitioners
motion for new trial or reconsideration filed in due
time after notice of the judgment. x x x.

a party litigant wishing to file a petition for review

on certiorari must do so within 15 days from
receipt of the judgment, final order or resolution
sought to be appealed. In this case, petitioners
Bernyl and Katherenes motion for reconsideration
of the appellate courts Resolution was denied by
the Court of Appeals in its Resolution dated 29
June 2006, a copy of which was received by
petitioners on 4 July 2006. The present petition
was filed on 1 September 2006; thus, at the time of
the filing of said petition, 59 days had elapsed, way
beyond the 15-day period within which to file a

petition for review under Rule 45, and even beyond

an extended period of 30 days, the maximum
period for extension allowed by the rules had
petitioners sought to move for such extra time. As
the facts stand, petitioners Bernyl and Katherene
had lost the right to appeal via Rule 45.

Be that as it may, alternatively, if the decision of

the appellate court is attended by grave abuse of
discretion amounting to lack or excess of
jurisdiction, then such ruling is fatally defective on
jurisdictional ground and may be questioned even
after the lapse of the period of appeal under Rule
45[26] but still within the period for filing a petition
for certiorari under Rule 65.

We have previously ruled that grave abuse of

discretion may arise when a lower court or tribunal
violates and contravenes the Constitution, the law
or existing jurisprudence. By grave abuse of
discretion is meant such capricious and whimsical
exercise of judgment as is equivalent to lack of
jurisdiction. The abuse of discretion must be grave,
as where the power is exercised in an arbitrary or
despotic manner by reason of passion or personal
hostility and must be so patent and gross as to
amount to an evasion of positive duty or to a
virtual refusal to perform the duty enjoined by or to
act at all in contemplation of law.[27] The word
capricious, usually used in tandem with the term
arbitrary, conveys the notion of willful and
unreasoning action. Thus, when seeking the
corrective hand of certiorari, a clear showing of
caprice and arbitrariness in the exercise of
discretion is imperative.[28]

In reversing and setting aside the resolutions of the

DOJ, petitioners Bernyl and Katherene contend
that the Court of Appeals acted with grave abuse of
discretion amounting to lack or excess of
jurisdiction.

Admin. Law | 85

The Court of Appeals, when it resolved to grant the

petition in CA-G.R. CEB. SP No. 00068, did so on
two grounds, i.e., 1) that the public respondent
(DOJ) gravely abused his discretion in finding that
there was no reversible error on the part of the
Cebu City Prosecutor dismissing the case against
the private respondent without stating the facts and
the law upon which this conclusion was made [29];
and 2) that the public respondent (DOJ) made
reference to the facts and circumstances of the case
leading to his finding that no probable cause exists,
x x x (the) very facts and circumstances (which)
show that there exists a probable cause to believe
that indeed the private respondents committed the
crimes x x x charged against them.[30]

able to present photographs of private respondent

Ms. Balangauan leaving her office carrying a bulky
plastic bag. There was also the fact that the
transactions in Mr. Yorks account used the code
CEO8 which presumably point to the private
respondent Ms. Balangauan as the author thereof
for she is the one assigned to such work station.

Furthermore, petitioner was able to establish that it

was Ms. Balangauan who handled Mr. Yorks
account and she was the one authorized to make
the placement of the sum of P2,500,000.00. Since
said sum is nowhere to be found in the records of
the bank, then, apparently, Ms. Balangauan must
be made to account for the same.[31]
The appellate court then concluded that:

It explained that:

In refusing to file the appropriate information

against the private respondents because he does not
dwell on possibilities, suspicion and speculation
and that he rules based on hard facts and solid
evidence, (sic) the public respondent exceeded his
authority and gravely abused his discretion. It must
be remembered that a finding of probable cause
does not require an inquiry into whether there is
sufficient evidence to procure a conviction. It is
enough that it is believed that the act or omission
complained of constitutes the offense charged. The
term does not mean actual or positive cause; (sic)
nor does it import absolute certainty. It is merely
based on opinion and reasonable belief. [Citation
omitted.] A trial is there precisely for the reception
of evidence of the prosecution in support of the
charge.

In this case, the petitioner had amply established

that it has a prima facie case against the private
respondents. As observed by the public respondent
in his second assailed resolution, petitioner was

These facts engender a well-founded belief that

that (sic) a crime has been committed and that the
private respondents are probably guilty thereof. In
refusing to file the corresponding information
against the private respondents despite the
presence of the circumstances making out a prima
facie case against them, the public respondent
gravely abused his discretion amounting to an
evasion of a positive duty or to a virtual refusal
either to perform the duty enjoined or to act at all
in contemplation of law.[32]

The Court of Appeals found fault in the DOJs

failure to identify and discuss the issues raised by
the respondent HSBC in its Petition for Review
filed therewith. And, in support thereof, respondent
HSBC maintains that it is incorrect to argue that it
was not necessary for the Secretary of Justice to
have his resolution recite the facts and the law on
which it was based, because courts and quasijudicial bodies should faithfully comply with
Section 14, Article VIII of the Constitution
requiring that decisions rendered by them should

Admin. Law | 86

state clearly and distinctly the facts of the case and

the law on which the decision is based.[33]
Petitioners Bernyl and Katherene, joined by the
Office of the Solicitor General, on the other hand,
defends the DOJ and assert that the questioned
resolution was complete in that it stated the legal
basis for denying respondent HSBCs petition for
review that (after) an examination (of) the petition
and its attachment [it] found no reversible error
that would justify a reversal of the assailed
resolution which is in accord with the law and
evidence on the matter.

It must be remembered that a preliminary

investigation is not a quasi-judicial proceeding, and
that the DOJ is not a quasi-judicial agency
exercising a quasi-judicial function when it
reviews the findings of a public prosecutor
regarding the presence of probable cause.
In Bautista v. Court of Appeals,[34] this Court held
that a preliminary investigation is not a quasijudicial proceeding, thus:

[T]he prosecutor in a preliminary investigation

does not determine the guilt or innocence of the
accused. He does not exercise adjudication nor
rule-making functions. Preliminary investigation
is merely inquisitorial, and is often the only means
of discovering the persons who may be reasonably
charged with a crime and to enable the fiscal to
prepare his complaint or information. It is not a
trial of the case on the merits and has no purpose
except that of determining whether a crime has
been committed and whether there is probable
cause to believe that the accused is guilty thereof.
While the fiscal makes that determination, he
cannot be said to be acting as a quasi-court, for it is
the courts, ultimately, that pass judgment on the
accused, not the fiscal.
Though some cases[35] describe the public
prosecutors power to conduct a preliminary
investigation as quasi-judicial in nature, this is true

only to the extent that, like quasi-judicial bodies,

the prosecutor is an officer of the executive
department exercising powers akin to those of a
court, and the similarity ends at this point. [36] A
quasi-judicial body is an organ of government
other than a court and other than a legislature
which affects the rights of private parties through
either adjudication or rule-making. [37] A quasijudicial agency performs adjudicatory functions
such that its awards, determine the rights of parties,
and their decisions have the same effect as
judgments of a court. Such is not the case when a
public prosecutor conducts a preliminary
investigation to determine probable cause to file an
Information against a person charged with a
criminal offense, or when the Secretary of Justice
is reviewing the formers order or resolutions. In
this case, since the DOJ is not a quasi-judicial
body, Section 14, Article VIII of the Constitution
finds no application. Be that as it may, the DOJ
rectified the shortness of its first resolution by
issuing a lengthier one when it resolved respondent
HSBCs motion for reconsideration.

Anent the substantial merit of the case, whether or

not the Court of Appeals decision and resolution
are tainted with grave abuse of discretion in
finding probable cause, this Court finds the petition
dismissible.

The Court of Appeals cannot be said to have acted

with grave abuse of discretion amounting to lack or
excess of jurisdiction in reversing and setting aside
the resolutions of the DOJ. In the resolutions of the
DOJ, it affirmed the recommendation of ACP
Laborte that no probable cause existed to warrant
the filing in court of an Information for estafa
and/or qualified estafa against petitioners Bernyl
and Katherene. It was the reasoning of the DOJ
that [w]hile appellant has every reason to suspect
Katherene for the loss of the P2,500,000.00 as per
Yorks bank statements, the cash deposits were
identified by the numerals CEO8 and it was only
Katherene who could transact from the computer in
Admin. Law | 87

the work station CEO-8, plus alleged photographs

showing Katherene leaving her office at 5:28 p.m.
with a bulky plastic bag presumably containing
cash since a portion of the funds was withdrawn,
we do not, however, dwell on possibilities,
suspicion and speculation. We rule based on hard
facts and solid evidence.[38]
We do not agree.
Probable cause has been defined as the existence of
such facts and circumstances as would excite belief
in a reasonable mind, acting on the facts within the
knowledge of the prosecutor, that the person
charged was guilty of the crime for which he was
prosecuted.[39] A finding of probable cause merely
binds over the suspect to stand trial. It is not a
pronouncement of guilt.[40]

The executive department of the government is

accountable for the prosecution of crimes, its
principal obligation being the faithful execution of
the laws of the land. A necessary component of the
power to execute the laws is the right to prosecute
their violators,[41] the responsibility for which is
thrust upon the DOJ. Hence, the determination of
whether or not probable cause exists to warrant the
prosecution in court of an accused is consigned and
entrusted to the DOJ. And by the nature of his
office, a public prosecutor is under no compulsion
to file a particular criminal information where he is
not convinced that he has evidence to prop up the
averments thereof, or that the evidence at hand
points to a different conclusion.

But this is not to discount the possibility of the

commission of abuses on the part of the
prosecutor. It is entirely possible that the
investigating prosecutor has erroneously exercised
the discretion lodged in him by law. This, however,
does not render his act amenable to correction and
annulment by the extraordinary remedy
of certiorari, absent any showing of grave abuse of
discretion amounting to excess of jurisdiction. [42]

And while it is this Courts general policy not to

interfere in the conduct of preliminary
investigations, leaving the investigating officers
sufficient discretion to determine probable cause,
[43]
we have nonetheless made some exceptions to
the general rule, such as when the acts of the
officer are without or in excess of authority,
[44]
resulting
from
a
grave
abuse
of
discretion. Although there is no general formula or
fixed rule for the determination of probable cause,
since the same must be decided in the light of the
conditions obtaining in given situations and its
existence depends to a large degree upon the
finding or opinion of the judge conducting the
examination, such a finding should not disregard
the facts before the judge (public prosecutor) or
run counter to the clear dictates of reason. [45]

Applying the foregoing disquisition to the present

petition, the reasons of DOJ for affirming the
dismissal of the criminal complaints for estafa
and/or qualified estafa are determinative of
whether or not it committed grave abuse of
discretion amounting to lack or excess of
jurisdiction. In requiring hard facts and solid
evidenceas the basis for a finding of probable cause
to hold petitioners Bernyl and Katherene liable to
stand trial for the crime complained of, the DOJ
disregards the definition of probable cause that it is
a reasonable ground of presumption that a matter
is, or may be, well-founded, such a state of facts in
the mind of the prosecutor as would lead a person
of ordinary caution and prudence to believe, or
entertain an honest or strong suspicion, that a thing
is so.[46] The term does not mean actual and
positive cause nor does it import absolute certainty.
[47]
It is merely based on opinion and reasonable
belief;[48] that is, the belief that the act or omission
complained
of
constitutes
the
offense
charged. While probable cause demands more than
bare suspicion, it requires less than evidence which
would justify conviction. Herein, the DOJ reasoned
as if no evidence was actually presented by
respondent HSBC when in fact the records of the
Admin. Law | 88

case were teeming; or it discounted the value of

such substantiation when in fact the evidence
presented was adequate to excite in a reasonable
mind the probability that petitioners Bernyl and
Katherene committed the crime/s complained of. In
so doing, the DOJ whimsically and capriciously
exercised its discretion, amounting to grave abuse
of discretion, which rendered its resolutions
amenable to correction and annulment by the
extraordinary remedy of certiorari.

From the records of the case, it is clear that

a prima facie case for estafa/qualified estafa exists
against petitioners Bernyl and Katherene. A perusal
of the records, i.e., the affidavits of respondent
HSBCs witnesses, the documentary evidence
presented, as well as the analysis of the factual
milieu of the case, leads this Court to agree with
the Court of Appeals that, taken together, they are
enough to excite the belief, in a reasonable mind,
that the Spouses Bernyl Balangauan and Katherene
Balangauan are guilty of the crime complained
of. Whether or not they will be convicted by a trial
court based on the same evidence is not a
consideration.It is enough that acts or omissions
complained of by respondent HSBC constitute the
crime of estafa and/or qualified estafa.

Collectively, the photographs of petitioner

Katherene leaving the premises of respondent
HSBC carrying a bulky plastic bag and the
affidavits of respondent HSBCs witnesses
sufficiently establish acts adequate to constitute the
crime of estafa and/or qualified estafa. What the
affidavits bear out are the following: that York was
a Premier Client of respondent HSBC; that
petitioner Katherene handled all the accounts of
York; that not one of Yorks accounts reflect
the P2,500,000.00 allegedly deposited in a higher
yielding account; that prior to the discovery of her
alleged acts and omissions, petitioner Katherene
supposedly persuaded York to invest in a new
product of respondent HSBC, i.e., a higher interest
yielding time deposit; that York made a total

of P2,500,000.00 investment in the new product by

authorizing petitioner Balangauan to transfer said
funds to it; that petitioner Katherene supposedly
asked York to sign several transaction documents
in order to transfer the funds to the new product;
that said documents turned out to be withdrawal
slips and cash movement tickets; that at no time
did York receive the cash as a result of signing the
documents that turned out to be withdrawal
slips/cash movement tickets; that Yorks account
was regularly credited loose change in the amounts
of P12,500.00 and P8,333.33 beginning in the
month after the alleged transfer of Yorks funds to
the new product; that the regular deposits of loose
change were transacted with the use of petitioner
Katherenes work terminal accessed by her
password CEO8; that the CEO8 password was
keyed in with the use of a swipe card always in the
possession of petitioner Katherene; that one of the
loose-change deposits was transacted via the phone
banking feature of respondent HSBC and that
when traced, the phone number used was the
landline number of the house of petitioners Bernyl
and Katherene; that respondent HSBCs bank
personnel, as well as York, supposedly a) talked
with petitioner Katherene on the phone, and that
she allegedly admitted that the missing funds were
invested with Shell Company, of which York
approved, and that it was only for one year; and b)
met with petitioner Bernyl, and that the latter at
first denied having knowledge of his wifes
complicity, but later on admitted that he knew of
the investment with Shell Company, and that he
supposedly
made
the
loose-change
deposit via phone banking; that after 23 April
2002, York was told that respondent HSBC had no
new product or that it was promoting investment
with Shell Company; that York denied having any
knowledge that his money was invested outside of
respondent HSBC; and that petitioner Katherene
would not have been able to facilitate the alleged
acts or omissions without taking advantage of her
position or office, as a consequence of which,
HSBC
had
to
reimburse
York
the
missing P2,500,000.00.

Admin. Law | 89

From the above, the alleged circumstances of the

case at bar make up the elements of abuse of
confidence, deceit or fraudulent means, and
damage under Art. 315 of the Revised Penal Code
on estafa and/or qualified estafa. They give rise to
the presumption or reasonable belief that the
offense of estafa has been committed; and, thus,
the filing of an Information against petitioners
Bernyl and Katherene is warranted. That
respondent HSBC is supposed to have no
personality to file any criminal complaint against
petitioners Bernyl and Katherene does not ipso
facto clear them of prima facie guilt. The same
goes for their basic denial of the acts or omissions
complained of; or their attempt at shifting the
doubt to the person of York; and their claim that
witnesses of respondent HSBC are guilty of
fabricating the whole scenario. These are matters
of defense; their validity needs to be tested in the
crucible of a full-blown trial. Lest it be forgotten,
the presence or absence of the elements of the
crime is evidentiary in nature and is a matter of
defense, the truth of which can best be passed upon
after a full-blown trial on the merits. Litigation will
prove petitioners Bernyl and Katherenes innocence
if their defense be true.

In fine, the relaxation of procedural rules may be

allowed only when there are exceptional
circumstances to justify the same. Try as we might,
this Court cannot find grave abuse of discretion on
the part of the Court of Appeals, when it reversed
and set aside the resolutions of the DOJ. There is
no showing that the appellate court acted in an
arbitrary and despotic manner, so patent or gross as
to amount to an evasion or unilateral refusal to
perform its legally mandated duty. On the contrary,
we find the assailed decision and resolution of the
Court of Appeals to be more in accordance with the
evidence on record and relevant laws and
jurisprudence than the resolutions of the DOJ.

dismiss the instant petition for being the wrong

remedy under the Revised Rules of Court, as well
as for petitioner Bernyl and Katherenes failure to
sufficiently
show
that
the
challenged Decision and Resolution of the Court of
Appeals were rendered in grave abuse of discretion
amounting to lack or excess of jurisdiction.

WHEREFORE, premises considered, the instant

Petition for Certiorari is DISMISSED for lack of
merit. The 28 April 2006 Decision and the 29 June
2006Resolution of the Court of Appeals in CAG.R.
CEBSP
No.
00068,
are
hereby AFFIRMED. With costs against petitioners
-- Spouses Bernyl Balangauan and Katherene
Balangauan.
SO ORDERED.

G.R. No. 81385 February 21, 1989

EDUARDO B. OLAGUER AND CONRADO S.
REYES in their official capacity as FISCAL
AGENTS
OF
THE
PRESIDENTIAL
COMMISSION
ON
GOOD
GOVERNMENT, petitioners,
vs.
THE REGIONAL TRIAL COURT, NATIONAL
CAPITAL JUDICIAL REGION, BRANCH 48,
MANILA, PRESIDED BY THE HONORABLE
JUDGE DEMETRIO M. BATARIO, JR., M.B.
OLIVARES,
AUGUSTO
VILLANUEVA,
ARACELLI
LINSANGAN,
LUISA
LINSANGAN, ALEJANDRO MARAMAG,
MANUEL SALAK, TURNITA SORIANO,
LINO
SISON
DOMINGO
FLORES,
MILAGROS
HIZON
and
CARIDAD
ORPIADA, respondents.
The Solicitor General for petitioners.
Delia L. Hermoso for private respondents.

Considering the allegations, issues and arguments

adduced and our disquisition above, we hereby
Admin. Law | 90

GANCAYCO, J.:
The parameters of the jurisdiction of the ordinary
courts in relation to the Securities and Exchange
Commission (SEC) and the Sandiganbayan are put
into issue in this petition.
On December 17, 1987, private respondents filed a
complaint for injunction and damages, with a
prayer for the issuance of a writ of preliminary
injunction and/or temporary restraining order, in
the Regional Trial Court (RTC) of Manila against
petitioners and Winston Marbella, Gaston Ortigas,
Robeto Federis, Manuel C. Villa-Real, Emanuel
Soriano, Jack Arroyo and Benjamin Tulio.
The complaint alleges, among others, that private
respondents are the only stockholders with the
right to vote of the Philippine Journalists, Inc. (PJI)
Publisher of several daily periodicals such
as Manila
Journal,
People's
Journal, etc.
Sometime in 1977, PJI obtained from the
Development Bank of the Philippines (DBP)
certain financing accommodations and as security
thereof executed a first mortgage in favor of DBP
on its acts enumerated in a list attached to the
mortgage. The PJI stockholders assigned to DBP
the voting rights over 67% of the total subscribed
and outstanding voting shares of stock of the
company held by them. The DBP appointed said
PJI stockholders as proxies to exercise its right to
vote. Due to some financial difficulty on its part,
PJI requested for a restructuring of its loan
obligation with certain conditions. The request was
granted by the DBP in a letter dated August 4,
1986. Due to the default on the part of the PJI the
DBP cancelled the proxies in favor of the assigning
stockholders on September 30, 1986 and
designated as its proxies petitioner Eduardo
Olaguer, Jose Mari Velez and Manuel de Leon.
DBP scheduled a special stockholders meeting for
the purpose of electing a new set of directors.
It is also alleged in the complaint that before the
special meeting, petitioner Olaguer asked private
respondent Rosario M. Barreto Olivares to assign
qualifying shares not only to the three proxies of
DBP but also to two others to be chosen by him so

as to enable the five of them to sit in the PJI board

of directors, and that, accordingly, they may be
able to coordinate more effectively with DBP as
regards the early evaluation and approval of the
request for another restructuring of the PJI loan.
Thus
respondent
Olivares
assigned
her
shareholdings covered by Stock Certificate. No. 34
(which were at that time assigned to DBP) to
petitioner Olaguer, Marbella, Ortigas, Mari Velez
and De Leon, at one share each. The deeds of
assignment provided that the said assignment are
valid only as long as the nominee is the person
designated by the DBP as its representative to sit in
the board of directors.
The complaint also alleges that although Olaguer
was elected chairman of the board and chief
executive officer of PJI he failed to comply with
his commitment and that this gave private
respondents a reason to cancel the assignment.
Olaguer also committed certain illegal acts which
gave rise to the filing of several complaints against
him. However, before these cases could be
resolved, Olaguer's appointment as member of the
board of directors of DBP was terminated by
President Corazon C. Aquino effective September
9, 1987. He was informed about his termination
through two letters dated August 27 and October
12, 1987.
It is likewise alleged that, the termination
notwithstanding, Olaguer continued to exercise and
retain full management and control of PJI The DBP
chief legal counsel wrote to petitioner Reyes
informing him of Olaguer's removal from office
and enjoining him from implementing or
complying with any instructions from Olaguer and
from disposing of the properties of PJI and
disbursing any funds without prior approval of the
board of directors of PJI which will soon be
elected, except such amounts needed in the
ordinary course of business. Accordingly, the DBP,
acting through its Chairman, Jesus Estanislao and
its Director-in-Charge, Jose Mari Velez, entered
into an Interim Agreement with private
respondents. The said agreement called for a
special stockholders meeting for the purpose of
Admin. Law | 91

electing a new board of directors which shall hold

office until the next regular stockholders meeting
to be held on February 2, 1988.
The complaint further alleges that in a letter dated
December 14, 1987, the DBP chief legal counsel
informed the private respondents that the said
Interim Agreement cannot be implemented because
Olaguer claims that he has just been designated the
fiscal and team leader of the Presidential
Commission on Good Government (PCGG)
assigned to the PJI and that all his actions are
sanctioned and reported to PCGG Chairman
Ramon A. Diaz, and that it is the PCGG which
exercises the voting rights of all PJI common
stocks sequestered since 1986, including those
assigned to DBP and that the PJI qualifying share
now held by PJI Directors came from shares
sequestered by the PCGG. These observations are
contained in a letter dated October 31, 1987 written
by petitioner Reyes in his capacity as chief legal
counsel and corporate secretary of PJI It is stated
therein that Olaguer, together with Marbella,
Ortigas, Soriano, Federis, Arroyo and Villa-Real
have been acting as corporate officers and/or
members of the board without their having been
elected by the majority vote of stockholders and
without their owning in their own right even a
single qualifying share.
In addition, it is alleged that petitioner Reyes had
been sending out notices to private respondents
about an alleged stockholders meeting to be held
on December 21, 1987 at the PJI building, and that
in the letter written by the DBP chief legal
counsel, 1 it is stated that petitioner Olaguer and his
associates who claim to be members of the board
and corporate officers of PJI do not represent DBP
and that they are not authorized to act in its behalf.
The complaint emphasizes that the claim of
petitioner Reyes that Olaguer can sit as chairman
of the board of directos of PJI even if he is no
longer a director of DBP but as long as he is the
fiscal agent and team leader of the PCGG assigned
is baseless because: (a) the writs of sequestration
on the shares of respondents Hizon, Orpiada,
Maramag, Flores and Sison, served on them on or

about February 19, 1987, and on respondents

Linsangan, Salak, Soriano and Villanueva, served
on them on or about April 28, 1987, bad been
automatically lifted last August 19, 1987 and
October 28, 1987, respectively, pursuant to Section
26, Article XVIII of the 1987 Constitution; and
only the sequestration on the shares of respondent
Olivares has not been lifted since a complaint was
filed against her before the expiration of the
constitutional deadline for filing cases; (b) the
sequestered shares of respondent Olivares could
not be voted upon by petitioners herein and their
companions under their claim of being PCGG
fiscal agents under the recent pronouncement of
the Supreme Court in several cases clearly stating
that sequestration does not involve the right of
ownership; (c) no other meeting has been validly
called for the election of a new set of directors
after the members of the board elected last October
2, 1986 had ceased to be such directors, either by
virtue of the cancellation of their qualifying shares
or their resignation; (d) with the filing of Civil
Case No. 35 before the Sandiganbayan where the
PJI was listed as one of the involved corporations,
all actions affecting said corporation, including
those which will affect rights of ownership and
disposition of assets, must have the prior approval
of the Sandiganbayan which excercises jurisdiction
over these corporations as one of the properties in
litigation; and (e) by order of President Aquino,
petitioner Olaguer's separation from the PJI was
called for; that the acts of all the petitioners and
their companions of either continuing to sit in the
board of directors of PJI and/or representing and
acting as its corporate officers are illegal and are
the acts of usurpers and intruders violative of the
rights of private respondents as stockholders and
are causing great damage and prejudice to them as
well as to the rights of the DBP under the Deed of
Assignment, and that such acts of usurpation
should be enjoined by the trial court.
Under the second cause of action for damages, it is
alleged that Olaguer acted illegally and outside the
authority granted him as nominee of DBP and,
accordingly, Olivares cancelled the Deed of
Assignment of one qualifying share to him as well
Admin. Law | 92

as the Deed of Assignment in favor of Marbella

and Ortigas. The notice of cancellation was served
upon them on December 5, 1986. As a
consequence of such cancellation, the three failed
to qualify to sit as members of the board of PJI.
Private respondents also alleged that despite such
notice, petitioner and his associates continued to sit
in the board and that Olaguer took over the
complete management of the corporation and even
caused the appointment of other members of the
board and/or corporate officers even if such
appointees do not own PJI shares of stock in their
own right. It is likewise alleged that the petitioner
and his associates should be enjoined from
committing further acts of usurpation and that they
should be held liable for all unlawful
disbursements they have made. It is further alleged
that some of the private respondents had been
unlawfully dismissed and/or retired one after
another thereby depriving them of all benefits they
are entitled to and subjecting them to great mental
anguish, sleepless nights, deep humiliation and
great anxiety for which they must be paid damages
in an amount left to the sound discretion of the
court. Private respondents also asked for
exemplary damages as well as the sum of
P200,000.00 for attorney's fees and expenses of
litigation.
Private respondents prayed that pending a hearing
on the merits of the case, a writ of preliminary
injunction or a temporary restraining order be
issued against petitioner Reyes enjoining him from
holding the special stockholders meeting scheduled
at 8:00 A.M. on December 21, 1987, and enjoining
Olaguer and his associates from sitting and acting
as members of the board of directors of PJI or as
corporate officers. Private respondents also prayed
that such temporary restraining order and/or writ of
preliminary injunction be made permanent after
due hearing and that Petitioner Olaguer and his
associates be made to pay, jointly and severally,
actual damages as may be proved after audit,
including moral and exemplary damages, attorney's
fees and litigation expenses in the amount of
P200,000.00, and the costs of the suit. 2

On December 18, 1987, an order was issued by the

trial court setting the petition for the issuance of a
writ of preliminary injunction for bearing on
January 4, 1988 at 1:30 in the afternoon. A
temporary restraining order was issued enjoining
petitioner Reyes from holding the special
stockholders meeting scheduled for December 21,
1987 and enjoining all the other petitioners
including Olaguer from sitting and acting as
members of the board and/or corporate officers of
PJI until further orders of the court.
On January 4, 1988, a motion to dismiss was filed
by the petitioners on the ground that the court has
no jurisdiction over the persons of petitioners; that
they were not served summons and that the subject
matter of the action involves controversies arising
out of intra-corporate relations between and among
stockholders which are covered by the provisions
of Section 5 of Presidential Decree No. 902-A so
that the matter is within the original and exclusive
jurisdiction of the Securities and Exchange
Commission (SEC); that the venue for a petition
seeking injunctive relief should be the
Sandiganbayan where aforesaid PCGG Case No.
0035 against Benjamin Romualdez, Rosario
Olivares, et al. is pending, pursuant to Executive
Order No. 14 defining the jurisdiction over cases
involving the alleged ill-gotten wealth of Former
President Marcos, et al.; that it is the SEC which
should exercise jurisdiction over the case pursuant
to Section 6 of Presidential Decree No. 902-A; and
that the complaint states no cause of action
inasmuch as the petitioners and the other
defendants hold shares emanating from the PCGG,
and not from the DBP; that the shares issued to
DBP for Olivares, et al. on the basis of an
erroneous DBP legal opinion have been declared
void ab initio and cancelled by the PCGG on
November 4, 1987 so that the DBP is not a
stockholder of record; that the call for the
stockholders meeting by petitioner Reyes was with
the approval of the PCGG Chairman; that PJI is a
sequestered corporation listed as item No. 49 under
"Shares of Stock" in "Assets and Other Property of
Benjamin Romualdez" marked Annex "A", in Case
No. 0035 for "Reconveyance, Reversion,
Admin. Law | 93

Accounting, Restitution and Damages," entitled

"Republic of the Philippines, plaintiff versus
Benjamin (Kokoy) Romualdez, et al.,"; that the PJI
pursuant to its Board Resolution No. 43, dated
November 14, 1987, has authorized the filing of
criminal complaints against Benjamin (Kokoy)
Romualdez, Rosario Olivares, Tuynita Soriano,
Jose T. Abundo, Evelyn Nicasio, Alejandro
Maramag, Caridad Orpiada and other former and
present PJI officers and employees who defrauded
the company by conspiring in and/or authorizing
the illegal disbursements of PJI funds amounting to
P 10.6 million, all for the account and upon
instructions of said Romualdez who was neither an
officer, director, stockholder of record of PJI nor a
creditor or supplier thereof; that regarding the
sequestration of PJI pursuant to orders of the
PCGG dated April 22, 1986 and February 19,
1987, the actual sequestration proceedings have not
been terminated upon the filing of PCGG Case No.
0035 before the Sandiganbayan on July 31, 1987.
Petitioners maintain that under the pertinent
provisions of the 1987 Constitution, the
commencement of a judicial action does not ipso
facto lift the sequestration order. It is the non-filing
of a judicial action within six months from the
ratification of the 1987 Constitution if the
sequestration order is issued before the ratification,
or within six months from the time sequestration
order was issued if the same was issued after such
ratification, which will automatically lift the
sequestration order. Petitioners also stated that
while the PJI suffered huge loses under the
administration of private respondents, the
corporation realized profits under the management
of petitioner Olaguer. All the common and
preferred stocks of private respondents have been
sequestered pursuant to the orders of the PCGG
dated April 22, 1986 and February 19, 1987 and it
is the PCGG which exercises the voting rights
pertaining to said sequestered shares pursuant to
the Memorandum of President Aquino to the
PCGG dated June 26, 1986.
A Memorandum in support of the prayer for the
issuance of a writ of preliminary injunction and

opposition to the motion to dismiss was filed by

counsel for private respondents.
On January 14, 1988, an order was issued by the
trial court denying the motion to dismiss and
issuing a writ of preliminary injunction as prayed
for upon a bond in the amount of P50,000.00 to be
filed by private respondents.
Hence, the herein petition for certiorari and
prohibition with a prayer for the issuance of a
temporary restraining order and/ or a writ of
preliminary injunction wherein the main issue is
whether or not the trial court has jurisdiction over
the subject matter of the action.
On January 26, 1988, a resolution was issued by
this Court requiring the respondents to comment
therein within ten (10) days from notice. A
temporary restraining order was issued enjoining
the respondent judge to cease and desist from
enforcing the order of the trial court dated January
14, 1988 in Civil Case No. 87-43156 as well as the
writ of preliminary injunction issued against
petitioners.
Acting on the manifestation and motion filed by
counsel for private respondents on February 4,
1988, this Court issued a resolution enjoining
petitioner Reyes and/or the corporate officers of
PJI from holding another special stockholders
meeting on February 5, 1988 or at any date
thereafter pending resolution of this case, and
directing the parties to maintain the status quo until
further orders from the Court.
The private respondents filed their comment on the
petition. Thereafter, the petitioners filed their reply.
On April 5, 1988, the court resolved to give due
course to the petition and considered the case
submitted for decision. Nevertheless, the private
respondents filed a rejoinder.
The petition is impressed with merit. There is no
dispute that the PJI is now under sequestration by
the PCGG and that Civil Case No. 0035 was filed
in the Sandiganbayan wherein the PJI is listed as
among the corporations involved in the
Admin. Law | 94

unexplained wealth case against former President

Marcos, Romualdez and many others. The records
likewise show that petitioner Olaguer, among
others, is a fiscal agent of the PCGG and that as
Chairman of the Board of Directors of the PJI he
was acting for and in behalf of the PCGG. Under
Section 2 of Executive Order No. 14, the
Sandiganbayan has exclusive and original
jurisdiction over all cases regarding "the funds,
moneys, assets and properties illegally acquired by
Former President Ferdinand E. Marcos, Mrs.
Imelda Romualdez Marcos, their close relatives,
subordinates, business associates, dummies,
agents, or nominees," 3 civil or criminal, including
incidents arising from such cases. The Decision of
the Sandiganbayan is subject to review on
certiorari exclusively by the Supreme Court. 4
In the exercise of its functions, the PCGG is a coequal body with the regional trial courts and coequal bodies have no power to control the
other. 5 The regional trial courts and the Court of
Appeals have no jurisdiction over the PCGG in the
exercise of its powers under the applicable
Executive Orders and Section 26, Article XVIII of
the 1987 Constitution and, therefore, may not
interfere with and restrain or set aside the orders
and actions of the PCGG. 6 By the same token, the
regional trial courts have no jurisdiction over the
acts of fiscal agents of the PCGG acting for and in
behalf of said commission.
The Commission should not be embroiled in and
swamped by legal suits before inferior courts all
over the land. Otherwise, the Commission will be
forced to spend valuable time defending all its
actuations in such courts. This will defeat the very
purpose behind the creation of the Commission.
Accordingly, Section 4(a) of Executive Order No.
1 expressly accorded the Commission and its
members immunity from suit for damages in that:
"No civil action shall lie against the Commission
or any member thereof for anything done or
omitted in the discharge of the task contemplated
by this order."

"injunction with prayer for writ of preliminary

injunction and/or temporary restraining order and
damages." Particularly, under paragraph 17(d) of
the complaint, private respondents admitted that
the PJI is listed as one of the involved corporations
in Civil Case No. 0035 pending before the
Sandiganbayan which now exercises jurisdiction
over the said corporation. Petitioners Olaguer and
Reyes appear to be fiscal agents of the PCGG.
There can be no doubt, therefore, that the subject
matter of the action (the PJI its properties and
assets) falls within the exclusive jurisdiction of the
Sandiganbayan.
Petitioners, as fiscal agents of the PCGG, cannot
be sued in such capacity before the ordinary courts.
The tribunal for such purpose is the
Sandiganbayan.
It necessarily follows that the issues raised by the
private respondents before the respondent judge to
the effect that petitioners are usurpers and have no
right to sit in the board of directors or act as
corporate officers of the PJI are issues which
should be addressed to the Sandiganbayan.
WHEREFORE, the petition is GRANTED. The
respondent judge is permanently enjoined from
enforcing the order of the trial court dated January
14, 1988. The restraining order issued by this Court
dated February 4, 1988 enjoining petitioner Reyes
and/or the corporate officers of the PJI from
holding the special stockholders meeting on
February 5, 1988 or at any date thereafter, and to
preserve and maintain the status quo, is hereby
lifted. The order of the trial court dated January 14,
1988 is hereby SET ASIDE and another order is
hereby issued dismissing the complaint, without
pronouncement as to costs. This Decision is
immediately executory.
SO ORDERED.

G.R. No. 141949. October 14, 2002]

Civil Case No. 87-43156 pending before the

respondent judge is denominated as one for
Admin. Law | 95

CEFERINO PADUA, petitioner, vs. HON.

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

Agreement, dated November 27, 1995, referring to

Interim Adjustments in Toll Rates upon the
occurrence of a significant currency devaluation:
Be APPROVED, as it is hereby APPROVED.
RESOLVED
FURTHER,
hereby RESOLVED:

as

Section

Unrounded Toll
Rates

On November 9, 2001, the TRB issued Resolution

No. 2001-89 authorizing provisional toll rate
adjustments at the Metro Manila Skyway, effective
January 1, 2002,[1] thus:
NOW THEREFORE, it is RESOLVED, as it is
hereby RESOLVED:

Toll Rates f

CLASS
1

SANDOVAL-GUTIERREZ, J.:

A brief narration of the factual backdrop is

imperative, thus:

is

That the Provisional Toll Rates, which are not to

exceed the following:

DECISION

The focal point upon which these two consolidated

cases converge is whether Resolution No. 2001-89
issued by the Toll Regulatory Board (TRB) is
valid.

it

Elevated
Portion

75.00

75.00

19.35

19.50

Bicutan
Sucat

to 11.21

11.00

Sucat
Alabang

to 10.99

11.00

At-Grade
Portion

Magallanes
to Bicutan

1. That in view of urgent public interest, the Board

hereby GRANTS to the Metro Manila Skyway
Project, Provisional Relief in accordance with Rule
10, Section 3 of the Rules of Practice and
Procedure Governing Hearing before the Toll
Regulatory Board which states, among others that
the Board may grant (provisional relief)in its own
initiativewithout prejudice to the final decision
after completion of the hearing;

* includes C5 entry/exit and Merville exit.

2. That the Provisional Relief shall be in form of an

interim toll rate adjustment in accordance with
Section 7.04(3) of the Supplemental Toll Operation

For implementation starting January 1, 2002 after

its publication once a week for three (3)
consecutive weeks in a newspaper of general
Admin. Law | 96

circulation and that said Provisional Toll Rate

Increase shall remain in effect until such time that
the TRB Board has determined otherwise:

PROVIDED that the recovery of the sum from the

interim rate adjustment shall be applied starting the
year 2003.

Be APPROVED as it is hereby APPROVED.

APPROVED as it is hereby APPROVED.

RESOLVED FURTHERMORE, as it is
hereby RESOLVED that the Provisional Toll
Rates be implemented in two (2) stages in
accordance with the following schedule:

On December 17, 24 and 31, 2001, the above

Resolution approving provisional toll rate
adjustments was published in the newspapers of
general circulation.[2]

Section

Unrounded
Toll Rates as
Maximum for
One (1) Year

Tracing back the events that led to the issuance of

Toll Rates for Implementation
For
the said Resolution,
it appears that on February 27,
Class 1 as Reference
2001 the Citra Metro Manila Tollways Corporation

JANUARY 1,
2002 to JUNE
30, 2002

Elevated
Portion

75.00

65.00

(CITRA) filed with the TRB an application for an

interim adjustment of the toll rates at the Metro
Manila Skyway Project Stage 1. [3] CITRA moored
its petition on the provisions of the Supplemental
Toll Operation Agreement (STOA),[4] authorizing
it, as the investor, to apply for and if warranted, to
be granted an interim adjustment of toll rates in the
event of a significant currency devaluation. The
relevant portions of the STOA read:
a. The Investor and/or the Operator shall be
entitled to apply for and if warranted, to be granted
an interim adjustment of Toll Rates upon the
occurrence of any of the following events:
xxxxxx

At-Grade
Portion

(ii) a significant currency devaluation

xxxxxx

Magallanes to 19.35
Bicutan

15.00

Bicutan
Sucat

to 11.21

9.00

Sucat
Alabang

to 10.99

9.00

(i) A currency devaluation shall be deemed

significant if it results in a depreciation of the value
of the Philippine peso relative to the US dollar by
at least 10%. For purposes hereof the exchange rate
between the Philippine peso and the US dollar
which shall be applicable shall be the exchange
rate between the above mentioned currencies in
effect as of the date of approval of the prevailing
preceding Toll Rate.
(ii) The Investors right to apply for an interim Toll
Rate adjustment under section 7.04 (3) (a) (ii) shall
be effective only while any Financing is
outstanding and have not yet been paid in full.
Admin. Law | 97

xxxxxx
(iv) An interim adjustment in Toll Rate shall be
considered such amount as may be required to
provide interim relief to the Investor from a
substantial increase in debt-service burden
resulting from the devaluation.[5]
Claiming that the peso exchange rate to a U.S.
dollar had devaluated from P26.1671 in 1995 to
P48.00 in 2000, CITRA alleged that there was a
compelling need for the increase of the toll rates to
meet the loan obligations of the Project and the
substantial increase in debt-service burden.
Due to heavy opposition, CITRAs petition
remained unresolved. This prompted CITRA to file
on October 9, 2001 an Urgent Motion for
Provisional Approval,[6] this time, invoking Section
3, Rule 10 of the Rules of Practice and Procedure
Governing Hearing Before the Toll Regulatory
Board (TRB Rules of Procedure) which provides:
SECTION 3. Provisional Relief. Upon the filing
of an application or petition for the approval of the
initial toll rate or toll rate adjustment, or at any
stage, thereafter, the Board may grant on motion
of the pleader or in its own initiative, the relief
prayed for without prejudice to a final
decision after completion of the hearing should the
Board find that the pleading, together with the
affidavits and supporting documents attached
thereto and such additional evidence as may have
been requested and presented, substantially support
the provisional order; Provided: That the Board
may, motu proprio, continue to issue orders or
grant relief in the exercise of its powers of general
supervision under existing laws. Provided: Finally,
that pending finality of the decision, the Board may
require the Petitioner to deposit in whole or in part
in escrow the provisionally approved adjustment or
initial toll rates. (Emphasis supplied)
On October 30, 2001, CITRA moved to
withdraw[7] its Urgent Motion for Provisional
Approval without prejudice to its right to seek or
be granted provisional relief under the abovequoted provisions of the TRB Rules of Procedure,

obviously, referring to the power of the Board to

act on its own initiative.
On November 7, 2001, CITRA wrote a letter [8] to
TRB expressing its concern over the undue delay
in the proceeding, stressing that any further setback
would bring the Projects financial condition, as
well as the Philippine banking system, to a total
collapse. CITRA recounted that out of the US$354
million funding from creditors, two-thirds (2/3)
thereof came from the Philippine banks and
financial institutions, such as the Landbank of the
Philippines and the Government Service Insurance
Services. Thus, CITRA requested TRB to find a
timely solution to its predicament.
On November 9, 2001, TRB granted CITRAs
motion to withdraw[9] the Urgent Motion for
Provisional Approval and, at the same time, issued
Resolution No. 2001-89,[10]earlier quoted.
Hence, petitioners Ceferino Padua and Eduardo
Zialcita assail before this Court the validity and
legality of TRB Resolution No. 2001-89.
Petitioner Ceferino Padua, as a toll payer, filed an
Urgent Motion for a Temporary Restraining Order
to Stop Arbitrary Toll Fee Increases[11] in G.R. No.
141949,[12] a petition for mandamus earlier filed by
him. In that petition, Padua seeks to compel
respondent Judge Santiago Ranada of the Regional
Trial Court, Branch 137, Makati City, to issue a
writ of execution for the enforcement of the Court
of Appeals Decision dated August 4, 1989 in CAG.R. SP No. 13235. In its Decision, the Court of
Appeals ordered the exclusion of certain portions
of the expressways (from Villamor Air Base to
Alabang in the South, and from Balintawak to
Tabang in the North) from the franchise of the
PNCC.
In his urgent motion, petitioner Padua claims
that: (1) Resolution No. 2001-89 was issued
without the required publication and in violation of
due process; (2) alone, TRB Executive Director
Jaime S. Dumlao, Jr., could not authorize the
provisional toll rate adjustments because the TRB
is a collegial body; and (3) CITRA has no standing
Admin. Law | 98

to apply for a toll fee increase since it is an investor

and not a franchisee-operator.
On January 4, 2002, petitioner Padua filed a
Supplemental Urgent Motion for a TRO against
Toll
Fee
Increases,[13] arguing
further
that: (1) Resolution 2001-89 refers exclusively to
the Metro Manila Skyway Project, hence, there is
no legal basis for the imposition of the increased
rate at the at-grade portions; (2) Resolution No.
2001-89 was issued without basis considering that
while it was signed by three (3) of the five
members of the TRB, none of them actually
attended the hearing; and 3) the computation of the
rate adjustment under the STOA is inconsistent
with the rate adjustment formula under Presidential
Decree No. 1894.[14]
On January 10, 2002, the Office of the Solicitor
General (OSG) filed, in behalf of public
respondent TRB, Philippine National Construction
Corporation (PNCC), Department of Public Works
and Highways (DPWH) and Judge Ranada, a
Consolidated Comment[15] contending that: (1) the
TRB has the exclusive jurisdiction over all matters
relating to toll rates; (2) Resolution No. 2001-89
covers both the Skyway and the at-grade level of
the South Luzon Expressway as provided under the
STOA; (3) that while Resolution No. 2001-89 does
not mention any factual basis to justify its issuance,
however, it does not mean that TRB's finding of
facts
is
not
supported
by
evidence;
and (4) petitioner Padua cannot assail the validity
of the STOA because he is not a party thereto.
Upon the other hand, on January 9, 2002, petitioner
Eduardo Zialcita, as a taxpayer and as
Congressman of Paraaque City, filed the present
petition for prohibition[16] with prayer for a
temporary restraining order and/or writ of
preliminary injunction against TRB and CITRA,
docketed as G.R. No. 151108, impugning the same
Resolution No. 2001-89.
Petitioner Zialcita asserts that the provisional toll
rate adjustments are exorbitant and that the TRB
violated its own Charter, Presidential Decree No.
1112,[17] when it promulgated Resolution No. 2001-

89 without the benefit of any public hearing. He

also maintains that the TRB violated the
Constitution when it did not express clearly and
distinctly the facts and the law on which
Resolution No. 2001-89 was based. And lastly, he
claims that Section 3, Rule 10 of the TRB Rules of
Procedure is not sanctioned by P.D. No. 1112.
Private respondent CITRA, in its comment[18] on
Congressman
Zialcitas
petition,
counters
that: (1) the TRB has primary administrative
jurisdiction over all matters relating to toll
rates; (2) prohibition is an inappropriate remedy
because its function is to restrain acts about to be
done
and
not
acts
already
accomplished; (3) Resolution No. 2001-89 was
issued in accordance with law; (4) Section 3, Rule
10 of the TRB Rules is constitutional;
and (5) private respondent and the Republic of the
Philippines would suffer more irreparable damages
than petitioner.
The TRB, through the OSG, filed a separate
comment[19] reiterating the same arguments raised
by private respondent CITRA.
On January 11, 2002, this Court resolved to
consolidate the instant petitions, G.R. No. 141949
and G.R. No. 151108.[20]
We rule for the respondents.
In assailing Resolution No. 2001-89, petitioners
came to us via two unconventional remedies one is
an urgent motion for a TRO to stop arbitrary toll
fee increases; and the other is a petition for
prohibition. Unfortunately, both are procedurally
impermissible.
I
Petitioner Paduas motion is a leap to a legal contest
of different dimension. As previously stated, G.R.
No. 141949 is a petition for mandamus seeking
to compel respondent Judge Ranada to issue a writ
of execution for the enforcement of the Court of
Appeals Decision dated August 4, 1989 in CAG.R. SP No. 13235. The issue therein is whether
Admin. Law | 99

the application for a writ of execution should be by

a mere motion or by an action for revival of
judgment. Thus, for petitioner Padua to suddenly
interject in the same petition the issue of whether
Resolution No. 2001-89 is valid is to drag this
Court to his web of legal convolution. Courts
cannot, as a case progresses, resolve the intrinsic
merit of every issue that comes along its way,
particularly those which bear no relevance to the
resolution of the case.
Certainly, petitioner Paduas recourse in challenging
the validity of TRB Resolution No. 2001-89 should
have been to institute an action, separate and
independent from G.R. No. 141949.
II
The remedy of prohibition initiated by petitioner
Zialcita in G.R. No. 151108 also suffers several
infirmities. Initially, it violates the twin doctrine of
primary administrative jurisdiction and nonexhaustion of administrative remedies.
P.D. No. 1112 explicitly provides that the decisions
of the TRB on petitions for the increase of toll rate
shall be appealable to the Office of the President
within ten (10) days from the promulgation
thereof.[21] P.D. No. 1894 reiterates this instruction
and further provides:
SECTION 9. The GRANTEE shall have the right
and authority to adjust any existing toll being
charged the users of the Expressways under the
following guidelines:
xxxxxx
c) Any interested Expressways user shall have the
right to file, within a period of ninety (90) days
after the date of publication of the adjusted toll
rate (s), a petition with the Toll Regulatory Board
for a review of the adjusted toll rate
(s); provided, however, that notwithstanding the
filing of such petition and the pendency of the
resolution thereof, the adjusted toll shall be
enforceable and collectible by the GRANTEE

effective on the first day of January in accordance

with the immediately preceding paragraph.
xxxxxx
e) Decisions of the Toll Regulatory Board on
petitions for review of adjusted toll shall be
appealable to the Office of the President within ten
(10) days from the promulgation thereof.
These same provisions are incorporated in the TRB
Rules of Procedure, particularly in Section 6, Rule
5 and Section 1, Rule 12 thereof.[22]
Obviously, the laws and the TRB Rules of
Procedure have provided the remedies of an
interested Expressways user.[23] The initial proper
recourse is to file a petition for review of the
adjusted toll rates with the TRB. The need for a
prior resort to this body is with reason. The TRB,
as the agency assigned to supervise the collection
of toll fees and the operation of toll facilities, has
the necessary expertise, training and skills to
judiciously decide matters of this kind. As may be
gleaned from the petition, the main thrust of
petitioner Zialcitas argument is that the
provisional toll rate adjustments are exorbitant,
oppressive, onerous and unconscionable. This is
obviously a question of fact requiring
knowledge of the formula used and the factors
considered in determining the assailed
rates. Definitely, this task is within the province
of the TRB.
We take cognizance of the wealth of jurisprudence
on the doctrine of primary administrative
jurisdiction and exhaustion of administrative
remedies. In this era of clogged court dockets, the
need for specialized administrative boards or
commissions with the special knowledge,
experience and capability to hear and determine
promptly disputes on technical matters or intricate
questions of facts, subject to judicial review in case
of
grave
abuse
of
discretion,
is
indispensable. Between the power lodged in an
administrative body and a court, the
unmistakable trend is to refer it to the

Admin. Law | 100

former."[24] In Industrial Enterprises,

Court of Appeals,[25] we ruled:

Inc.

vs.

x x x, if the case is such that its determination

requires the expertise, specialized skills and
knowledge of the proper administrative bodies
because technical matters or intricate questions of
facts are involved, then relief must first be obtained
in an administrative proceeding before a remedy
will be supplied by the courts even though the
matter is within the proper jurisdiction of a court.
Moreover, petitioner Zialcitas resort to prohibition
is intrinsically inappropriate. It bears stressing that
the office of this remedy is not to correct errors of
judgment but to prevent or restrain usurpation of
jurisdiction or authority by inferior tribunals and to
compel them to observe the limitation of their
jurisdictions. G.R. No. 151108, while designated as
a petition for prohibition, has for its object the
setting aside of Resolution No. 2001-89 on the
ground that it was issued without prior notice,
hearing and publication and that the provisional
toll rate adjustments are exorbitant. This is not
the proper subject of prohibition because as long as
the inferior court, tribunal or board has jurisdiction
over the person and subject matter of the
controversy, the writ will not lie to correct errors
and irregularities in procedure, or to prevent an
erroneous decision or an enforcement of an
erroneous judgment. And even in cases of
encroachment,
usurpation,
and
improper
assumption of jurisdiction, the writ will not
issue where an adequate and applicable remedy
by appeal, writ or error, certiorari, or other
prescribed methods of review are available.[26] In
this case, petitioner Zialcita should have sought a
review of the assailed Resolution before the TRB.
III
Even granting that petitioners recourse to the
instant remedies is in order, still, we cannot rule in
their favor.
For one, it is not true that the provisional toll rate
adjustments were not published prior to its
implementation on January 1, 2002. Records show

that they were published on December 17, 24 and

31, 2001[27] in three newspapers of general
circulation, particularly the Philippine Star,
Philippine Daily Inquirer and The Manila
Bulletin. Surely, such publications sufficiently
complied with Section 5 of P.D. No. 1112 which
mandates that no new rates shall be collected
unless published in a newspaper of general
publication at least once a week for three
consecutive weeks. At any rate, it must be pointed
out that under Letter of Instruction No. 1334-A,
[28]
the TRB may grant and issue ex-parte to any
petitioner, without need of notice, publication or
hearing, provisional authority to collect, pending
hearing and decision on the merits of the petition,
the increase in rates prayed for or such lesser
amount as the TRB may in its discretion
provisionally grant. That LOI No. 1334-A has the
force and effect of law finds support in a catena of
cases decreeing that all proclamations, orders,
decrees, instructions, and acts promulgated,
issued, or done by the former President (Ferdinand
E. Marcos) are part of the law of the land, and shall
remain valid, legal, binding, and effective, unless
modified, revoked or superseded by subsequent
proclamations, orders, decrees, instructions, or
other acts of the President. [29] In Association of
Small Landowners in the Philippines, Inc. vs.
Secretary of Agrarian Reform,[30] this Court held:
The Court wryly observes that during the past
dictatorship, every presidential issuance, by
whatever name it was called, had the force and
effect of law because it came from President
Marcos.Such are the ways of despots. Hence, it is
futile to argue, as the petitioners do in G.R. No.
79744, that LOI 474 could not have repealed P.D.
No. 27 because the former was only a letter of
instruction. The important thing is that it was
issued by President Marcos, whose word was
law during that time. (Emphasis supplied)
For another, it is not true that it was TRB
Executive Director Dumlao, Jr. alone who issued
Resolution No. 2001-89. The Resolution itself
contains the signature of the four TRB Directors,
namely, Simeon A. Datumanong, Emmanuel P.
Admin. Law | 101

Bonoan, Ruben S. Reinoso, Jr. and Mario K.

Espinosa.[31] Petitioner Padua would argue that
while these Directors signed the Resolution, none
of them personally attended the hearing. This
argument is misplaced. Under our jurisprudence,
an administrative agency may employ other
persons, such as a hearing officer, examiner or
investigator, to receive evidence, conduct hearing
and make reports, on the basis of which the agency
shall render its decision. Such a procedure is a
practical necessity.[32] Thus, in Mollaneda vs.
Umacob,[33] we ruled:
x x x At any rate, it cannot be gainsaid that the
term administrative body or agency includes the
subordinate officials upon whose hand the body
or agency delegates a portion of its authority.
Included therein are the hearing officers
through whose eyes and ears the administrative
body or agency observes the demeanor, conduct
and attitude of the witnesses and listens to their
testimonies.
It must be emphasized that the appointment of
competent officers to hear and receive evidence is
commonly resorted to by administrative bodies or
agencies in the interest of an orderly and efficient
disposition of administrative cases. x x x
x x x Corollarily, in a catena of cases, this Court
laid down the cardinal requirements of due process
in administrative proceedings, one of which is that
the tribunal or body or any of its judges must act
on its or his own independent consideration of the
law and facts of the controversy, and not simply
accept the views of a subordinate. Thus, it is
logical to say that this mandate was rendered
precisely to ensure that in cases where the
hearing or reception of evidence is assigned to a
subordinate, the body or agency shall not
merely rely on his recommendation but instead
shall personally weigh and assess the evidence
which the said subordinate has gathered.
Be that as it may, we must stress that the TRBs
authority to grant provisional toll rate adjustments
does not require the conduct of a hearing. Pertinent
laws and jurisprudence support this conclusion.

It may be recalled that Former President Ferdinand

E. Marcos promulgated P.D. No. 1112 creating the
TRB on March 31, 1977. The end in view was to
authorize the collection of toll fees for the use of
certain public improvements in order to attract
private sector investment in the government
infrastructure projects. The TRB was tasked to
supervise the collection of toll fees and the
operation of toll facilities. One of its powers is
to issue, modify and promulgate from time to
time the rates of toll that will be charged the
direct users of toll facilities and upon notice and
hearing, to approve or disapprove petitions for
the increase thereof.[34]
To clarify the intent of P.D. No. 1112 as to the
extent of the TRBs power,[35] Former President
Marcos further issued LOI No. 1334-A expressly
allowing the TRB to grant ex-parte provisional or
temporary increase in toll rates, thus:
NOW, THEREFORE, I, FERDINAND E.
MARCOS, President of the Republic of the
Philippines, by virtue of the powers vested in me
by the Constitution, do hereby direct, order and
instruct the Toll Regulatory Board to grant and
issue ex-parte to any petitioner, without need of
notice, publication or hearing, provisional
authority to collect, pending hearing of and
decision on the merits of such petition, the
increase in rates prayed for or such lesser
amount as the Board may in its discretion
provisionally grant, upon (a) a finding that the
said petition is sufficient in form and
substance, (b) the submission of an affidavit by the
petitioner showing that the increase in rates
substantially conforms to the formula, if any
stipulated in the franchise or toll operation
agreement/certificate of the petitioner and that
failure to immediately impose and collect the
increase in rates would result in outright delay or
stoppage of urgently needed improvements,
expansion or repairs of toll facilities and/or in great
irreparable injury to the petitioner, and (c) the
submission by the petitioner to the Board of a
bond, in such amount and from such surety or
sureties and under such terms and conditions as the
Admin. Law | 102

Board shall fix, to guarantee the refund of the

increase in rates to the affected toll payers in case it
is finally determined, after notice and hearing, that
the petitioner is not entitled, in whole or in part, to
the same. Any provisional toll rate increases
shall be effective immediately upon approval
without need of publication.
Thereafter, the TRB promulgated as part of its
Rules of Procedure, the following provision:
RULE 5
PROCEDURE FOR APPROVAL OF TOLL
RATE
Section 2. Provisional Relief Upon initial findings
of the Board that the Petition for the approval of
initial toll rate or the petition for toll rate
adjustment is in accordance with Sections 1 and 2
of Rule 2, Section 2 of Rule 3 and Section 1 of
Rule 4 hereof, the Board within a reasonable time
after the filing of the Petition, may in an en banc
decision provisionally approve the initial toll rate
or toll rate adjustment, without the necessity of
any notice and hearing.
From the foregoing, it is clear that a hearing is not
necessary for the grant of provisional toll rate
adjustment. The language of LOI No. 1334-A is
not susceptible of equivocation. It directs, orders
and instructs the TRB to issue provisional toll rates
adjustment ex-parte without
the
need
of
notice, hearing and publication. All that is
necessary is that it be issued upon (1) a finding that
the main petition is sufficient in form and
substance; (2) the submission of an affidavit
showing that the increase in rates substantially
conforms to the formula, if any is stipulated in
the franchise or toll operation agreement, and
that failure to immediately impose and collect the
increase in rates would result in great irreparable
injury to the petitioner; and (3) the submission of a
bond. Again, whether or not CITRA complied
with these requirements is an issue that must be
addressed to the TRB.

The practice is not something peculiar. We have

ruled in a number of cases that an administrative
agency may be empowered to approve
provisionally, when demanded by urgent public
need, rates of public utilities without a
hearing. The reason is easily discerned from the
fact that provisional rates are by their nature
temporary and subject to adjustment in
conformity with the definitive rates approved
after final hearing.[36] In Maceda vs. Energy
Regulatory Board,[37] we ruled that while the ERB
is not precluded from conducting a hearing on the
grant of provisional authority which is of course,
the better procedure however, it can not be
stigmatized
if
it
failed
to
conduct
one. Citing Citizens Alliance for Consumer
Protection vs. Energy Regulatory Board,[38] this
Court held:
In the light of Section 8 quoted above, public
respondent Board need not even have conducted
formal hearings in these cases prior to issuance of
its Order of 14 August 1987 granting
a provisional increase of prices. The Board, upon
its own discretion and on the basis of documents
and evidence submitted by private respondents,
could have issued an order granting provisional
relief immediately upon filing by private
respondents of their respective applications. In
this respect, the Court considers the evidence
presented by private respondents in support of their
applications -.i.e., evidence showing that
importation costs of petroleum products had gone
up; that the peso had depreciated in value; and that
the Oil Price Stabilization Fund (OPSF) had been
depleted as substantial and hence constitutive of at
least prima facie basis for issuance by the Board of
a provisional relief order granting an increase in
the prices of petroleum products.
Anent petitioner Paduas contention that CITRA has
no standing to apply for a toll fee increase, suffice
it to say that CITRAs right stems from the STOA
which was entered into by no less than the
Republic of the Philippines and by the
PNCC. Section 7.04 of the STOA provides that the
Investor, CITRA, and/or the Operator, PNCC,
Admin. Law | 103

shall be entitled to apply for and if warranted, to

be granted an interim adjustment of toll rates in
case of force majeure and a significant currency
valuation.[39] Now, unless set aside through proper
action, the STOA has the force and effect of law
between the contracting parties, and is entitled to
recognition by this Court. [40] On the same breath,
we cannot sustain Paduas contention that the term
Metro Manila Skyway Project excludes the atgrade portions of the South Luzon Expressway
considering that under the same STOA the Metro
Manila Skyway includes: (a) the South Metro
Manila Skyway, coupled with the rehabilitated atgrade portion of the South Luzon Expressway,
from Alabang to Quirino Avenue; (b) the Central
Metro Manila Skyway, from Quirino Avenue to A.
Bonifacio Avenue; x x x.[41]
Petitioner Zialcita faults the TRB for not stating the
facts and the law on which Resolution No. 2001-89
is based. Petitioner is wrong. Suffice it to state that
while Section 14, Article VIII of the 1987
Constitution provides that no decision shall be
rendered by any court without expressing therein
clearly and distinctly the facts and the law on
which it is based, this rule applies only to
a decision of a court of justice, not TRB.[42]
At this point, let it be stressed that we are not
passing upon the reasonableness of the
provisional toll rate adjustments. As we have
earlier mentioned, this matter is best addressed
to the TRB.

remedy of prohibition where only questions of lack

or excess of jurisdiction or grave abuse of
discretion is to be entertained.
And to accord the main petition for mandamus in
G.R. No. 141949 the full deliberation it deserves,
we deem it appropriate to discuss its merit on
another occasion. Anyway, G.R. No. 141949 was
consolidated with G.R. No. 151108 only by reason
of petitioner Paduas deviant motion assailing
Resolution 2001-89. As we have previously said,
the main petition in G.R. No. 141949 presents an
entirely different issue and is set on a different
factual landscape.
WHEREFORE, petitioner Paduas Urgent Motion
for Temporary Restraining Order to Stop Arbitrary
Toll Fee Increases is DENIED and petitioner
Zialcitas Petition for Prohibition is DISMISSED.
SO ORDERED.

G.R. No. 115863 March 31, 1995

AIDA
D.
EUGENIO, petitioner,
vs.
CIVIL SERVICE COMMISSION, HON.
TEOFISTO T. GUINGONA, JR. & HON.
SALVADOR ENRIQUEZ, JR.,respondents.

PUNO, J.:
IV
In fine, as what we intimated in Philippine
National Construction Corp. vs. Court of Appeals,
[43]
we commend petitioners for devoting their time
and effort on a matter so imbued with public
interest as in this case. But we can do no better
than to brush aside their chief objections to the
provisional toll rate adjustments, for a different
approach would lead this Court astray into the field
of factual conflict where its pronouncements would
not rest on solid grounds. Time and again, we have
impressed that this Court is not a trier of facts,
more so, in the consideration of an extraordinary

The power of the Civil Service Commission to

abolish the Career Executive Service Board is
challenged in this petition for certiorari and
prohibition.
First the facts. Petitioner is the Deputy Director of
the Philippine Nuclear Research Institute. She
applied for a Career Executive Service (CES)
Eligibility and a CESO rank on August 2, 1993,
she was given a CES eligibility. On September 15,
1993, she was recommended to the President for a
CESO rank by the Career Executive Service
Board. 1
Admin. Law | 104

All was not to turn well for petitioner. On October

1,
1993,
respondent
Civil
Service
2
Commission passed Resolution No. 93-4359, viz:
RESOLUTION NO. 93-4359
WHEREAS, Section 1(1) of Article IX-B provides
that Civil Service shall be administered by the
Civil Service Commission, . . .;
WHEREAS, Section 3, Article IX-B of the 1987
Philippine Constitution provides that "The Civil
Service Commission, as the central personnel
agency of the government, is mandated to establish
a career service and adopt measures to promote
morale, efficiency, integrity, responsiveness,
progresiveness and courtesy in the civil
service, . . .";
WHEREAS, Section 12 (1), Title I, Subtitle A,
Book V of the Administrative Code of 1987 grants
the Commission the power, among others, to
administer and enforce the constitutional and
statutory provisions on the merit system for all
levels and ranks in the Civil Service;
WHEREAS, Section 7, Title I, Subtitle A, Book V
of the Administrative Code of 1987 Provides,
among others, that The Career Service shall be
characterized by (1) entrance based on merit and
fitness to be determined as far as practicable by
competitive examination, or based highly technical
qualifications; (2) opportunity for advancement to
higher career positions; and (3) security of tenure;
WHEREAS, Section 8 (c), Title I, Subtitle A, Book
V of the administrative Code of 1987 provides that
"The third level shall cover Positions in the Career
Executive Service";
WHEREAS, the Commission recognizes the
imperative need to consolidate, integrate and unify
the administration of all levels of positions in the
career service.
WHEREAS, the provisions of Section 17, Title I,
Subtitle A. Book V of the Administrative Code of
1987 confers on the Commission the power and

authority to effect changes in its organization as the

need arises.
WHEREAS, Section 5, Article IX-A of the
Constitution provides that the Civil Service
Commission shall enjoy fiscal autonomy and the
necessary implications thereof;
NOW
THEREFORE,
foregoing
premises
considered, the Civil Service Commission hereby
resolves to streamline reorganize and effect
changes in its organizational structure. Pursuant
thereto, the Career Executive Service Board, shall
now be known as the Office for Career Executive
Service of the Civil Service Commission.
Accordingly, the existing personnel, budget,
properties and equipment of the Career Executive
Service Board shall now form part of the Office for
Career Executive Service.
The above resolution became an impediment. to
the appointment of petitioner as Civil Service
Officer, Rank IV. In a letter to petitioner, dated
June 7, 1994, the Honorable Antonio T. Carpio,
Chief Presidential legal Counsel, stated:
xxx xxx xxx
On 1 October 1993 the Civil Service Commission
issued CSC Resolution No. 93-4359 which
abolished the Career Executive Service Board.
Several legal issues have arisen as a result of the
issuance of CSC Resolution No. 93-4359,
including whether the Civil Service Commission
has authority to abolish the Career Executive
Service Board. Because these issues remain
unresolved, the Office of the President has
refrained from considering appointments of career
service eligibles to career executive ranks.
xxx xxx xxx
You may, however, bring a case before the
appropriate court to settle the legal issues arising
from issuance by the Civil Service Commission of
CSC Resolution No. 93-4359, for guidance of all
concerned.
Admin. Law | 105

Thank You.
Finding herself bereft of further administrative
relief as the Career Executive Service Board which
recommended her CESO Rank IV has been
abolished, petitioner filed the petition at bench to
annul, among others, resolution No. 93-4359. The
petition is anchored on the following arguments:
A.
IN VIOLATION OF THE CONSTITUTION,
RESPONDENT COMMISSION USURPED THE
LEGISLATIVE FUNCTIONS OF CONGRESS
WHEN IT ABOLISHED THE CESB, AN OFFICE
CREATED BY LAW, THROUGH THE
ISSUANCE OF CSC: RESOLUTION NO. 934359;
B.
ALSO
IN
VIOLATION
OF
THE
CONSTITUTION,
RESPONDENT
CSC
USURPED THE LEGISLATIVE FUNCTIONS
OF CONGRESS WHEN IT ILLEGALLY
AUTHORIZED THE TRANSFER OF PUBLIC
MONEY, THROUGH THE ISSUANCE OF CSC
RESOLUTION NO. 93-4359.
Required to file its Comment, the Solicitor General
agreed with the contentions of petitioner.
Respondent Commission, however, chose to
defend its ground. It posited the following position:

III. THE OFFICE OF THE PRESIDENT IS

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

ARGUMENTS FOR PUBLIC RESPONDENT-CSC

I. THE INSTANT PETITION STATES NO
CAUSE OF ACTION AGAINST THE PUBLIC
RESPONDENT-CSC.
II. THE RECOMMENDATION SUBMITTED TO
THE PRESIDENT FOR APPOINTMENT TO A
CESO RANK OF PETITIONER EUGENIO WAS
A VALID ACT OF THE CAREER EXECUTIVE
SERVICE BOARD OF THE CIVIL SERVICE
COMMISSION AND IT DOES NOT HAVE ANY
DEFECT.

The controlling fact is that the Career Executive

Service Board (CESB) was created in the
Presidential Decree (P.D.) No. 1 on September 1,
1974 4 which adopted the Integrated Plan. Article
IV, Chapter I, Part of the III of the said Plan
provides:
Article IV Career Executive Service
1. A Career Executive Service is created to form a
continuing pool of well-selected and development
oriented career administrators who shall provide
competent and faithful service.

Admin. Law | 106

2. A Career Executive Service hereinafter referred

to in this Chapter as the Board, is created to serve
as the governing body of the Career Executive
Service. The Board shall consist of the Chairman
of the Civil Service Commission as presiding
officer, the Executive Secretary and the
Commissioner of the Budget as ex-officio members
and two other members from the private sector
and/or the academic community who are familiar
with the principles and methods of personnel
administration.
xxx xxx xxx
5. The Board shall promulgate rules, standards and
procedures on the selection, classification,
compensation and career development of members
of the Career Executive Service. The Board shall
set up the organization and operation of the
service. (Emphasis supplied)
It cannot be disputed, therefore, that as the CESB
was created by law, it can only be abolished by the
legislature. This follows an unbroken stream of
rulings that the creation and abolition of public
offices is primarily a legislative function. As aptly
summed up in AM JUR 2d on Public Officers and
Employees, 5 viz:
Except for such offices as are created by the
Constitution, the creation of public offices is
primarily a legislative function. In so far as the
legislative power in this respect is not restricted by
constitutional provisions, it supreme, and the
legislature may decide for itself what offices are
suitable, necessary, or convenient. When in the
exigencies of government it is necessary to create
and define duties, the legislative department has
the discretion to determine whether additional
offices shall be created, or whether these duties
shall be attached to and become ex-officio duties of
existing offices. An office created by the legislature
is wholly within the power of that body, and it may
prescribe the mode of filling the office and the
powers and duties of the incumbent, and if it sees
fit, abolish the office.

In the petition at bench, the legislature has not

enacted any law authorizing the abolition of the
CESB. On the contrary, in all the General
Appropriations Acts from 1975 to 1993, the
legislature has set aside funds for the operation of
CESB. Respondent Commission, however, invokes
Section 17, Chapter 3, Subtitle A. Title I, Book V
of the Administrative Code of 1987 as the source
of its power to abolish the CESB. Section 17
provides:
Sec. 17. Organizational Structure. Each office
of the Commission shall be headed by a Director
with at least one Assistant Director, and may have
such divisions as are necessary independent
constitutional body, the Commission may effect
changes in the organization as the need arises.
But as well pointed out by petitioner and the
Solicitor General, Section 17 must be read together
with Section 16 of the said Code which enumerates
the offices under the respondent Commission, viz:
Sec. 16. Offices in the Commission. The
Commission shall have the following offices:
(1) The Office of the Executive Director headed by
an Executive Director, with a Deputy Executive
Director shall implement policies, standards, rules
and regulations promulgated by the Commission;
coordinate the programs of the offices of the
Commission and render periodic reports on their
operations, and perform such other functions as
may be assigned by the Commission.
(2) The Merit System Protection Board composed
of a Chairman and two (2) members shall have the
following functions:
xxx xxx xxx
(3) The Office of Legal Affairs shall provide the
Chairman with legal advice and assistance; render
counselling services; undertake legal studies and
researches; prepare opinions and ruling in the
interpretation and application of the Civil Service
law, rules and regulations; prosecute violations of

Admin. Law | 107

such law, rules and regulations; and represent the

Commission before any court or tribunal.
(4) The Office of Planning and Management shall
formulate development plans, programs and
projects; undertake research and studies on the
different aspects of public personnel management;
administer management improvement programs;
and provide fiscal and budgetary services.
(5) The Central Administrative Office shall provide
the Commission with personnel, financial, logistics
and other basic support services.
(6) The Office of Central Personnel Records shall
formulate and implement policies, standards, rules
and regulations pertaining to personnel records
maintenance, security, control and disposal;
provide storage and extension services; and
provide and maintain library services.
(7) The Office of Position Classification and
Compensation shall formulate and implement
policies, standards, rules and regulations relative to
the administration of position classification and
compensation.
(8) The Office of Recruitment, Examination and
Placement shall provide leadership and assistance
in developing and implementing the overall
Commission programs relating to recruitment,
execution and placement, and formulate policies,
standards, rules and regulations for the proper
implementation of the Commission's examination
and placement programs.
(9) The Office of Career Systems and
Standards shall provide leadership and assistance
in the formulation and evaluation of personnel
systems and standards relative to performance
appraisal, merit promotion, and employee incentive
benefit and awards.
(10)
The
Office
of
Human
Resource
Development shall
provide
leadership
and
assistance in the development and retention of
qualified and efficient work force in the Civil
Service; formulate standards for training and staff

development; administer service-wide scholarship

programs; develop training literature and materials;
coordinate and integrate all training activities and
evaluate training programs.
(11) The Office of Personnel Inspection and
Audit shall develop policies, standards, rules and
regulations for the effective conduct or inspection
and audit personnel and personnel management
programs and the exercise of delegated authority;
provide technical and advisory services to Civil
Service Regional Offices and government agencies
in the implementation of their personnel programs
and evaluation systems.
(12) The Office of Personnel Relations shall
provide leadership and assistance in the
development and implementation of policies,
standards, rules and regulations in the accreditation
of employee associations or organizations and in
the adjustment and settlement of employee
grievances and management of employee disputes.
(13) The Office of Corporate Affairs shall
formulate and implement policies, standards, rules
and regulations governing corporate officials and
employees in the areas of recruitment,
examination, placement, career development, merit
and awards systems, position classification and
compensation, performing appraisal, employee
welfare and benefit, discipline and other aspects of
personnel management on the basis of comparable
industry practices.
(14) The Office of Retirement Administration shall
be responsible for the enforcement of the
constitutional and statutory provisions, relative to
retirement and the regulation for the effective
implementation of the retirement of government
officials and employees.
(15) The Regional and Field Offices. The
Commission shall have not less than thirteen (13)
Regional offices each to be headed by a Director,
and such field offices as may be needed, each to be
headed by an official with at least the rank of an
Assistant Director.

Admin. Law | 108

As read together, the inescapable conclusion is that

respondent Commission's power to reorganize is
limited to offices under its control as enumerated in
Section 16, supra. From its inception, the CESB
was intended to be an autonomous entity, albeit
administratively
attached
to
respondent
Commission. As
conceptualized
by
the
Reorganization Committee "the CESB shall be
autonomous. It is expected to view the problem of
building up executive manpower in the
government with a broad and positive
outlook." 6 The essential autonomous character of
the CESB is not negated by its attachment to
respondent Commission. By said attachment,
CESB was not made to fall within the control of
respondent Commission. Under the Administrative
Code of 1987, the purpose of attaching one
functionally inter-related government agency to
another is to attain "policy and program
coordination." This is clearly etched out in Section
38(3), Chapter 7, Book IV of the aforecited Code,
to wit:
(3) Attachment. (a) This refers to the lateral
relationship between the department or its
equivalent and attached agency or corporation for
purposes of policy and program coordination. The
coordination may be accomplished by having the
department represented in the governing board of
the attached agency or corporation, either as
chairman or as a member, with or without voting
rights, if this is permitted by the charter; having the
attached corporation or agency comply with a
system of periodic reporting which shall reflect the
progress of programs and projects; and having the
department or its equivalent provide general
policies through its representative in the board,
which shall serve as the framework for the internal
policies of the attached corporation or agency.
Respondent Commission also relies on the case
of Datumanong, et al., vs. Civil Service
Commission, G. R. No. 114380 where the petition
assailing the abolition of the CESB was dismissed
for lack of cause of action. Suffice to state that the
reliance is misplaced considering that the cited

case was dismissed for lack of standing of the

petitioner, hence, the lack of cause of action.
IN VIEW WHEREOF, the petition is granted and
Resolution No. 93-4359 of the respondent
Commission is hereby annulled and set aside. No
costs.
SO ORDERED.

G.R. No. L-34526 August 9, 1988

HIJO PLANTATION INC., DAVAO FRUITS
CORPORATION,
TWIN
RIVERS
PLANTATION, INC. and MARSMAN & CO.,
INC., for themselves and in behalf of other
persons
and
entities
similarly
situated, petitioners,
vs.
CENTRAL
BANK
OF
THE
PHILIPPINES, respondent.

PARAS, J.:
This is a petition for certiorari and prohibition
which seeks: (1) to declare Monetary Board
Resolution No. 1995, series of 1971, as null and
void; (2) to prohibit the Central Bank from
collecting the stabilization tax on banana exports
shipped during the period January 1, 1972 to June
30, 1982; and (3) a refund of the amount collected
as stabilization tax from the Central Bank.
The facts of this case as culled from the records are
as follows:
Hijo Plantation, Inc., Davao Fruits Corporation,
Twin Rivers Plantation, Inc. and Marsman
Plantation (Manifestation, Rollo, P. 18),
collectively referred to herein as petitioners, are
domestic corporations duly organized and existing
under the laws of the Philippines, all of which are
engaged in the production and exportation of
bananas in and from Mindanao.

Admin. Law | 109

Owing to the difficulty of determining the

exchange rate of the peso to the dollar because of
the floating rate and the promulgation of Central
Bank Circular No. 289 which imposes an 80%
retention scheme on all dollar earners, Congress
passed Republic Act No. 6125 entitled "an act
imposing
STABILIZATION
TAX
ON
CONSIGNMENTS ABROAD TO ACCELERATE
THE ECONOMIC DEVELOPMENT OF THE
PHILIPPINES AND FOR OTHER PURPOSES,"
approved and made effective on May 1, 1970
(Comment on Petition, Rollo, p, 32), to eliminate
the necessity for said circular and to stabilize the
peso. Among others, it provides as follows:
SECTION 1. There shall be imposed, assessed and
collected a stabilization tax on the gross F.O.B.
peso proceeds, based on the rate of exchange
prevailing at the time of receipt of such proceeds,
whether partial or total, of any exportation of the
following products in accordance with the
following schedule:
a. In the case of logs, copra, centrifugal sugar, and
copper ore and concentrates:
Ten per centum of the F.O.B. peso proceeds of
exports received on or after the date of effectivity
of this Act to June thirty, nineteen hundred seventy
one;
Eight per centum of the F.O.B. peso proceeds of
exports received from July first, nineteen hundred
seventy-one to June thirty, nineteen hundred
seventy-two;
Six per centum of the F.O.B. peso proceeds of
exports received from July first, nineteen hundred
seventy two to June thirty, nineteen hundred
seventy- three; and
Four per centum of the F.O.B. peso proceeds of
exports received from July first, nineteen hundred
seventy-three to June thirty, nineteen hundred
seventy-four.
b. In the case of molasses, coconut oil, dessicated
coconut, iron ore and concentrates, chromite ore

and concentrates, copra meal or cake,

unmanufactured abaca, unmanufactured tobacco,
veneer core and sheets, plywood (including
plywood panels faced with plastics), lumber,
canned pineapples, and bunker fuel oil;
Eight per centum of the F.O.B. peso proceeds of
exports shipped on or after the date of effectivity of
this Act to June thirty, nineteen hundred seventyone;
Six per centum of the F.O.B. peso proceeds of
exports shipped from July first, nineteen hundred
seventy one to June thirty nineteen hundred
seventy- two;
Four per centum of the F.O.B. peso proceeds of
exports shipped from July first, nineteen hundred
seventy-two to June thirty nineteen hundred
seventy-three; and
Two per centum of the F.O.B. peso proceeds of
exports shipped from July first, nineteen hundred
seventy three to June thirty nineteen hundred
seventy-four.
Any export product the aggregate annual F.O.B.
value of which shall exceed five million United
States dollars in any one calendar year during the
effectivity of this Act shall likewise be subject to
the rates of tax in force during the fiscal years
following its reaching the said aggregate
value. (Emphasis supplied).
During the first nine (9) months of calendar year
1971, the total banana export amounted to an
annual aggregate F.O.B. value of P8,949,000.00
(Answer, Rollo, p. 73) thus exceeding the
aggregate F.O.B. value of five million United
States Dollar, bringing it within the ambit of
Republic Act No. 6125. Consequently, the banana
industry was in a dilemma as to when the
stabilization tax was to become due and collectible
from it and under what schedule of Section 1 (b) of
Republic Act 6125 should said tax be collected.
Accordingly, petitioners through their counsel, by
letter dated November 5, 1971, sought the
authoritative pronouncement of the Central Bank
Admin. Law | 110

(herein referred to as respondent), therein

advancing the opinion that the stabilization tax
does not become due and collectible from the
petitioners until July 1, 1972 at the rate of 4% of
the F.O.B. peso proceeds of the exports shipped
from July 1, 1972 to June 30,1973. Replying by
letter dated December 17,1971 (Rollo, p. 11), the
Central Bank called attention to Monetary Board
Resolution No. 1995 dated December 3, 1971
which clarified that:

There is here no dispute that the banana industry is

liable to pay the stabilization tax prescribed under
Republic Act No. 1995, it being the admission of
both parties, that the Industry has indeed reached
and for the first time in the calendar year 1971, a
total banana export exceeding the aggregate annual
F.O.B. value of five million United States dollars.
The crux of the controversy, however, is the
manner of implementation of Republic Act No.
6125.

1) For exports of bananas shipped during the

period from January 1, 1972 to June 30, 1972; the
stabilization tax shall be at the rate of 6%;

Section 1 of R.A. 6125 clearly provides as follows:

2) For exports of bananas shipped during the

period from July 1, 1972 to June 30, 1973, the
stabilization tax shall be at the rate of 4%; and
3) For exports of bananas shipped during the
period from July 1, 1973, to June 30, 1974, the
stabilization tax shall be at the rate of 2%."
Contending that said Board Resolution No. 1995
was manifestly contrary to the legislative intent,
petitioners sought a reconsideration of said Board
Resolution by letter dated December 27, 1971
(Rollo, p. 12) which request for reconsideration
was denied by the respondent, also by letter dated
January 20, 1972 (Rollo, p. 24). With the denial of
petitioners' request for reconsideration, respondent
thru its agent Bank, Rizal Commercial Banking
Corporation has been collecting from the
petitioners who have been forced to pay under
protest, such stabilization tax.
Petitioners view respondent's act as a clear
violation of the provision of Republic Act No.
6125, and as an act in excess of its jurisdiction,
hence, this petition.
The sole issue in this case is whether or not
respondent acted with grave abuse of discretion
amounting to lack of jurisdiction when it issued
Monetary Board Resolution No. 1995, series of
1971 which in effect reaffirmed Central Bank
Circular No. 309, enacted pursuant to Monetary
Board Resolution No. 1179.

An export product the aggregate annual F.O.B.

value of which shall exceed five million US dollars
in any one calendar year during the effectivity of
the act shall likewise be subject to the rates of tax
in force during the fiscal year following its
reaching the said aggregate value."
Petitioners contend that the stabilization tax to be
collected from the banana industry does not
become due and collectible until July 1, 1972 at the
rate of 4% of the F.O.B. peso proceeds of the
export shipped from July 1, 1972 to June 30,1973.
They further contend that respondent gave
retroactive effect to the law (RA 6125) by ruling in
Monetary Board Resolution No. 1995 dated
December 3, 1 971, that the export stabilization tax
on banana industry would start to accrue on
January 1, 1972 at the rate of 6% of the F.O.B.
peso proceeds of export shipped from July 1, 1971
to June 30, 1972 (Rollo, pp. 3-4).
Respondent, on the other hand, contends that the
aforecited provision of RA 6125 merely prescribes
the rates that may be imposed but does not provide
when the tax shall be collected and makes no
reference to any definite fixed period when the tax
shall begin to be collected (Rollo, pp. 77-78).
There is merit in this petition.
In the very nature of things, in many cases it
becomes impracticable for the legislative
department of the Government to provide general
regulations for the various and varying details for
the management of a particular department of the
Admin. Law | 111

Government. It therefore becomes convenient for

the legislative department of the government, by
law, in a most general way, to provide for the
conduct, control, and management of the work of
the particular department of the government; to
authorize certain persons, in charge of the
management and control of such department
(United States v. Tupasi Molina, 29 Phil. 119
[19141).

reached the aggregate annual F.O.B. value of more

than $5 million and the applicable tax rates shall be
the rates prescribed in schedule (b) of Section 1 of
RA No. 6125 for the fiscal year following the
reaching of the said aggregate value." Central Bank
Circular No. 309 was subsequently reaffirmed in
Monetary Board Resolution No. 1995 herein
assailed by petitioners for being null and void
(Rollo, pp. 97- 98).

Such is the case in RA 6125, which provided in its

Section 6, as follows:

In its comment (Rollo, p. 40), respondent argues

that the request for authoritative pronouncement of
petitioners was made because there was no express
provision in Section 1 of RA 6125 which
categorically states, when the stabilization tax shall
begin to accrue on those aggregate annual F.O.B.
values exceeding five (5) million United States
dollars in any one calendar year during the
effectivity of said act. For which reason, the law
itself authorized it under Section 7 to promulgate
rules and regulations to carry out the provisions of
said law.

All rules and regulations for the purpose of

carrying out the provisions of the act shall be
promulgated by the Central Bank of the Philippines
and shall take effect fifteen days after publication
in three newspapers of general circulation
throughout the Philippines, one of which shall be
in the national language.
Such regulations have uniformly been held to have
the force of law, whenever they are found to be in
consonance and in harmony with the general
purposes and objects of the law. Such regulations
once established and found to be in conformity
with the general purposes of the law, are just as
binding upon all the parties, as if the regulation had
been written in the original law itself (29 Phil.
119, Ibid). Upon the other hand, should the
regulation conflict with the law, the validity of the
regulation cannot be sustained (Director of
Forestry vs. Muroz 23 SCRA 1183).
Pursuant to the aforecited provision, the Monetary
Board issued Resolution No. 1179 which contained
the rules and regulations for the implementation of
said provision which Board resolution was
subsequently embodied in Central Bank Circular
No. 309, dated August 10, 1970 (duly published in
the Official Gazette, Vol. 66, No. 34, August 24,
1940, p. 7855 and in three newspapers of general
circulation throughout the Philippines namely, the
Manila Times, Manila Chronicle and Manila Daily
Bulletin). Section 3 of Central Bank Circular No.
309, "provides that the stabilization tax shall begin
to apply on January first following the calendar
year during which such export products shall have

In petitioner's reply (Rollo, p. 154) they argue that

since the Banana Exports reached the aggregate
annual F.O.B. value of US $5 million in August
1971, the stabilization tax on banana should be
imposed only on July 1, 1972, the fiscal year
following the calendar year during which the
industry attained the $5 million mark. Their
argument finds support in the very language of the
law and upon congressional record where a
clarification on the applicability of the law was
categorically made by the then Senator Aytona who
stated that the tax shall be applicable only after the
$5 million aggregate value is reached, making such
tax prospective in application and for a period of
one year- referring to the fiscal year (Annex 8,
Comment of Respondent; Rollo, p. 60). Clearly
such clarification was indicative of the legislative
intent. Further, they argue that respondent bank
through the Monetary Board clearly overstepped
RA 6125 which empowered it to promulgate rules
and regulations for the purpose of carrying out the
provisions of said act, because while Section 1 of
the law authorizes it to levy a stabilization tax on
petitioners only in the fiscal year following their
Admin. Law | 112

reaching the aggregate annual F.O.B. value of US

$5 million, that is, the fiscal year July 1, 1972 to
June 30, 1973, at a tax rate of 4% of the F.O.B.
peso proceeds, respondent in gross violation of the
law, instead issued Resolution No. 1995 which
impose a 6% stabilization tax for the calendar year
January 1, 1972 to June 30, 1972, which obviously
is in excess of its jurisdiction. It was further argued
that in directing its agent bank to collect the
stabilization tax in accordance with Monetary
Board Resolution No. 1995, it acted whimsically
and capriciously. (Rollo, p. 155).
It will be observed that while Monetary Board
Resolution No. 1995 cannot be said to be the
product of grave abuse of discretion but rather the
result of respondent's overzealous desire to carry
into effect the provisions of RA 6125, it is evident
that the Board acted beyond its authority under the
law and the Constitution. Hence, the petition for
certiorari and prohibition in the case at bar, is
proper.
Moreover, there is no dispute that in case of
discrepancy between the basic law and a rule or
regulation issued to implement said law, the basic
law prevails because said rule or regulation cannot
go beyond the terms and provisions of the basic
law (People vs. Lim, 108 Phil. 1091). Rules that
subvert the statute cannot be sanctioned
(University of Sto. Tomas v. Board of Tax Appeals,
93 Phil. 376; Del Mar v. Phil. Veterans
Administration, 51 SCRA 340). Except for
constitutional officials who can trace their
competence to act to the fundamental law itself, a
public official must locate to the statute relied upon
a grant of power before he can exercise it.
Department zeal may not be permitted to outrun
the authority conferred by statute (Radio
Communications of the Philippines, Inc. v.
Santiago L-29236, August 21, 1974, 58 SCRA 493;
cited in Tayug Rural Bank v. Central Bank, L46158, November 28,1986,146 SCRA 120,130).
PREMISES CONSIDERED, this petition is hereby
GRANTED.
SO ORDERED.

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

RADIO COMMUNICATIONS OF THE
PHILIPPINES,
INC., petitioner,
vs.
FRANCISCO SANTIAGO and ENRIQUE
MEDINA, as Commissioner, Public Service
Commission,respondents.
G.R. No. L-29247 August 21, 1974
RADIO COMMUNICATIONS OF THE
PHILIPPINES,
INC., petitioner,
vs.
CONSTANCIO JAUGAN and ENRIQUE
MEDINA, Commissioner, Public Service
Commission, respondents.
Jose B. Trenas & Cecero L. Aligaen for petitioner.
Generoso Almario for respondents.

FERNANDO, J.:p
It is a legal question of significance that was raised
in these two petitions for review, to be decided
jointly. It is whether the Public Service
Commission, no longer in existence by virtue of
the Presidential Decree reorganizing the executive
branch of the national government 1 had the
jurisdiction to act on complaints by dissatisfied
customers of petitioner Radio Communications of
the Phil., Inc. and thereafter to penalize it with a
fine. In Radio Communications of the Phil., Inc. v.
Francisco Santiago & Enrique Medina,
as Commissioner, Public Service Commission 2 the
dispositive portion of the challenged order insofar
as pertinent reads thus: "[Wherefore], under
Section 21 of the Public Service Act as amended,
the respondent operator of Radio Communications
of the Philippines, Inc. (RCPI) is hereby ordered to
pay a fine of [two hundred pesos](P200.00) within
fifteen (15) days from receipt hereof, with the
warning that failure to pay the said fine within the
aforecited period of time, will leave the
Admin. Law | 113

Commission no other alternative but to suspend the

rates authorized for the operation of respondent
herein." 3 In Radio Communications of the Phil.,
Inc. v. Constancio Jaugan & Enrique Medina,
Commissioner, Public Service Commission, 4 the
dispositive portion insofar as pertinent is worded as
follows: "[For all the foregoing considerations],
under Section 21 of the Public Service Act as
amended, the respondent, operator of Radio
Communications of the Philippines, Inc. (RCPI) is
hereby ordered to pay a fine of Two Hundred Pesos
(P200.00) within fifteen (15) days from receipt
hereof, with a warning that failure to pay the said
fine within the aforecited period of time, will leave
the Commission no other alternative but to suspend
and revoke the rates authorized, for the operation
of respondent herein." 5 The allegation by petitioner
that it was devoid of such competence is based on
the express limitation found in the Public Service
Act 6 expressly exempting radio companies from
the jurisdiction, supervision and control of such
body "except with respect to the fixing of
rates." 7 In the face of the provision itself, it is
rather apparent that the Public Service Commission
lacked the required power to proceed against
petitioner. There is nothing in Section 21 thereof
which impowers it to impose a fine that calls for a
different conclusion. 8 We have to reverse.
There is no dispute as to the facts. The challenged
order in Radio Communications of the Phil., Inc. v.
Santiago and Medina stated: "It is admitted by
respondent [now petitioner] that on July 12, 1966,
a telegram was filed with respondent-company and
the amount of P1.50 was paid for the transmission
of said telegram to Zamboanga City .... The
telegram, however, was never transmitted until
now. The respondent not only did not give any
valid explanation, but did not present any evidence
to explain why the said telegram was not
forwarded to the addressee until now. This is,
therefore, a clear case where the respondent, taking
advantage of the rates fixed by this Commission
collected the sum of P1.50 and promised to render
a service to the complainant, i.e. the transmission
of his telegram filed on July 12, 1966; but, after
receiving the sum of P1.50, respondent failed to

render
the
promised
service," 9 in Radio
Communications of the Phil., Inc. v. Jaugan and
Medina, the order sought to be reviewed had this to
say: "The evidence presented shows that on August
1, 1967, complainant Constancio Jaugan filed a
telegram at the branch office of respondent in
Dumaguete City, ... addressed to Commissioner
Enrique Medina, PSC, Manila. The telegram was
received by an employee of the respondent, Mrs.
Jesusa A. Orge, as shown by the receipt ... dated
August 1, 1967, and the sum of P2.64 was
collected in payment of said telegram. The
telegram, ... in effect, advised Commissioner
Medina that the Land Registration Case where he
was cited by subpoena to testify before the CFI of
Oriental Negros on August 14 and 15, 1967, was
transferred and, therefore, there was no necessity
for the said Commissioner to proceed to Negros
Oriental on those dates. It appears that the said
telegram received by Jesusa Orge at Dumaguete
City on August 1, 1967, was transmitted to Manila,
on the same date, but was never delivered to the
addressee, and on August 14 and 15, when
Commissioner Medina appeared before the
Dumaguete Court, he was advised that the case
was postponed since August 1 and that a telegram
was sent to the said Commissioner. Inquiries were
made, why the telegram was not received by the
Commissioner in Manila; the Dumaguete Office
communicated with the Manila Office, on the same
date, August 14, 1967 and it was only on August
15, 1967 that the telegram was relayed to the
Public Service Commission and was received by
one of the employees of the Commission, in the
absence of Commissioner Medina who was then in
Negros Oriental. ... ." 10 It was the manifest failure
in both cases to render the service expected of a
responsible operator that led to the imposition of
the penalty. The motions for reconsideration in
both cases having proved futile, the matter was
elevated to this Court.
As noted at the outset, a reversal is called for.
1. Except for constitutional officials who can trace
their competence to act to the fundamental law
itself, a public official must locate in the statute
Admin. Law | 114

relied upon a grant of power before he can exercise

it. It need not be express. It may be implied from
the wording of the law. Absent such a requisite,
however, no warrant exists for the assumption of
authority. The act performed, if properly
challenged, cannot meet the test of validity. It must
be set aside. So it must be in these two petitions.
That is to defer to a principle reiterated by this
Court time and time again. 11 That doctrine goes
back
to
a
1916
decision, Bautista
v.
12
Angeles, where Chief Justice Arellano stated the
following: "It devolves upon the judicial power to
convince the private individual, the party governed,
that he has no right to do what he did in violating
orders of the administrative authorities issued by
them in the exercise of their rights. Once he is
convinced, the administrative authorities, by virtue
of their own powers, impose the weight of their
authority upon him. If they, the administrative
authorities of public officials, exceed lawful limits
in the exercise of their power of execution, the law
provides what shall be done before the judicial
power can step in and repair the damage to the
private interest, or apply the law by declaring what
was properly or improperly done in exercising
public power." 13 There is likewise this relevant
excerpt from Villegas v. Subido: 14 "Nothing is
better settled in the law than that a public official
exercises power, not rights. The government itself
is merely an agency through which the will of the
state is expressed and enforced. Its officers
therefore are likewise agents entrusted with the
responsibility of discharging its functions. As such
there is no presumption that they are empowered to
act. There must be a delegation of such authority,
either express or implied. In the absence of a valid
grant, they are devoid of power. What they do
suffers from a fatal infirmity. That principle cannot
be sufficiently stressed. In the appropriate language
of Chief Justice Hughes: 'It must be conceded that
departmental zeal may not be permitted to outrun
the authority conferred by statute.' Neither the high
dignity of the office nor the righteousness of the
motive then is an acceptable substitute. Otherwise
the rule of law becomes a myth. Such an
eventuality, we must take all pains to
avoid." 15Such a fundamental postulate applies to

the Executive itself. So it has been attested by a

number of cases involving the President of the
Philippines. 16
There can be no justification then for the Public
Service Commission imposing the fines in these
two petitions. The law cannot be any clearer. The
only power it possessed over radio companies, as
noted was the fix rates. 17 It could not take to task a
radio company for any negligence or misfeasance.
It was bereft of such competence. It was not vested
with such authority. What it did then in these two
petitions lacked the impress of validity.
2. The Public Service Commission having been
abolished by virtue of a Presidential Decree, as set
forth at the outset, and a new Board of
Communications having been created to take its
place, nothing said in this decision has reference to
whatever powers are now lodged in the latter body.
It is to be understood, likewise, that insofar as the
complainants are concerned, this decision goes no
further than to rule adversely on the exercise of
authority by the Public Service Commission when
it took disciplinary action against petitioner.
WHEREFORE,
in
L-29236, Radio
Communications of the Phil., Inc. v. Francisco
Santiago and Enrique Medina, the order of former
Commissioner Enrique Medina of October 13,
1967 as affirmed by the order of the Public Service
Commission en banc of May 3, 1968, is reversed
and set aside, and in L-29247, Radio
Communications of the Phil., Inc. v. Constancio
Jaugan and Enrique Medina, the order of former
Commissioner Enrique Medina of October 10,
1967 as affirmed by the order of the Public Service
Commission en banc of April 4, 1968, is reversed
and set aside. No costs.

G.R. No. L-46158 November 28, 1986

TAYUG RURAL BANK, plaintiff-appellee,
vs.
CENTRAL
BANK
OF
THE
PHILIPPINES, defendant-appellant.
Admin. Law | 115

Bengzon, Bengzon, Villaroman & De Vera Law

Office for plaintiff-appellee.
Evangelista, Bautista & Valdehuesa Law Office
for defendant-appellant.

PARAS, J.:p
Submitted on May 20, 1977 for decision by this
Court is this appeal from the decision dated
January 6, 1971 rendered by the Court of First
Instance of Manila, Branch III in Civil Case No.
76920, the decretal portion of which states as
follows:
WHEREFORE, judgment is rendered for the
plaintiff on the complaint and the defendant is
ordered to further credit the plaintiff the
amounts collected as 10% penalty in the sum of
P19,335.88 or up to July 15, 1969 and to refrain
from collecting the said 10% penalty on the
remaining past due loans of plaintiff with the
defendant.
With respect to defendant's counterclaim,
judgment is hereby rendered against the
plaintiff and the defendant is ordered to pay the
Central Bank of the Philippines the outstanding
balance of its past overdue accounts in the sum
of P444,809,45 plus accrued interest at the rate
of 1/2 of 1 % per annum with respect to the
promissory notes (Annexes 1 to 1-E of
defendant's Answer) and 2-1/2% per annum
with respect to the promissory notes (Annexes 1f to 1-i of the Answer). From this amount shall
be deducted the sum of P19,335.88 collected as
10% penalty.
The facts of the case based on the parties'
stipulation of facts (Record on Appeal p. 67), are
as follows:
Plaintiff-Appellee, Tayug Rural Bank, Inc., is a
banking corporation in Tayug, Pangasinan.
During the period from December 28, 1962 to
July 30, 1963, it obtained thirteen (13) loans
from Defendant-Appellant, Central Bank of the

Philippines, by way of rediscounting, at the rate

of 1/2 of 1% per annum from 1962 to March 28,
1963 and thereafter at the rate of 2-1/2% per
anum. The loans, amounting to P813,000.00 as
of July 30, 1963, were all covered by
corresponding promissory notes prescribing the
terms and conditions of the aforesaid loans
(Record on Appea, pp. 15-53). As of July 15,
1969, the outstanding balance was P 444,809.45
(Record on Appeal, p. 56).
On December 23, 1964, Appellant, thru the
Director of the Department of Loans and
Credit, issued Memorandum Circular No. DLC8, informing all rural banks that an additional
penalty interest rate of ten per cent (10%) per
annum would be assessed on all past due loans
beginning January 4, 1965. Said Memorandum
Circular was actually enforced on all rural
banks effective July 4, 1965.
On June 27, 1969, Appellee Rural Bank sued
Appellant in the Court of First Instance of
Manila, Branch III, to recover the 10% penalty
imposed by Appellant amounting to P16,874.97,
as of September 27, 1968 and to restrain
Appellant from continuing the imposition of the
penalty. Appellant filed a counterclaim for the
outstanding balance and overdue accounts of
Appellee in the total amount of P444,809.45 plus
accrued interest and penalty at 10% per annum
on the outstanding balance until full payment.
(Record on Appeal, p. 13). Appellant justified
the imposition of the penalty by way of
affirmative and special defenses, stating that it
was legally imposed under the provisions of
Section 147 and 148 of the Rules and
Regulations
Governing
Rural
Banks
promulgated by the Monetary Board on
September 5, 1958, under authority of Section 3
of Republic Act No. 720, as amended (Record on
Appeal, p. 8, Affirmative and Special Defenses
Nos. 2 and 3).
In its answer to the counterclaim, Appellee
prayed for the dismissal of the counterclaim,
denying Appellant's allegations stating that if
Appellee has any unpaid obligations with
Admin. Law | 116

Appellant, it was due to the latter's fault on

account of its flexible and double standard
policy in the granting of rediscounting privileges
to Appellee and its subsequent arbitrary and
illegal imposition of the 10% penalty (Record on
Appeal, p. 57). In its Memorandum filed on
November 11, 1970, Appellee also asserts that
Appellant had no basis to impose the penalty
interest inasmuch as the promissory notes
covering the loans executed by Appellee in favor
of Appellants do not provide for penalty interest
rate of 10% per annum on just due loans
beginning January 4, 1965 (Record on Appeal p.
96).
The lower court, in its Order dated March 3,
1970, stated that "only a legal question has been
raised in the pleadings" and upholding the
stand of plaintiff Rural Bank, decided the case
in its favor. (Rollo, p. 34).
Appellant appealed the decision of the trial
court to the Court of Appeals, for determination
of questions of facts and of law. However, in its
decision promulgated April 13, 1977, the Court
of Appeals, finding no controverted facts and
taking note of the statement of the lower court
in its pre-trial Order dated March 3, 1970 that
only a legal question has been raised in the
pleadings, (Record on Appeal, p. 61), ruled that
the resolution of the appeal will solely depend
on the legal issue of whether or not the
Monetary Board had authority to authorize
Appellant Central Bank to impose a penalty
rate of 10% per annum on past due loans of
rural banks which had failed to pay their
accounts on time and ordered the certification
of this case to this Court for proper
determination (Rollo, pp. 34-35).
On April 20, 1977, the entire record of the case
was forwarded to this Court (Rollo, p. 36). In
the resolution of May 20, 1977, the First
Division of this Court, ordered the case
docketed and as already stated declared the
same submitted for decision (Rollo, p. 38).

In its Brief, Appellant assigns the following

errors:
I. THE LOWER COURT ERRED IN
HOLDING THAT IT IS BEYOND THE
REACH OF THE MONETARY BOARD TO
METE OUT PENALTIES ON PAST DUE
LOANS OF RURAL BANKS ESPECIALLY
SINCE NO PENAL CLAUSE HAS BEEN
INCLUDED IN THE PROMISSORY NOTES.
II. THE LOWER COURT ERRED IN
HOLDING THAT THE IMPOSITION OF THE
PENALTY IS AN IMPAIRMENT OF THE
OBLIGATION OF CONTRACT WITHOUT
DUE PROCESS.
III. THE LOWER COURT ERRED IN NOT
FINDING JUDGMENT AGAINST PLAINTIFF
FOR 10% COST OF COLLECTION OF THE
PROMISSORY NOTE
AS
PROVIDED
THEREIN.
It is undisputed that no penal clause has been
included in the promissory notes. For this
reason, the trial court is of the view that
Memorandum Circular DLC-8 issued on
December 23, 1964 prescribing retroactive effect
on all past due loans, impairs the obligation of
contract and deprives the plaintiff of its
property without due process of law. (Record on
Appel, p. 40).
On the other hand appellant without opposing
appellee's right against impairment of
contracts, contends that when the promissory
notes were signed by appellee, it was chargeable
with knowledge of Sections 147 and 148 of the
rules and regulations authorizing the Central
Bank to impose additional reasonable penalties,
which became part of the agreement. (ibid).
Accordingly, the issue is reduced to the sole
question as to whether or not the Central Bank
can validly impose the 10% penalty on
Appellee's past overdue loans beginning July 4,
1965, by virtue of Memorandum Circular No.
DLC-8 dated December 23, 1964.
Admin. Law | 117

The answer is in the negative.

Memorandum Circular No. DLC-8 issued by
the Director of Appellant's Department of
Loans and Credit on December 23, 1964, reads
as follows:
Pursuant to Monetary Board Resolution No.
1813 dated December 18, 1964, and in
consonance with Section 147 and 148 of the
Rules and Regulations Governing Rural Banks
concerning the responsibility of a rural bank to
remit immediately to the Central Bank
payments received on papers rediscounted with
the latter including the loan value of
rediscounted papers as they mature, and to
liquidate fully its maturing loan obligations with
the Central Bank, personal checks, for purposes
of repayment, shall considered only after such
personal checks shall have been honored at
clearing.
In addition, rural banks which shall default in
their loan obligations, thus incurring past due
accounts with the Central Bank, shall be
assessed an additional penalty interest rate of
ten per cent (10%) per annum on such past due
accounts with the Central Bank over and above
the customary interest rate(s) at which such
loans were originally secured from the Central
Bank. (Record on Appeal, p. 135).
The above-quoted Memorandum Circular was
issued on the basis of Sections 147 and 148 of
the Rules and Regulations Governing Rural
Banks of the Philippines approved on
September 5, 1958, which provide:
Section 147. Duty of Rural Bank to turn over
payment received for papers discounted or used
for collateral. A Rural Bank receiving any
payment on account of papers discounted or
used for collateral must turn the same over to
the creditor bank before the close of the
banking day next following the receipt of
payment, as long as the aggregate discounting
on loan amount is not fully paid, unless the
Rural Bank substitutes the same with another

eligible paper with at least the same or earlier

maturity and the same or greater value.
A Rural Bank failing to comply with the
provisions of the preceding paragraph shall ipso
facto lose its right to the rediscounting or loan
period, without prejudice to the Central Bank
imposing additional reasonable penalties,
including curtailment or withdrawal of financial
assistance.
Sec. 148. Default and other violations of
obligation by Rural Bank, effect. A Rural
Bank becomes in default upon the expiration of
the maturity period of its note, or that of the
papers discounted or used as collateral, without
the necessity of demand.
A Rural Bank incurring default, or in any other
manner, violating any of the stipulations in its
note, shall suffer the consequences provided in
the second paragraph of the preceding section.
(Record on Appeal, p. 136.)
The "Rules and Regulations Governing Rural
Banks" was published in the Official Gazette,
55 O.G., on June 13, 1959, pp. 5186-5289. It is
by virtue of these same Rules that Rural Banks
re-discount their loan papers with the Central
Bank at 2-1/2% interest per annum and in turn
lend the money to the public at 12% interest per
annum (Defendant's Reply to Plaintiff's
Memorandum, Record on Appeal, p. 130).
Appellant maintains that it is pursuant to
Section 3 of R.A. No. 720, as amended, that the
Monetary Board has adopted the set of Rules
and Regulations Governing Rural Banks. It
reads:
SEC. 3. In furtherance of this policy, the
Monetary Board of the Central Bank of the
Philippines shall formulate the necessary rules
and regulations governing the establishment
and operatives of Rural Banks for the purpose
of providing adequate credit facilities to small
farmers and merchants, or to cooperatives of

Admin. Law | 118

such farmers or merchants and to supervise the

operation of such banks.
The specific provision under the law claimed as
basis for Sections 147 and 148 of the Rules and
Regulations Governing Rural Banks, that is, on
Appellant's authority to extend loans to Rural
Banks by way of rediscounting is Section 13 of
R.A. 720, as amended, which provides:
SEC. 13. In an emergency or when a financial
crisis is imminent the Central Bank may give a
loan to any Rural Bank against assets of the
Rural Bank which may be considered
acceptable by a concurrent vote of at least, five
members of the Monetary Board.
In normal times, the Central Bank may rediscount against papers evidencing a loan
granted by a Rural Bank to any of its customers
which can be liquefied within a period of two
hundred and seventy days: PROVIDED,
HOWEVER, That for the purpose of
implementing a nationwide program of
agricultural and industrial development, Rural
Banks are hereby authorized under such terms
and conditions as the Central Bank shall
prescribe to borrow on a medium or long term
basis, funds that the Central Bank or any other
government financing institutions shall borrow
from the International Bank for Reconstruction
and Development or other international or
foreign lending institutions for the specific
purpose of financing the above stated
agricultural
and
industrial
program.
Repayment of loans obtained by the Central
Bank of the Philippines or any other
government financing institution from said
foreign lending institutions under this section
shall be guaranteed by the Republic of the
Philippines.
As to the supervising authority of the Monetary
Board of the Central Bank over Rural Banks,
the same is spelled-out under Section 10 of R.A.
720, as follows:

SEC. 10. The power to supervise the operation

of any Rural Bank by the Monetary Board of
the Central Bank as herein indicated, shall
consist in placing limits to the maximum credit
allowed any individual borrower; in prescribing
the interest rate; in determining the loan period
and loan procedure; in indicating the manner in
which technical assistance shall be extended to
Rural Banks; in imposing a uniform accounting
system and manner of keeping the accounts and
records of the Rural Banks; in undertaking
regular credit examination of the Rural Banks:
in instituting periodic surveys of loan and
lending procedures, audits, test check of cash
and other transactions of the Rural Banks; in
conducting training courses for personnel of
Rural Banks; and, in general in supervising the
business operation of the Rural Banks.
Nowhere in any of the above-quoted pertinent
provisions of R.A. 720 nor in any other
provision of R.A. 720 for that matter, is the
monetary Board authorized to mete out on
rural banks an additional penalty rate on their
past due accounts with Appellant. As correctly
stated by the trial court, while the Monetary
Board possesses broad supervisory powers,
nonetheless, the retroactive imposition of
administrative penalties cannot be taken as a
measure supervisory in character. (Record on
Appeal, p. 141).
Administrative rules and regulations have the
force and effect of law (Valerio v. Hon.
Secretary of Agriculture and Natural Resources,
7 SCRA 719; Commissioner of Civil Service v.
Cruz, 15 SCRA 638; R.B. Industrial
Development Company, Ltd. v. Enage, 24 SCRA
365; Director of Forestry v. Munoz, 23 SCRA
1183; Gonzalo Sy v. Central Bank of the
Philippines, 70 SCRA 570).
There are, however, limitations to the rulemaking power of administrative agencies. A rule
shaped out by jurisprudence is that when
Congress
authorizes
promulgation
of
administrative rules and regulations to
implement given legislation, all that is required
Admin. Law | 119

is that the regulation be not in contradiction

with it, but conform to the standards that the
law prescribes (Director of Forestry v. Munoz,
23 SCRA 1183). The rule delineating the extent
of the binding force to be given to
administrative rules and regulations was
explained by the Court in Teoxon v. Member of
the Board of Administrators (33 SCRA 588),
thus: "The recognition of the power of
administrative officials to promulgate rules in
the implementation of the statute, as necessarily
limited to what is provided for in the legislative
enactment, may be found as early as 1908 in the
case of United States v. Barrias (11 Phil. 327) in
1914 U.S. v. Tupasi Molina (29 Phil. 119), in
1936 People v. Santos(63 Phil. 300), in
1951 Chinese
Flour
Importers
Ass.
v.
Price Stabilization Board (89 Phil. 439), and in
1962 Victorias Milling Co., Inc. v. Social Security
Commission (4 SCRA 627). The Court held in
the same case that "A rule is binding on the
courts so long as the procedure fixed for its
promulgation is followed and its scope is within
the statute granted by the legislature, even if the
courts are not in agreement with the policy
stated therein or its innate wisdom ...." On the
other hand, "administrative interpretation of
the law is at best merely advisory, for it is the
courts that finally determine what the law
means." Indeed, it cannot be otherwise as the
Constitution limits the authority of the
President, in whom all executive power resides,
to take care that the laws be faithfully executed.
No lesser administrative, executive office, or
agency then can, contrary to the express
language of the Constitution, assert for itself a
more extensive prerogative. Necessarily, it is
bound to observe the constitutional mandate.
There must be strict compliance with the
legislative enactment. The rule has prevailed
over the years, the latest restatement of which
was made by the Court in the case of Bautista v.
Junio (L-50908, January 31, 1984, 127 SCRA
342).
In case of discrepancy between the basic law
and a rule or regulation issued to implement

said law, the basic law prevails because said rule

or regulation cannot go beyond the terms and
provisions of the basic law (People v. Lim, 108
Phil. 1091). Rules that subvert the statute
cannot be sanctioned (University of St. Tomas v.
Board of Tax Appeals, 93 Phil. 376; Del Mar v.
Phil. Veterans Administration, 51 SCRA 340).
Except for constitutional officials who can trace
their competence to act to the fundamental law
itself, a public official must locate in the statute
relied upon a grant of power before he can
exercise it. Department zeal may not be
permitted to outrun the authority conferred by
statute (Radio Communications of the
Philippines, Inc. v. Santiago, L-29236, August
21, 1974, 58 SCRA 493).
When promulgated in pursuance of the
procedure or authority conferred upon the
administrative agency by law, the rules and
regulations partake of the nature of a statute,
and compliance therewith may be enforced by a
penal sanction provided in the law (Victorias
Milling Co., Inc. v. Social Security Commission,
114 Phil. 555; People v. Maceren, L-32166,
October 18, 1977, 79 SCRA 462; Daza v.
Republic, L-43276, September 28, 1984, 132
SCRA 267). Conversely, the rule is likewise
clear. Hence an administrative agency cannot
impose a penalty not so provided in the law
authorizing the promulgation of the rules and
regulations, much less one that is applied
retroactively.
The records show that DLC Form No. 11
(Folder of Exhibits, p. 16) was revised December
23, 1964 to include the penal clause, as follows:
In the event that this note becomes past due, the
undersigned shall pay a penalty at the rate of
_____ per cent ( ) per annum on such past due
account over and above the interest rate at
which such loan was originally secured from the
Central Bank.
Such clause was not a part of the promissory
notes executed by Appellee to secure its loans.
Appellant inserted the clause in the revised
Admin. Law | 120

DLC Form No. 11 to make it a part of the

contractual obligation of rural banks securing
loans from the Central Bank, after December
23, 1964. Thus, while there is now a basis for the
imposition of the 10% penalty rate on overdue
accounts of rural banks, there was none during
the period that Appellee contracted its loans
from Appellant, the last of which loan was on
July 30, 1963. Surely, the rule cannot be given
retroactive effect.
Finally, on March 31, 1970, the Monetary Board
in its Resolution No. 475 effective April 1, 1970,
revoked its Resolution No. 1813, dated
December 18, 1964 imposing the questioned
10% per annum penalty rate on past due loans
of rural banks and amended sub-paragraph (a),
Section 10 of the existing guidelines governing
rural banks' applications for a loan or
rediscount, dated May 7, 1969 (Folder of
Exhibits, p. 19). As stated by the trial court, this
move on the part of the Monetary Board clearly
shows an admission that it has no power to
impose the 10% penalty interest through its
rules and regulations but only through the
terms and conditions of the promissory notes
executed by the borrowing rural banks.
Appellant evidently hoped that the defect could
be adequately accomplished by the revision of
DLC Form No. 11.
The contention that Appellant is entitled to the
10% cost of collection in case of suit and should
therefore, have been awarded the same by the
court below, is well taken. It is provided in all
the promissory notes signed by Appellee that in
case of suit for the collection of the amount of
the note or any unpaid balance thereof, the
Appellee Rural Bank shall pay the Central
Bank of the Philippines a sum equivalent to ten
(10%) per cent of the amount unpaid not in any
case less than five hundred (P500.00) pesos as
attorney's fees and costs of suit and collection.
Thus, Appellee cannot be allowed to come to
Court seeking redress for an wrong done
against it and then be allowed to renege on its
corresponding obligations.

PREMISES CONSIDERED, the decision of the

trial court is hereby AFFIRMED with
modification that Appellee Rural Bank is
ordered to pay a sum equivalent to 10% of the
outstanding balance of its past overdue
accounts, but not in any case less than P500.00
as attorney's fees and costs of suit and
collection.
SO ORDERED.

G.R. No. L-27520 January 21, 1987

GLOBE
WIRELESS
LTD., petitioner,
vs.
PUBLIC SERVICE COMMISSION and
ANTONIO B. ARNAIZ, respondents.
RESOLUTION
G.R. No. 27520 [Globe Wireless Ltd., vs. Public
Service Commission and Antonio B. Arnaiz].
Challenged in this petition for certiorari is the
jurisdiction of the defunct Public Service
Commission [PSC] under Section 21 of
Commonwealth Act No. 146, as amended, to
discipline and impose a fine upon petitioner, Globe
Wireless, Ltd., a duly organized Philippines
corporation
engaged
in
;international
telecommunication business under a franchise
granted by Public Acts Nos. 3495, 3692 and 4150
as amended by Republic Act No. 4630.
A message addressed to Maria Diaz, Monte
Esquina 30, Madrid, Spain, filed by private
respondent Antonio B. Arnaiz with the telegraph
office of the Bureau of Telecommunications in
Dumaguete City was transmitted to the Bureau of
Telecommunications in Manila. It was forwarded
to petitioner Globe Wireless Ltd. for transmission
to Madrid. Petitioner sent the message to the
American Cable and Radio Corporation in New
York, which, in turn, transmitted the same to the
Empresa Nacional de Telecommunicaciones in
Madrid. The latter, however, mislaid said message,
resulting in its non-delivery to the addressee.
Admin. Law | 121

After being informed of said fact, private

respondent Arnaiz, sent to then Public Service
Commissioner Enrique Medina an unverified
letter-complaint relating the incident. The
complaint was docketed as PSC Case No. 65-39OC and petitioner was required to answer the
same. Petitioner, in its answer, questioned PSC's
jurisdiction over the subject matter of the lettercomplaint, even as it denied liability for the nondelivery of the message to the addressee.
Hearing ensued, after which the PSC issued an
order finding petitioner "responsible for the
inadequate and unsatisfactory service complained
of, in violation of the Public Service Act" and
ordering it "to pay a fine of TWO HUNDRED
[P200.00] PESOS under Sec. 21 of Com. Act 146,
as amended." petitioner was likewise required to
refund the sum of P19.14 to the remitter of the
undelivered message. [Annex "C", petition, .
23, Rollo].
Its motion for reconsideration having been denied,
petitioner instituted the instant petition.
We find for petitioner.
Verily, Section 13 of Commonwealth Act No. 146,
as amended otherwise known as the Public Service
Act, vested in the Public Service Commission
jurisdiction, supervision and control over all Public
services and their franchises, equipment and other
properties. However, Section 5 of Republic Act
No. 4630, the legislative franchise under which
petitioner was operating, limited respondent
Commission's jurisdiction over petitioner only to
the rate which petitioner may charge the Public.
Thus,
Sec. 5. The Public Service Commission is hereby
given jurisdiction over the grantee only with
respect to the rates which the grantee may charge
the public subject to international commitments
made or adhered to by the Republic of the
Philippines. (Emphasis supplied.)
The act complained of consisted in petitioner
having allegedly failed to deliver the telegraphic

message of private respondent to the addressee in

Madrid, Spain. Obviously, such imputed
negligence had nothing whatsoever to do with the
subject matter of the very limited jurisdiction of
the Commission over petitioner.
Moreover, under Section 21 of C.A. No. 146, as
amended, the Commission was empowered to
impose an administrative fine in cases of violation
of or failure by a Public service to comply with the
terms and conditions of any certificate or any
orders, decisions or regulations of the Commission.
petitioner operated under a legislative franchise, so
there were no terms nor conditions of any
certificate issued by the Commission to violate.
Neither was there any order, decision or regulation
from the Commission applicable to petitioner that
the latter had allegedly violated, disobeyed, defied
or disregarded.
Too basic in administrative law to need citation of
jurisprudence is the rule that the jurisdiction and
powers of administrative agencies, like respondent
Commission, are limited to those expressly granted
or necessarily implied from those granted in the
legislation creating such body; and any order
without or beyond such jurisdiction is void and
ineffective. The order under consideration
belonged to this category.
ACCORDINGLY, the instant petition is hereby
granted and the order of respondent Public Service
Commission in PSC Case No. 65-39-OC is set
aside for being null and void.

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

DANTE M. POLLOSO, petitioner, vs. HON.
CELSO
D.
GANGAN,
Chairman,
COMMISSION ON AUDIT, HON. RAUL C.
FLORES, COMMISSIONER, COMMISSION
ON AUDIT, HON. EMMANUEL M. DALMAN,
COMMISSIONER,
COMMISSION
ON
AUDIT. respondents.
DECISION
Admin. Law | 122

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

total amount of P283,763.39. The following

reasons were cited for said disallowance:
1)....The contract for services did not have the
written conformity and acquiescence of the
Solicitor General or the Corporate Counsel and
concurrence of the Commission on Audit as
required under COA Circular No. 86-255 dated
April 2, 1986.
2)....The contract was not supported with
Certificate of Availability of Funds as required
under Sec. 86 of P.D. 1445.
3)....The contract was not submitted to the Civil
Service Commission for final review and was not
forwarded to the Compensation and Position
Confirmation and Classification Bureau, DBM for
appropriate action as required in CSC MC # 5
Series of 1985.[3]
Accordingly, the following were held to be
personally liable for the amounts due to Atty.
Satorre: Dr. Francisco Viray, NPC contracting
party; Manolo C. Marquez, for certifying the claim
as necessary, lawful and authorized; Andrea B. Roa
and Romeo Gallego, for verifying the supporting
documents to be complete and proper; Jesus Alio,
for reviewing the supporting documents to be
complete and proper; Dante M. Polloso, Project
Manager II, Leyte-Cebu Interconnection Project
(LCIP), National Power Corporation-Visayas
Regional Center, for approving the claim; and
Benemerito Satorre, as the payee.[4]
On 27 January 1995, only petitioner Dante Polloso
submitted a letter-explanation refuting the alleged
violation contained in the Notice of Disallowance
and sought reconsideration thereof. [5] This was
denied by the Unit Auditor in a resolution, dated 30
March 1995.[6]
On 10 October 1995, petitioner appealed the denial
of the Unit Auditor to the Regional Director, COA
Regional Office No. VII;[7] the latter denied the
same.[8]

Admin. Law | 123

On 29 June 1998, a petition for review was filed

before the Commission Proper, Commission on
Audit, Central Office.[9] On 29 October 1999, the
COA issued the decision assailed before this Court.
The dispositive portion thereof, reads:
Thus, it is crystal clear from the aforequoted
provision of law and regulations that the service
contract entered into by and between the National
Power Corporation and Atty. Satorre is in
contravention thereof.
Upon the foregoing considerations, the instant
appeal of MR. DANTE M. POLLOSO, has to be,
as it is hereby denied. Accordingly, the
disallowance of P283,763.39 is hereby affirmed. [10]
Hence, this appeal, petitioner raising the following
issues:
I
DOES THE PROHIBITION UNDER COA
CIRCULAR NO. 86-255 DATED APRIL 2, 1986
AND SEC. 212 OF THE GOVERNMENT
ACCOUNTING AND AUDITING MANUAL
IMPOSED ON GOVERNMENT AGENCIES
FROM HIRING PRIVATE LAWYERS "TO
HANDLE THEIR LEGAL CASES" APPLY TO A
LAWYER HIRED BY VIRTUE OF A SERVICE
CONTRACT BUT WHO ACTUALLY HANDLE
PURELY
RIGHT-OF-WAY
MATTERS
(EXCLUDING
HANDLING
OF
COURT
CASES)?
II
WILL COA CIRCULAR NO. 86-255 DATED
APRIL 2, 1986 AND SEC. 212, VOLUME I OF
THE GOVERNMENT ACCOUNTING AND
AUDITING MANUAL OPERATE TO RESTRICT
THE PRACTICE OF THE LAW PROFESSION
AND THEREFORE REPUGNANT TO SEC. 5,
ARTICLE VII OF THE 1987 PHILIPPINE
CONSTITUTION?
III

DOES SECTION 38, CHAPTER 9, BOOK I OF

EXECUTIVE ORDER NO. 292, OTHERWISE
KNOWN AS THE ADMINISTRATIVE CODE OF
1987 APPLY TO PETITIONER FOR HAVING
ACTED IN GOOD FAITH AND WITHOUT
MALICE AND MERELY IMPLEMENTED A
VALID CONTRACT ENTERED INTO BY THE
PRESIDENT OF THE NATIONAL POWER
CORPORATION?
IV
DOES THE PRINCIPLE OF "QUANTUM
MERUIT" APPLY TO THE SERVICES
RENDERED BY ATTY. SATORRE WHICH
BENEFITTED THE NATIONAL POWER
CORPORATION?[11]
The petition is without merit.
In the main, petitioner posits that the phrase
"handling of legal cases" should be construed to
mean as conduct of cases or handling of court
cases or litigation and not to other legal matters,
such as legal documentation, negotiations,
counseling or right of way matters.
To test the accuracy of such an interpretation, an
examination of the subject COA Circular is in
order:
SUBJECT: Inhibition against employment by
government agencies and instrumentalities,
including government-owned or controlled
corporations, of private lawyers to handle their
legal cases.
It has come to the attention of this Commission
that notwithstanding restrictions or prohibitions on
the matter under existing laws, certain government
agencies, instrumentalities, and government-owned
and/or controlled corporations, notably government
banking and financing institutions, persist in hiring
or employing private lawyers or law practitioners
to render legal services for them and/or to handle
their legal cases in consideration of fixed retainer
fees, at times in unreasonable amounts, paid from
public funds. In keeping with the retrenchment
Admin. Law | 124

policy of the present administration,

Commission frowns upon such a practice.

this

Accordingly, it is hereby directed that, henceforth,

the payment out of public funds of retainer fees to
private law practitioners who are so hired or
employed without the prior written conformity and
acquiescence of the Office of the Solicitor General
or the Government Corporate Counsel, as the case
may be, as well as the written concurrence of the
Commission on Audit shall be disallowed in audit
and the same shall be a personal liability of the
officials concerned. [underscoring supplied]
What can be gleaned from a reading of the above
circular is that government agencies and
instrumentalities are restricted in their hiring of
private lawyers to render legal services or handle
their cases. No public funds will be disbursed for
the payment to private lawyers unless prior to the
hiring of said lawyer, there is a written conformity
and acquiescence from the Solicitor General or the
Government Corporate Counsel.
Contrary to the view espoused by petitioner, the
prohibition covers the hiring of private lawyers to
render any form of legal service. It makes no
distinction as to whether or not the legal services to
be performed involve an actual legal controversy
or court litigation. Petitioner insists that the
prohibition pertains only to "handling of legal
cases," perhaps because this is what is stated in the
title of the circular. To rely on the title of the
circular would go against a basic rule in statutory
construction that a particular clause should not be
studied as a detached and isolated expression, but
the whole and every part of the statute must be
considered in fixing the meaning of any of its part.
[12]
Petitioner, likewise, insists that the service
contract in question falls outside the ambit of the
circular as what is being curtailed is the payment of
retainer fees and not the payment of fees for legal
services actually rendered.
A retainer fee has been defined as a "preliminary
fee to an attorney or counsel to insure and secure
his future services, and induce him to act for the
client. It is intended to remunerate counsel for

being deprived, by being retained by one party, of

the opportunity of rendering services to the other
and of receiving pay from him, and payment of
such fee, in the absence of an express
understanding to the contrary, is neither made nor
received in payment of the services contemplated;
its payment has no relation to the obligation of the
client to pay his attorney for the services for which
he has retained him to perform."[13] To give such a
technical interpretation to the term "retainer fees"
would go against the purpose of the circular and
render the same ineffectual. In his resolution, Unit
Auditor Alexander Tan expounded on the purpose
of the circular, as enunciated therein:
On the claim that COA Circular 86-255 is not
applicable in this case because the inhibition
provided for in said Circular relates to the handling
of legal cases of a government agency and that the
contractor was not hired in that capacity but to
handle legal matters (sic) involving right-of-way, it
is maintained that the contracted service falls
within the scope of the inhibition which clearly
includes "the hiring or employing private lawyers
or law practitioners to render legal services for
them and/or to handle their legal cases" Moreover,
it is important to mention that the intention of said
Circular is to curb the observed and persistent
violation of existing laws and regulations,
including CSC MC # 5 series of 1985 pertaining to
the employment of private lawyers on a contractual
basis in government agencies which involves the
disbursement of public funds by subjecting the
same to the conformity and concurrence
requirements of said Circular. Being so, the manner
of agreed payment or consideration, whether
termed as a fixed retainer basis or a fixed contract
price patterned after existing salary scale of
existing and comparable positions in NPC-VRC is
immaterial as both still involve the outlay of public
funds and also the contractual employment/hiring
of a private lawyer.
Hence, while the circular uses the phrase "retainer
fees," such should not be given its technical
interpretation but should mean any "fee" paid for
any legal service rendered. As pointed out by the
Admin. Law | 125

Office of the Solicitor General, any interpretation

of subject circular to the contrary would open the
floodgate to future circumventions thereof by the
simple expedience of hiring private lawyers to
service the legal needs of the government not on a
retainer basis but by way of service contract akin to
that which Atty. Satorre and the NPC entered into.
[14]
No dictum is more fundamental in statutory
interpretation than that the intent of the law must
prevail over the letter thereof, for whatever is
within the spirit of the statute is within the statute,
since adherence to the letter would result in an
absurdity, injustice and contradictions and would
defeat the plain and vital purpose of the statute. [15]
It bears repeating that the purpose of the circular is
to curtail the unauthorized and unnecessary
disbursement of public funds to private lawyers for
services rendered to the government. This is in line
with the Commission on Audits constitutional
mandate to promulgate accounting and auditing
rules and regulations including those for the
prevention and disallowance of irregular,
unnecessary,
excessive,
extravagant
or
unconscionable expenditures or uses of
government funds and properties. [16] Having
determined the intent of the law, this Court has the
imperative duty to give it effect even if the policy
goes beyond the letter or words of the statute. [17]
Hence, as the hiring of Atty. Satorre was clearly
done without the prior conformity and
acquiescence of the Office of the Solicitor General
or the Government Corporate Counsel, as well as
the written concurrence of the Commission on
Audit, the payment of fees to Atty. Satorre was
correctly disallowed in audit by the COA.
Thus being said, it is no longer necessary to delve
into whether or not the hiring of Atty. Satorre is in
accord with the rules of the Civil Service
Commission.
Petitioners claim that the
Circular
is
unconstitutional for being an invalid restriction to
the practice of the law profession, is clearly bereft
of any merit. The Government has its own counsel,
which is the Office of the Solicitor General headed

by the Solicitor General,[18] while the Office of the

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

Admin. Law | 126

WHEREFORE, the petition is hereby DENIED

for lack of showing that the respondents committed
a reversible error.

Respondents. August 15, 2007

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

SO ORDERED.
DECISION
FRANCISCO I. CHAVEZ, G.R. No. 164527

VELASCO, JR., J.:

Petitioner,
Present:

PUNO, CJ,
QUISUMBING,

In this Petition for Prohibition and Mandamus with

Prayer for Temporary Restraining Order and/or
Writ of Preliminary Injunction under Rule 65,
petitioner, in his capacity as taxpayer, seeks:

YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
- versus - CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
AZCUNA,
TINGA,
CHICO-NAZARIO,

to declare NULL AND VOID the Joint Venture

Agreement (JVA) dated March 9, 1993 between the
National Housing Authority and R-II Builders, Inc.
and the Smokey Mountain Development and
Reclamation Project embodied therein; the
subsequent amendments to the said JVA; and all
other agreements signed and executed in relation
thereto including, but not limited to the Smokey
Mountain Asset Pool Agreement dated 26
September 1994 and the separate agreements for
Phase I and Phase II of the Projectas well as all
other transactions which emanated therefrom, for
being UNCONSTITUTIONAL and INVALID;

GARCIA,
NATIONAL HOUSING VELASCO,
AUTHORITY, R-II BUILDERS, NACHURA,
and
INC., R-II HOLDINGS, INC., REYES, JJ.

to enjoin respondentsparticularly respondent

NHAfrom further implementing and/or enforcing
the said project and other agreements related
thereto, and from further deriving and/or enjoying
any rights, privileges and interest therefrom x x x;
and

HARBOUR CENTRE PORT

TERMINAL, INC., and Promulgated:
MR. REGHIS ROMERO II,

to compel respondents to disclose all documents

and information relating to the projectincluding,
but not limited to, any subsequent agreements with
Admin. Law | 127

respect to the different phases of the project, the

revisions over the original plan, the additional
works incurred thereon, the current financial
condition of respondent R-II Builders, Inc., and the
transactions made respecting the project. [1]

The Facts

On March 1, 1988, then President Corazon C.

Aquino issued Memorandum Order No. (MO)
161[2] approving and directing the implementation
of the Comprehensive and Integrated Metropolitan
Manila Waste Management Plan (the Plan). The
Metro Manila Commission, in coordination with
various government agencies, was tasked as the
lead agency to implement the Plan as formulated
by the Presidential Task Force on Waste
Management created by Memorandum Circular
No. 39. A day after, on March 2, 1988, MO 161A[3] was issued, containing the guidelines which
prescribed the functions and responsibilities of
fifteen (15) various government departments and
offices tasked to implement the Plan,
namely: Department of Public Works and Highway
(DPWH), Department of Health (DOH),
Department of Environment and Natural Resources
(DENR), Department of Transportation and
Communication, Department of Budget and
Management,
National
Economic
and
Development Authority (NEDA), Philippine
Constabulary
Integrated
National
Police,
Philippine Information Agency and the Local
Government Unit (referring to the City of Manila),
Department of Social Welfare and Development,
Presidential Commission for Urban Poor, National
Housing Authority (NHA), Department of Labor
and Employment, Department of Education,
Culture and Sports (now Department of
Education), and Presidential Management Staff.

Specifically, respondent NHA was ordered to

conduct feasibility studies and develop low-cost
housing projects at the dumpsite and absorb
scavengers in NHA resettlement/low-cost housing
projects.[4] On the other hand, the DENR was
tasked to review and evaluate proposed projects
under the Plan with regard to their environmental
impact, conduct regular monitoring of activities of
the Plan to ensure compliance with environmental
standards and assist DOH in the conduct of the
study on hospital waste management.[5]

At the time MO 161-A was issued by President

Aquino, Smokey Mountain was a wasteland in
Balut, Tondo, Manila, where numerous Filipinos
resided in subhuman conditions, collecting items
that may have some monetary value from the
garbage. The Smokey Mountain dumpsite
is
bounded on the north by the Estero Marala, on the
south by the property of the National Government,
on the east by the property of B and I Realty Co.,
and on the west by Radial Road 10 (R-10).

Pursuant to MO 161-A, NHA prepared the

feasibility studies of the Smokey Mountain lowcost housing project which resulted in the
formulation of the Smokey Mountain Development
Plan and Reclamation of the Area Across R-10 or
the Smokey Mountain Development and
Reclamation Project (SMDRP; the Project). The
Project
aimed
to
convert
the Smokey Mountain dumpsite into a habitable
housing project, inclusive of the reclamation of the
area
across
R-10,
adjacent
to
the SmokeyMountain as the enabling component
of the project.[6] Once finalized, the Plan was
submitted to President Aquino for her approval.

On July 9, 1990, the Build-Operate-and-Transfer

(BOT) Law (Republic Act No. [RA] 6957) was
enacted.[7] Its declared policy under Section 1 is
[t]o recognize the indispensable role of the private
Admin. Law | 128

sector as the main engine for national growth and

development and provide the most appropriate
favorable incentives to mobilize private resources
for the purpose. Sec. 3 authorized and empowered
[a]ll government infrastructure agencies, including
government-owned and controlled corporations
and local government units x x x to enter into
contract with any duly pre-qualified private
contractor for the financing, construction,
operation and maintenance of any financially
viable infrastructure facilities through the buildoperate-transfer or build and transfer scheme.

RA 6957 defined build-and-transfer scheme as [a]

contractual arrangement whereby the contractor
undertakes the construction, including financing, of
a given infrastructure facility, and its turnover after
the completion to the government agency or local
government unit concerned which shall pay the
contractor its total investment expended on the
project, plus reasonable rate of return thereon. The
last paragraph of Sec. 6 of the BOT Law provides
that the repayment scheme in the case of land
reclamation or the building of industrial estates
may consist of [t]he grant of a portion or
percentage of the reclaimed land or industrial
estate built, subject to the constitutional
requirements with respect to the ownership of
lands.

On February 10, 1992, Joint Resolution No.

03[8] was passed by both houses of Congress. Sec. 1
of this resolution provided, among other things,
that:

Section 1. There is hereby approved the following

national infrastructure projects for implementation
under the provisions of Republic Act No. 6957 and
its implementing rules and regulations:

(d) Port infrastructure like piers, wharves, quays,

storage handling, ferry service and related
facilities;

xxxx

(k) Land reclamation, dredging and other related

development facilities;

(l) Industrial estates, regional industrial centers and

export processing zones including steel mills, ironmaking and petrochemical complexes and related
infrastructure and utilities;

xxxx

(p) Environmental and solid waste managementrelated facilities such as collection equipment,
composting plants, incinerators, landfill and tidal
barriers, among others; and

(q) Development
of
new
townsites
communities and related facilities.

and

This resolution complied with and conformed to

Sec. 4 of the BOT Law requiring the approval of
all national infrastructure projects by the Congress.

xxxx
Admin. Law | 129

On January 17, 1992, President Aquino proclaimed

MO
415[9] approving
and
directing
the
implementation of the SMDRP. Secs. 3 and 4 of
the Memorandum Order stated:

Section 3. The National Housing Authority is

hereby directed to implement the Smokey
Mountain Development Plan and Reclamation of
the Area Across R-10 through a private sector
joint venture scheme at the least cost to the
government.

Section
4. The
land
area
covered
by
the Smokey Mountain dumpsite
is
hereby
conveyed to the National Housing Authority as
well as the area to be reclaimed across R-10.
(Emphasis supplied.)

In addition, the Public Estates Authority (PEA)

was directed to assist in the evaluation of proposals
regarding the technical feasibility of reclamation,
while the DENR was directed to (1) facilitate
titling of Smokey Mountain and of the area to be
reclaimed and (2) assist in the technical evaluation
of proposals regarding environmental impact
statements.[10]

In the same MO 415, President Aquino created an

Executive Committee (EXECOM) to oversee the
implementation of the Plan, chaired by the
National Capital Region-Cabinet Officer for
Regional Development (NCR-CORD) with the
heads of the NHA, City of Manila, DPWH, PEA,
Philippine Ports Authority (PPA), DENR, and
Development Bank of the Philippines (DBP) as
members.[11] The NEDA subsequently became a
member of the EXECOM. Notably, in a September
2, 1994Letter,[12] PEA General Manager Amado

Lagdameo approved the plans for the reclamation

project prepared by the NHA.

In conformity with Sec. 5 of MO 415, an interagency technical committee (TECHCOM) was

created composed of the technical representatives
of the EXECOM [t]o assist the NHA in the
evaluation of the project proposals, assist in the
resolution of all issues and problems in the project
to ensure that all aspects of the development from
squatter
relocation,
waste
management,
reclamation, environmental protection, land and
house construction meet governing regulation of
the region and to facilitate the completion of the
project.[13]

Subsequently, the TECHCOM put out the Public

Notice and Notice to Pre-Qualify and Bid for the
right to become NHAs joint venture partner in the
implementation of the SMDRP. The notices were
published in newspapers of general circulation on
January 23 and 26 and February 1, 14, 16, and 23,
1992, respectively. Out of the thirteen (13)
contractors who responded, only five (5)
contractors fully complied with the required prequalification documents. Based on the evaluation
of the pre-qualification documents, the EXECOM
declared the New San Jose Builders, Inc. and R-II
Builders, Inc. (RBI) as the top two contractors. [14]

Thereafter, the TECHCOM evaluated the bids

(which include the Pre-feasibility Study and
Financing Plan) of the top two (2) contractors in
this manner:

(1) The DBP, as financial advisor to the Project,

evaluated their Financial Proposals;

Admin. Law | 130

(2) The DPWH, PPA, PEA and NHA evaluated the

Technical Proposals for the Housing Construction
and Reclamation;

(3) The DENR evaluated Technical Proposals on

Waste Management and Disposal by conducting
the Environmental Impact Analysis; and

(4) The NHA and the City of Manila evaluated the

socio-economic benefits presented by the
proposals.

On June 30, 1992, Fidel V. Ramos assumed the

Office of the President (OP) of the Philippines.

On August 31, 1992, the TECHCOM submitted its

recommendation to the EXECOM to approve the
R-II Builders, Inc. (RBI) proposal which garnered
the highest score of 88.475%.

Subsequently, the EXECOM made a Project

briefing to President Ramos. As a result, President
Ramos
issued
Proclamation
No.
39[15] on September 9, 1992, which reads:

WHEREAS, the National Housing Authority has

presented a viable conceptual plan to convert the
Smokey Mountain dumpsite into a habitable
housing project, inclusive of the reclamation of the
area across Road Radial 10 (R-10) adjacent to the
Smokey Mountain as the enabling component of
the project;

xxxx

These parcels of land of public domain are

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

In order to facilitate the early development of the

area for disposition, the Department of
Environment and Natural Resources, through the
Lands and Management Bureau, is hereby directed
to approve the boundary and subdivision survey
and to issue a special patent and title in the name of
the National Housing Authority, subject to final
survey and private rights, if any there
be. (Emphasis supplied.)

On October 7, 1992, President Ramos authorized

NHA to enter into a Joint Venture Agreement with
RBI [s]ubject to final review and approval of the
Joint Venture Agreement by the Office of the
President.[16]

On March 19, 1993, the NHA and RBI entered into

a Joint Venture Agreement[17] (JVA) for the
development of the Smokey Mountain dumpsite
and the reclamation of the area across R-10 based
on Presidential Decree No. (PD) 757[18] which
mandated NHA [t]o undertake the physical and
socio-economic upgrading and development of
lands of the public domain identified for housing,
MO 161-A which required NHA to conduct the
feasibility studies and develop a low-cost housing
project at the Smokey Mountain, and MO 415 as
amended by MO 415-A which approved the
Conceptual Plan for Smokey Mountain and
creation of the EXECOM and TECHCOM. Under
the JVA, the Project involves the clearing
Admin. Law | 131

of Smokey Mountain for eventual development

into a low cost medium rise housing complex and
industrial/commercial site with the reclamation of
the area directly across [R-10] to act as the
enabling component of the Project.[19] The JVA
covered a lot in Tondo,Manila with an area of two
hundred twelve thousand two hundred thirty-four
(212,234) square meters and another lot to be
reclaimed also in Tondo with an area of four
hundred thousand (400,000) square meters.

The Scope of Work of RBI under Article II of the

JVA is as follows:

a) To fully finance all aspects of development

of Smokey Mountain and reclamation of no more
than 40 hectares of Manila Bay area across Radial
Road 10.

b) To immediately commence on the preparation of

feasibility report and detailed engineering with
emphasis to the expedient acquisition of the
Environmental Clearance Certificate (ECC) from
the DENR.

c) The construction activities will only commence

after the acquisition of the ECC, and

d) Final details of the contract, including

construction, duration and delivery timetables,
shall be based on the approved feasibility report
and detailed engineering.

2.02 The [RBI] shall develop the PROJECT based

on the Final Report and Detailed Engineering as
approved by the Office of the President. All costs
and expenses for hiring technical personnel, date
gathering, permits, licenses, appraisals, clearances,
testing and similar undertaking shall be for the
account of the [RBI].

2.03 The [RBI] shall undertake the construction of

3,500 temporary housing units complete with basic
amenities such as plumbing, electrical and
sewerage facilities within the temporary housing
project as staging area to temporarily house the
squatter families from the Smokey Mountain while
development is being undertaken. These temporary
housing units shall be turned over to the [NHA] for
disposition.

2.04 The [RBI] shall construct 3,500 medium rise

low cost permanent housing units on the
leveled Smokey Mountain complete with basic
utilities and amenities, in accordance with the
plans and specifications set forth in the Final
Report approved by the [NHA]. Completed units
ready for mortgage take out shall be turned over by
the [RBI] to NHA on agreed schedule.

2.05 The [RBI] shall reclaim forty (40) hectares

of Manila Bay area directly across [R-10] as
contained in Proclamation No. 39 as the enabling
component of the project and payment to the [RBI]
as its asset share.

2.06 The [RBI] shall likewise furnish all labor

materials and equipment necessary to complete all
herein development works to be undertaken on a
phase to phase basis in accordance with the work
program stipulated therein.

Other obligations of RBI are as follows:

Admin. Law | 132

The profit sharing shall be based on the approved

pre-feasibility report submitted to the EXECOM,
viz:

For the developer (RBI):

1. To own the forty (40) hectares of reclaimed land.

2. To
own
the
commercial
area
the Smokey Mountain area composed of
hectares, and

at
1.3

5. To own the open spaces, roads and facilities

within the Smokey Mountain area.

In the event of extraordinary increase in labor,

materials, fuel and non-recoverability of total
project expenses,[20] the OP, upon recommendation
of the NHA, may approve a corresponding
adjustment in the enabling component.

The functions and responsibilities of RBI and NHA

are as follows:
3. To own all the constructed units of medium rise
low cost permanent housing units beyond the 3,500
units share of the [NHA].

For the NHA:

1. To own the temporary housing consisting of
3,500 units.

2. To own the cleared and fenced incinerator site

consisting
of
5
hectares
situated
at
the Smokey Mountain area.

3. To own the 3,500 units of permanent housing to

be
constructed
by
[RBI]
at
the Smokey Mountain area to be awarded to
qualified on site residents.

4. To own the Industrial Area site consisting of 3.2

hectares, and

For RBI:

4.01 Immediately commence on the preparation of

the FINAL REPORT with emphasis to the
expedient acquisition, with the assistance of the
[NHA] of Environmental Compliance Certificate
(ECC) from the Environmental Management
Bureau (EMB) of the [DENR]. Construction shall
only commence after the acquisition of the
ECC. The Environment Compliance Certificate
(ECC) shall form part of the FINAL REPORT.

The FINAL REPORT shall provide the necessary

subdivision and housing plans, detailed
engineering and architectural drawings, technical
specifications and other related and required
documents relative to the Smokey Mountain area.

With respect to the 40-hectare reclamation area, the

[RBI] shall have the discretion to develop the same
in a manner that it deems necessary to recover the

Admin. Law | 133

[RBIs] investment, subject to environmental and

zoning rules.

4.02 Finance the total project cost for land

development,
housing
construction
and
reclamation of the PROJECT.

4.03 Warrant that all developments shall be in

compliance with the requirements of the FINAL
REPORT.

4.04 Provide all administrative resources for the

submission of project accomplishment reports to
the [NHA] for proper evaluation and supervision
on the actual implementation.

4.05 Negotiate and secure, with the assistance of

the [NHA] the grant of rights of way to the
PROJECT, from the owners of the adjacent lots for
access road, water, electrical power connections
and drainage facilities.

4.06 Provide temporary field office and

transportation vehicles (2 units), one (1) complete
set of computer and one (1) unit electric typewriter
for the [NHAs] field personnel to be charged to the
PROJECT.

relocation areas with the assistance of the

[RBI]. The [RBI] shall be responsible in releasing
the funds allocated and committed for relocation as
detailed in the FINAL REPORT.

4.08 Assist the [RBI] and shall endorse granting of

exemption fees in the acquisition of all necessary
permits, licenses, appraisals, clearances and
accreditations for the PROJECT subject to existing
laws, rules and regulations.

4.09 The [NHA] shall inspect, evaluate and

monitor all works at the Smokey Mountain and
Reclamation Area while the land development and
construction of housing units are in progress to
determine whether the development and
construction works are undertaken in accordance
with the FINAL REPORT. If in its judgment, the
PROJECT is not pursued in accordance with the
FINAL REPORT, the [NHA] shall require the
[RBI] to undertake necessary remedial works. All
expenses, charges and penalties incurred for such
remedial, if any, shall be for the account of the
[RBI].

4.10 The [NHA] shall assist the [RBI] in the

complete electrification of the PROJECT. x x x

4.11 Handle the processing and documentation of

all sales transactions related to its assets shares
from the venture such as the 3,500 units of
permanent housing and the allotted industrial area
of 3.2 hectares.

For the NHA:

4.07 The [NHA] shall be responsible for the

removal and relocation of all squatters
within Smokey Mountain to
the
Temporary
Housing Complex or to other areas prepared as

4.12 All advances outside of project costs made by

the [RBI] to the [NHA] shall be deducted from the
proceeds due to the [NHA].

Admin. Law | 134

4.13 The [NHA] shall be responsible for the

acquisition
of
the
Mother
Title
for
the Smokey Mountain and
Reclamation
Area
within 90 days upon submission of Survey returns
to the Land Management Sector. The land titles to
the 40-hectare reclaimed land, the 1.3 hectare
commercial area at the Smokey Mountain area and
the constructed units of medium-rise permanent
housing units beyond the 3,500 units share of the
[NHA] shall be issued in the name of the [RBI]
upon completion of the project. However, the
[RBI] shall have the authority to pre-sell its share
as indicated in this agreement.

The final details of the JVA, which will include the

construction duration, costs, extent of reclamation,
and delivery timetables, shall be based on the
FINAL REPORT which will be contained in a
Supplemental Agreement to be executed later by
the parties.

The JVA may be modified or revised by written

agreement between the NHA and RBI specifying
the clauses to be revised or modified and the
corresponding amendments.

If the Project is revoked or terminated by the

Government through no fault of RBI or by mutual
agreement, the Government shall compensate RBI
for its actual expenses incurred in the Project plus a
reasonable rate of return not exceeding that stated
in the feasibility study and in the contract as of the
date of such revocation, cancellation, or
termination on a schedule to be agreed upon by
both parties.

As a preliminary step in the project

implementation, consultations and dialogues were
conducted with the settlers of the Smokey

Mountain Dumpsite Area. At the same time,

DENR started processing the application for the
Environmental Clearance Certificate (ECC) of the
SMDRP. As a result however of the consultative
dialogues, public hearings, the report on the on-site
field conditions, the Environmental Impact
Statement (EIS) published on April 29 and May 12,
1993 as required by the Environmental
Management Bureau of DENR, the evaluation of
the DENR, and the recommendations from other
government agencies, it was discovered that design
changes and additional work have to be undertaken
to successfully implement the Project. [21]

Thus, on February 21, 1994, the parties entered

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

The PROJECT shall consist of Phase I and Phase

II.

Phase I shall involve the following:

Admin. Law | 135

a.
the construction of 2,992 units of
temporary housing for the affected residents while
clearing and development of Smokey Mountain
[are] being undertaken

b.
the clearing of Smokey Mountain and
the subsequent construction of 3,520 units of
medium rise housing and the development of the
industrial/commercial
site
within
the Smokey Mountain area

c.
the reclamation and development of a
79 hectare area directly across Radial Road 10 to
serve as the enabling component of Phase I

Phase II shall involve the following:

a.
the construction and operation of an
incinerator plant that will conform to the emission
standards of the DENR

ORIGINAL CHANGES/REVISIONS

1. TEMPORARY HOUSING

Wood/Plywood, ga. 31 G.I. Concrete/Steel Frame

Structure Sheet usable life of 3 years, gauge 26
G.I. roofing sheets future 12 SM floor area. use as
permanent structures for factory and warehouses
mixed 17 sm & 12 sm floor area.

2. MEDIUM RISE MASS

HOUSING

Box type precast Shelter Conventional and precast

component 20 square meter concrete structures, 32
square floor area with 2.4 meter meter floor area
with loft floor height; bare type, 160
units/ (sleeping
quarter)
3.6
m.
floor
building. height, painted and improved
architectural faade, 80 units/

b. the reclamation and development of 119-hectare

area contiguous to that to be reclaimed under Phase
I to serve as the enabling component of Phase II.

Under the ARJVA, RBI shall construct 2,992

temporary housing units, a reduction from 3,500
units under the JVA.[27] However, it was required to
construct 3,520 medium-rise low-cost permanent
housing units instead of 3,500 units under the
JVA. There was a substantial change in the design
of the permanent housing units such that a loft
shall be incorporated in each unit so as to increase
the living space from 20 to 32 square meters. The
additions and changes in the Original Project
Component are as follows:

building.
3. MITIGATING MEASURES

3.1 For reclamation work Use of clean dredgefill

material below the MLLW and SM material mixed
with dredgefill above MLLW.

a. 100% use of Smokey

Mountain material as
dredgefill Use of Steel Sheet Piles needed

Admin. Law | 136

for longer depth of embedment.

b. Concrete Sheet Piles
short depth of

Phase II shall involve the following:

embedment

c. Silt removal approximately Need to remove

more than 3.0
1.0 meter only meters of silt after sub-soil
investigation.[28]
These material and substantial modifications
served as justifications for the increase in the share
of RBI from 40 hectares to 79 hectares of
reclaimed land.

Under the JVA, the specific costs of the Project

were not stipulated but under the ARJVA, the
stipulated cost for Phase I was pegged at six billion
six hundred ninety-three million three hundred
eighty-seven thousand three hundred sixty-four
pesos (PhP 6,693,387,364).

In his February 10, 1994 Memorandum, the

Chairperson of the SMDRP EXECOM submitted
the ARJVA for approval by the OP. After review of
said agreement, the OP directed that certain terms
and conditions of the ARJVA be further clarified or
amended preparatory to its approval. Pursuant to
the Presidents directive, the parties reached an
agreement on the clarifications and amendments
required to be made on the ARJVA.

On August 11, 1994, the NHA and RBI executed

an Amendment To the Amended and Restated Joint
Venture Agreement (AARJVA)[29] clarifying certain
terms and condition of the ARJVA, which was
submitted to President Ramos for approval, to wit:

a.
the construction and operation of an
incinerator plant that will conform to the
emission standards of the DENR

b. the reclamation and development of 119-hectare

area contiguous to that to be reclaimed under Phase
I to serve as the enabling component of Phase
II, the exact size and configuration of which
shall be approved by the SMDRP Committee[30]

Other substantial amendments are the following:

4. Paragraph 2.05 of Article II of the ARJVA is

hereby amended to read as follows:

2.05. The DEVELOPER shall reclaim seventy nine

(79) hectares of the Manila Bay area directly across
Radial Road 10 (R-10) to serve as payment to the
DEVELOPER as its asset share for Phase I and to
develop such land into commercial area with port
facilities; provided, that the port plan shall be
integrated with the Philippine Port Authoritys
North Harbor plan for the Manila Bay area and
provided further, that the final reclamation and port
plan for said reclaimed area shall be submitted for
approval by the Public Estates Authority and the
Philippine Ports Authority, respectively: provided
finally, that subject to par. 2.02 above, actual
reclamation work may commence upon approval
of the final reclamation plan by the Public Estates
Authority.

Admin. Law | 137

xxxx

9. A new paragraph to be numbered 5.05 shall be

added to Article V of the ARJVA, and shall read as
follows:

5.05. In the event this Agreement is revoked,

cancelled or terminated by the AUTHORITY
through no fault of the DEVELOPER, the
AUTHORITY shall compensate the DEVELOPER
for the value of the completed portions of, and
actual expenditures on the PROJECT plus a
reasonable rate of return thereon, not exceeding
that stated in the Cost Estimates of Items of Work
previously approved by the SMDRP Executive
Committee and the AUTHORITY and stated in this
Agreement, as of the date of such revocation,
cancellation, or termination, on a schedule to be
agreed upon by the parties, provided that said
completed portions of Phase I are in accordance
with the approved FINAL REPORT.

Afterwards, President Ramos issued Proclamation

No. 465 dated August 31, 1994[31] increasing the
proposed area for reclamation across R-10 from 40
hectares to 79 hectares,[32] to wit:

NOW, THEREFORE, I, FIDEL V. RAMOS,

President of the Republic of the Philippines, by
virtue of the powers vested in me by the law, and
as recommended by the SMDRP Executive
Committee, do hereby authorize the increase of the
area of foreshore or submerged lands of Manila
Bay to be reclaimed, as previously authorized
under Proclamation No. 39 (s. 1992) and

Memorandum Order No. 415 (s. 1992), from Four

Hundred Thousand (400,000) square meters, more
or less, to Seven Hundred Ninety Thousand
(790,000) square meters, more or less.

On September 1, 1994, pursuant to Proclamation

No. 39, the DENR issued Special Patent No. 3591
conveying in favor of NHA an area of 211,975
square meters covering the Smokey Mountain
Dumpsite.

In its September 7, 1994 letter to the EXECOM,

the OP through then Executive Secretary Teofisto
T. Guingona, Jr., approved the ARJVA as amended
by the AARJVA.

On September 8, 1994, the DENR issued Special

Patent 3592 pursuant to Proclamation No. 39,
conveying in favor of NHA a 401,485-square
meter area.

On September 26, 1994, the NHA, RBI, Home

Insurance and Guaranty Corporation (HIGC), now
known as the Home Guaranty Corporation, and the
Philippine National Bank (PNB)[33] executed the
Smokey Mountain Asset Pool Formation Trust
Agreement (Asset Pool Agreement).[34] Thereafter,
a Guaranty Contract was entered into by NHA,
RBI, and HIGC.

On June 23, 1994, the Legislature passed the Clean

Air Act.[35] The Act made the establishment of an
incinerator illegal and effectively barred the
implementation of the planned incinerator project
under Phase II. Thus, the off-site disposal of the
garbage
at
the Smokey Mountain became
[36]
necessary.

Admin. Law | 138

The land reclamation was completed in August

1996.[37]

Sometime later in 1996, pursuant likewise to

Proclamation No. 39, the DENR issued Special
Patent No. 3598 conveying in favor of NHA an
additional 390,000 square meter area.

During the actual construction and implementation

of Phase I of the SMDRP, the Inter-Agency
Technical Committee found and recommended to
the EXECOM on December 17, 1997 that
additional works were necessary for the
completion and viability of the Project. The
EXECOM approved the recommendation and so,
NHA instructed RBI to implement the change
orders or necessary works.[38]

Such necessary works comprised more than 25%

of the original contract price and as a result, the
Asset Pool incurred direct and indirect costs. Based
on C1 12 A of the Implementing Rules and
Regulations of PD 1594, a supplemental agreement
is required for all change orders and extra work
orders, the total aggregate cost of which being
more than twenty-five (25%) of the escalated
original contract price.

The EXECOM requested an opinion from the

Department of Justice (DOJ) to determine whether
a bidding was required for the change orders
and/or necessary works. The DOJ, through DOJ
Opinion Nos. 119 and 155 dated August 26, 1993
and November 12, 1993, opined that a rebidding,
pursuant to the aforequoted provisions of the
implementing rules (referring to PD 1594) would
not be necessary where the change orders
inseparable from the original scope of the project,
in which case, a negotiation with the incumbent
contractor may be allowed.

Thus, on February 19, 1998, the EXECOM issued

a resolution directing NHA to enter into a
supplemental agreement covering said necessary
works.

On March 20, 1998, the NHA and RBI entered into

a Supplemental Agreement covering the
aforementioned necessary works and submitted it
to the President on March 24, 1998 for approval.

Outgoing President Ramos decided to endorse the

consideration of the Supplemental Agreement to
incoming President Joseph E. Estrada. On June 30,
1998, Estrada became the 13th Philippine
President.

However, the approval of the Supplemental

Agreement was unacted upon for five months. As a
result, the utilities and the road networks were
constructed to cover only the 79-hectare original
enabling
component
granted
under
the
ARJVA. The 220-hectare extension of the 79hectare area was no longer technically
feasible.Moreover, the financial crises and
unreliable real estate situation made it difficult to
sell the remaining reclaimed lots. The devaluation
of the peso and the increase in interest cost led to
the substantial increase in the cost of reclamation.

On August 1, 1998, the NHA granted RBIs request

to suspend work on the SMDRP due to the delay in
the approval of the Supplemental Agreement, the
consequent absence of an enabling component to
cover the cost of the necessary works for the
project, and the resulting inability to replenish the
Asset Pool funds partially used for the completion
of the necessary works.[39]

Admin. Law | 139

As of August 1, 1998 when the project was

suspended, RBI had already accomplished a
portion of the necessary works and change orders
which resulted in [RBI] and the Asset Pool
incurring advances for direct and indirect cost
which amount can no longer be covered by the 79hectare enabling component under the ARJVA. [40]

Repeated demands were made by RBI in its own

capacity and on behalf of the asset pool on NHA
for payment for the advances for direct and indirect
costs subject to NHA validation.

b) The conveyance of the 15-hectare NHA Vitas

property (actually 17 hectares based on surveys) to
the SMDRP Asset Pool.

c) The inclusion in the total development cost of

other additional, necessary and indispensable
infrastructure works and the revision of the original
cost stated in the Supplemental Agreement
dated March
20,
1998 from
PhP
2,953,984,941.40 to PhP 2,969,134,053.13.

d) Revision in the sharing agreement between the

parties.
In November 1998, President Estrada issued
Memorandum Order No. 33 reconstituting the
SMDRP EXECOM and further directed it to
review the Supplemental Agreement and submit its
recommendation on the completion of the SMDRP.

The reconstituted EXECOM conducted a review of

the project and recommended the amendment of
the March 20, 1998 Supplemental Agreement to
make it more feasible and to identify and provide
new sources of funds for the project and provide
for a new enabling component to cover the
payment for the necessary works that cannot be
covered by the 79-hectare enabling component
under the ARJVA.[41]

The EXECOM passed Resolution Nos. 99-16-01

and 99-16-02[42] which approved the modification
of the Supplemental Agreement, to wit:

a) Approval of 150 hectares additional reclamation

in order to make the reclamation feasible as part of
the enabling component.

In the March 23, 2000 OP Memorandum, the

EXECOM was authorized to proceed and complete
the SMDRP subject to certain guidelines and
directives.

After the parties in the case at bar had complied

with the March 23, 2000 Memorandum, the NHA
November 9, 2000 Resolution No. 4323 approved
the conveyance of the 17-hectare Vitas property in
favor of the existing or a newly created Asset Pool
of the project to be developed into a mixed
commercial-industrial area, subject to certain
conditions.

On January 20, 2001, then President Estrada was

considered resigned. On the same day, President
Gloria M. Arroyo took her oath as the 14th
President of thePhilippines.

As of February 28, 2001, the estimated total

project cost of the SMDRP has reached P8.65
billion comprising of P4.78 billion in direct cost
Admin. Law | 140

and P3.87 billion in indirect cost, [43] subject to

validation by the NHA.

On August 28, 2001, NHA issued Resolution No.

4436 to pay for the various necessary
works/change orders to SMDRP, to effect the
corresponding enabling component consisting of
the conveyance of the NHAs Vitas Property and an
additional 150-hectare reclamation area and to
authorize the release by NHA of PhP 480 million
as advance to the project to make the Permanent
Housing habitable, subject to reimbursement from
the proceeds of the expanded enabling component.
[44]

On November
19,
2001,
the
Amended
Supplemental Agreement (ASA) was signed by the
parties, and on February 28, 2002, the Housing and
Urban Development Coordinating Council
(HUDCC) submitted the agreement to the OP for
approval.
In the July 20, 2002 Cabinet Meeting, HUDCC
was directed to submit the works covered by the
PhP 480 million [advance to the Project] and the
ASA to public bidding.[45] On August 28, 2002, the
HUDCC informed RBI of the decision of the
Cabinet.

Consequently, the parties negotiated the terms of

the termination of the JVA and other subsequent
agreements.

On August 27, 2003, the NHA and RBI executed a

Memorandum of Agreement (MOA) whereby both
parties agreed to terminate the JVA and other
subsequent agreements, thus:

1. TERMINATION

1.1 In compliance with the Cabinet directive

dated 30 July 2002 to submit the works covered by
the P480 Million and the ASA to public bidding,
the following agreements executed by and between
the NHA and the DEVELOPER are hereby
terminated, to wit:

a. Joint Venture Agreement (JVA) dated 19 March

1993
b. Amended and Restated Joint Venture Agreement
(ARJVA) dated 21 February 1994
c. Amendment and Restated Joint
Agreement dated 11 August 1994

In its September 2, 2002 letter to the HUDCC

Chairman, RBI lamented the decision of the
government to bid out the remaining works under
the ASA thereby unilaterally terminating the
Project with RBI and all the agreements related
thereto. RBI demanded the payment of just
compensation for all accomplishments and costs
incurred in developing the SMDRP plus a
reasonable rate of return thereon pursuant to
Section 5.05 of the ARJVA and Section 6.2 of the
ASA.[46]

Venture

d. Supplemental Agreement dated 24 March 1998

e. Amended Supplemental
dated 19 November 2001.

Agreement

(ASA)

xxxx

5. SETTLEMENT OF CLAIMS

Admin. Law | 141

5.1 Subject to the validation of the DEVELOPERs

claims, the NHA hereby agrees to initially
compensate the Developer for the abovementioned
costs as follows:

a. Direct payment to DEVELOPER of the amounts

herein listed in the following manner:

of properties, the parties shall agree on which

properties shall be subject to conveyance. The
NHA and DEVELOPER hereby agree to determine
the valuation of the properties to be conveyed by
getting the average of the appraisals to be made by
two (2) mutually acceptable independent
appraisers.

a.1 P250 Million in cash from the escrow account

in accordance with Section 2 herewith;

a.2 Conveyance of a 3 hectare portion of the Vitas

Industrial
area
immediately
after
joint
determination of the appraised value of the said
property in accordance with the procedure herein
set forth in the last paragraph of Section 5.3. For
purposes of all payments to be made through
conveyance of real properties, the parties shall
secure from the NHA Board of Directors all
documents necessary and sufficient to effect the
transfer of title over the properties to be conveyed
to RBI, which documents shall be issued within a
reasonable period.

5.2 Any unpaid balance of the DEVELOPERS

claims determined after the validation process
referred to in Section 4 hereof, may be paid in
cash, bonds or through the conveyance of
properties or any combination thereof. The manner,
terms and conditions of payment of the balance
shall be specified and agreed upon later within a
period of three months from the time a substantial
amount representing the unpaid balance has been
validated pursuant hereto including, but not limited
to the programming of quarterly cash payments to
be sourced by the NHA from its budget for debt
servicing, from its income or from any other
sources.

5.3 In any case the unpaid balance is agreed to be

paid, either partially or totally through conveyance

Meanwhile, respondent Harbour Centre Port

Terminal, Inc. (HCPTI) entered into an agreement
with the asset pool for the development and
operations of a port in the Smokey Mountain Area
which is a major component of SMDRP to provide
a source of livelihood and employment
for Smokey Mountain residents and spur economic
growth. A Subscription Agreement was executed
between the Asset Pool and HCPTI whereby the
asset pool subscribed to 607 million common
shares and 1,143 million preferred shares of
HCPTI. The HCPTI preferred shares had a
premium and penalty interest of 7.5% per annum
and a mandatory redemption feature. The asset
pool paid the subscription by conveying to HCPTI
a 10-hectare land which it acquired from the NHA
being a portion of the reclaimed land of the
SMDRP.Corresponding certificates of titles were
issued to HCPTI, namely: TCT Nos. 251355,
251356, 251357, and 251358.

Due to HCPTIs failure to obtain a license to handle

foreign containerized cargo from PPA, it suffered a
net income loss of PhP 132,621,548 in 2002 and a
net loss of PhP 15,540,063 in 2003. The Project
Governing Board of the Asset Pool later conveyed
by way of dacion en pago a number of HCPTI
shares to RBI in lieu of cash payment for the latters
work in SMDRP.

On August 5, 2004, former Solicitor General

Francisco I. Chavez, filed the instant petition
Admin. Law | 142

which impleaded as respondents the NHA, RBI, RII Holdings, Inc. (RHI), HCPTI, and Mr. Reghis
Romero II, raising constitutional issues.

The NHA reported that thirty-four (34) temporary

housing structures and twenty-one (21) permanent
housing structures had been turned over by
respondent RBI. It claimed that 2,510 beneficiaryfamilies belonging to the poorest of the poor had
been transferred to their permanent homes and
benefited from the Project.

The Issues

2. EVEN ASSUMING THAT RESPONDENTS

NHA AND R-II BUILDERS WERE GIVEN THE
POWER AND AUTHORITY TO RECLAIM
FORESHORE
AND
SUBMERGED
LAND, THEY WERE NEVER GIVEN THE
AUTHORITY BY THE DENR TO DO SO.

II

RESPONDENT R-II BUILDERS CANNOT

ACQUIRE THE RECLAIMED FORESHORE
AND SUBMERGED LAND AREAS BECAUSE:

1. THE RECLAIMED FORESHORE AND

SUBMERGED PARCELS OF LAND ARE
INALIENABLE PUBLIC LANDS WHICH ARE
BEYOND THE COMMERCE OF MAN.

The grounds presented in the instant petition are:

I

NEITHER
RESPONDENT
NHA
NOR
RESPONDENT R-II BUILDERS MAY VALIDLY
RECLAIM FORESHORE AND SUBMERGED
LAND BECAUSE:

1. RESPONDENT NHA AND R-II BUILDERS

WERE NEVER GRANTED ANY POWER AND
AUTHORITY TO RECLAIM LANDS OF THE
PUBLIC
DOMAIN AS
THIS
POWER
IS VESTED EXCLUSIVELY WITH THE PEA.

2. ASSUMING ARGUENDO THAT THE

SUBJECT RECLAIMED FORESHORE AND
SUBMERGED PARCELS OF LAND WERE
ALREADY DECLARED ALIENABLE LANDS
OF THE PUBLIC DOMAIN, RESPONDENT R-II
BUILDERS STILL COULD NOT ACQUIRE THE
SAME BECAUSE THERE WAS NEVER ANY
DECLARATION THAT THE SAID LANDS
WERE NO LONGER NEEDED FOR PUBLIC
USE.

3. EVEN ASSUMING THAT THE SUBJECT

RECLAIMED LANDS ARE ALIENABLE AND
NO LONGER NEEDED FOR PUBLIC USE,
RESPONDENT
R-II
BUILDERS
STILL CANNOT ACQUIRE THE SAME
BECAUSE THERE WAS NEVER ANY LAW
AUTHORIZING THE SALE THEREOF.

Admin. Law | 143

4. THERE WAS NEVER ANY PUBLIC

BIDDING
AWARDING OWNERSHIP
OF
THE SUBJECT LAND TO RESPONDENT R-II
BUILDERS.

5. ASSUMING
THAT
ALL
THE
REQUIREMENTS FOR A VALID TRANSFER
OF ALIENABLE PUBLIC HAD BEEN
PERFORMED, RESPONDENT R-II BUILDERS,
BEING
PRIVATE
CORPORATION
IS
NONETHELESS EXPRESSLYPROHIBITED BY
THE
PHILIPPINE
CONSTITUTION
TO
ACQUIRE LANDS OF THE PUBLIC DOMAIN.

III

RESPONDENT HARBOUR, BEING A PRIVATE

CORPORATION WHOSE MAJORITY STOCKS
ARE OWNED AND CONTROLLED BY
RESPONDENT ROMEROS CORPORATIONS RII BUILDERS AND R-II HOLDINGS IS
DISQUALIFIED
FROM
BEING
A
TRANSFEREE OF PUBLIC LAND.

IV

RESPONDENTS MUST BE COMPELLED TO

DISCLOSE ALL INFORMATION RELATED TO
THE SMOKEY MOUNTAIN DEVELOPMENT
AND RECLAMATION PROJECT.

The Courts Ruling

Before we delve into the substantive issues raised

in this petition, we will first deal with several
procedural matters raised by respondents.

Whether petitioner has the requisite locus

standi to file this case

Respondents argue that petitioner Chavez has no

legal standing to file the petition.

Only a person who stands to be benefited or

injured by the judgment in the suit or entitled to the
avails of the suit can file a complaint or petition.
[47]
Respondents claim that petitioner is not a proper
party-in-interest as he was unable to show that he
has sustained or is in immediate or imminent
danger of sustaining some direct and personal
injury as a result of the execution and enforcement
of the assailed contracts or agreements.
[48]
Moreover, they assert that not all government
contracts can justify a taxpayers suit especially
when no public funds were utilized in
contravention of the Constitution or a law.
We explicated in Chavez v. PCGG[49] that in cases
where issues of transcendental public importance
are presented, there is no necessity to show that
petitioner has experienced or is in actual danger of
suffering direct and personal injury as the requisite
injury is assumed. We find our ruling in Chavez v.
PEA[50] as conclusive authority on locus standi in
the case at bar since the issues raised in this
petition are averred to be in breach of the fair
diffusion of the countrys natural resources and the
constitutional right of a citizen to information
which have been declared to be matters of
transcendental public importance. Moreover, the
pleadings especially those of respondents readily
reveal that public funds have been indirectly
utilized in the Project by means of Smokey
Mountain Project Participation Certificates
(SMPPCs) bought by some government agencies.
Hence, petitioner, as a taxpayer, is a proper party to
the instant petition before the court.

Admin. Law | 144

Whether petitioners direct recourse to this

Court was proper

constitutional questions it had previously resolved

and settled.

Respondents are one in asserting that petitioner

circumvents the principle of hierarchy of courts in
his petition. Judicial hierarchy was made clear in
the case of People v. Cuaresma, thus:

In the light of existing jurisprudence, we find

paucity of merit in respondents postulation.

There is after all a hierarchy of courts. That

hierarchy is determinative of the venue of appeals,
and should also serve as a general determinant of
the appropriate forum for petitions for the
extraordinary writs. A becoming regard for that
judicial hierarchy most certainly indicates that
petitions for the issuance of extraordinary writs
against first level (inferior) courts should be filed
with the Regional Trial Court, and those against the
latter, with the Court of Appeals. A direct
invocation of the Supreme Courts original
jurisdiction to issue these writs should be allowed
only when there are special and important reasons
therefor, clearly and specifically set out in the
petition. This is established policy. It is a policy
that is necessary to prevent inordinate demands
upon the Courts time and attention which are better
devoted to those matters within its exclusive
jurisdiction, and to prevent further over-crowding
of the Courts docket.[51] x x x

The OSG claims that the jurisdiction over petitions

for prohibition and mandamus is concurrent with
other lower courts like the Regional Trial Courts
and the Court of Appeals. Respondent NHA argues
that the instant petition is misfiled because it does
not introduce special and important reasons or
exceptional and compelling circumstances to
warrant direct recourse to this Court and that the
lower courts are more equipped for factual issues
since this Court is not a trier of facts.Respondents
RBI and RHI question the filing of the petition as
this Court should not be unduly burdened with
repetitions, invocation of jurisdiction over

While direct recourse to this Court is generally

frowned upon and discouraged, we have however
ruled in Santiago v. Vasquez that such resort to us
may be allowed in certain situations, wherein this
Court ruled that petitions for certiorari, prohibition,
or mandamus, though cognizable by other courts,
may directly be filed with us if the redress desired
cannot be obtained in the appropriate courts or
where exceptional compelling circumstances
justify availment of a remedy within and calling
for the exercise of [this Courts] primary
jurisdiction.[52]

The instant petition challenges the constitutionality

and legality of the SMDRP involving several
hectares of government land and hundreds of
millions of funds of several government
agencies. Moreover,
serious
constitutional
challenges are made on the different aspects of the
Project which allegedly affect the right of Filipinos
to the distribution of natural resources in the
country and the right to information of a
citizenmatters which have been considered to be of
extraordinary significance and grave consequence
to the public in general. These concerns in the
instant action compel us to turn a blind eye to the
judicial structure meant to provide an orderly
dispensation of justice and consider the instant
petition as a justified deviation from an established
precept.

Core factual matters undisputed

Admin. Law | 145

Respondents next challenge the projected review

by this Court of the alleged factual issues
intertwined in the issues propounded by
petitioner. They listed a copious number of
questions seemingly factual in nature which would
make this Court a trier of facts.[53]

We find the position of respondents bereft of merit.

For one, we already gave due course to the instant
petition in our January 18, 2005 Resolution.[54] In
said issuance, the parties were required to make
clear and concise statements of established facts
upon which our decision will be based.

Secondly, we agree with petitioner that there is no

necessity for us to make any factual findings since
the facts needed to decide the instant petition are
well established from the admissions of the parties
in their pleadings[55] and those derived from the
documents appended to said submissions. Indeed,
the core facts which are the subject matter of the
numerous issues raised in this petition are
undisputed.

Now we will tackle the issues that prop up the

instant petition.

Since petitioner has cited our decision in PEA as

basis for his postulations in a number of issues, we
first resolve the queryis PEA applicable to the case
at bar?

said case are substantially different from the facts

and circumstances in the case at bar, thus:

(1) The reclamation project in PEA was undertaken

through a JVA entered into between PEA and
AMARI. The reclamation project in the instant
NHA case was undertaken by the NHA, a national
government agency in consultation with PEA and
with the approval of two Philippine Presidents;

(2) In PEA, AMARI and PEA executed a JVA to

develop
the Freedom Islands and
reclaim
submerged areas without public bidding on April
25, 1995. In the instant NHA case, the NHA and
RBI executed a JVA after RBI was declared the
winning bidder on August 31, 1992 as the JVA
partner of the NHA in the SMDRP after
compliance with the requisite public bidding.

(3) In PEA, there was no law or presidential

proclamation classifying the lands to be reclaimed
as alienable and disposal lands of public
domain. In this RBI case, MO 415 of former
President Aquino and Proclamation No. 39 of then
President Ramos, coupled with Special Patents
Nos. 3591, 3592, and 3598, classified the
reclaimed lands as alienable and disposable;

A juxtaposition of the facts in the two cases

constrains the Court to rule in the negative.

(4) In PEA, the Chavez petition was filed before

the amended JVA was executed by PEA and
AMARI. In this NHA case, the JVA and
subsequent amendments were already substantially
implemented. Subsequently, the Project was
terminated through a MOA signed on August 27,
2003. Almost one year later on August 5, 2004, the
Chavez petition was filed;

The Court finds that PEA is not a binding

precedent to the instant petition because the facts in

(5) In PEA, AMARI was considered to be in bad

faith as it signed the amended JVA after the Chavez
Admin. Law | 146

petition was filed with the Court and after Senate

Committee Report No. 560 was issued finding that
the subject lands are inalienable lands of public
domain. In the instant petition, RBI and other
respondents are considered to have signed the
agreements in good faith as the Project was
terminated even before the Chavez petition was
filed;

(6) The PEA-AMARI JVA was executed as a result

of direct negotiation between the parties and not in
accordance with the BOT Law. The NHA-RBI JVA
and subsequent amendments constitute a BOT
contract governed by the BOT Law; and

(7) In PEA, the lands to be reclaimed or already

reclaimed were transferred to PEA, a government
entity tasked to dispose of public lands under
Executive Order No. (EO) 525.[56] In the NHA
case, the reclaimed lands were transferred to NHA,
a government entity NOT tasked to dispose of
public land and therefore said alienable lands were
converted to patrimonial lands upon their transfer
to NHA.[57]
Thus the PEA Decision[58] cannot be considered an
authority or precedent to the instant case. The
principle of stare decisis[59] has no application to
the different factual setting of the instant case.

We will now dwell on the substantive issues raised

by petitioner. After a perusal of the grounds raised
in this petition, we find that most of these issues
are moored on our PEA Decision which, as earlier
discussed, has no application to the instant
petition. For this reason alone, the petition can
already be rejected.Nevertheless, on the premise of
the applicability of said decision to the case at bar,
we will proceed to resolve said issues.

First Issue: Whether respondents NHA and RBI

have been granted
the power and authority to reclaim lands of the
public domain as
this power is vested exclusively in PEA as
claimed by petitioner

Petitioner contends that neither respondent NHA

nor respondent RBI may validly reclaim foreshore
and submerged land because they were not given
any power and authority to reclaim lands of the
public domain as this power was delegated by law
to PEA.

Asserting that existing laws did not empower the

NHA and RBI to reclaim lands of public domain,
the Public Estates Authority (PEA), petitioner
claims, is the primary authority for the reclamation
of all foreshore and submerged lands of public
domain, and relies on PEA where this Court held:

Moreover, Section 1 of Executive Order No. 525

provides that PEA shall be primarily responsible
for integrating, directing, and coordinating all
reclamation projects for and on behalf of the
National Government. The same section also states
that [A]ll reclamation projects shall be approved by
the President upon recommendation of the PEA,
and shall be undertaken by the PEA or through a
proper contract executed by it with any person or
entity; x x x. Thus, under EO No. 525, in relation
to PD No. 3-A and PD No. 1084, PEA became the
primary implementing agency of the National
Government to reclaim foreshore and submerged
lands of the public domain. EO No. 525 recognized
PEA as the government entity to undertake the
reclamation of lands and ensure their maximum
Admin. Law | 147

utilization in promoting public welfare and

interests. Since large portions of these reclaimed
lands would obviously be needed for public
service, there must be a formal declaration
segregating reclaimed lands no longer needed for
public service from those still needed for public
service.[60]

The aforequoted provision points to three (3)

requisites for a legal and valid reclamation project,
viz:

(1) approval by the President;

(2) favorable recommendation of PEA; and
(3) undertaken by any of the following:

In the Smokey Mountain Project, petitioner

clarifies that the reclamation was not done by PEA
or through a contract executed by PEA with
another person or entity but by the NHA through
an agreement with respondent RBI. Therefore, he
concludes that the reclamation is null and void.

Petitioners contention has no merit.

EO 525 reads:

Section 1. The Public Estates Authority (PEA)

shall be primarily responsible for integrating,
directing, and coordinating all reclamation projects
for and on behalf of the National Government. All
reclamation projects shall be approved by the
President upon recommendation of the PEA, and
shall be undertaken by the PEA or through a proper
contract executed by it with any person or entity;
Provided, that, reclamation projects of any
national government agency or entity
authorized under its charter shall be
undertaken in consultation with the PEA upon
approval of the President. (Emphasis supplied.)

a. by PEA
b. by any person or entity pursuant to a contract it
executed with PEA
c. by the National Government agency or entity
authorized under its charter to reclaim lands
subject to consultation with PEA

Without doubt, PEA under EO 525 was designated

as the agency primarily responsible for integrating,
directing, and coordinating all reclamation
projects. Primarily means mainly, principally,
mostly, generally. Thus, not all reclamation
projects fall under PEAs authority of supervision,
integration, and coordination. The very charter of
PEA, PD 1084,[61] does not mention that PEA has
the exclusive and sole power and authority to
reclaim lands of public domain. EO 525 even
reveals the exceptionreclamation projects by a
national government agency or entity authorized by
its charter to reclaim land. One example is EO 405
which authorized the Philippine Ports Authority
(PPA) to reclaim and develop submerged areas for
port related purposes. Under its charter, PD 857,
PPA has the power to reclaim, excavate, enclose or
raise any of the lands vested in it.

Thus, while PEA under PD 1084 has the power to

reclaim land and under EO 525 is primarily
Admin. Law | 148

responsible for integrating, directing and

coordinating reclamation projects, such authority is
NOT exclusive and such power to reclaim may be
granted or delegated to another government agency
or entity or may even be undertaken by the
National Government itself, PEA being only an
agency and a part of the National Government.

Let us apply the legal parameters of Sec. 1, EO 525

to the reclamation phase of SMDRP. After a
scrutiny of the facts culled from the records, we
find that the project met all the three (3)
requirements, thus:

1. There was ample approval by the President of

the Philippines; as a matter of fact, two Philippine
Presidents approved the same, namely: Presidents
Aquino and Ramos. President Aquino sanctioned
the reclamation of both the SMDRP housing and
commercial-industrial sites through MO 415 (s.
1992) which approved the SMDRP under Sec. 1
and directed NHA x x x to implement the Smokey
Mountain Development Plan and Reclamation of
the Area across R-10 through a private sector joint
venture scheme at the least cost to government
under Section 3.

For his part, then President Ramos issued

Proclamation No. 39 (s. 1992) which expressly
reserved the Smokey Mountain Area and the
Reclamation Area for a housing project and
related commercial/industrial development.

Moreover, President Ramos issued Proclamation

No. 465 (s. 1994) which authorized the increase of
the Reclamation Area from 40 hectares of
foreshore
and
submerged
land
of
the Manila Bay to 79 hectares. It speaks of the
reclamation of 400,000 square meters, more or
less, of the foreshore and submerged lands
ofManila Bay adjoining R-10 as an enabling
component of the SMDRP.

As a result of Proclamations Nos. 39 and 465,

Special Patent No. 3591 covering 211,975 square
meters of Smokey Mountain, Special Patent No.
3592 covering 401,485 square meters of reclaimed
land, and Special Patent No. 3598 covering another
390,000 square meters of reclaimed land were
issued by the DENR.

Thus, the first requirement of presidential

imprimatur on the SMDRP has been satisfied.

2. The requisite favorable endorsement of the

reclamation phase was impliedly granted by
PEA. President Aquino saw to it that there was
coordination of the project with PEA by
designating its general manager as member of the
EXECOM tasked to supervise the project
implementation. The assignment was made in Sec.
2 of MO 415 which provides:

Section 2. An Executive Committee is hereby

created to oversee the implementation of the Plan,
chaired by the NCR-CORD, with the heads of the
following agencies as members: The National
Housing Authority, the City of Manila, the
Department of Public Works and Highways, the
Public Estates Authority, the Philippine Ports
Authority, the Department of Environment and
Natural Resources and the Development Bank of
the Philippines. (Emphasis supplied.)
Admin. Law | 149

The favorable recommendation by PEA of the JVA

and subsequent amendments were incorporated as
part of the recommendations of the EXECOM
created under MO 415. While there was no specific
recommendation on the SMDRP emanating solely
from PEA, we find that the approbation of the
Project and the land reclamation as an essential
component by the EXECOM of which PEA is a
member, and its submission of the SMDRP and the
agreements on the Project to the President for
approval amply met the second requirement of EO
525.
3. The third element was also presentthe
reclamation was undertaken either by PEA or any
person or entity under contract with PEA or by the
National Government agency or entity authorized
under its charter to reclaim lands subject to
consultation with PEA. It cannot be disputed that
the reclamation phase was not done by PEA or any
person
or
entity
under
contract
with
PEA. However, the reclamation was implemented
by the NHA, a national government agency whose
authority to reclaim lands under consultation with
PEA is derived from its charterPD 727 and other
pertinent lawsRA 7279[62] and RA 6957 as
amended by RA 7718.

While the authority of NHA to reclaim lands is

challenged by petitioner, we find that the NHA had
more than enough authority to do so under existing
laws. While PD 757, the charter of NHA, does not
explicitly mention reclamation in any of the listed
powers of the agency, we rule that the NHA has an
implied power to reclaim land as this is vital or
incidental to effectively, logically, and successfully
implement an urban land reform and housing
program enunciated in Sec. 9 of Article XIII of the
1987 Constitution.

Basic in administrative law is the doctrine that a

government agency or office has express and
implied powers based on its charter and other
pertinent statutes. Express powers are those powers
granted, allocated, and delegated to a government
agency or office by express provisions of law. On
the other hand, implied powers are those that can
be inferred or are implicit in the wordings of the
law[63] or conferred by necessary or fair implication
in the enabling act.[64] In Angara v. Electoral
Commission, the Court clarified and stressed that
when a general grant of power is conferred or duty
enjoined, every particular power necessary for the
exercise of the one or the performance of the other
is also conferred by necessary implication. [65] It
was also explicated that when the statute does not
specify the particular method to be followed or
used by a government agency in the exercise of the
power vested in it by law, said agency has the
authority to adopt any reasonable method to carry
out its functions.[66]

The power to reclaim on the part of the NHA is

implicit from PD 757, RA 7279, MO 415, RA
6957, and PD 3-A,[67] viz:

1. NHAs power to reclaim derived from PD 757

provisions:

a. Sec. 3 of PD 757 implies that reclamation may

be resorted to in order to attain the goals of NHA:

Section 3. Progress and Objectives. The Authority

shall have the following purposes and objectives:

xxxx

Admin. Law | 150

b)
To undertake housing, development,
resettlement or other activities as would enhance
the provision of housing to every Filipino;

PD 570 dated October 30, 1974 created the TFDA,

which defined its objectives, powers, and
functions. Sec. 2 provides:

c)
To harness and promote private
participation in housing ventures in terms of capital
expenditures, land, expertise, financing and other
facilities for the sustained growth of the housing
industry. (Emphasis supplied.)

Section 2. Objectives and Purposes. The Authority

shall have the following purposes and objectives:

Land reclamation is an integral part of the

development of resources for some of the housing
requirements of the NHA. Private participation in
housing projects may also take the form of land
reclamation.

a) To undertake all manner of activity, business or

development projects for the establishment of
harmonious, comprehensive, integrated and
healthy living community in the Tondo
Foreshoreland and its resettlement site;

b) To undertake and promote the physical and

socio-economic amelioration of the Tondo
Foreshore residents in particular and the nation in
general (Emphasis supplied.)

b. Sec. 5 of PD 757 serves as proof that the NHA,

as successor of the Tondo Foreshore Development
Authority (TFDA), has the power to reclaim, thus:
Section 5. Dissolution of Existing Housing
Agencies. The People's Homesite and Housing
Corporation (PHHC), the Presidential Assistant on
Housing Resettlement Agency (PAHRA), the
Tondo Foreshore Development Authority
(TFDA), the Central Institute for the Training and
Relocation of Urban Squatters (CITRUS), the
Presidential Committee for Housing and Urban
Resettlement
(PRECHUR),
Sapang
Palay
Development Committee, Inter-Agency Task Force
to Undertake the Relocation of Families in Barrio
Nabacaan, Villanueva, Misamis Oriental and all
other
existing
government
housing
and
resettlement agencies, task forces and ad-hoc
committees, are hereby dissolved. Their powers
and functions, balance of appropriations,
records, assets, rights, and choses in action, are
transferred to, vested in, and assumed by the
Authority. x x x (Emphasis supplied.)

The powers and functions are contained in Sec. 3,

to wit:

a) To develop and implement comprehensive and

integrated urban renewal programs for the Tondo
Foreshore and Dagat-dagatan lagoon and/or any
other additional/alternative resettlement site and
to formulate and enforce general and specific
policies for its development which shall ensure
reasonable
degree
of
compliance
with
environmental standards.

b) To prescribe guidelines and standards for the

reservation, conservation and utilization of public
lands covering the Tondo Foreshore land and its
resettlement sites;
Admin. Law | 151

c) To construct, acquire, own, lease, operate and

maintain infrastructure facilities, housing complex,
sites and services;

d) To determine, regulate and supervise the

establishment and operation of housing, sites,
services and commercial and industrial complexes
and any other enterprises to be constructed or
established within the Tondo Foreshore and its
resettlement sites;

e) To undertake and develop, by itself or through

joint ventures with other public or private entities,
all or any of the different phases of development of
the Tondo Foreshore land and its resettlement
sites;

f) To acquire and own property, property-rights and

interests, and encumber or otherwise dispose of the
same as it may deem appropriate (Emphasis
supplied.)

Proclamations Nos. 39 and 465 and Special Patents

Nos. 3592 and 3598.

c. Sec. 6 of PD 757 delineates the functions and

powers of the NHA which embrace the authority to
reclaim land, thus:

Sec. 6. Powers and functions of the Authority.The

Authority shall have the following powers and
functions to be exercised by the Board in
accordance with its established national human
settlements plan prepared by the Human
Settlements Commission:

(a) Develop and implement the comprehensive

and integrated housing program provided for in
Section hereof;

xxxx

(c) Prescribe guidelines and standards for the

reservation, conservation and utilization of public
lands identified for housing and resettlement;
From the foregoing provisions, it is readily
apparent that the TFDA has the explicit power to
develop public lands covering the Tondo foreshore
land and any other additional and alternative
resettlement sites under letter b, Sec. 3 of PD
570. Since the additional and/or alternative sites
adjacent to Tondo foreshore land cover foreshore
and submerged areas, the reclamation of said areas
is necessary in order to convert them into a
comprehensive and integrated resettlement housing
project for the slum dwellers and squatters of
Tondo. Since the powers of TFDA were assumed
by the NHA, then the NHA has the power to
reclaim lands in the Tondo foreshore area which
covers the 79-hectare land subject of

xxxx

(e) Develop and undertake housing development

and/or resettlement projects through joint
ventures or other arrangements with public and
private entities;
xxxx

Admin. Law | 152

(k) Enter into contracts whenever necessary under

such terms and conditions as it may deem proper
and reasonable;

(l) Acquire property rights and interests and

encumber or otherwise dispose the same as it may
deem appropriate;

PD 757 identifies NHAs mandate to [d]evelop and

undertake
housing
development
and/or
resettlement projects through joint ventures or
other arrangements with public and private entities.

The power of the NHA to undertake reclamation of

land can be inferred from Secs. 12 and 29 of RA
7279, which provide:

xxxx

(s) Perform such other acts not inconsistent with

this Decree, as may be necessary to effect the
policies
and
objectives
herein
declared. (Emphasis supplied.)

The NHAs authority to reclaim land can be

inferred from the aforequoted provisions. It can
make use of public lands under letter (c) of Sec. 6
which includes reclaimed land as site for its
comprehensive and integrated housing projects
under letter (a) which can be undertaken through
joint ventures with private entities under letter
(e). Taken together with letter (s) which authorizes
NHA to perform such other activities necessary to
effect the policies and objectives of PD 757, it is
safe to conclude that the NHAs power to reclaim
lands is a power that is implied from the exercise
of its explicit powers under Sec. 6 in order to
effectively accomplish its policies and objectives
under Sec. 3 of its charter. Thus, the reclamation of
land is an indispensable component for the
development and construction of the SMDRP
housing facilities.

2. NHAs implied power to reclaim land is

enhanced by RA 7279.

Section 12. Disposition of Lands for Socialized

Housing.The National Housing Authority, with
respect to lands belonging to the National
Government, and the local government units with
respect to other lands within their respective
localities, shall coordinate with each other to
formulate and make available various alternative
schemes for the disposition of lands to the
beneficiaries of the Program. These schemes
shall not be limited to those involving transfer of
ownership in fee simple but shall include lease,
with option to purchase, usufruct or such other
variations as the local government units or the
National Housing Authority may deem most
expedient in carrying out the purposes of this Act.

xxxx

Section 29. Resettlement.With two (2) years from

the effectivity of this Act, the local government
units, in coordination with the National Housing
Authority, shall implement the relocation and
resettlement of persons living in danger areas such
as esteros, railroad tracks, garbage dumps,
riverbanks, shorelines, waterways, and in other
public places as sidewalks, roads, parks, and
playgrounds. The local government unit, in
coordination with the National Housing Authority,
shall provide relocation or resettlement sites with
basic services and facilities and access to
Admin. Law | 153

employment and livelihood opportunities sufficient

to meet the basic needs of the affected
families. (Emphasis supplied.)

WHEREAS, the government encourages private

sector initiative in the implementation of its
projects. (Emphasis supplied.)

Lands belonging to the National Government

include foreshore and submerged lands which can
be reclaimed to undertake housing development
and resettlement projects.

Proceeding from these whereas clauses, it is

unequivocal that reclamation of land in
the Smokey Mountain area is an essential and vital
power of the NHA to effectively implement its
avowed goal of developing low-cost housing units
at
the Smokey Mountain dumpsites.
The
interpretation made by no less than the President of
the Philippines as Chief of the Executive Branch,
of which the NHA is a part, must necessarily
command respect and much weight and credit.

3. MO 415 explains the undertaking of the NHA in

SMDRP:

WHEREAS, Memorandum Order No. 161-A

mandated the National Housing Authority to
conduct feasibility studies and develop low-cost
housing projects at the dumpsites of Metro
Manila;

WHEREAS, the National Housing Authority has

presented a viable Conceptual Plan to convert the
Smokey Mountain dumpsite into a habitable
housing project inclusive of the reclamation area
across R-10 as enabling component of the
Project;

WHEREAS, the said Plan requires the coordinated

and synchronized efforts of the City of Manila and
other government agencies and instrumentalities to
ensure effective and efficient implementation;

4. RA 6957 as amended by RA 7718the BOT

Lawserves as an exception to PD 1084 and EO
525.
Based on the provisions of the BOT Law and
Implementing Rules and Regulations, it is
unequivocal that all government infrastructure
agencies like the NHA can undertake infrastructure
or development projects using the contractual
arrangements prescribed by the law, and land
reclamation is one of the projects that can be
resorted to in the BOT project implementation
under the February 10, 1992 Joint Resolution No. 3
of the 8th Congress.

From the foregoing considerations, we find that the

NHA has ample implied authority to undertake
reclamation projects.

Even without an implied power to reclaim lands

under NHAs charter, we rule that the authority
granted to NHA, a national government agency, by
Admin. Law | 154

the President under PD 3-A reinforced by EO 525

is more than sufficient statutory basis for the
reclamation of lands under the SMDRP.

PD 3-A is a law issued by then President Ferdinand

E. Marcos under his martial law powers
on September 23, 1972. It provided that [t]he
provisions of any law to the contrary
notwithstanding, the reclamation of areas,
underwater, whether foreshore or inland, shall be
limited to the National Government or any person
authorized by it under the proper contract. It
repealed, in effect, RA 1899 which previously
delegated the right to reclaim lands to
municipalities and chartered cities and revested it
to the National Government.[68] Under PD 3-A,
national government can only mean the Executive
Branch headed by the President. It cannot refer to
Congress as it was dissolved and abolished at the
time of the issuance of PD 3-A on September 23,
1972. Moreover, the Executive Branch is the only
implementing arm in the government with the
equipment, manpower, expertise, and capability by
the very nature of its assigned powers and
functions to undertake reclamation projects. Thus,
under PD 3-A, the Executive Branch through the
President can implement reclamation of lands
through any of its departments, agencies, or
offices.

Subsequently, on February 4, 1977, President

Marcos issued PD 1084 creating the PEA, which
was granted, among others, the power to reclaim
land, including foreshore and submerged areas by
dredging, filling or other means or to acquire
reclaimed lands. The PEAs power to reclaim is not
however exclusive as can be gleaned from its
charter, as the President retained his power under
PD 3-A to designate another agency to reclaim
lands.

On February 14, 1979, EO 525 was issued. It

granted PEA primary responsibility for integrating,
directing, and coordinating reclamation projects for
and on behalf of the National Government
although other national government agencies can
be designated by the President to reclaim lands in
coordination with the PEA. Despite the issuance of
EO 525, PD 3-A remained valid and
subsisting. Thus, the National Government through
the President still retained the power and control
over all reclamation projects in the country.

The power of the National Government through the

President over reclamation of areas, that is,
underwater whether foreshore or inland, was made
clear in EO 543[69] which took effect on June 24,
2006. Under EO 543, PEA was renamed the
Philippine Reclamation Authority (PRA) and was
granted the authority to approve reclamation
projects, a power previously reposed in the
President under EO 525. EO 543 reads:

Section 1. The power of the President to approve

reclamation projects is hereby delegated to the
Philippine Reclamation Authority [formerly
PEA], through its governing board, subject to
compliance with existing laws and rules and
subject to the condition that reclamation contracts
to be executed with any person or entity go through
public bidding.

Section 2. Nothing in the Order shall be

construed as diminishing the Presidents
authority to modify, amend or nullify PRAs
action.

Section 3. All executive issuances inconsistent

with this Executive Order are hereby repealed or
amended accordingly. (Emphasis supplied.)

Admin. Law | 155

Sec. 2 of EO 543 strengthened the power of control

and supervision of the President over reclamation
of lands as s/he can modify, amend, or nullify the
action of PEA (now PRA).

From the foregoing issuances, we conclude that the

Presidents delegation to NHA, a national
government agency, to reclaim lands under the
SMDRP, is legal and valid, firmly anchored on PD
3-A buttressed by EO 525 notwithstanding the
absence of any specific grant of power under its
charter, PD 757.

Second Issue: Whether respondents NHA and

RBI were given the
power and authority by DENR to reclaim
foreshore and submerged
lands

supervision and control over alienable and

disposable public lands. DENR also exercises
exclusive jurisdiction on the management and
disposition of all lands of the public domain. Thus,
DENR decides whether areas under water, like
foreshore or submerged areas of Manila Bay,
should be reclaimed or not. This means that PEA
needs authorization from DENR before PEA can
undertake reclamation projects in Manila Bay, or in
any part of the country.

DENR also exercises exclusive jurisdiction over

the disposition of all lands of the public
domain. Hence, DENR decides whether reclaimed
lands of PEA should be classified as alienable
under Sections 6 and 7 of CA No. 141. Once
DENR decides that the reclaimed lands should be
so classified, it then recommends to the President
the issuance of a proclamation classifying the lands
as alienable or disposable lands of the public
domain open to disposition. We note that then
DENR Secretary Fulgencio S. Factoran, Jr.
countersigned Special Patent No. 3517 in
compliance with the Revised Administrative Code
and Sections 6 and 7 of CA No. 141.

Again, reliance is made on our ruling

in PEA where it was held that the DENRs authority
is necessary in order for the government to validly
reclaim foreshore and submerged lands. In PEA,
we expounded in this manner:

In short, DENR is vested with the power to

authorize the reclamation of areas under water,
while PEA is vested with the power to undertake
the physical reclamation of areas under water,
whether
directly
or
through
private
contractors. DENR is also empowered to classify
lands of the public domain into alienable or
disposable lands subject to the approval of the
President. On the other hand, PEA is tasked to
develop, sell or lease the reclaimed alienable lands
of the public domain.[70]

As manager, conservator and overseer of the

natural resources of the State, DENR exercises

Despite our finding that PEA is not a precedent to

the case at bar, we find after all that under existing

Petitioner Chavez puts forth the view that even if

the NHA and RBI were granted the authority to
reclaim, they were not authorized to do so by the
DENR.

Admin. Law | 156

laws, the NHA is still required to procure DENRs

authorization before a reclamation project in
Manila Bay or in any part of the Philippines can be
undertaken. The requirement applies to PEA,
NHA, or any other government agency or office
granted with such power under the law.

Notwithstanding the need for DENR permission,

we nevertheless find petitioners position bereft of
merit.

The DENR is deemed to have granted the authority

to reclaim in the Smokey Mountain Project for the
following reasons:

1. Sec. 17, Art. VII of the Constitution provides

that the President shall have control of all
executive departments, bureaus and offices. The
President is assigned the task of seeing to it that all
laws are faithfully executed. Control, in
administrative law, means the power of an officer
to alter, modify, nullify or set aside what a
subordinate officer has done in the performance of
his duties and to substitute the judgment of the
former for that of the latter.[71]

As such, the President can exercise executive

power motu proprio and can supplant the act or
decision of a subordinate with the Presidents
own. The DENR is a department in the executive
branch under the President, and it is only an alter
ego of the latter. Ordinarily the proposed action
and the staff work are initially done by a
department like the DENR and then submitted to
the President for approval. However, there is
nothing infirm or unconstitutional if the President
decides on the implementation of a certain project
or activity and requires said department to
implement it. Such is a presidential prerogative as
long as it involves the department or office
authorized by law to supervise or execute the

Project. Thus, as in this case, when the President

approved and ordered the development of a
housing project with the corresponding reclamation
work, making DENR a member of the committee
tasked to implement the project, the required
authorization from the DENR to reclaim land can
be deemed satisfied. It cannot be disputed that the
ultimate power over alienable and disposable
public lands is reposed in the President of
the Philippines and not the DENR Secretary. To
still require a DENR authorization on
the Smokey Mountain when the President has
already authorized and ordered the implementation
of the Project would be a derogation of the powers
of the President as the head of the executive
branch. Otherwise, any department head can defy
or oppose the implementation of a project
approved by the head of the executive branch,
which is patently illegal and unconstitutional.

In Chavez v. Romulo, we stated that when a statute

imposes a specific duty on the executive
department, the President may act directly or order
the said department to undertake an activity, thus:

[A]t the apex of the entire executive officialdom is

the President. Section 17, Article VII of the
Constitution specifies [her] power as Chief
executive departments, bureaus and offices. [She]
shall ensure that the laws be faithfully executed. As
Chief Executive, President Arroyo holds the
steering wheel that controls the course of her
government. She lays down policies in the
execution of her plans and programs. Whatever
policy she chooses, she has her subordinates to
implement them. In short, she has the power of
control.Whenever a specific function is entrusted
by law or regulation to her subordinate, she
may act directly or merely direct the
performance of a duty x x x. Such act is well
within the prerogative of her office (emphasis
supplied).[72]

Admin. Law | 157

allowed then the department head will become

more powerful than the President.
Moreover, the power to order the reclamation of
lands of public domain is reposed first in the
Philippine President. The Revised Administrative
Code of 1987 grants authority to the President to
reserve lands of public domain for settlement for
any specific purpose, thus:

Section 14. Power to Reserve Lands of the Public

and Private Domain of the Government.(1) The
President shall have the power to reserve for
settlement or public use, and for specific public
purposes, any of the lands of the public domain,
the use of which is not otherwise directed by
law. The reserved land shall thereafter remain
subject to the specific public purpose indicated
until
otherwise
provided
by
law
or
proclamation. (Emphasis supplied.)

President Aquino reserved the area of

the Smokey Mountain dumpsite for settlement and
issued MO 415 authorizing the implementation of
the Smokey Mountain Development Project plus
the reclamation of the area across R-10. Then
President Ramos issued Proclamation No. 39
covering the 21-hectare dumpsite and the 40hectare
commercial/industrial
area,
and
Proclamation No. 465 and MO 415 increasing the
area of foreshore and submerged lands
of Manila Bay to be reclaimed from 40 to 79
hectares. Having supervision and control over the
DENR, both Presidents directly assumed and
exercised the power granted by the Revised
Administrative Code to the DENR Secretary to
authorize the NHA to reclaim said lands. What can
be done indirectly by the DENR can be done
directly by the President. It would be absurd if the
power of the President cannot be exercised simply
because the head of a department in the executive
branch has not acted favorably on a project already
approved by the President. If such arrangement is

2. Under Sec. 2 of MO 415, the DENR is one of

the members of the EXECOM chaired by the
NCR-CORD to oversee the implementation of the
Project. The EXECOM was the one which
recommended approval of the project plan and the
joint venture agreements. Clearly, the DENR
retained its power of supervision and control over
the laws affected by the Project since it was tasked
to facilitate the titling of the Smokey Mountain and
of the area to be reclaimed, which shows that it had
tacitly given its authority to the NHA to undertake
the reclamation.

3. Former DENR Secretary Angel C. Alcala issued

Special Patents Nos. 3591 and 3592 while then
Secretary Victor O. Ramos issued Special Patent
No. 3598 that embraced the areas covered by the
reclamation. These patents conveyed the lands to
be reclaimed to the NHA and granted to said
agency the administration and disposition of said
lands for subdivision and disposition to qualified
beneficiaries and for development for mix land use
(commercial/industrial) to provide employment
opportunities to on-site families and additional
areas for port related activities. Such grant of
authority to administer and dispose of lands of
public domain under the SMDRP is of course
subject to the powers of the EXECOM of SMDRP,
of which the DENR is a member.

4. The issuance of ECCs by the DENR for SMDRP

is but an exercise of its power of supervision and
control over the lands of public domain covered by
the Project.

Based on these reasons, it is clear that the DENR,

through its acts and issuances, has ratified and
confirmed the reclamation of the subject lands for
Admin. Law | 158

the purposes laid down in Proclamations Nos. 39

and 465.

Third Issue: Whether respondent RBI can

acquire reclaimed

Secs. 2 and 3, Art. XII of the Constitution declare

that all natural resources are owned by the State
and they cannot be alienated except for alienable
agricultural lands of the public domain. One of the
States natural resources are lands of public domain
which include reclaimed lands.

outside the commerce of man

Petitioner contends that for these reclaimed lands

to be alienable, there must be a law or presidential
proclamation officially classifying these reclaimed
lands as alienable and disposable and open to
disposition or concession. Absent such law or
proclamation, the reclaimed lands cannot be the
enabling component or consideration to be paid to
RBI as these are beyond the commerce of man.

Petitioner postulates that respondent RBI cannot

acquire the reclaimed foreshore and submerged
areas as these are inalienable public lands beyond
the commerce of man based on Art. 1409 of the
Civil Code which provides:

We are not convinced of petitioners postulation.

foreshore and submerged lands considered as

inalienable and

are

The reclaimed lands across R-10 were classified

alienable and disposable lands of public domain of
the State for the following reasons, viz:

(1) Those whose cause, object or purpose is

contrary to law, morals, good customs, public order
or public policy;

First, there were three (3) presidential

proclamations classifying the reclaimed lands
across R-10 as alienable or disposable hence open
to disposition or concession, to wit:

Article 1409. The following contracts

inexistent and void from the beginning:

xxxx

(7) Those expressly prohibited or declared void by

law.

These contracts cannot be ratified. Neither can the

right to set up the defense of illegality be waived.

(1) MO 415 issued by President Aquino, of which

Sec. 4 states that [t]he land covered by the Smokey
Mountain Dumpsite is hereby conveyed to the
National Housing Authority as well as the area to
be reclaimed across R-10.

The directive to transfer the lands once reclaimed

to the NHA implicitly carries with it the
declaration that said lands are alienable and
Admin. Law | 159

disposable. Otherwise, the NHA cannot effectively

use them in its housing and resettlement project.
(2) Proclamation No. 39 issued by then President
Ramos by which the reclaimed lands were
conveyed to NHA for subdivision and disposition
to qualified beneficiaries and for development into
a mixed land use (commercial/industrial) to
provide employment opportunities to on-site
families and additional areas for port-related
activities. Said directive carries with it the
pronouncement that said lands have been
transformed to alienable and disposable
lands. Otherwise, there is no legal way to convey it
to the beneficiaries.

(3) Proclamation No. 465 likewise issued by

President Ramos enlarged the reclaimed area to 79
hectares to be developed and disposed of in the
implementation of the SMDRP. The authority put
into the hands of the NHA to dispose of the
reclaimed lands tacitly sustains the conversion to
alienable and disposable lands.

disposable lands of the public domain. This is in

line with the ruling in PEA where said issue was
clarified and stressed:

PD No. 1085, coupled with President

Aquinos actual issuance of a special patent
covering the Freedom Islands, is equivalent to
an
official
proclamation
classifying
theFreedom Islands as alienable or disposable
lands of the public domain. PD No. 1085 and
President Aquinos issuance of a land patent also
constitute
a
declaration
that
theFreedom Islands are no longer needed for
public service. The Freedom Islands are thus
alienable or disposable lands of the public domain,
open to disposition or concession to qualified
parties.[73] (Emphasis supplied.)

Secondly, Special Patents Nos. 3591, 3592, and

3598 issued by the DENR anchored on
Proclamations Nos. 39 and 465 issued by President
Ramos, without doubt, classified the reclaimed
areas as alienable and disposable.

Thus, MO 415 and Proclamations Nos. 39 and 465

cumulatively and jointly taken together with
Special Patent Nos. 3591, 3592, and 3598 more
than satisfy the requirement in PEA that [t]here
must
be
a
law
or presidential
proclamation officially
classifying
these
reclaimed lands as alienable or disposable and
open to disposition or concession (emphasis
supplied).[74]

Admittedly, it cannot be said that MO 415,

Proclamations Nos. 39 and 465 are explicit
declarations that the lands to be reclaimed are
classified as alienable and disposable. We find
however that such conclusion is derived and
implicit from the authority given to the NHA to
transfer the reclaimed lands to qualified
beneficiaries.

Apropos the requisite law categorizing reclaimed

land as alienable or disposable, we find that RA
6957 as amended by RA 7718 provides ample
authority for the classification of reclaimed land in
the SMDRP for the repayment scheme of the BOT
project as alienable and disposable lands of public
domain. Sec. 6 of RA 6957 as amended by RA
7718 provides:

The query is, when did the declaration take effect?

It did so only after the special patents covering the
reclaimed areas were issued. It is only on such date
that the reclaimed lands became alienable and

For the financing, construction, operation and

maintenance of any infrastructure projects
undertaken through the build-operate-and transfer
arrangement or any of its variations pursuant to the
Admin. Law | 160

provisions of this Act, the project proponent x x x

may likewise be repaid in the form of a share in the
revenue of the project or other non-monetary
payments, such as, but not limited to, the grant of
a portion or percentage of the reclaimed land,
subject to the constitutional requirements with
respect to the ownership of the land. (Emphasis
supplied.)

While RA 6957 as modified by RA 7718 does not

expressly declare that the reclaimed lands that shall
serve as payment to the project proponent have
become alienable and disposable lands and opened
for disposition; nonetheless, this conclusion is
necessarily implied, for how else can the land be
used as the enabling component for the Project if
such classification is not deemed made?

It may be argued that the grant of authority to sell

public lands, pursuant to PEA, does not convert
alienable lands of public domain into private or
patrimonial lands. We ruled in PEA that alienable
lands of public domain must be transferred to
qualified private parties, or to government
entities not tasked to dispose of public lands,
before these lands can become private or
patrimonial lands (emphasis supplied).[75] To
lands reclaimed by PEA or through a contract with
a private person or entity, such reclaimed lands still
remain alienable lands of public domain which can
be transferred only to Filipino citizens but not to a
private corporation.This is because PEA under PD
1084 and EO 525 is tasked to hold and dispose of
alienable lands of public domain and it is only
when it is transferred to Filipino citizens that it
becomes patrimonial property. On the other hand,
the NHA is a government agency not tasked to
dispose of public lands under its charterThe
Revised Administrative Code of 1987. The NHA is
an end-user agency authorized by law to administer
and dispose of reclaimed lands. The moment titles
over reclaimed lands based on the special patents

are transferred to the NHA by the Register of

Deeds, they are automatically converted to
patrimonial properties of the State which can be
sold to Filipino citizens and private corporations,
60% of which are owned by Filipinos. The reason
is obvious: if the reclaimed land is not converted to
patrimonial land once transferred to NHA, then it
would be useless to transfer it to the NHA since it
cannot legally transfer or alienate lands of public
domain. More importantly, it cannot attain its
avowed purposes and goals since it can only
transfer patrimonial lands to qualified beneficiaries
and prospective buyers to raise funds for the
SMDRP.

From the foregoing considerations, we find that the

79-hectare reclaimed land has been declared
alienable and disposable land of the public domain;
and in the hands of NHA, it has been reclassified
as patrimonial property.

Petitioner, however, contends that the reclaimed

lands were inexistent prior to the three (3)
Presidential Acts (MO 415 and Proclamations Nos.
39 and 465) and hence, the declaration that such
areas are alienable and disposable land of the
public domain, citing PEA, has no legal basis.

Petitioners contention is not well-taken.

Petitioners sole reliance on Proclamations Nos. 39

and 465 without taking into consideration the
special patents issued by the DENR demonstrates
the inherent weakness of his proposition. As was
ruled in PEA cited by petitioner himself, PD No.
1085, coupled with President Aquinos actual
issuance of a special patent covering
the Freedom Islands is equivalent to an official
proclamation classifying the Freedom islands as
alienable or disposable lands of public domain. In a
similar vein, the combined and collective effect of
Admin. Law | 161

Proclamations Nos. 39 and 465 with Special

Patents Nos. 3592 and 3598 is tantamount to and
can be considered to be an official declaration that
the reclaimed lots are alienable or disposable lands
of the public domain.

The reclaimed lands covered by Special Patents

Nos. 3591, 3592, and 3598, which evidence
transfer of ownership of reclaimed lands to the
NHA, are official acts of the DENR Secretary in
the exercise of his power of supervision and
control over alienable and disposable public lands
and his exclusive jurisdiction over the management
and disposition of all lands of public domain under
the Revised Administrative Code of 1987. Special
Patent No. 3592 speaks of the transfer of Lots 1
and 2, and RI-003901-000012-D with an area of
401,485 square meters based on the survey and
technical description approved by the Bureau of
Lands. Lastly, Special Patent No. 3598 was issued
in favor of the NHA transferring to said agency a
tract of land described in Plan RL-00-000013 with
an area of 390,000 square meters based on the
survey and technical descriptions approved by the
Bureau of Lands.

The conduct of the survey, the preparation of the

survey plan, the computation of the technical
description, and the processing and preparation of
the special patent are matters within the technical
area of expertise of administrative agencies like the
DENR and the Land Management Bureau and are
generally accorded not only respect but at times
even finality.[76] Preparation of special patents calls
for technical examination and a specialized review
of calculations and specific details which the courts
are ill-equipped to undertake; hence, the latter
defer to the administrative agency which is trained
and knowledgeable on such matters.[77]

the
City
of Manila for
registration,
and
corresponding certificates of titles over the
reclaimed lots were issued based on said special
patents. The issuance of certificates of titles in
NHAs name automatically converts the reclaimed
lands to patrimonial properties of the
NHA. Otherwise, the lots would not be of use to
the NHAs housing projects or as payment to the
BOT contractor as the enabling component of the
BOT contract. The laws of the land have to be
applied and interpreted depending on the changing
conditions and times. Tempora mutantur et legis
mutantur in illis (time changes and laws change
with it). One such law that should be treated
differently is the BOT Law (RA 6957) which
brought about a novel way of implementing
government contracts by allowing reclaimed land
as part or full payment to the contractor of a
government project to satisfy the huge financial
requirements of the undertaking. The NHA holds
the lands covered by Special Patents Nos. 3592 and
3598 solely for the purpose of the SMDRP
undertaken by authority of the BOT Law and for
disposition in accordance with said special
law. The lands become alienable and disposable
lands of public domain upon issuance of the
special patents and become patrimonial properties
of the Government from the time the titles are
issued to the NHA.
As early as 1999, this Court in Baguio v.
Republic laid down the jurisprudence that:

It is true that, once a patent is registered and the

corresponding certificate of title is issued, the land
covered by them ceases to be part of the public
domain and becomes private property, and the
Torrens Title issued pursuant to the patent becomes
indefeasible upon the expiration of one year from
the date of issuance of such patent. [78]

Subsequently, the special patents in the name of the

NHA were submitted to the Register of Deeds of
Admin. Law | 162

The doctrine was reiterated in Republic v. Heirs of

Felipe Alijaga, Sr.,[79] Heirs of Carlos Alcaraz v.
Republic,[80] and the more recent case of Doris
Chiongbian-Oliva v. Republic of the Philippines.
[81]
Thus, the 79-hectare reclaimed land became
patrimonial property after the issuance of
certificates of titles to the NHA based on Special
Patents Nos. 3592 and 3598.

contrary is provided. This is expressed in the

familiar legal maxim lex prospicit, non respicit, the
law looks forward not backward.The rationale
against retroactivity is easy to perceive. The
retroactive application of a law usually divests
rights that have already become vested or impairs
the obligations of contract and hence, is
unconstitutional.

One last point. The ruling in PEA cannot even be

applied retroactively to the lots covered by Special
Patents Nos. 3592 (40 hectare reclaimed land) and
3598 (39-hectare reclaimed land). The reclamation
of the land under SMDRP was completed in
August 1996 while the PEA decision was rendered
on July 9, 2002. In the meantime, subdivided lots
forming parts of the reclaimed land were already
sold to private corporations for value and separate
titles issued to the buyers. The Project was
terminated through a Memorandum of Agreement
signed on August 27, 2003. The PEA decision
became final through the November 11,
2003 Resolution. It is a settled precept that
decisions of the Supreme Court can only be
applied prospectively as they may prejudice vested
rights if applied retroactively.

The same consideration underlies our rulings

giving only prospective effect to decisions
enunciating new doctrines. Thus, we emphasized
in People v. Jabinal, 55 SCRA 607 [1974] x x x
when a doctrine of this Court is overruled and a
different view is adopted, the new doctrine should
be applied prospectively and should not apply to
parties who had relied on the old doctrine and
acted on the faith thereof. [82]

In Benzonan v. Court of Appeals, the Court

trenchantly elucidated the prospective application
of its decisions based on considerations of equity
and fair play, thus:
At that time, the prevailing jurisprudence
interpreting section 119 of R.A. 141 as amended
was that enunciated in Monge and Tupas cited
above. The petitioners Benzonan and respondent
Pe and the DBP are bound by these decisions for
pursuant to Article 8 of the Civil Code judicial
decisions applying or interpreting the laws of the
Constitution shall form a part of the legal system of
the Philippines. But while our decisions form part
of the law of the land, they are also subject to
Article 4 of the Civil Code which provides that
laws shall have no retroactive effect unless the

Fourth Issue: Whether respondent RBI can

acquire reclaimed
lands when there was no declaration that said
lands are no
longer needed for public use

Petitioner Chavez avers that despite the declaration

that the reclaimed areas are alienable lands of the
public domain, still, the reclamation is flawed for
there was never any declaration that said lands are
no longer needed for public use.

We are not moved by petitioners submission.

Even if it is conceded that there was no explicit

declaration that the lands are no longer needed for
public use or public service, there was however an
Admin. Law | 163

implicit executive declaration that the reclaimed

areas R-10 are not necessary anymore for public
use or public service when President Aquino
through MO 415 conveyed the same to the NHA
partly for housing project and related
commercial/industrial development intended for
disposition to and enjoyment of certain
beneficiaries and not the public in general and
partly as enabling component to finance the
project.

President Ramos, in issuing Proclamation No. 39,

declared, though indirectly, that the reclaimed
lands of the Smokey Mountain project are no
longer required for public use or service, thus:

These parcels of land of public domain are hereby

placed under the administration and disposition of
the National Housing Authority to develop,
subdivide and dispose to qualified beneficiaries,
as well as its development for mix land use
(commercial/industrial) to provide employment
opportunities to on-site families and additional
areas for port related activities. (Emphasis
supplied.)

While numerical count of the persons to be

benefited is not the determinant whether the
property is to be devoted to public use, the
declaration in Proclamation No. 39 undeniably
identifies
only
particular
individuals
as
beneficiaries to whom the reclaimed lands can be
sold, namelythe Smokey Mountain dwellers. The
rest of the Filipinos are not qualified; hence, said
lands are no longer essential for the use of the
public in general.

In addition, President Ramos issued on August 31,

1994 Proclamation No. 465 increasing the area to

be reclaimed from forty (40) hectares to seventynine (79) hectares, elucidating that said lands are
undoubtedly set aside for the beneficiaries of
SMDRP and not the publicdeclaring the power of
NHA to dispose of land to be reclaimed, thus: The
authority to administer, develop, or dispose
lands identified and reserved by this Proclamation
and Proclamation No. 39 (s.1992), in accordance
with the SMDRP, as enhance, is vested with the
NHA, subject to the provisions of existing laws.
(Emphasis supplied.)

MO 415 and Proclamations Nos. 39 and 465 are

declarations that proclaimed the non-use of the
reclaimed areas for public use or service as the
Project cannot be successfully implemented
without the withdrawal of said lands from public
use or service. Certainly, the devotion of the
reclaimed land to public use or service conflicts
with the intended use of the Smokey Mountain
areas for housing and employment of the Smokey
Mountain scavengers and for financing the Project
because the latter cannot be accomplished without
abandoning the public use of the subject
land. Without doubt, the presidential proclamations
on SMDRP together with the issuance of the
special patents had effectively removed the
reclaimed lands from public use.

More decisive and not in so many words is the

ruling in PEA which we earlier cited, that PD No.
1085 and President Aquinos issuance of a land
patent also constitute a declaration that the
Freedom Islands are no longer needed for public
service. Consequently, we ruled in that case that
the reclaimed lands are open to disposition or
concession to qualified parties.[83]

In a similar vein, presidential Proclamations Nos.

39 and 465 jointly with the special patents have
Admin. Law | 164

classified the reclaimed lands as alienable and

disposable and open to disposition or concession as
they
would
be
devoted
to
units
for Smokey Mountain beneficiaries. Hence,
said
lands are no longer intended for public use or
service and shall form part of the patrimonial
properties of the State under Art. 422 of the Civil
Code.[84] As discussed a priori, the lands were
classified as patrimonial properties of the NHA
ready for disposition when the titles were
registered in its name by the Register of Deeds.

Moreover, reclaimed lands that are made the

enabling components of a BOT infrastructure
project are necessarily reclassified as alienable
and disposable lands under the BOT Law;
otherwise, absurd and illogical consequences
would naturally result. Undoubtedly, the BOT
contract will not be accepted by the BOT
contractor since there will be no consideration for
its contractual obligations. Since reclaimed land
will be conveyed to the contractor pursuant to the
BOT Law, then there is an implied declaration that
such land is no longer intended for public use or
public service and, hence, considered patrimonial
property of the State.

Fifth Issue: Whether there is a law authorizing

sale of
reclaimed lands

Petitioner next claims that RBI cannot acquire the

reclaimed lands because there was no law
authorizing their sale. He argues that unlike PEA,
no legislative authority was granted to the NHA to
sell reclaimed land.

This position is misplaced.

Petitioner relies on Sec. 60 of Commonwealth Act

(CA) 141 to support his view that the NHA is not
empowered by any law to sell reclaimed land, thus:

Section 60. Any tract of land comprised under this

title may be leased or sold, as the case may be, to
any person, corporation or association authorized
to purchase or lease public lands for agricultural
purposes. The area of the land so leased or sold
shall be such as shall, in the judgment of the
Secretary of Agriculture and Natural Resources, be
reasonably necessary for the purposes for which
such sale or lease if requested and shall in no case
exceed
one
hundred
and
forty-four
hectares: Provided, however, That this limitation
shall not apply to grants, donations, transfers, made
to a province, municipality or branch or
subdivision of the Government for the purposes
deemed by said entities conducive to the public
interest; but the land so granted donated or
transferred to a province, municipality, or
branch or subdivision of the Government shall
not be alienated, encumbered, or otherwise
disposed of in a manner affecting its title, except
when authorized by Congress; Provided, further,
That any person, corporation, association or
partnership disqualified from purchasing public
land for agricultural purposes under the provisions
of this Act, may lease land included under this title
suitable for industrial or residential purposes, but
the lease granted shall only be valid while such
land is used for the purposes referred to. (Emphasis
supplied.)

Reliance on said provision is incorrect as the same

applies only to a province, municipality or branch
or subdivision of the Government. The NHA is not
a government unit but a government corporation
Admin. Law | 165

performing
functions.

governmental

and

proprietary

lands to any
corporation.

Filipino

citizen

or

qualified

In addition, PD 757 is clear that the NHA is

empowered by law to transfer properties acquired
by it under the law to other parties, thus:

Section 6. Powers and functions of the

Authority. The Authority shall have the following
powers and functions to be exercised by the Boards
in accordance with the established national human
settlements plan prepared by the Human
Settlements Commission:

xxxx

(k) Enter into contracts whenever necessary under

such terms and conditions as it may deem proper
and reasonable;

(l) Acquire property rights and interests, and

encumber or otherwise dispose the same as it may
deem appropriate (Emphasis supplied.)

Letter (l) is emphatic that the NHA can acquire

property rights and interests and encumber or
otherwise dispose of them as it may deem
appropriate. The transfer of the reclaimed lands by
the National Government to the NHA for housing,
commercial, and industrial purposes transformed
them into patrimonial lands which are of course
owned by the State in its private or proprietary
capacity. Perforce, the NHA can sell the reclaimed

Sixth Issue: Whether the transfer of reclaimed

lands to RBI
was done by public bidding

Petitioner also contends that there was no public

bidding but an awarding of ownership of said
reclaimed lands to RBI. Public bidding, he says, is
required under Secs. 63 and 67 of CA 141 which
read:
Section 63. Whenever it is decided that lands
covered by this chapter are not needed for public
purposes, the Director of Lands shall ask the
Secretary of Agriculture and Commerce for
authority to dispose of the same. Upon receipt of
such authority, the Director of Lands shall give
notice by public advertisement in the same manner
as in the case of leases or sales of agricultural
public land, that the Government will lease or sell,
as the case may be, the lots or blocks specified in
the advertisement, for the purpose stated in the
notice and subject to the conditions specified in
this chapter.

xxxx

Section 67. The lease or sale shall be made through

oral bidding; and adjudication shall be made to the
highest bidder. However, where an applicant has
made improvements on the land by virtue of a
permit issued to him by competent authority, the
sale or lease shall be made by sealed bidding as
Admin. Law | 166

prescribed in section twenty-six of this Act, the

provisions of which shall be applied whenever
applicable. If all or part of the lots remain unleased
or unsold, the Director of Lands shall from time to
time announce in the Official Gazette or in any
other newspapers of general circulation, the lease
of sale of those lots, if necessary.

He finds that the NHA and RBI violated Secs. 63

and 67 of CA 141, as the reclaimed lands were
conveyed to RBI by negotiated contract and not by
public bidding as required by law.

This stand is devoid of merit.

There is no doubt that respondent NHA conducted

a public bidding of the right to become its joint
venture partner in the Smokey Mountain
Project. Notices or Invitations to Bid were
published in the national dailies on January 23 and
26, 1992 and February 1, 14, 16, and 23, 1992. The
bidding proper was done by the Bids and Awards
Committee (BAC) on May 18, 1992. On August
31, 1992, the Inter-Agency Techcom made up of
the NHA, PEA, DPWH, PPA, DBP, and DENR
opened the bids and evaluated them, resulting in
the award of the contract to respondent RBI on
October 7, 1992.

On March 19, 1993, respondents NHA and RBI

signed the JVA. On February 23, 1994, said JVA
was
amended
and
restated
into
the
ARJVA. On August 11, 1994, the ARJVA was
again amended. On September 7, 1994, the OP
approved the ARJVA and the amendments to the
ARJVA. From these factual settings, it cannot be
gainsaid that there was full compliance with the
laws and regulations governing public biddings
involving a right, concession, or property of the
government.

Petitioner concedes that he does not question the

public bidding on the right to be a joint venture
partner of the NHA, but the absence of bidding in
the sale of alienable and disposable lands of public
domain pursuant to CA 141 as amended.

Petitioners theory is incorrect.

Secs. 63 and 67 of CA 141, as amended, are in

point as they refer to government sale by the
Director of Lands of alienable and disposable
lands of public domain.This is not present in the
case at bar. The lands reclaimed by and conveyed
to the NHA are no longer lands of public
domain. These lands became proprietary lands or
patrimonial properties of the State upon transfer of
the titles over the reclaimed lands to the NHA and
hence outside the ambit of CA 141. The NHA can
therefore legally transfer patrimonial land to RBI
or to any other interested qualified buyer without
any bidding conducted by the Director of Lands
because the NHA, unlike PEA, is a government
agency not tasked to sell lands of public
domain. Hence, it can only hold patrimonial lands
and can dispose of such lands by sale without need
of public bidding.
Petitioner likewise relies on Sec. 79 of PD 1445
which requires public bidding when government
property has become unserviceable for any cause
Admin. Law | 167

or is no longer needed. It appears from the

Handbook on Property and Supply Management
System, Chapter 6, that reclaimed lands which
have become patrimonial properties of the State,
whose titles are conveyed to government agencies
like the NHA, which it will use for its projects or
programs, are not within the ambit of Sec. 79. We
quote the determining factors in the Disposal of
Unserviceable Property, thus:

Determining Factors
Unserviceable Property

in

the

Disposal

of

Property, which can no longer be repaired or

reconditioned;

Property whose maintenance costs of repair

more than outweigh the benefits and services that
will be derived from its continued use;

Property that has become obsolete

outmoded because of changes in technology;

or

Serviceable property that has been rendered

unnecessary due to change in the agencys function
or mandate;

Unused supplies, materials and spare parts

that were procured in excess of requirements; and

Unused supplies and materials that [have]

become dangerous to use because of long storage
or use of which is determined to be hazardous. [85]

Reclaimed
lands
cannot
be
considered
unserviceable properties. The reclaimed lands in
question are very much needed by the NHA for the
Smokey Mountain Project because without it, then
the
projects
will
not
be
successfully
implemented. Since the reclaimed lands are not
unserviceable properties and are very much needed
by NHA, then Sec. 79 of PD 1445 does not apply.

More importantly, Sec. 79 of PD 1445 cannot be

applied to patrimonial properties like reclaimed
lands transferred to a government agency like the
NHA which has entered into a BOT contract with a
private firm. The reason is obvious. If the
patrimonial property will be subject to public
bidding as the only way of disposing of said
property, then Sec. 6 of RA 6957 on the repayment
scheme is almost impossible or extremely difficult
to implement considering the uncertainty of a
winning bid during public auction. Moreover, the
repayment scheme of a BOT contract may be in the
form of non-monetary payment like the grant of a
portion or percentage of reclaimed land. Even if
the BOT partner participates in the public bidding,
there is no assurance that he will win the bid and
therefore the payment in kind as agreed to by the
parties cannot be performed or the winning bid
prize might be below the estimated valuation of the
land. The only way to harmonize Sec. 79 of PD
1445 with Sec. 6 of RA 6957 is to consider Sec. 79
of PD 1445 as inapplicable to BOT contracts
involving patrimonial lands. The law does not
intend anything impossible (lex non intendit
aliquid impossibile).

Seventh Issue: Whether RBI, being a private

corporation,
is barred by the Constitution to acquire lands of
public domain
Admin. Law | 168

Petitioner maintains that RBI, being a private

corporation, is expressly prohibited by the 1987
Constitution from acquiring lands of public
domain.

3. The NHA is an end-user entity such that when

alienable lands of public domain are transferred to
said agency, they are automatically classified as
patrimonial properties. The NHA is similarly
situated as BCDA which was granted the authority
to dispose of patrimonial lands of the government
under RA 7227. The nature of the property
holdings conveyed to BCDA is elucidated and
stressed in the May 6, 2003 Resolution in Chavez
v. PEA, thus:

Petitioners proposition has no legal mooring for the

following reasons:

1. RA 6957 as amended by RA 7718 explicitly

states that a contractor can be paid a portion as
percentage of the reclaimed land subject to the
constitutional requirement that only Filipino
citizens or corporations with at least 60% Filipino
equity can acquire the same. It cannot be denied
that RBI is a private corporation, where Filipino
citizens own at least 60% of the stocks. Thus, the
transfer to RBI is valid and constitutional.
2. When Proclamations Nos. 39 and 465 were
issued, inalienable lands covered by said
proclamations were converted to alienable and
disposable lands of public domain. When the titles
to the reclaimed lands were transferred to the
NHA, said alienable and disposable lands of public
domain were automatically classified as lands of
the private domain or patrimonial properties of the
State because the NHA is an agency NOT tasked to
dispose of alienable or disposable lands of public
domain. The only way it can transfer the reclaimed
land in conjunction with its projects and to attain
its goals is when it is automatically converted to
patrimonial properties of the State. Being
patrimonial or private properties of the State, then
it has the power to sell the same to any qualified
personunder the Constitution, Filipino citizens as
private corporations, 60% of which is owned by
Filipino citizens like RBI.

BCDA is an entirely different government

entity. BCDA is authorized by law to
sell specific government lands that have long
been declared by presidential proclamations as
military reservations for use by the different
services of the armed forces under the
Department of National Defense. BCDAs
mandate is specific and limited in area, while
PEAs mandate is general and national. BCDA
holds government lands that have been granted
to end-user government entitiesthe military
services of the armed forces. In contrast, under
Executive Order No. 525, PEA holds the
reclaimed public lands, not as an end-user
entity, but as the government agency primarily
responsible for integrating, directing, and
coordinating all reclamation projects for and on
behalf of the National Government.

x x x Well-settled is the doctrine that public land

granted to an end-user government agency for a
specific public use may subsequently be withdrawn
by Congress from public use and declared
patrimonial property to be sold to private
parties. R.A. No. 7227 creating the BCDA is a
law that declares specific military reservations
no longer needed for defense or military
purposes and reclassifies such lands as
patrimonial property for sale to private
parties.

Admin. Law | 169

Government owned lands, as long as they are

patrimonial property, can be sold to private
parties, whether Filipino citizens or qualified
private corporations. Thus, the so-called Friar
Lands acquired by the government under Act No.
1120 are patrimonial property which even private
corporations can acquire by purchase. Likewise,
reclaimed alienable lands of the public domain if
sold or transferred to a public or municipal
corporation for a monetary consideration become
patrimonial property in the hands of the public or
municipal corporation. Once converted to
patrimonial property, the land may be sold by the
public or municipal corporation to private parties,
whether Filipino citizens or qualified private
corporations.[86] (Emphasis supplied.)

The foregoing Resolution makes it clear that the

SMDRP was a program adopted by the
Government under Republic Act No. 6957 (An Act
Authorizing
the
Financing,
Construction,
Operation and Maintenance of Infrastructure
Projects by the Private Sector, and For Other
Purposes), as amended by RA 7718, which is a
special law similar to RA 7227. Moreover, since
the implementation was assigned to the NHA, an
end-user agency under PD 757 and RA 7279, the
reclaimed lands registered under the NHA are
automatically classified as patrimonial lands ready
for disposition to qualified beneficiaries.

Eighth Issue: Whether respondents can be

compelled to disclose
all information related to the SMDRP

Petitioner asserts his right to information on all

documents such as contracts, reports, memoranda,
and the like relative to SMDRP.

Petitioner asserts that matters relative to the

SMDRP have not been disclosed to the public like
the current stage of the Project, the present
financial capacity of RBI, the complete list of
investors in the asset pool, the exact amount of
investments in the asset pool and other similar
important information regarding the Project.

He prays that respondents be compelled to disclose

all information regarding the SMDRP and furnish
him with originals or at least certified true copies
of all relevant documents relating to the said
project including, but not limited to, the original
JVA, ARJVA, AARJVA, and the Asset Pool
Agreement.

This relief must be granted.

The foregoing reasons likewise apply to the
contention of petitioner that HCPTI, being a
private corporation, is disqualified from being a
transferee of public land.What was transferred to
HCPTI is a 10-hectare lot which is already
classified as patrimonial property in the hands of
the NHA. HCPTI, being a qualified corporation
under the 1987 Constitution, the transfer of the
subject lot to it is valid and constitutional.

The right of the Filipino people to information on

matters of public concern is enshrined in the 1987
Constitution, thus:

Admin. Law | 170

ARTICLE II

to information relating thereto can such bear fruit.

[87]

xxxx

SEC. 28. Subject to reasonable conditions

prescribed by law, the State adopts and implements
a policy of full public disclosure of all its
transactions involving public interest.

ARTICLE III

SEC. 7. The right of the people to information on

matters
of
public
concern
shall
be
recognized. Access to official records, and to
documents, and papers pertaining to official acts,
transactions, or decisions, as well as to government
research data used as basis for policy development,
shall be afforded the citizen, subject to such
limitations as may be provided by law.

In PEA, this Court elucidated the rationale behind

the right to information:

These twin provisions of the Constitution seek to

promote transparency in policy-making and in the
operations of the government, as well as provide
the people sufficient information to exercise
effectively other constitutional rights. These twin
provisions are essential to the exercise of freedom
of expression. If the government does not disclose
its official acts, transactions and decisions to
citizens, whatever citizens say, even if expressed
without any restraint, will be speculative and
amount to nothing. These twin provisions are also
essential to hold public officials at all times x x x
accountable to the people, for unless citizens have
the proper information, they cannot hold public
officials accountable for anything. Armed with the
right information, citizens can participate in public
discussions leading to the formulation of
government policies
and
their
effective
implementation.An informed citizenry is essential
to the existence and proper functioning of any
democracy.[88]

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

this way:
[A]n essential element of these freedoms is to keep
open a continuing dialogue or process of
communication between the government and the
people. It is in the interest of the State that the
channels for free political discussion be maintained
to the end that the government may perceive and
be responsive to the peoples will. Yet, this open
dialogue can be effective only to the extent that the
citizenry is informed and thus able to formulate its
will intelligently. Only when the participants in the
discussion are aware of the issues and have access

Sec. 28, Art. II compels the State and its agencies

to fully disclose all of its transactions involving
public interest. Thus, the government agencies,
without need of demand from anyone, must bring
into public view all the steps and negotiations
leading to the consummation of the transaction and
the contents of the perfected contract. [89] Such
information must pertain to definite propositions of
the
government,
meaning
official
recommendations or final positions reached on the
different matters subject of negotiation. The
Admin. Law | 171

government agency, however, need not disclose

intra-agency or inter-agency recommendations or
communications during the stage when common
assertions are still in the process of being
formulated or are in the exploratory stage. The
limitation also covers privileged communication
like information on military and diplomatic secrets;
information affecting national security; information
on investigations of crimes by law enforcement
agencies before the prosecution of the accused;
information on foreign relations, intelligence, and
other classified information.

It is unfortunate, however, that after almost twenty

(20) years from birth of the 1987 Constitution,
there is still no enabling law that provides the
mechanics for the compulsory duty of government
agencies to disclose information on government
transactions. Hopefully, the desired enabling law
will finally see the light of day if and when
Congress decides to approve the proposed
Freedom of Access to Information Act. In the
meantime, it would suffice that government
agencies post on their bulletin boards the
documents incorporating the information on the
steps and negotiations that produced the
agreements and the agreements themselves, and if
finances permit, to upload said information on their
respective websites for easy access by interested
parties. Without any law or regulation governing
the right to disclose information, the NHA or any
of the respondents cannot be faulted if they were
not able to disclose information relative to the
SMDRP to the public in general.

Thus, the duty to disclose information should be

differentiated from the duty to permit access to
information. There is no need to demand from the
government agency disclosure of information as
this is mandatory under the Constitution; failing
that, legal remedies are available. On the other
hand, the interested party must first request or even
demand that he be allowed access to documents
and papers in the particular agency. A request or
demand is required; otherwise, the government
office or agency will not know of the desire of the
interested party to gain access to such papers and
what papers are needed. The duty to disclose
covers only transactions involving public interest,
while the duty to allow access has a broader scope
of information which embraces not only
transactions involving public interest, but any
matter contained in official communications and
public documents of the government agency.

We find that although petitioner did not make any

demand on the NHA to allow access to
information, we treat the petition as a written
request or demand. We order the NHA to allow
petitioner access to its official records, documents,
and papers relating to official acts, transactions,
and decisions that are relevant to the said JVA and
subsequent agreements relative to the SMDRP.

Ninth Issue: Whether

doctrine applies to the

the

operative

fact

instant petition
The other aspect of the peoples right to know apart
from the duty to disclose is the duty to allow
access to information on matters of public concern
under Sec. 7, Art. III of the Constitution. The
gateway to information opens to the public the
following: (1) official records; (2) documents and
papers pertaining to official acts, transactions, or
decisions; and (3) government research data used
as a basis for policy development.

Petitioner postulates that the operative fact doctrine

is inapplicable to the present case because it is an
equitable doctrine which could not be used to
countenance an inequitable result that is contrary to
its proper office.
Admin. Law | 172

On the other hand, the petitioner Solicitor General

argues that the existence of the various agreements
implementing the SMDRP is an operative fact that
can no longer be disturbed or simply ignored,
citing Rieta v. People of the Philippines.[90]

The argument of the

meritorious.

Solicitor

General is

The operative fact doctrine is embodied in De

Agbayani v. Court of Appeals, wherein it is stated
that a legislative or executive act, prior to its being
declared as unconstitutional by the courts, is valid
and must be complied with, thus:

As the new Civil Code puts it: When the courts

declare a law to be inconsistent with the
Constitution, the former shall be void and the latter
shall govern. Administrative or executive acts,
orders and regulations shall be valid only when
they are not contrary to the laws of the
Constitution. It is understandable why it should be
so, the Constitution being supreme and paramount.
Any legislative or executive act contrary to its
terms cannot survive.

Such a view has support in logic and possesses the

merit of simplicity. It may not however be
sufficiently realistic. It does not admit of doubt
that prior to the declaration of nullity such
challenged legislative or executive act must have
been in force and had to be complied with. This
is so as until after the judiciary, in an appropriate
case, declares its invalidity, it is entitled to
obedience and respect. Parties may have acted
under it and may have changed their
positions. What could be more fitting than that in a
subsequent litigation regard be had to what has
been done while such legislative or executive act

was in operation and presumed to be valid in all

respects. It is now accepted as a doctrine that prior
to its being nullified, its existence as a fact must be
reckoned with. This is merely to reflect awareness
that precisely because the judiciary is the
governmental organ which has the final say on
whether or not a legislative or executive measure is
valid, a period of time may have elapsed before it
can exercise the power of judicial review that may
lead to a declaration of nullity. It would be to
deprive the law of its quality of fairness and justice
then, if there be no recognition of what had
transpired prior to such adjudication.

In the language of an American Supreme Court

decision: The actual existence of a statute, prior
to such a determination [of unconstitutionality],
is an operative fact and may have consequences
which cannot justly be ignored. The past cannot
always be erased by a new judicial
declaration. The effect of the subsequent ruling as
to invalidity may have to be considered in various
aspects, with respect to particular relations,
individual and corporate, and particular conduct,
private and official. This language has been quoted
with approval in a resolution in Araneta v. Hill and
the decision in Manila Motor Co., Inc.
v. Flores. An even more recent instance is the
opinion of Justice Zaldivar speaking for the Court
in Fernandez v. Cuerva and Co.[91] (Emphasis
supplied.)

This doctrine was reiterated in the more recent case

of City of Makati v. Civil Service Commission,
wherein we ruled that:

Moreover, we certainly cannot nullify the City

Governments order of suspension, as we have no
reason to do so, much less retroactively apply such
nullification to deprive private respondent of a
compelling and valid reason for not filing the leave
application. For as we have held, a void act
Admin. Law | 173

though in law a mere scrap of paper nonetheless

confers legitimacy upon past acts or omissions
done in reliance thereof. Consequently, the
existence of a statute or executive order prior to
its being adjudged void is an operative fact to
which legal consequences are attached. It would
indeed be ghastly unfair to prevent private
respondent from relying upon the order of
suspension in lieu of a formal leave application.
[92]
(Emphasis supplied.)

The principle was further explicated in the case

of Rieta v. People of the Philippines, thus:

In similar situations in the past this Court had taken

the pragmatic and realistic course set forth in
Chicot County Drainage District vs. Baxter Bank
to wit:

The courts below have proceeded on the theory

that the Act of Congress, having been found to be
unconstitutional, was not a law; that it was
inoperative, conferring no rights and imposing no
duties, and hence affording no basis for the
challenged decree. x x x It is quite clear, however,
that such broad statements as to the effect of a
determination of unconstitutionality must be taken
with qualifications. The actual existence of a
statute, prior to [the determination of its invalidity],
is an operative fact and may have consequences
which cannot justly be ignored. The past cannot
always be erased by a new judicial declaration. The
effect of the subsequent ruling as to invalidity may
have to be considered in various aspects with
respect to particular conduct, private and
official. Questions of rights claimed to have
become vested, of status, of prior determinations
deemed to have finality and acted upon
accordingly, of public policy in the light of the

nature both of the statute and of its previous

application, demand examination. These questions
are among the most difficult of those which have
engaged the attention of courts, state and federal,
and it is manifest from numerous decisions that an
all-inclusive statement of a principle of absolute
retroactive invalidity cannot be justified.

In the May 6, 2003 Resolution in Chavez v. PEA,

[93]
we ruled that De Agbayani[94] is not applicable
to the case considering that the prevailing law did
not authorize private corporations from owning
land. The prevailing law at the time was the 1935
Constitution as no statute dealt with the same issue.

In the instant case, RA 6957 was the prevailing law

at the time that the joint venture agreement was
signed. RA 6957, entitled An Act Authorizing The
Financing,
Construction,
Operation
And
Maintenance Of Infrastructure Projects By The
Private Sector And For Other Purposes, which was
passed by Congress onJuly 24, 1989, allows
repayment to the private contractor of reclaimed
lands.[95] Such law was relied upon by respondents,
along with the above-mentioned executive
issuances in pushing through with the Project. The
existence of such law and issuances is an operative
fact to which legal consequences have
attached. This Court is constrained to give legal
effect to the acts done in consonance with such
executive and legislative acts; to do otherwise
would work patent injustice on respondents.

Further, in the May 6, 2003 Resolution in Chavez

v. PEA, we ruled that in certain cases, the transfer
of land, although illegal or unconstitutional, will
not be invalidated on considerations of equity and
social justice. However, in that case, we did not
apply the same considering that PEA, respondent
Admin. Law | 174

in said case, was not entitled to equity principles

there being bad faith on its part, thus:

principle has set in. The titles to the lands in the

hands of the buyers can no longer be invalidated.
The Courts Dispositions

There are, moreover, special circumstances that

disqualify Amari from invoking equity principles.
Amari cannot claim good faith because even before
Amari signed the Amended JVA on March 30,
1999, petitioner had already filed the instant case
on April 27, 1998 questioning precisely the
qualification
of
Amari
to
acquire
the Freedom Islands. Even before the filing of this
petition, two Senate Committees had already
approved
on September
16,
1997 Senate
Committee Report No. 560. This Report
concluded, after a well-publicized investigation
into PEAs sale of the Freedom Islands to Amari,
that the Freedom Islands are inalienable lands of
the public domain. Thus, Amari signed the
Amended JVA knowing and assuming all the
attendant risks, including the annulment of the
Amended JVA.[96]

Such indicia of bad faith are not present in the

instant case. When the ruling in PEA was rendered
by this Court on July 9, 2002, the JVAs were all
executed.Furthermore, when petitioner filed the
instant case against respondents on August 5, 2004,
the JVAs were already terminated by virtue of the
MOA between the NHA and RBI. The respondents
had no reason to think that their agreements were
unconstitutional or even questionable, as in fact,
the concurrent acts of the executive department
lent validity to the implementation of the
Project. The SMDRP agreements have produced
vested rights in favor of the slum dwellers, the
buyers of reclaimed land who were issued titles
over said land, and the agencies and investors who
made investments in the project or who bought
SMPPCs. These properties and rights cannot be
disturbed or questioned after the passage of around
ten (10) years from the start of the SMDRP
implementation. Evidently, the operative fact

Based on the issues raised in this petition, we find

that the March 19, 1993 JVA between NHA and
RBI and the SMDRP embodied in the JVA, the
subsequent amendments to the JVA and all other
agreements signed and executed in relation to it,
including, but not limited to, the September 26,
1994 Smokey Mountain Asset Pool Agreement and
the agreement on Phase I of the Project as well as
all other transactions which emanated from the
Project, have been shown to be valid, legal, and
constitutional. Phase II has been struck down by
the Clean Air Act.

With regard to the prayer for prohibition, enjoining

respondents particularly respondent NHA from
further implementing and/or enforcing the said
Project and other agreements related to it, and from
further deriving and/or enjoying any rights,
privileges and interest from the Project, we find the
same prayer meritless.

Sec. 2 of Rule 65 of the 1997 Rules of Civil

Procedure provides:

Sec. 2. Petition for prohibition.When the

proceedings of any tribunal, corporation, board,
officer or person, whether exercising judicial,
quasi-judicial or ministerial functions, are without
or in excess of its or his jurisdiction, or with grave
abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal or any other
plain, speedy, and adequate remedy in the ordinary
course of law, a person aggrieved thereby may file
a verified petition in the proper court, alleging the
facts with certainty and praying that judgment be
rendered commanding the respondent to desist
Admin. Law | 175

from further proceedings in the action or matter

specified therein, or otherwise granting such
incidental reliefs as law and justice may require.

It has not been shown that the NHA exercised

judicial or quasi-judicial functions in relation to the
SMDRP and the agreements relative to it.
Likewise, it has not been shown what ministerial
functions the NHA has with regard to the SMDRP.
A ministerial duty is one which is so clear and
specific as to leave no room for the exercise of
discretion in its performance. It is a duty which an
officer performs in a given state of facts in a
prescribed manner in obedience to the mandate of
legal authority, without regard to the exercise of
his/her own judgment upon the propriety of the act
done.[97]
Whatever is left to be done in relation to
the August 27, 2003 MOA, terminating the JVA
and other related agreements, certainly does not
involve ministerial functions of the NHA but
instead requires exercise of judgment. In fact, Item
No. 4 of the MOA terminating the JVAs provides
for validation of the developers (RBIs) claims
arising from the termination of the SMDRP
through the various government agencies. [98] Such
validation requires the exercise of discretion.

In addition, prohibition does not lie against the

NHA in view of petitioners failure to avail and
exhaust all administrative remedies. Clear is the
rule that prohibition is only available when there is
no adequate remedy in the ordinary course of law.

implemented. He had the opportunity to question

the SMDRP and the agreements on it, but he did
not. The moment to challenge the Project had
passed.

On the prayer for a writ of mandamus, petitioner

asks the Court to compel respondents to disclose
all documents and information relating to the
project, including, but not limited to, any
subsequent agreements with respect to the different
phases of the Project, the revisions of the original
plan, the additional works incurred on the Project,
the current financial condition of respondent RBI,
and the transactions made with respect to the
project. We earlier ruled that petitioner will be
allowed access to official records relative to the
SMDRP. That would be adequate relief to satisfy
petitioners right to the information gateway.

WHEREFORE, the petition is PARTIALLY

GRANTED.
The prayer for a writ of prohibition is DENIED for
lack of merit.
The prayer for a writ of mandamus
is GRANTED. Respondent NHA is ordered to
allow access to petitioner to all public documents
and
official
records
relative
to
the
SMDRPincluding, but not limited to, the March
19, 1993 JVA between the NHA and RBI and
subsequent agreements related to the JVA, the
revisions over the original plan, and the additional
works incurred on and the transactions made with
respect to the Project.
No costs. SO ORDERED.

More importantly, prohibition does not lie to

restrain an act which is already a fait
accompli. The operative fact doctrine protecting
vested rights bars the grant of the writ of
prohibition to the case at bar. It should be
remembered that petitioner was the Solicitor
General at the time SMDRP was formulated and

G.R. No. L-23004

MAKATI
INC., petitioner,
vs.

June 30, 1965

STOCK

EXCHANGE,

Admin. Law | 176

SECURITIES
AND
EXCHANGE
COMMISSION
and
MANILA
STOCK
EXCHANGE, respondents.
Hermenegildo
B.
Reyes
for
petitioner.
Office of the Solicitor General for respondent
Securities
and
Exchange
Commission.
Norberto J. Quisumbing and Emma QuisumbingFernando for respondent Manila Stock Exchange.
BENGZON, C.J.:
This is a review of the resolution of the Securities
and Exchange Commission which would deny the
Makati Stock Exchange, Inc., permission to
operate a stock exchange unless it agreed not to list
for trading on its board, securities already listed in
the Manila Stock Exchange.
Objecting to the requirement, Makati Stock
Exchange, Inc. contends that the Commission has
no power to impose it and that, anyway, it is
illegal, discriminatory and unjust.
Under the law, no stock exchange may do business
in the Philippines unless it is previously registered
with the Commission by filing a statement
containing the information described in Sec. 17 of
the Securities Act (Commonwealth Act 83, as
amended).
It is assumed that the Commission may permit
registration if the section is complied with; if not, it
may refuse. And there is now no question that the
section has been complied with, or would be
complied with, except that the Makati Stock
Exchange, upon challenging this particular
requirement of the Commission (rule against
double listing) may be deemed to have shown
inability or refusal to abide by its rules, and thereby
to have given ground for denying registration.
[Sec. 17 (a) (1) and (d)].
Such rule provides: "... nor shall a security already
listed in any securities exchange be listed anew in
any other securities exchange ... ."
The objection of Makati Stock Exchange, Inc., to
this rule is understandable. There is actually only

one securities exchange The Manila Stock

Exchange that has been operating alone for the
past 25 years; and all or presumably all
available or worthwhile securities for trading in the
market are now listed there. In effect, the
Commission permits the Makati Stock Exchange,
Inc., to deal only with other securities. Which is
tantamount to permitting a store to open provided
it sells only those goods not sold in other stores.
And if there's only one existing store, 1 the result is
a monopoly.
It is not farfetched to assert as petitioner
does 2 that for all practical purposes, the
Commission's order or resolution would make it
impossible for the Makati Stock Exchange to
operate. So, its "permission" amounted to a
"prohibition."
Apparently, the Commission acted "in the public
interest." 3 Hence, it is pertinent to inquire whether
the Commission may "in the public interest"
prohibit (or make impossible) the establishment of
another stock exchange (besides the Manila Stock
Exchange), on the ground that the operation of two
or more exchanges adversely affects the public
interest.
At first glance, the answer should be in the
negative, because the law itself contemplated, and,
therefore, tacitly permitted or tolerated at least, the
operation of two or more exchanges.
Wherever two or more exchanges exist, the
Commission, by order, shall require and enforce
uniformity of trading regulations in and/or between
said exchanges. [Emphasis Ours] (Sec. 28b-13,
Securities Act.)
In fact, as admitted by respondents, there were five
stock exchanges in Manila, before the Pacific War
(p. 10, brief), when the Securities Act was
approved or amended. (Respondent Commission
even admits that dual listing was practiced then.)
So if the existence of more than one exchange were
contrary to public interest, it is strange that the
Congress having from time to time enacted

Admin. Law | 177

legislation amending the Securities Act, 4 has not

barred multiplicity of exchanges.
Forgetting for the moment the monopolistic aspect
of the Commission's resolution, let us examine the
authority of the Commission to promulgate and
implement the rule in question.
It is fundamental that an administrative officer has
only such powers as are expressly granted to him
by the statute, and those necessarily implied in the
exercise thereof.
In its brief and its resolution now subject to review,
the Commission cites no provision expressly
supporting its rule. Nevertheless, it suggests that
the power is "necessary for the execution of the
functions vested in it"; but it makes no explanation,
perhaps relying on the reasons advanced in support
of its position that trading of the same securities in
two or more stock exchanges, fails to give
protection to the investors, besides contravening
public interest. (Of this, we shall treat later) .
On the legality of its rule, the Commission's
argument is that: (a) it was approved by the
Department Head before the War; and (b) it is
not in conflict with the provisions of the Securities
Act. In our opinion, the approval of the
Department, 5 by itself, adds no weight in a judicial
litigation; and the test is not whether the Act
forbids the Commission from imposing a
prohibition,
but
whether
it empowers the
Commission to prohibit. No specific portion of the
statute has been cited to uphold this power. It is not
found in sec. 28 (of the Securities Act), which is
entitled "Powers (of the Commission) with Respect
to Exchanges and Securities." 6
According to many court precedents, the general
power to "regulate" which the Commission has
(Sec. 33) does not imply authority to prohibit." 7
The Manila Stock Exchange, obviously the
beneficiary of the disputed rule, contends that the
power may be inferred from the express power of
the Commission to suspend trading in a security,
under said sec. 28 which reads partly:

And if in its opinion, the public interest so requires,

summarily to suspend trading in any registered
security on any securities exchange ... . (Sec. 28[3],
Securities Act.)
However, the Commission has not acted nor
claimed to have acted in pursuance of such
authority, for the simple reason that suspension
under it may only be for ten days. Indeed, this
section, if applicable, precisely argues against the
position of the Commission because the
"suspension," if it is, and as applied to Makati
Stock Exchange, continues for an indefinite period,
if not forever; whereas this Section 28 authorizes
suspension for ten days only. Besides, the
suspension of trading in the security should not be
on one exchange only, but on all exchanges;
bearing in mind that suspension should be ordered
"for the protection of investors" (first par., sec. 28)
in all exchanges, naturally, and if "the public
interest so requires" [sec. 28(3)].
This brings up the Commission's principal
conclusions underlying its determination viz.: (a)
that the establishment of another exchange in the
environs of Manila would be inimical to the public
interest; and (b) that double or multiple listing of
securities should be prohibited for the "protection
of the investors."
(a) Public Interest Having already adverted to
this aspect of the matter, and the emerging
monopoly of the Manila Stock Exchange, we may,
at this juncture, emphasize that by restricting free
competition in the marketing of stocks, and
depriving the public of the advantages thereof the
Commission
all
but permits what
the
law punishes as monopolies as "crimes against
public interest." 8
"A stock exchange is essentially monopolistic," the
Commission states in its resolution (p. 14-a,
Appendix, Brief for Petitioner). This reveals the
basic foundation of the Commission's process of
reasoning. And yet, a few pages afterwards, it
recalls the benefits to be derived "from the
existence of two or more exchanges," and the
desirability of "a healthy and fair competition in
Admin. Law | 178

the securities market," even as it expresses the

belief that "a fair field of competition among stock
exchanges should be encouraged only to resolve,
paradoxically enough, that Manila Stock Exchange
shall, in effect, continue to be the only stock
exchange in Manila or in the Philippines.
"Double listing of a security," explains the
Commission, "divides the sellers and the buyers,
thus destroying the essence of a stock exchange as
a two-way auction market for the securities, where
all the buyers and sellers in one geographical area
converge in one defined place, and the bidders
compete with each other to purchase the security at
the lowest possible price and those seeking to sell
it compete with each other to get the highest price
therefor. In this sense, a stock exchange is
essentially monopolistic."
Inconclusive premises, for sure. For it is debatable
whether the buyer of stock may get the lowest
price where all the sellers assemble in only one
place. The price there, in one sale, will tend to fix
the price for the succeeding, sales, and he has no
chance to get a lower price except at another stock
exchange. Therefore, the arrangement desired by
the Commission may, at most, be beneficial to
sellers of stock not to buyers although what
applies to buyers should obtain equally as to sellers
(looking for higher prices). Besides, there is the
brokerage fee which must be considered. Not to
mention the personality of the broker.

(b) Protection of investors. At any rate,

supposing
the
arrangement
contemplated
is beneficial to investors (as the Commission says),
it is to be doubted whether it is "necessary" for
their "protection" within the purview of the
Securities Act. As the purpose of the Act is to give
adequate and effective protection to the investing
public against fraudulent representations, or false
promises and the imposition of worthless
ventures, 9 it is hard to see how the proposed
concentration of the market has a necessary
bearing to the prevention of deceptive devices or
unlawful practices. For it is not mere semantics to
declare that acts for the protection of investors are
necessarily beneficial to them; but not everything
beneficial to them is necessary for their protection.
And yet, the Commission realizes that if there were
two or more exchanges "the same security may sell
for more in one exchange and sell for less in the
other. Variance in price of the same security would
be the rule ... ." Needless to add, the brokerage
rates will also differ.
This, precisely, strengthens the objection to the
Commission's ruling. Such difference in prices and
rates gives the buyer of shares alternative options,
with the opportunity to invest at lower expense;
and the seller, to dispose at higher prices.
Consequently, for the investors' benefit (protection
is not the word), quality of listing 10 should be
permitted, nay, encouraged, and other exchanges
allowed to operate. The circumstance that some
people "made a lot of money due to the difference
in prices of securities traded in the stock exchanges
of Manila before the war" as the Commission
noted, furnishes no sufficient reason to let one
exchange corner the market. If there was undue
manipulation or unfair advantage in exchange
trading the Commission should have other means
to correct the specific abuses.
Granted that, as the Commission observes, "what
the country needs is not another" market for
securities already listed on the Manila Stock
Exchange, but "one that would focus its attention
and energies on the listing of new securities and
thus effectively help in raising capital sorely
Admin. Law | 179

needed by our
enterprises."

...

unlisted

industries

and

Nonetheless, we discover no legal authority for it

to shore up (and stifle) free enterprise and
individual liberty along channels leading to that
economic desideratum. 11
The Legislature has specified the conditions under
which a stock exchange may legally obtain a
permit (sec. 17, Securities Act); it is not for the
Commission to impose others. If the existence of
two competing exchanges jeopardizes public
interest which is doubtful let the Congress
speak. 12 Undoubtedly,
the
opinion
and
recommendation of the Commission will be given
weight by the Legislature, in judging whether or
not to restrict individual enterprise and business
opportunities. But until otherwise directed by law,
the operation of exchanges should not be so
regulated as practically to create a monopoly by
preventing the establishment of other stock
exchanges and thereby contravening:
(a) the organizers' (Makati's) Constitutional right to
equality before the law;
(b) their guaranteed civil liberty to pursue any
lawful employment or trade; and
(c) the investor's right to choose where to buy or to
sell, and his privilege to select the brokers in his
employment. 13
And no extended elucidation is needed to conclude
that for a licensing officer to deny license solely on
the basis of what he believes is best for the
economy of the country may amount to
regimentation or, in this instance, the exercise of
undelegated legislative powers and discretion.
Thus, it has been held that where the licensing
statute does not expressly or impliedly authorize
the officer in charge, he may not refuse to grant a
license simply on the ground that a sufficient
number of licenses to serve the needs of the public
have already been issued. (53 C.J.S. p. 636.)

Concerning res judicata. Calling attention to the

Commission's order of May 27, 1963, which
Makati Stock did not appeal, the Manila Stock
Exchange
pleads
the
doctrine
of res
judicata. 14 (The order now reviewed is dated May
7, 1964.)
It appears that when Makati Stock Exchange, Inc.
presented its articles of incorporation to the
Commission, the latter, after making some
inquiries, issued on May 27, 1963, an order reading
as follows.
Let the certificate of incorporation of the MAKATI
STOCK EXCHANGE be issued, and if the
organizers thereof are willing to abide by the
foregoing conditions, they may file the proper
application for the registration and licensing of the
said Exchange.
In that order, the Commission advanced the
opinion that "it would permit the establishment and
operation of the proposed Makati Stock Exchange,
provided ... it shall not list for trading on its board,
securities already listed in the Manila Stock
Exchange ... ."
Admittedly, Makati Stock Exchange, Inc. has not
appealed from that order of May 27, 1963. Now,
Manila Stock insists on res judicata.
Why should Makati have appealed? It got the
certificate of incorporation which it wanted. The
condition or proviso mentioned would only apply
if and when it subsequently filed the application for
registration as stock exchange. It had not yet
applied. It was not the time to question the
condition; 15 Makati was still exploring the
convenience of soliciting the permit to operate
subject to that condition. And it could have
logically thought that, since the condition did not
affect its articles of incorporation, it should not
appeal the order (of May 27, 1963) which after all,
granted the certificate of incorporation (corporate
existence) it wanted at that time.
And when the Makati Stock Exchange finally
found that it could not successfully operate with
Admin. Law | 180

the condition attached, it took the issue by the

horns, and expressing its desire for registration and
license, it requested that the condition (against
double listing) be dispensed with. The order of the
Commission denying, such request is dated May 7,
1964, and is now under, review.
Indeed, there can be no valid objection to the
discussion of this issue of double listing
now, 16 because even if the Makati Stock
Exchange, Inc. may be held to have accepted the
permission to operate with the condition against
double listing (for having failed to appeal the order
of May 27, 1963), still it was not precluded from
afterwards contesting 17 the validity of such
condition or rule:
(1) An agreement (which shall not be construed as
a waiver of any constitutional right or any right to
contest the validity of any rule or regulation) to
comply and to enforce so far as is within its
powers, compliance by its members, with the
provisions of this Act, and any amendment thereto,
and any rule or regulation made or to be made
thereunder. (See. 17-a-1, Securities Act [Emphasis
Ours].)

GOVERNOR
VERCELES, respondents.

LEANDRO

Balgos & Perez and Bugaring, Tugonon &

Associates Law Offices for petitioner.
Juan G. Atencia for private respondent.

GANCAYCO, J.:p
The extent of authority of the Secretary of Local
Government over the katipunan ng mga
barangay or the barangay councils is brought to
the fore in this case.
On June 18,1989, the Federation of Associations of
Barangay Councils (FABC) of Catanduanes,
composed of eleven (11) members, in their
capacities as Presidents of the Association of
Barangay
Councils
in
their
respective
municipalities, convened in Virac, Catanduanes
with six members in attendance for the purpose of
holding the election of its officers.

Surely, this petition for review has suitably been

coursed. And making reasonable allowances for the
presumption of regularity and validity of
administrative action, we feel constrained to reach
the conclusion that the respondent Commission
possesses no power to impose the condition of the
rule, which, additionally, results in discrimination
and violation of constitutional rights.

Present were petitioner Ruperto Taule of San

Miguel, Allan Aquino of Viga, Vicente Avila of
Virac, Fidel Jacob of Panganiban, Leo Sales of
Caramoran and Manuel Torres of Baras. The Board
of Election Supervisors/Consultants was composed
of Provincial Government Operation Officer
(PGOO) Alberto P. Molina, Jr. as Chairman with
Provincial Treasurer Luis A. Manlapaz, Jr. and
Provincial Election Supervisor Arnold Soquerata as
members.

ACCORDINGLY, the license of the petition to

operate a stock exchange is approved without such
condition. Costs shall be paid by the Manila Stock
Exchange. So ordered.

When the group decided to hold the election

despite the absence of five (5) of its members, the
Provincial Treasurer and the Provincial Election
Supervisor walked out.

G.R. No. 90336 August 12, 1991

The election nevertheless proceeded with PGOO

Alberto P. Molina, Jr. as presiding officer. Chosen
as members of the Board of Directors were Taule,
Aquino, Avila, Jacob and Sales.

RUPERTO
vs.
SECRETARY

TAULE,
LUIS

T.

petitioner,
SANTOS

and

Thereafter, the following were elected officers of

the FABC:
Admin. Law | 181

President Ruperto Taule

Vice-President Allan Aquino
Secretary Vicente Avila
Treasurer Fidel Jacob
Auditor Leo Sales 1
On June 19, 1989, respondent Leandro I. Verceles,
Governor of Catanduanes, sent a letter to
respondent Luis T. Santos, the Secretary of Local
Government,* protesting the election of the
officers of the FABC and seeking its nullification
in view of several flagrant irregularities in the
manner it was conducted. 2
In compliance with the order of respondent
Secretary, petitioner Ruperto Taule as President of
the FABC, filed his comment on the letter-protest
of respondent Governor denying the alleged
irregularities and denouncing said respondent
Governor for meddling or intervening in the
election of FABC officers which is a purely nonpartisan affair and at the same time requesting for
his appointment as a member of the Sangguniang
Panlalawigan of the province being the duly
elected President of the FABC in Catanduanes. 3
On August 4, 1989, respondent Secretary issued a
resolution nullifying the election of the officers of
the FABC in Catanduanes held on June 18, 1989
and ordering a new one to be conducted as early as
possible to be presided by the Regional Director of
Region V of the Department of Local
Government. 4
Petitioner filed a motion for reconsideration of the
resolution of August 4, 1989 but it was denied by
respondent Secretary in his resolution of
September 5, 1989. 5
In the petition for certiorari before Us, petitioner
seeks the reversal of the resolutions of respondent
Secretary dated August 4, 1989 and September 5,
1989 for being null and void.

1) Whether or not the respondent Secretary has

jurisdiction to entertain an election protest
involving the election of the officers of the
Federation of Association of Barangay Councils;
2) Whether or not the respondent Governor has the
legal personality to file an election protest;
3) Assuming that the respondent Secretary has
jurisdiction over the election protest, whether or
not he committed grave abuse of discretion
amounting to lack of jurisdiction in nullifying the
election;
The Katipunan ng mga Barangay is the
organization of all sangguniang barangays in the
following levels: in municipalities to be known
as katipunang bayan; in cities, katipunang
panlungsod;
in
provinces, katipunang
panlalawigan; in regions, katipunang pampook;
and on the national level, katipunan ng mga
barangay. 6
The Local Government Code provides for the
manner in which the katipunan ng mga
barangay at all levels shall be organized:
Sec. 110. Organization. (1) The katipunan at all
levels shall be organized in the following manner:
(a) The katipunan in each level shall elect a board
of directors and a set of officers. The president of
each level shall represent the katipunan concerned
in the next higher level of organization.
(b) The katipunan ng mga barangay shall be
composed of the katipunang pampook, which shall
in turn be composed of the presidents of the
katipunang panlalawigan and the katipunang
panlungsod. The presidents of the katipunang
bayan in each province shall constitute the
katipunang
panlalawigan.
The
katipunang
panlungsod and the katipunang bayan shall be
composed of the punong barangays of cities and
municipalities, respectively.
xxx xxx xxx

Petitioner raises the following issues:

Admin. Law | 182

The respondent Secretary, acting in accordance

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

jurisdiction or elective barangay officials decided

by trial courts of limited jurisdiction. 9
The jurisdiction of the COMELEC over contests
involving elective barangay officials is limited to
appellate jurisdiction from decisions of the trial
courts. Under the law, 10 the sworn petition
contesting the election of a barangay officer shall
be filed with the proper Municipal or Metropolitan
Trial Court by any candidate who has duly filed a
certificate of candidacy and has been voted for the
same office within 10 days after the proclamation
of the results. A voter may also contest the election
of any barangay officer on the ground of
ineligibility or of disloyalty to the Republic of the
Philippines by filing a sworn petition for quo
warranto with the Metropolitan or Municipal Trial
Court within 10 days after the proclamation of the
results of the election. 11 Only appeals from
decisions of inferior courts on election matters as
aforestated may be decided by the COMELEC.
The Court agrees with the Solicitor General that
the jurisdiction of the COMELEC is over popular
elections, the elected officials of which are
determined through the will of the electorate. An
election is the embodiment of the popular will, the
expression of the sovereign power of the
people. 12 It involves the choice or selection of
candidates to public office by popular
vote. 13 Specifically, the term "election," in the
context of the Constitution, may refer to the
conduct of the polls, including the listing of voters,
the holding of the electoral campaign, and the
casting and counting of the votes 14which do not
characterize the election of officers in
the Katipunan ng mga barangay. "Election
contests" would refer to adversary proceedings by
which matters involving the title or claim of title to
an elective office, made before or after
proclamation of the winner, is settled whether or
not the contestant is claiming the office in
dispute 15 and in the case of elections of barangay
officials, it is restricted to proceedings after the
proclamation of the winners as no preproclamation controversies are allowed. 16

Admin. Law | 183

The jurisdiction of the COMELEC does not cover

protests over the organizational set-up of the
katipunan ng mga barangay composed of popularly
elected punong barangays as prescribed by law
whose officers are voted upon by their respective
members. The COMELEC exercises only appellate
jurisdiction over election contests involving
elective barangay officials decided by the
Metropolitan or Municipal Trial Courts which
likewise have limited jurisdiction. The authority of
the COMELEC over the katipunan ng mga
barangay is limited by law to supervision of the
election
of
the
representative
of
the katipunan concerned to the sanggunian in a
particular level conducted by their own respective
organization. 17
However, the Secretary of Local Government is
not vested with jurisdiction to entertain any protest
involving the election of officers of the FABC.
There is no question that he is vested with the
power to promulgate rules and regulations as set
forth in Section 222 of the Local Government
Code.
Likewise, under Book IV, Title XII, Chapter 1, See.
3(2) of the Administrative Code of 1987, ** the
respondent Secretary has the power to "establish
and prescribe rules, regulations and other issuances
and implementing laws on the general supervision
of local government units and on the promotion of
local autonomy and monitor compliance thereof by
said units."
Also, the respondent Secretary's rule making power
is provided in See. 7, Chapter II, Book IV of the
Administrative Code, to wit:
(3) Promulgate rules and regulations necessary to
carry out department objectives, policies,
functions, plans, programs and projects;
Thus, DLG Circular No. 89-09 was issued by
respondent Secretary in pursuance of his rulemaking power conferred by law and which now
has the force and effect of law. 18

Now the question that arises is whether or not a

violation of said circular vests jurisdiction upon the
respondent Secretary, as claimed by him, to hear a
protest filed in relation thereto and consequently
declare an election null and void.
It is a well-settled principle of administrative law
that unless expressly empowered, administrative
agencies are bereft of quasi- judicial powers. 19 The
jurisdiction of administrative authorities is
dependent entirely upon the provisions of the
statutes reposing power in them; they cannot
confer it upon themselves. 20 Such jurisdiction is
essential to give validity to their determinations. 21
There is neither a statutory nor constitutional
provision expressly or even by necessary
implication conferring upon the Secretary of Local
Government the power to assume jurisdiction over
an election protect involving officers of
the katipunan ng mga barangay. An understanding
of the extent of authority of the Secretary over
local governments is therefore necessary if We are
to resolve the issue at hand.
Presidential power over local governments is
limited by the Constitution to the exercise of
general supervision 22 "to ensure that local affairs
are administered according to law." 23 The general
supervision is exercised by the President through
the Secretary of Local Government. 24
In administrative law, supervision means
overseeing or the power or authority of an officer
to see that the subordinate officers perform their
duties. If the latter fails or neglects to fulfill them
the former may take such action or step as
prescribed by law to make them perform their
duties. Control, on the other hand, means the
power of an officer to alter or modify or nullify or
set aside what a subordinate officer had done in the
performance of his duties and to substitute the
judgment of the former for that of the latter. The
fundamental law permits the Chief Executive to
wield no more authority than that of checking
whether said local government or the officers
thereof perform their duties as provided by
statutory enactments. Hence, the President cannot
Admin. Law | 184

interfere with local governments so long as the

same or its officers act within the scope of their
authority. 25 Supervisory power, when contrasted
with control, is the power of mere oversight over
an inferior body; it does not include any restraining
authority over such body. 26
Construing the constitutional limitation on the
power of general supervision of the President over
local governments, We hold that respondent
Secretary has no authority to pass upon the validity
or regularity of the election of the officers of the
katipunan. To allow respondent Secretary to do so
will give him more power than the law or the
Constitution grants. It will in effect give him
control over local government officials for it will
permit him to interfere in a purely democratic and
non-partisan activity aimed at strengthening the
barangay as the basic component of local
governments so that the ultimate goal of fullest
autonomy may be achieved. In fact, his order that
the new elections to be conducted be presided by
the Regional Director is a clear and direct
interference by the Department with the political
affairs of the barangays which is not permitted by
the limitation of presidential power to general
supervision over local governments. 27
Indeed, it is the policy of the state to ensure the
autonomy of local governments. 28 This state policy
is echoed in the Local Government Code wherein
it is declared that "the State shall guarantee and
promote the autonomy of local government units to
ensure their fullest development as self-reliant
communities and make them more effective
partners in the pursuit of national development and
social progress." 29 To deny the Secretary of Local
Government the power to review the regularity of
the elections of officers of the katipunan would be
to enhance the avowed state policy of promoting
the autonomy of local governments.
Moreover, although the Department is given the
power to prescribe rules, regulations and other
issuances, the Administrative Code limits its
authority to merely "monitoring compliance" by
local government units of such issuances. 30 To
monitor means "to watch, observe or check. 31 This

is compatible with the power of supervision of the

Secretary over local governments which as earlier
discussed is limited to checking whether the local
government unit concerned or the officers thereof
perform their duties as provided by statutory
enactments. Even the Local Government Code
which grants the Secretary power to issue
implementing circulars, rules and regulations is
silent as to how these issuances should be
enforced. Since the respondent Secretary exercises
only supervision and not control over local
governments, it is truly doubtful if he could
enforce compliance with the DLG Circular. 32 Any
doubt therefore as to the power of the Secretary to
interfere with local affairs should be resolved in
favor of the greater autonomy of the local
government.
Thus, the Court holds that in assuming jurisdiction
over the election protest filed by respondent
Governor and declaring the election of the officers
of the FABC on June 18, 1989 as null and void, the
respondent Secretary acted in excess of his
jurisdiction. The respondent Secretary not having
the jurisdiction to hear an election protest
involving officers of the FABC, the recourse of the
parties is to the ordinary courts. The Regional Trial
Courts have the exclusive original jurisdiction to
hear the protest. 33
The provision in DLG Circular No. 89-15
amending DLG Circular No. 89-09 which states
that "whenever the guidelines are not substantially
complied with, the election shall be declared null
and void by the Department of Local Government
and an election shall conduct and being invoked by
the Solicitor General cannot be applied. DLG
Circular No. 89-15 was issued on July 3, 1989 after
the June 18, 1989 elections of the FABC officers
and it is the rule in statutory construction that laws,
including circulars and regulations 34 cannot be
applied retrospectively. 35Moreover, such provision
is null and void for having been issued in excess of
the respondent Secretary's jurisdiction, inasmuch
as an administrative authority cannot confer
jurisdiction upon itself.

Admin. Law | 185

As regards the second issue raised by petitioner,

the Court finds that respondent Governor has the
personality to file the protest. Under Section 205 of
the Local Government Code, the membership of
the sangguniang panlalawiganconsists of the
governor, the vice-governor, elective members of
the said sanggunian and the presidents of the
katipunang panlalawigan and the kabataang
barangay provincial federation. The governor acts
as the presiding officer of the sangguniang
panlalawigan. 36
As
presiding
officer
of
the sagguniang
panlalawigan, the respondent governor has an
interest in the election of the officers of the FABC
since its elected president becomes a member of
the assembly. If the president of the FABC assumes
his presidency under questionable circumstances
and is allowed to sit in the sangguniang
panlalawiganthe official actions of the sanggunian
may be vulnerable to attacks as to their validity or
legality. Hence, respondent governor is a proper
party to question the regularity of the elections of
the officers of the FABC.
As to the third issue raised by petitioner, the Court
has already ruled that the respondent Secretary has
no jurisdiction to hear the protest and nullify the
elections.
Nevertheless, the Court holds that the issue of the
validity of the elections should now be resolved in
order to prevent any unnecessary delay that may
result from the commencement of an appropriate
action by the parties.
The elections were declared null and void
primarily for failure to comply with Section 2.4 of
DLG Circular No. 89-09 which provides that "the
incumbent FABC President or the VicePresident shall preside over the reorganizational
meeting, there being a quorum." The rule
specifically provides that it is the incumbent FABC
President or Vice-President who shall preside over
the meeting. The word "shall" should be taken in
its ordinary signification, i.e., it must be imperative
or
mandatory
and
not
merely
37
permissive, as the rule is explicit and requires no

other interpretation. If it had been intended that any

other official should preside, the rules would have
provided so, as it did in the elections at the town
and city levels 38 as well as the regional level.. 39
It is admitted that neither the incumbent FABC
President nor the Vice-President presided over the
meeting and elections but Alberto P. Molina, Jr.,
the Chairman of the Board of Election
Supervisors/Consultants. Thus, there was a clear
violation of the aforesaid mandatory provision. On
this ground, the elections should be nullified.
Under Sec. 2.3.2.7 of the same circular it is
provided
that
a
Board
of
Election
Supervisors/Consultants shall be constituted to
oversee and/or witness the canvassing of votes and
proclamation of winners. The rules confine the role
of the Board of Election Supervisors/Consultants
to merely overseeing and witnessing the conduct of
elections. This is consistent with the provision in
the Local Government Code limiting the authority
of the COMELEC to the supervision of the
election. 40
In case at bar, PGOO Molina, the Chairman of the
Board, presided over the elections. There was
direct participation by the Chairman of the Board
in the elections contrary to what is dictated by the
rules. Worse, there was no Board of Election
Supervisors to oversee the elections in view of the
walk out staged by its two other members, the
Provincial COMELEC Supervisor and the
Provincial Treasurer. The objective of keeping the
election free and honest was therefore
compromised.
The Court therefore finds that the election of
officers of the FABC held on June 18, 1989 is null
and void for failure to comply with the provisions
of DLG Circular No. 89-09.
Meanwhile, pending resolution of this petition,
petitioner filed a supplemental petition alleging
that public respondent Local Government
Secretary, in his memorandum dated June 7, 1990,
designated Augusto Antonio as temporary
representative
of
the
Federation
to
Admin. Law | 186

the sangguniang
panlalawigan of
41
Catanduanes. By virtue of this memorandum,
respondent governor swore into said office
Augusto Antonio on June 14, 1990. 42
The Solicitor General filed his comment on the
supplemental petition 43 as required by the
resolution of the Court dated September 13,1990.
In his comment, the Solicitor General dismissed
the supervening event alleged by petitioner as
something immaterial to the petition. He argues
that Antonio's appointment was merely temporary
"until such time that the provincial FABC president
in that province has been elected, appointed and
qualified." 44 He
stresses
that
Antonio's
appointment was only a remedial measure
designed to cope with the problems brought about
by the absence of a representative of the FABC to
the "sanggunian ang panlalawigan."
Sec. 205 (2) of the Local Government Code (B.P.
Blg. 337) provides(2) The sangguniang panlalawigan shall be
composed of the governor, the vice-governor,
elective members of the said sanggunian and the
presidents of the katipunang panlalawigan and the
kabataang barangay provincial federation who
shall be appointed by the President of the
Philippines. (Emphasis supplied.)
Batas Pambansa Blg. 51, under Sec. 2 likewise
states:
xxx xxx xxx
The sangguniang panlalawigan of each province
shall be composed of the governor as chairman and
presiding officer, the vice-governor as presiding
officer pro tempore, the elective sangguniang
panlalawigan members, and the appointive
members consisting of the president of the
provincial association of barangay councils, and
the president of the provincial federation of the
kabataang barangay. (Emphasis supplied.)
In Ignacio vs. Banate Jr. 45 the Court, interpreting
similarly worded provisions of Batas Pambansa

Blg. 337 and Batas Pambansa Blg. 51 on the

composition
of
the sangguniang
46
panlungsod, declared as null and void the
appointment of private respondent Leoncio Banate
Jr. as member of the Sangguniang Panlungsod of
the City of Roxas representing the katipunang
panlungsod ng mga barangay for he lacked the
elegibility and qualification required by law, not
being a barangay captain and for not having been
elected president of the association of barangay
councils. The Court held that an unqualified person
cannot be appointed a member of the sanggunian,
even in an acting capacity. In Reyes vs.
Ferrer, 47 the appointment of Nemesio L. Rasgo Jr.
as representative of the youth sector to
the sangguniang panlungsod of Davao City was
declared invalid since he was never the president
of the kabataang barangay city federation as
required by Sec. 173, Batas Pambansa Blg. 337.
In
the
present
controversy
involving
the sangguniang panlalawigan, the law is likewise
explicit. To be appointed by the President of the
Philippines
to
sit
in
the sangguniang
panlalawigan is the president of the katipunang
panlalawigan. The appointee must meet the
qualifications set by law. 48 The appointing power
is bound by law to comply with the requirements
as to the basic qualifications of the appointee to
the sangguniang panlalawigan. The President of
the Philippines or his alter ego, the Secretary of
Local Government, has no authority to appoint
anyone who does not meet the minimum
qualification to be the president of the federation of
barangay councils.
Augusto Antonio is not the president of the
federation. He is a member of the federation but he
was not even present during the elections despite
notice. The argument that Antonio was appointed
as a remedial measure in the exigency of the
service cannot be sustained. Since Antonio does
not meet the basic qualification of being president
of the federation, his appointment to
the sangguniang panlalawigan is not justified
notwithstanding that such appointment is merely in
a temporary capacity. If the intention of the
Admin. Law | 187

respondent Secretary was to protect the interest of

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

G.R. No. 84811 August 29, 1989

SOLID
HOMES,
vs.
TERESITA PAYAWAL
APPEALS, respondents.

INC., petitioner,
and

COURT

OF

CRUZ, J.:
We are asked to reverse a decision of the Court of
Appeals sustaining the jurisdiction of the Regional
Trial Court of Quezon City over a complaint filed
by a buyer, the herein private respondent, against
the petitioner, for delivery of title to a subdivision
lot. The position of the petitioner, the defendant in
that action, is that the decision of the trial court is
null and void ab initio because the case should
have been heard and decided by what is now called
the Housing and Land Use Regulatory Board.
The complaint was filed on August 31, 1982, by
Teresita Payawal against Solid Homes, Inc. before
the Regional Trial Court of Quezon City and
docketed as Civil Case No. Q-36119. The plaintiff
alleged that the defendant contracted to sell to her a
subdivision lot in Marikina on June 9, 1975, for the
agreed price of P 28,080.00, and that by September
10, 1981, she had already paid the defendant the
total amount of P 38,949.87 in monthly
installments and interests. Solid Homes
subsequently executed a deed of sale over the land
but failed to deliver the corresponding certificate of
title despite her repeated demands because, as it
appeared later, the defendant had mortgaged the
property in bad faith to a financing company. The
plaintiff asked for delivery of the title to the lot or,
alternatively, the return of all the amounts paid by
her plus interest. She also claimed moral and
exemplary damages, attorney's fees and the costs
of the suit.
Solid Homes moved to dismiss the complaint on
the ground that the court had no jurisdiction, this
being vested in the National Housing Authority
under PD No. 957. The motion was denied. The
defendant repleaded the objection in its answer,
Admin. Law | 188

citing Section 3 of the said decree providing that

"the National Housing Authority shall have
exclusive jurisdiction to regulate the real estate
trade and business in accordance with the
provisions of this Decree." After trial, judgment
was rendered in favor of the plaintiff and the
defendant was ordered to deliver to her the title to
the land or, failing this, to refund to her the sum of
P 38,949.87 plus interest from 1975 and until the
full amount was paid. She was also awarded P
5,000.00 moral damages, P 5,000.00 exemplary
damages, P 10,000.00 attorney's fees, and the costs
of the suit. 1
Solid Homes appealed but the decision was
affirmed by the respondent court, 2 which also
berated the appellant for its obvious efforts to
evade a legitimate obligation, including its dilatory
tactics during the trial. The petitioner was also
reproved for its "gall" in collecting the further
amount of P 1,238.47 from the plaintiff purportedly
for realty taxes and registration expenses despite its
inability to deliver the title to the land.
In holding that the trial court had jurisdiction, the
respondent court referred to Section 41 of PD No.
957 itself providing that:
SEC. 41. Other remedies.-The rights and remedies
provided in this Decree shall be in addition to any
and all other rights and remedies that may be
available under existing laws.
and declared that "its clear and unambiguous tenor
undermine(d) the (petitioner's) pretension that the
court a quowas bereft of jurisdiction." The decision
also dismissed the contrary opinion of the
Secretary of Justice as impinging on the authority
of the courts of justice. While we are disturbed by
the findings of fact of the trial court and the
respondent court on the dubious conduct of the
petitioner, we nevertheless must sustain it on the
jurisdictional issue.
The applicable law is PD No. 957, as amended by
PD No. 1344, entitled "Empowering the National
Housing Authority to Issue Writs of Execution in
the Enforcement of Its Decisions Under

Presidential Decree No. 957." Section 1 of the

latter decree provides as follows:
SECTION 1. In the exercise of its function to
regulate the real estate trade and business and in
addition to its powers provided for in Presidential
Decree No. 957, the National Housing Authority
shall haveexclusive jurisdiction to hear and decide
cases of the following nature:
A. Unsound real estate business practices;
B. Claims involving refund and any other
claims filed by subdivision lot or condominium
unit buyer against the project owner, developer,
dealer, broker or salesman; and
C. Cases involving specific performance of
contractuala statutory obligations filed by buyers
of subdivision lot or condominium unit against the
owner, developer, dealer, broker or salesman.
(Emphasis supplied.)
The language of this section, especially the
italicized portions, leaves no room for doubt that
"exclusive jurisdiction" over the case between the
petitioner and the private respondent is vested not
in the Regional Trial Court but in the National
Housing Authority. 3
The private respondent contends that the applicable
law is BP No. 129, which confers on regional trial
courts jurisdiction to hear and decide cases
mentioned in its Section 19, reading in part as
follows:
SEC. 19. Jurisdiction in civil cases.-Regional Trial
Courts shall exercise exclusive original
jurisdiction:
(1) In all civil actions in which the subject of the
litigation is incapable of pecuniary estimation;
(2) In all civil actions which involve the title to, or
possession of, real property, or any interest therein,
except actions for forcible entry into and unlawful
detainer of lands or buildings, original jurisdiction
over which is conferred upon Metropolitan Trial

Admin. Law | 189

Courts, Municipal Trial Courts, and Municipal

Circuit Trial Courts;
xxx xxx xxx

(8) In all other cases in which the demand,

exclusive of interest and cost or the value of the
property in controversy, amounts to more than
twenty thousand pesos (P 20,000.00).
It stresses, additionally, that BP No. 129 should
control as the later enactment, having been
promulgated in 1981, after PD No. 957 was issued
in 1975 and PD No. 1344 in 1978.
This construction must yield to the familiar canon
that in case of conflict between a general law and a
special law, the latter must prevail regardless of the
dates of their enactment. Thus, it has been held
thatThe fact that one law is special and the other
general creates a presumption that the special act is
to be considered as remaining an exception of the
general act, one as a general law of the land and
the other as the law of the particular case. 4
xxx xxx xxx
The circumstance that the special law is passed
before or after the general act does not change the
principle. Where the special law is later, it will be
regarded as an exception to, or a qualification of,
the prior general act; and where the general act is
later, the special statute will be construed as
remaining an exception to its terms, unless
repealed expressly or by necessary implication. 5
It is obvious that the general law in this case is BP
No. 129 and PD No. 1344 the special law.
The argument that the trial court could also assume
jurisdiction because of Section 41 of PD No. 957,
earlier quoted, is also unacceptable. We do not read
that provision as vesting concurrent jurisdiction on
the Regional Trial Court and the Board over the
complaint mentioned in PD No. 1344 if only

because grants of power are not to be lightly

inferred or merely implied. The only purpose of
this section, as we see it, is to reserve. to the
aggrieved party such other remedies as may be
provided by existing law, like a prosecution for the
act complained of under the Revised Penal Code. 6
On the competence of the Board to award
damages, we find that this is part of the exclusive
power conferred upon it by PD No. 1344 to hear
and decide "claims involving refund and any other
claims filed by subdivision lot or condominium
unit buyers against the project owner, developer,
dealer, broker or salesman." It was therefore
erroneous for the respondent to brush aside the
well-taken opinion of the Secretary of Justice thatSuch
claim
for
damages
which
the
subdivision/condominium buyer may have against
the owner, developer, dealer or salesman, being a
necessary consequence of an adjudication of
liability for non-performance of contractual or
statutory obligation, may be deemed necessarily
included in the phrase "claims involving refund
and any other claims" used in the aforequoted
subparagraph C of Section 1 of PD No. 1344. The
phrase "any other claims" is, we believe,
sufficiently broad to include any and all claims
which are incidental to or a necessary consequence
of the claims/cases specifically included in the
grant of jurisdiction to the National Housing
Authority under the subject provisions.
The same may be said with respect to claims for
attorney's fees which are recoverable either by
agreement of the parties or pursuant to Art. 2208 of
the Civil Code (1) when exemplary damages are
awarded and (2) where the defendant acted in gross
and evident bad faith in refusing to satisfy the
plaintiff 's plainly valid, just and demandable
claim.
xxx xxx xxx
Besides, a strict construction of the subject
provisions of PD No. 1344 which would deny the
HSRC the authority to adjudicate claims for
damages and for damages and for attorney's fees
Admin. Law | 190

would result in multiplicity of suits in that the

subdivision condominium buyer who wins a case
in the HSRC and who is thereby deemed entitled to
claim damages and attorney's fees would be forced
to litigate in the regular courts for the purpose, a
situation which is obviously not in the
contemplation of the law. (Emphasis supplied.) 7
As a result of the growing complexity of the
modern society, it has become necessary to create
more and more administrative bodies to help in the
regulation of its ramified activities. Specialized in
the particular fields assigned to them, they can deal
with the problems thereof with more expertise and
dispatch than can be expected from the legislature
or the courts of justice. This is the reason for the
increasing vesture of quasi-legislative and quasijudicial powers in what is now not unreasonably
called the fourth department of the government.
Statutes conferring powers on their administrative
agencies must be liberally construed to enable
them to discharge their assigned duties in
accordance
with
the
legislative
8
purpose. Following this policy in Antipolo Realty
Corporation v. National Housing Authority, 9 the
Court sustained the competence of the respondent
administrative body, in the exercise of the
exclusive jurisdiction vested in it by PD No. 957
and PD No. 1344, to determine the rights of the
parties under a contract to sell a subdivision lot.
It remains to state that, contrary to the contention
of the petitioner, the case of Tropical Homes v.
National Housing Authority 10 is not in point. We
upheld in that case the constitutionality of the
procedure for appeal provided for in PD No. 1344,
but we did not rule there that the National Housing
Authority and not the Regional Trial Court had
exclusive jurisdiction over the cases enumerated in
Section I of the said decree. That is what we are
doing now.
It is settled that any decision rendered without
jurisdiction is a total nullity and may be struck
down at any time, even on appeal before this
Court. 11 The only exception is where the party
raising the issue is barred by estoppel, 12 which

does not appear in the case before us. On the

contrary, the issue was raised as early as in the
motion to dismiss filed in the trial court by the
petitioner, which continued to plead it in its answer
and, later, on appeal to the respondent court. We
have no choice, therefore, notwithstanding the
delay this decision will entail, to nullify the
proceedings in the trial court for lack of
jurisdiction.
WHEREFORE, the challenged decision of the
respondent court is REVERSED and the decision
of the Regional Trial Court of Quezon City in Civil
Case No. Q-36119 is SET ASIDE, without
prejudice to the filing of the appropriate complaint
before the Housing and Land Use Regulatory
Board. No costs.
SO ORDERED.

G.R. No. L-50444 August 31, 1987

ANTIPOLO
REALTY
CORPORATION, petitioner,
vs.
THE NATIONAL HOUSING AUTHORITY,
HON. G.V. TOBIAS, in his capacity as General
Manager of the National Housing Authority,
THE HON. JACOBO C. CLAVE, in his
capacity as Presidential Executive Assistant and
VIRGILIO A. YUSON, respondents.

FELICIANO, J.:
By virtue of a Contract to Sell dated 18 August
1970, Jose Hernando acquired prospective and
beneficial ownership over Lot. No. 15, Block IV of
the Ponderosa Heights Subdivision in Antipolo,
Rizal, from the petitioner Antipolo Realty
Corporation.
On 28 August 1974, Mr. Hernando transferred his
rights over Lot No. 15 to private respondent
Virgilio Yuson. The transfer was embodied in a
Deed of Assignment and Substitution of Obligor
Admin. Law | 191

(Delegacion), executed with the consent of

Antipolo Realty, in which Mr. Yuson assumed the
performance of the vendee's obligations under the
original contract, including payment of his
predecessor's installments in arrears. However, for
failure of Antipolo Realty to develop the
subdivision project in accordance with its
undertaking under Clause 17 of the Contract to
Sell, Mr. Yuson paid only the arrearages pertaining
to the period up to, and including, the month of
August 1972 and stopped all monthly installment
payments falling due thereafter Clause 17 reads:
Clause
17.

SUBDIVISION
BEAUTIFICATION. To insure the beauty of the
subdivision in line with the modern trend of urban
development, the SELLER hereby obligates itself
to provide the subdivision with:
a) Concrete curbs and gutters
b) Underground drainage system
c) Asphalt paved roads
d) Independent water system
e) Electrical installation with concrete posts.

replied that he would conform with the request as

soon as he was able to verify the truth of the
representation in the notice.
In a second letter dated 27 November 1976,
Antipolo Realty reiterated its request that Mr.
Yuson resume payment of his monthly
installments, citing the decision rendered by the
National Housing Authority (NHA) on 25 October
1976 in Case No. 252 (entitled "Jose B. Viado Jr.,
complainant vs. Conrado S. Reyes, respondent")
declaring Antipolo Realty to have "substantially
complied with its commitment to the lot buyers
pursuant to the Contract to Sell executed by and
between the lot buyers and the respondent." In
addition, a formal demand was made for full and
immediate payment of the amount of P16,994.73,
representing installments which, Antipolo Realty
alleged, had accrued during the period while the
improvements were being completed i.e.,
between September 1972 and October 1976.
Mr. Yuson refused to pay the September 1972October 1976 monthly installments but agreed to
pay the post October 1976 installments. Antipolo
Realty responded by rescinding the Contract to
Sell, and claiming the forfeiture of all installment
payments previously made by Mr. Yuson.

f) Landscaping and concrete sidewall

g) Developed park or amphi-theatre
h) 24-hour security guard service.
These improvements shall be complete within a
period of two (2) years from date of this
contract. Failure by the SELLER shall permit the
BUYER to suspend his monthly installments
without any penalties or interest charges until such
time that such improvements shall have been
completed. 1
On 14 October 1976, the president of Antipolo
Realty sent a notice to private respondent Yuson
advising that the required improvements in the
subdivision had already been completed, and
requesting resumption of payment of the monthly
installments on Lot No. 15. For his part, Mr. Yuson

Aggrieved by the rescission of the Contract to Sell,

Mr. Yuson brought his dispute with Antipolo
Realty before public respondent NHA through a
letter-complaint dated 10 May 1977 which
complaint was docketed in NHA as Case No. 2123.
Antipolo Realty filed a Motion to Dismiss which
was heard on 2 September 1977. Antipolo Realty,
without presenting any evidence, moved for the
consolidation of Case No. 2123 with several other
cases filed against it by other subdivision lot
buyers, then pending before the NHA. In an Order
issued on 7 February 1978, the NHA denied the
motion to dismiss and scheduled Case No. 2123 for
hearing.
After hearing, the NHA rendered a decision on 9
March 1978 ordering the reinstatement of the
Contract to Sell under the following conditions:
Admin. Law | 192

l) Antipolo Realty Corporation shall sent [sic] to

Virgilio Yuzon a statement of account for the
monthly amortizations from November 1976 to the
present;
m) No penalty interest shall be charged for the
period from November 1976 to the date of the
statement of account; and
n) Virgilio Yuzon shall be given sixty (60) days to
pay the arrears shown in the statement of account. 2
Antipolo Realty filed a Motion for Reconsideration
asserting: (a) that it had been denied due process of
law since it had not been served with notice of the
scheduled hearing; and (b) that the jurisdiction to
hear and decide Mr. Yuson's complaint was lodged
in the regular courts, not in the NHA, since that
complaint involved the interpretation and
application of the Contract to Sell.
The motion for reconsideration was denied on 28
June 1978 by respondent NHA General Manager
G.V. Tobias, who sustained the jurisdiction of the
NHA to hear and decide the Yuson complaint. He
also found that Antipolo Realty had in fact been
served with notice of the date of the hearing, but
that its counsel had failed to attend the
hearing. 3 The case was submitted for decision, and
eventually decided, solely on the evidence
presented by the complainant.
On 2 October 1978, Antipolo Realty came to this
Court with a Petition for certiorari and Prohibition
with Writ of Preliminary Injunction, which was
docketed as G.R. No. L-49051. Once more, the
jurisdiction of the NHA was assailed. Petitioner
further asserted that, under Clause 7 of the
Contract to Sell, it could validly terminate its
agreement with Mr. Yuson and, as a consequence
thereof, retain all the prior installment payments
made by the latter. 4
This Court denied certiorari in a minute resolution
issued on 11 December 1978, "without prejudice to
petitioner's
pursuing
the
administrative
5
remedy." A motion for reconsideration was
denied on 29 January 1979.

Thereafter, petitioner interposed an appeal from the

NHA decision with the Office of the President
which, on 9 March 1979, dismissed the same
through public respondent Presidential Executive
Assistant Jacobo C. Clave. 6
In the present petition, Antipolo Realty again
asserts that, in hearing the complaint of private
respondent Yuson and in ordering the reinstatement
of the Contract to Sell between the parties, the
NHA had not only acted on a matter beyond its
competence, but had also, in effect, assumed the
performance of judicial or quasi-judicial functions
which the NHA was not authorized to perform.
We find the petitioner's arguments lacking in merit.
It is by now commonplace learning that many
administrative agencies exercise and perform
adjudicatory powers and functions, though to a
limited extent only. Limited delegation of judicial
or quasi-judicial authority to administrative
agencies (e.g., the Securities and Exchange
Commission and the National Labor Relations
Commission) is well recognized in our
jurisdiction, 7 basically because the need for special
competence and experience has been recognized as
essential in the resolution of questions of complex
or specialized character and because of a
companion recognition that the dockets of our
regular courts have remained crowded and
clogged. In Spouses Jose Abejo and Aurora Abejo,
et al. vs. Hon. Rafael dela Cruz, etc., et al., 8 the
Court, through Mr. Chief Justice Teehankee, said:
In the fifties, the Court taking cognizance of the
move to vest jurisdiction in administrative
commissions and boards the power to resolve
specialized disputes in the field of labor (as in
corporations, public transportation and public
utilities) ruled that Congress in requiring the
Industrial Court's intervention in the resolution of
labor management controversies likely to cause
strikes or lockouts meant such jurisdiction to be
exclusive, although it did not so expressly state in
the law. The Court held that under the "sensemaking and expeditious doctrine of primary
jurisdiction . . . the courts cannot or will not
Admin. Law | 193

determine a controversy involving a question

which is within the jurisdiction of an
administrative tribunal where the question
demands the exercise of sound administrative
discretion requiring the special knowledge,
experience, and services of the administrative
tribunal to determine technical and intricate
matters of fact, and a uniformity of ruling is
essential to comply with the purposes of the
regulatory statute administered" (Pambujan Sur
United Mine Workers v. Samar Mining Co., Inc.,
94 Phil, 932, 941 [1954]).
In this era of clogged court dockets, the need for
specialized administrative boards or commissions
with the special knowledge, experience and
capability to hear and determine promptly disputes
on technical matters or essentially factual matters,
subject to judicial review in case of grave abuse of
discretion
has
become
well
nigh
indispensable. Thus, in 1984, the Court noted that
'between the power lodged in an administrative
body and a court, the unmistakeable trend has been
to refer it to the former, "Increasingly, this Court
has been committed to the view that unless the law
speaks clearly and unequivocably, the choice
should fall on fan administrative agency]" ' (NFL v.
Eisma, 127 SCRA 419, 428, citing precedents).
The Court in the earlier case of Ebon vs. De
Guzman (113 SCRA 52, 56 [1982]), noted that the
lawmaking authority, in restoring to the labor
arbiters and the NLRC their jurisdiction to award
all kinds of damages in labor cases, as against the
previous P.D. amendment splitting their
jurisdiction with the regular courts, "evidently, . . .
had second thoughts about depriving the Labor
Arbiters and the NLRC of the jurisdiction to award
damages in labor cases because that setup would
mean duplicity of suits, splitting the cause of action
and possible conflicting findings and conclusions
by two tribunals on one and the same claim."
In an even more recent case, Tropical Homes, Inc.
vs. National Housing Authority, et al., 9 Mr. Justice
Gutierrez, speaking for the Court, observed that:

agency over certain disputes and controversies

falling within the agency's special expertise. The
very definition of an administrative agency
includes its being vested with quasi-judicial
powers. The ever increasing variety of powers and
functions given to administrative agencies
recognizes the need for the active intervention of
administrative agencies in matters calling for
technical knowledge and speed in countless
controversies which cannot possibly be handled by
regular courts.
In general the quantum of judicial or quasi-judicial
powers which an administrative agency may
exercise is defined in the enabling act of such
agency. In other words, the extent to which an
administrative entity may exercise such powers
depends largely, if not wholly, on the provisions of
the statute creating or empowering such
agency. 10 In the exercise of such powers, the
agency concerned must commonly interpret and
apply contracts and determine the rights of private
parties under such contracts. One thrust of the
multiplication of administrative agencies is that the
interpretation of contracts and the determination of
private rights thereunder is no longer a uniquely
judicial function, exercisable only by our regular
courts.
Thus, the extent to which the NHA has been vested
with quasi-judicial authority must be determined
by referring to the terms of Presidential Decree No.
957, known as "The Subdivision and
Condominium Buyers' Decree." 11 Section 3 of
this statute provides as follows:
National Housing Authority. The National
Housing Authority shall have exclusive jurisdiction
to regulate the real estate trade and business in
accordance with the provisions of this decree
(emphasis supplied)
The need for and therefore the scope of the
regulatory authority thus lodged in the NHA are
indicated in the second and third preambular
paragraphs of the statute which provide:

There is no question that a statute may vest

exclusive original jurisdiction in an administrative
Admin. Law | 194

WHEREAS, numerous reports reveal that many

real estate subdivision owners, developers,
operators, and/or sellers have reneged on their
representations and obligations to provide and
maintain properly subdivision roads, drainage,
sewerage, water systems lighting systems and
other similar basic requirements, thus endangering
the health and safety of home and lot buyers;
WHEREAS, reports of alarming magnitude also
show cases of swindling and fraudulent
manipulations perpetrated by unscrupulous
subdivision and condominium sellers and
operators, such as failure to deliver titles to the
buyers or titles free from liens and encumbrances,
and to pay real estate taxes, and fraudulent sales
of the same subdivision lots to different innocent
purchasers for value . (emphasis supplied)
Presidential Decree No. 1344 12 clarified and
spelled out the quasi-judicial dimensions of the
grant of regulatory authority to the NHA in the
following quite specific terms:
SECTION 1. In the exercise of its functions to
regulate the real estate trade and business and in
addition to its powers provided for in Presidential
Decree No. 957, the National Housing Authority
shall have exclusive jurisdiction to hear and decide
cases of the following nature:
A. Unsound real estate business practices:
B. Claims involving refund and any other claims
filed by sub- division lot or condominium unit
buyer against the project owner, developer, dealer,
broker or salesman; and
C. Cases involving specific performance of
contractual and statutory obligations filed by
buyers of subdivision lots or condominium units
against the owner, developer, dealer, broker or
salesman.(emphasis supplied.)
The substantive provisions being applied and
enforced by the NHA in the instant case are found
in Section 23 of Presidential Decree No. 957 which
reads:

Sec. 23. Non-Forfeiture of Payments. No

installment payment made by a buyer in a
subdivision or condominium project for the lot or
unit he contracted to buy shall be forfeited in favor
of the owner or developer when the buyer, after
due notice to the owner or developer, desists from
further payment due to the failure of the owner or
developer to develop the subdivision or
condominium project according to the approved
plans and within the time limit for complying with
the same. Such buyer may, at his option, be
reimbursed the total amount paid including
amortization and interests but excluding
delinquency interests, with interest thereon at the
legal rate. (emphasis supplied.)
Having failed to comply with its contractual
obligation to complete certain specified
improvements in the subdivision within the
specified period of two years from the date of the
execution of the Contract to Sell, petitioner was not
entitled to exercise its options under Clause 7 of
the Contract. Hence, petitioner could neither
rescind the Contract to Sell nor treat the
installment payments made by the private
respondent as forfeited in its favor. Indeed, under
the general Civil Law, 13 in view of petitioner's
breach of its contract with private respondent, it is
the latter who is vested with the option either to
rescind the contract and receive reimbursement of
an installment payments (with legal interest) made
for the purchase of the subdivision lot in question,
or to suspend payment of further purchase
installments until such time as the petitioner had
fulfilled its obligations to the buyer. The NHA was
therefore correct in holding that private
respondent's prior installment payments could not
be forfeited in favor of petitioner.
Neither did the NHA commit any abuse, let alone a
grave abuse of discretion or act in excess of its
jurisdiction when it ordered the reinstatement of
the Contract to Sell between the parties. Such
reinstatement is no more than a logical
consequence of the NHA's correct ruling, just
noted, that the petitioner was not entitled to rescind
the Contract to Sell. There is, in any case, no
Admin. Law | 195

question that under Presidential Decree No. 957,

the NHA was legally empowered to determine and
protect the rights of contracting parties under the
law administered by it and under the respective
agreements, as well as to ensure that their
obligations thereunder are faithfully performed.
We turn to petitioner's assertion that it had been
denied the right to due process. This assertion lacks
substance. The record shows that a copy of the
order denying the Motion to Dismiss and
scheduling the hearing of the complaint for the
morning of 6 March 1978, was duly served on
counsel for petitioner, as evidenced by the
annotation appearing at the bottom of said copy
indicating that such service had been
effected. 14 But even if it be assumed, arguendo,
that such notice had not been served on the
petitioner, nevertheless the latter was not deprived
of due process, for what the fundamental law
abhors is not the absence of previous notice but
rather the absolute lack of opportunity to be
heard. 15 In the instant case, petitioner was given
ample opportunity to present its side and to be
heard on a motion for reconsideration as well, and
not just on a motion to dismiss; the claim of denial
of due process must hence sound even more
hollow. 16
We turn finally to the question of the amount of
P16,994.73 which petitioner insists had accrued
during the period from September 1972 to October
1976, when private respondent had suspended
payment of his monthly installments on his chosen
subdivision lot. The NHA in its 9 March 1978
resolution ruled that the regular monthly
installments under the Contract to Sell did not
accrue during the September 1972 October
1976 period:
[R]espondent allowed the complainant to suspend
payment of his monthly installments until the
improvements in the subdivision shall have been
completed. Respondent informed complainant on
November 1976 that the improvements have been
completed. Monthly installments during the period
of suspension of payment did not become due and
demandable Neither did they accrue Such must be

the case, otherwise, there is no sense in suspending

payments. If the suspension is lifted the debtor
shall resume payments but never did he incur any
arrears.
Such being the case, the demand of respondent for
complainant to pay the arrears due during the
period of suspension of payment is null and
void. Consequently, the notice of cancellation
based on the refusal to pay the s that were not due
and demandable is also null and void. 17
The NHA resolution is probably too terse and in
need of certification and amplification. The NHA
correctly held that no installment payments should
be considered as having accrued during the period
of suspension of payments. Clearly, the critical
issue is what happens to the installment payments
which would have accrued and fallen due during
the period of suspension had no default on the part
of the petitioner intervened. To our mind, the NHA
resolution is most appropriately read as directing
that the original period of payment in the Contract
to Sell must be deemed extended by a period of
time equal to the period of suspension (i.e., by four
(4) years and two (2) months) during which
extended time (tacked on to the original contract
period) private respondent buyer must continue to
pay the monthly installment payments until the
entire original contract price shall have been
paid. We think that such is the intent of the NHA
resolution which directed that "[i]f the suspension
is lifted, the debtor shall resume payments" and
that such is the most equitable and just reading that
may be given to the NHA resolution. To permit
Antipolo Realty to collect the disputed amount in a
lump sum after it had defaulted on its obligations
to its lot buyers, would tend to defeat the purpose
of the authorization (under Sec. 23 of Presidential
Decree No. 957, supra) to lot buyers to suspend
installment payments. As the NHA resolution
pointed out, [s]uch must be the case, otherwise,
there is no sense in suspending payments." Upon
the other hand, to condone the entire amount that
would have become due would be an expressively
harsh penalty upon the petitioner and would result
in the unjust enrichment of the private respondent
Admin. Law | 196

at the expense of the petitioner. It should be

recalled that the latter had already fulfilled, albeit
tardily, its obligations to its lot buyers under their
Contracts to Sell. At the same time, the lot buyer
should not be regarded as delinquent and as such
charged penalty interest. The suspension of
installment payments was attributable to the
petitioner, not the private respondent. The tacking
on of the period of suspension to the end of the
original period precisely prevents default on the
part of the lot buyer. In the words of the NHA
resolution, "never would [the buyer] incur any
arrears."
WHEREFORE, the Petition for certiorari is
DISMISSED. The NHA decision appealed from is
hereby AFFIRMED and clarified as providing for
the lengthening of the original contract period for
payment of installments under the Contract to Sell
by four (4) years and two (2) months, during which
extended time private respondent shall continue to
pay the regular monthly installment payments until
the entire original contract price shall have been
paid. No pronouncement as to costs.
SO ORDERED.
G.R. No. 110120 March 16, 1994
LAGUNA
LAKE
DEVELOPMENT
AUTHORITY, petitioner,
vs.
COURT OF APPEALS, HON. MANUEL JN.
SERAPIO, Presiding Judge RTC, Branch 127,
Caloocan City, HON. MACARIO A. ASISTIO,
JR., City Mayor of Caloocan and/or THE CITY
GOVERNMENT OF CALOOCAN,respondents.
Alberto N. Hidalgo and Ma. Teresa T. Oledan for
petitioner.
The City Legal Officer & Chief, Law Department
for Mayor Macario A. Asistio, Jr. and the City
Government of Caloocan.

ROMERO, J.:

The clash between the responsibility of the City

Government of Caloocan to dispose off the 350
tons of garbage it collects daily and the growing
concern and sensitivity to a pollution-free
environment of the residents of Barangay Camarin,
Tala Estate, Caloocan City where these tons of
garbage are dumped everyday is the hub of this
controversy elevated by the protagonists to the
Laguna Lake Development Authority (LLDA) for
adjudication.
The instant case stemmed from an earlier petition
filed with this Court by Laguna Lake Development
Authority (LLDA for short) docketed as G.R.
No. 107542 against the City Government of
Caloocan, et al. In the Resolution of November 10,
1992, this Court referred G.R. No. 107542 to the
Court of Appeals for appropriate disposition.
Docketed
therein
as
CA-G.R.
SP
No. 29449, the Court of Appeals, in a
decision 1 promulgated on January 29, 1993 ruled
that the LLDA has no power and authority to issue
a cease and desist order enjoining the dumping of
garbage in Barangay Camarin, Tala Estate,
Caloocan City. The LLDA now seeks, in this
petition, a review of the decision of the Court of
Appeals.
The facts, as disclosed in the records, are
undisputed.
On March 8, 1991, the Task Force Camarin
Dumpsite of Our Lady of Lourdes Parish,
Barangay Camarin, Caloocan City, filed a lettercomplaint 2 with the Laguna Lake Development
Authority seeking to stop the operation of the 8.6hectare open garbage dumpsite in Tala Estate,
Barangay Camarin, Caloocan City due to its
harmful effects on the health of the residents and
the possibility of pollution of the water content of
the surrounding area.
On November 15, 1991, the LLDA conducted an
on-site investigation, monitoring and test sampling
of the leachate 3that seeps from said dumpsite to the
nearby creek which is a tributary of the Marilao
River. The LLDA Legal and Technical personnel
found that the City Government of Caloocan was
Admin. Law | 197

maintaining an open dumpsite at the Camarin area

without first securing an Environmental
Compliance Certificate (ECC) from the
Environmental Management Bureau (EMB) of the
Department of Environment and Natural
Resources, as required under Presidential Decree
No. 1586, 4 and clearance from LLDA as required
under Republic Act No. 4850, 5 as amended by
Presidential Decree No. 813 and Executive Order
No. 927, series of 1983. 6
After a public hearing conducted on December 4,
1991, the LLDA, acting on the complaint of Task
Force Camarin Dumpsite, found that the water
collected from the leachate and the receiving
streams could considerably affect the quality, in
turn, of the receiving waters since it indicates the
presence of bacteria, other than coliform, which
may have contaminated the sample during
collection or handling. 7 On December 5, 1991, the
LLDA issued a Cease and Desist Order 8 ordering
the City Government of Caloocan, Metropolitan
Manila Authority, their contractors, and other
entities, to completely halt, stop and desist from
dumping any form or kind of garbage and other
waste matter at the Camarin dumpsite.
The dumping operation was forthwith stopped by
the City Government of Caloocan. However,
sometime in August 1992 the dumping operation
was resumed after a meeting held in July 1992
among the City Government of Caloocan, the
representatives of Task Force Camarin Dumpsite
and LLDA at the Office of Environmental
Management Bureau Director Rodrigo U. Fuentes
failed to settle the problem.
After an investigation by its team of legal and
technical personnel on August 14, 1992, the LLDA
issued another order reiterating the December 5,
1991, order and issued an Alias Cease and Desist
Order enjoining the City Government of Caloocan
from continuing its dumping operations at the
Camarin area.
On September 25, 1992, the LLDA, with the
assistance of the Philippine National Police,
enforced its Alias Cease and Desist Order by

prohibiting the entry of all garbage dump trucks

into the Tala Estate, Camarin area being utilized as
a dumpsite.
Pending
resolution
of
its
motion
for
reconsideration earlier filed on September 17, 1992
with the LLDA, the City Government of Caloocan
filed with the Regional Trial Court of Caloocan
City an action for the declaration of nullity of the
cease and desist order with prayer for the issuance
of writ of injunction, docketed as Civil Case No.
C-15598. In its complaint, the City Government of
Caloocan sought to be declared as the sole
authority empowered to promote the health and
safety and enhance the right of the people in
Caloocan City to a balanced ecology within its
territorial jurisdiction. 9
On September 25, 1992, the Executive Judge of the
Regional Trial Court of Caloocan City issued a
temporary restraining order enjoining the LLDA
from enforcing its cease and desist order.
Subsequently, the case was raffled to the Regional
Trial Court, Branch 126 of Caloocan which, at the
time, was presided over by Judge Manuel Jn.
Serapio of the Regional Trial Court, Branch 127,
the pairing judge of the recently-retired presiding
judge.
The LLDA, for its part, filed on October 2, 1992 a
motion to dismiss on the ground, among others,
that under Republic Act No. 3931, as amended by
Presidential Decree No. 984, otherwise known as
the Pollution Control Law, the cease and desist
order issued by it which is the subject matter of the
complaint is reviewable both upon the law and the
facts of the case by the Court of Appeals and not
by the Regional Trial Court. 10
On October 12, 1992 Judge Manuel Jn. Serapio
issued an order consolidating Civil Case No. C15598 with Civil Case No. C-15580, an earlier
case filed by the Task Force Camarin Dumpsite
entitled "Fr. John Moran, et al. vs. Hon. Macario
Asistio." The LLDA, however, maintained during
the trial that the foregoing cases, being
independent of each other, should have been
treated separately.
Admin. Law | 198

On October 16, 1992, Judge Manuel Jn. Serapio,

after hearing the motion to dismiss, issued in the
consolidated cases an order 11 denying LLDA's
motion to dismiss and granting the issuance of a
writ of preliminary injunction enjoining the LLDA,
its agent and all persons acting for and on its
behalf, from enforcing or implementing its cease
and desist order which prevents plaintiff City of
Caloocan from dumping garbage at the Camarin
dumpsite during the pendency of this case and/or
until further orders of the court.
On November 5, 1992, the LLDA filed a petition
for certiorari, prohibition and injunction with
prayer for restraining order with the Supreme
Court, docketed as G.R. No. 107542, seeking to
nullify the aforesaid order dated October 16, 1992
issued by the Regional Trial Court, Branch 127 of
Caloocan City denying its motion to dismiss.
The Court, acting on the petition, issued a
Resolution 12 on November 10, 1992 referring the
case to the Court of Appeals for proper disposition
and at the same time, without giving due course to
the petition, required the respondents to comment
on the petition and file the same with the Court of
Appeals within ten (10) days from notice. In the
meantime, the Court issued a temporary restraining
order, effective immediately and continuing until
further orders from it, ordering the respondents: (1)
Judge Manuel Jn. Serapio, Presiding Judge,
Regional Trial Court, Branch 127, Caloocan City
to cease and desist from exercising jurisdiction
over the case for declaration of nullity of the cease
and desist order issued by the Laguna Lake
Development Authority (LLDA); and (2) City
Mayor of Caloocan and/or the City Government of
Caloocan to cease and desist from dumping its
garbage at the Tala Estate, Barangay Camarin,
Caloocan City.
Respondents City Government of Caloocan and
Mayor Macario A. Asistio, Jr. filed on November
12, 1992 a motion for reconsideration and/or to
quash/recall the temporary restraining order and an
urgent motion for reconsideration alleging that ". . .
in view of the calamitous situation that would arise
if the respondent city government fails to collect

350 tons of garbage daily for lack of dumpsite (i)t

is therefore, imperative that the issue be resolved
with dispatch or with sufficient leeway to allow the
respondents to find alternative solutions to this
garbage problem."
On November 17, 1992, the Court issued a
Resolution 13 directing the Court of Appeals to
immediately set the case for hearing for the
purpose of determining whether or not the
temporary restraining order issued by the Court
should be lifted and what conditions, if any, may
be required if it is to be so lifted or whether the
restraining order should be maintained or
converted into a preliminary injunction.
The Court of Appeals set the case for hearing on
November 27, 1992, at 10:00 in the morning at the
Hearing Room, 3rd Floor, New Building, Court of
Appeals. 14 After the oral argument, a conference
was set on December 8, 1992 at 10:00 o'clock in
the morning where the Mayor of Caloocan City,
the General Manager of LLDA, the Secretary of
DENR or his duly authorized representative and
the Secretary of DILG or his duly authorized
representative were required to appear.
It was agreed at the conference that the LLDA had
until December 15, 1992 to finish its study and
review of respondent's technical plan with respect
to the dumping of its garbage and in the event of a
rejection of respondent's technical plan or a failure
of settlement, the parties will submit within 10
days from notice their respective memoranda on
the merits of the case, after which the petition shall
be
deemed
submitted
for
15
resolution. Notwithstanding such efforts, the
parties failed to settle the dispute.
On April 30, 1993, the Court of Appeals
promulgated its decision holding that: (1) the
Regional Trial Court has no jurisdiction on appeal
to try, hear and decide the action for annulment of
LLDA's cease and desist order, including the
issuance of a temporary restraining order and
preliminary injunction in relation thereto, since
appeal therefrom is within the exclusive and
appellate jurisdiction of the Court of Appeals under
Admin. Law | 199

Section 9, par. (3), of Batas Pambansa Blg. 129;

and (2) the Laguna Lake Development Authority
has no power and authority to issue a cease and
desist order under its enabling law, Republic Act
No. 4850, as amended by P.D. No. 813 and
Executive
Order
No. 927, series of 1983.
The Court of Appeals thus dismissed Civil Case
No. 15598 and the preliminary injunction issued in
the said case was set aside; the cease and desist
order of LLDA was likewise set aside and the
temporary restraining order enjoining the City
Mayor of Caloocan and/or the City Government of
Caloocan to cease and desist from dumping its
garbage at the Tala Estate, Barangay Camarin,
Caloocan City was lifted, subject, however, to the
condition that any future dumping of garbage in
said area, shall be in conformity with the procedure
and protective works contained in the proposal
attached to the records of this case and found on
pages 152-160 of the Rollo, which was thereby
adopted by reference and made an integral part of
the decision, until the corresponding restraining
and/or injunctive relief is granted by the proper
Court upon LLDA's institution of the necessary
legal proceedings.
Hence, the Laguna Lake Development Authority
filed the instant petition for review on certiorari,
now docketed as G.R. No. 110120, with prayer that
the temporary restraining order lifted by the Court
of Appeals be re-issued until after final
determination by this Court of the issue on the
proper interpretation of the powers and authority of
the LLDA under its enabling law.
On July, 19, 1993, the Court issued a temporary
restraining order 16 enjoining the City Mayor of
Caloocan and/or the City Government of Caloocan
to cease and desist from dumping its garbage at the
Tala Estate, Barangay Camarin, Caloocan City,
effective as of this date and containing until
otherwise ordered by the Court.
It is significant to note that while both parties in
this case agree on the need to protect the
environment and to maintain the ecological

balance of the surrounding areas of the Camarin

open dumpsite, the question as to which agency
can lawfully exercise jurisdiction over the matter
remains highly open to question.
The City Government of Caloocan claims that it is
within its power, as a local government unit,
pursuant to the general welfare provision of the
Local Government Code, 17 to determine the effects
of the operation of the dumpsite on the ecological
balance and to see that such balance is maintained.
On the basis of said contention, it questioned, from
the inception of the dispute before the Regional
Trial Court of Caloocan City, the power and
authority of the LLDA to issue a cease and desist
order enjoining the dumping of garbage in the
Barangay Camarin over which the City
Government of Caloocan has territorial
jurisdiction.
The Court of Appeals sustained the position of the
City of Caloocan on the theory that Section 7 of
Presidential Decree No. 984, otherwise known as
the Pollution Control law, authorizing the defunct
National Pollution Control Commission to issue
an ex-parte cease and desist order was not
incorporated in Presidential Decree No. 813 nor in
Executive
Order
No.
927,
series
of
1983. The Court of Appeals ruled that under
Section 4, par. (d), of Republic Act No. 4850, as
amended, the LLDA is instead required "to
institute the necessary legal proceeding against any
person who shall commence to implement or
continue implementation of any project, plan or
program within the Laguna de Bay region without
previous clearance from the Authority."
The LLDA now assails, in this partition for review,
the abovementioned ruling of the Court of Appeals,
contending that, as an administrative agency which
was granted regulatory and adjudicatory powers
and functions by Republic Act No. 4850 and its
amendatory laws, Presidential Decree No. 813 and
Executive Order No. 927, series of 1983, it is
invested with the power and authority to issue a
cease and desist order pursuant to Section 4 par.
(c), (d), (e), (f) and (g) of Executive Order No. 927
series of 1983 which provides, thus:
Admin. Law | 200

Sec. 4. Additional Powers and Functions. The

authority shall have the following powers and
functions:
xxx xxx xxx
(c) Issue orders or decisions to compel compliance
with the provisions of this Executive Order and its
implementing rules and regulations only after
proper notice and hearing.
(d) Make, alter or modify orders requiring the
discontinuance of pollution specifying the
conditions and the time within which such
discontinuance must be accomplished.
(e) Issue, renew, or deny permits, under such
conditions as it may determine to be reasonable,
for the prevention and abatement of pollution, for
the discharge of sewage, industrial waste, or for the
installation or operation of sewage works and
industrial disposal system or parts thereof.
(f) After due notice and hearing, the Authority may
also revoke, suspend or modify any permit issued
under this Order whenever the same is necessary to
prevent or abate pollution.
(g) Deputize in writing or request assistance of
appropriate
government
agencies
or
instrumentalities for the purpose of enforcing this
Executive Order and its implementing rules and
regulations and the orders and decisions of the
Authority.
The LLDA claims that the appellate court
deliberately suppressed and totally disregarded the
above provisions of Executive Order No. 927,
series of 1983, which granted administrative quasijudicial functions to LLDA on pollution abatement
cases.
In light of the relevant environmental protection
laws cited which are applicable in this case, and
the corresponding overlapping jurisdiction of
government agencies implementing these laws, the
resolution of the issue of whether or not the LLDA
has the authority and power to issue an order
which, in its nature and effect was injunctive,

necessarily requires a determination of the

threshold question: Does the Laguna Lake
Development Authority, under its Charter and its
amendatory laws, have the authority to entertain
the complaint against the dumping of garbage in
the open dumpsite in Barangay Camarin authorized
by the City Government of Caloocan which is
allegedly endangering the health, safety, and
welfare of the residents therein and the sanitation
and quality of the water in the area brought about
by exposure to pollution caused by such open
garbage dumpsite?
The matter of determining whether there is such
pollution of the environment that requires control,
if not prohibition, of the operation of a business
establishment is essentially addressed to the
Environmental Management Bureau (EMB) of the
DENR which, by virtue of Section 16 of Executive
Order No. 192, series of 1987, 18 has assumed the
powers and functions of the defunct National
Pollution Control Commission created under
Republic Act No. 3931. Under said Executive
Order, a Pollution Adjudication Board (PAB) under
the Office of the DENR Secretary now assumes the
powers and functions of the National Pollution
Control Commission with respect to adjudication
of pollution cases. 19
As a general rule, the adjudication of pollution
cases generally pertains to the Pollution
Adjudication Board (PAB), except in cases where
the special law provides for another forum. It must
be recognized in this regard that the LLDA, as a
specialized administrative agency, is specifically
mandated under Republic Act No. 4850 and its
amendatory laws to carry out and make effective
the declared national policy 20 of promoting and
accelerating the development and balanced growth
of the Laguna Lake area and the surrounding
provinces of Rizal and Laguna and the cities of San
Pablo, Manila, Pasay, Quezon and Caloocan 21 with
due regard and adequate provisions for
environmental
management
and
control,
preservation of the quality of human life and
ecological systems, and the prevention of undue
ecological disturbances, deterioration and
Admin. Law | 201

pollution. Under such a broad grant and power and

authority, the LLDA, by virtue of its special
charter, obviously has the responsibility to protect
the inhabitants of the Laguna Lake region from the
deleterious effects of pollutants emanating from the
discharge of wastes from the surrounding areas. In
carrying out the aforementioned declared policy,
the LLDA is mandated, among others, to pass upon
and approve or disapprove all plans, programs, and
projects
proposed
by
local
government
offices/agencies within the region, public
corporations, and private persons or enterprises
where such plans, programs and/or projects are
related to those of the LLDA for the development
of the region. 22
In the instant case, when the complainant Task
Force Camarin Dumpsite of Our Lady of Lourdes
Parish, Barangay Camarin, Caloocan City, filed its
letter-complaint before the LLDA, the latter's
jurisdiction under its charter was validly invoked
by complainant on the basis of its allegation that
the open dumpsite project of the City Government
of Caloocan in Barangay Camarin was undertaken
without a clearance from the LLDA, as required
under Section 4, par. (d), of Republic Act. No.
4850, as amended by P.D. No. 813 and Executive
Order No. 927. While there is also an allegation
that the said project was without an Environmental
Compliance Certificate from the Environmental
Management Bureau (EMB) of the DENR, the
primary jurisdiction of the LLDA over this case
was recognized by the Environmental Management
Bureau of the DENR when the latter acted as
intermediary at the meeting among the
representatives of the City Government of
Caloocan, Task Force Camarin Dumpsite and
LLDA sometime in July 1992 to discuss the
possibility
of
re-opening the open dumpsite.
Having thus resolved the threshold question, the
inquiry then narrows down to the following issue:
Does the LLDA have the power and authority to
issue a "cease and desist" order under Republic Act
No. 4850 and its amendatory laws, on the basis of
the facts presented in this case, enjoining the

dumping of garbage in Tala Estate, Barangay

Camarin, Caloocan City.
The irresistible answer is in the affirmative.
The cease and desist order issued by the LLDA
requiring the City Government of Caloocan to stop
dumping its garbage in the Camarin open dumpsite
found by the LLDA to have been done in violation
of Republic Act No. 4850, as amended, and other
relevant environment laws, 23 cannot be stamped as
an unauthorized exercise by the LLDA of
injunctive powers. By its express terms, Republic
Act No. 4850, as amended by P.D. No. 813 and
Executive Order No. 927, series of 1983,
authorizes the LLDA to "make, alter or modify
order
requiring
the
discontinuance
or
24
pollution." (Emphasis supplied) Section 4, par.
(d)
explicitly
authorizes
the
LLDA
to make whatever order may be necessary in the
exercise of its jurisdiction.
To be sure, the LLDA was not expressly conferred
the power "to issue and ex-parte cease and desist
order" in a language, as suggested by the City
Government of Caloocan, similar to the express
grant to the defunct National Pollution Control
Commission under Section 7 of P.D. No. 984
which, admittedly was not reproduced in P.D. No.
813 and E.O. No. 927, series of 1983. However, it
would be a mistake to draw therefrom the
conclusion that there is a denial of the power to
issue the order in question when the power
"to make, alter or modify orders requiring the
discontinuance of pollution" is expressly and
clearly bestowed upon the LLDA by Executive
Order No. 927, series of 1983.
Assuming arguendo that the authority to issue a
"cease and desist order" were not expressly
conferred by law, there is jurisprudence enough to
the effect that the rule granting such authority need
not necessarily be express. 25 While it is a
fundamental rule that an administrative agency has
only such powers as are expressly granted to it by
law, it is likewise a settled rule that an
administrative agency has also such powers as are
necessarily implied in the exercise of its express
Admin. Law | 202

powers. 26 In the exercise, therefore, of its express

powers under its charter as a regulatory and quasijudicial body with respect to pollution cases in the
Laguna Lake region, the authority of the LLDA to
issue a "cease and desist order" is, perforce,
implied. Otherwise, it may well be reduced to a
"toothless" paper agency.
In this connection, it must be noted that
in Pollution Adjudication Board v. Court of
Appeals, et al., 27 the Court ruled that the Pollution
Adjudication Board (PAB) has the power to issue
an ex-parte cease and desist order when there
is prima facie evidence of an establishment
exceeding the allowable standards set by the antipollution laws of the country. Theponente,
Associate Justice Florentino P. Feliciano, declared:
Ex parte cease and desist orders are permitted by
law and regulations in situations like that here
presented precisely because stopping the
continuous discharge of pollutive and untreated
effluents into the rivers and other inland waters of
the Philippines cannot be made to wait until
protracted litigation over the ultimate correctness
or propriety of such orders has run its full course,
including multiple and sequential appeals such as
those which Solar has taken, which of course may
take several years. The relevant pollution control
statute and implementing regulations were enacted
and promulgated in the exercise of that pervasive,
sovereign power to protect the safety, health, and
general welfare and comfort of the public, as well
as the protection of plant and animal life,
commonly designated as the police power. It is a
constitutional commonplace that the ordinary
requirements of procedural due process yield to the
necessities of protecting vital public interests like
those here involved, through the exercise of police
power. . . .
The immediate response to the demands of "the
necessities of protecting vital public interests"
gives vitality to the statement on ecology embodied
in the Declaration of Principles and State Policies
or the 1987 Constitution. Article II, Section 16
which provides:

The State shall protect and advance the right of the

people to a balanced and healthful ecology in
accord with the rhythm and harmony of nature.
As a constitutionally guaranteed right of every
person, it carries the correlative duty of nonimpairment. This is but in consonance with the
declared policy of the state "to protect and promote
the right to health of the people and instill health
consciousness among them." 28 It is to be borne in
mind that the Philippines is party to the Universal
Declaration of Human Rights and the Alma
Conference Declaration of 1978 which recognize
health as a fundamental human right. 29
The issuance, therefore, of the cease and desist
order by the LLDA, as a practical matter of
procedure under the circumstances of the case, is a
proper exercise of its power and authority under its
charter and its amendatory laws. Had the cease and
desist order issued by the LLDA been complied
with by the City Government of Caloocan as it did
in the first instance, no further legal steps would
have been necessary.
The charter of LLDA, Republic Act No. 4850, as
amended, instead of conferring upon the LLDA the
means of directly enforcing such orders, has
provided under its Section 4 (d) the power to
institute "necessary legal proceeding against any
person who shall commence to implement or
continue implementation of any project, plan or
program within the Laguna de Bay region without
previous clearance from the LLDA."
Clearly, said provision was designed to invest the
LLDA with sufficiently broad powers in the
regulation of all projects initiated in the Laguna
Lake region, whether by the government or the
private sector, insofar as the implementation of
these projects is concerned. It was meant to deal
with cases which might possibly arise where
decisions or orders issued pursuant to the exercise
of such broad powers may not be obeyed, resulting
in the thwarting of its laudabe objective. To meet
such
contingencies,
then
the
writs
of mandamus and injunction which are beyond the

Admin. Law | 203

power of the LLDA to issue, may be sought from

the proper courts.

Injunction or Temporary Restraining Order, under

Rule 65 of the Revised Rules of Court.

Insofar as the implementation of relevant antipollution laws in the Laguna Lake region and its
surrounding provinces, cities and towns are
concerned, the Court will not dwell further on the
related issues raised which are more appropriately
addressed to an administrative agency with the
special knowledge and expertise of the LLDA.

Principally, the petition seeks to nullify the Order

of the Ombudsman dated January 7, 1992,
directing the preventive suspension of petitioners,
Dr. Brigida S. Buenaseda, Chief of Hospital III;
Isabelo C. Banez, Jr., Administrative Officer III;
Conrado Rey Matias, Technical Assistant to the
Chief of Hospital; Cora C. Solis, Accountant III;
and Enya N. Lopez, Supply Officer III, all of the
National Center for Mental Health. The petition
also asks for an order directing the Ombudsman to
disqualify Director Raul Arnaw and Investigator
Amy de Villa-Rosero, of the Office of the
Ombudsman, from participation in the preliminary
investigation of the charges against petitioner
(Rollo, pp. 2-17; Annexes to Petition, Rollo, pp.
19-21).

WHEREFORE, the petition is GRANTED. The

temporary restraining order issued by the Court on
July 19, 1993 enjoining the City Mayor of
Caloocan and/or the City Government of Caloocan
from dumping their garbage at the Tala Estate,
Barangay Camarin, Caloocan City is hereby made
permanent.
SO ORDERED.

G.R. No. 106719 September 21, 1993

DRA. BRIGIDA S. BUENASEDA, Lt. Col.
ISABELO BANEZ, JR., ENGR. CONRADO
REY MATIAS, Ms. CORA S. SOLIS and Ms.
ENYA
N.
LOPEZ, petitioners,
vs.
SECRETARY JUAN FLAVIER, Ombudsman
CONRADO M. VASQUEZ, and NCMH
NURSES ASSOCIATION, represented by
RAOULITO GAYUTIN, respondents.
Renato J. Dilag and Benjamin C. Santos for
petitioners.
Danilo C. Cunanan for respondent Ombudsman.
Crispin T. Reyes and Florencio T. Domingo for
private respondent.

QUIASON, J.:
This is a Petition for Certiorari, Prohibition
and Mandamus, with Prayer for Preliminary

The questioned order was issued in connection

with the administrative complaint filed with the
Ombudsman (OBM-ADM-0-91-0151) by the
private respondents against the petitioners for
violation of the Anti-Graft and Corrupt Practices
Act.
According to the petition, the said order was issued
upon the recommendation of Director Raul Arnaw
and Investigator Amy de Villa-Rosero, without
affording petitioners the opportunity to controvert
the charges filed against them. Petitioners had
sought to disqualify Director Arnaw and
Investigator Villa-Rosero for manifest partiality
and bias (Rollo, pp. 4-15).
On September 10, 1992, this Court required
respondents' Comment on the petition.
On September 14 and September 22, 1992,
petitioners filed a "Supplemental Petition (Rollo,
pp. 124-130); Annexes to Supplemental
Petition; Rollo pp. 140-163) and an "Urgent
Supplemental
Manifestation"
(Rollo,
pp. 164-172; Annexes to Urgent Supplemental
Manifestation; Rollo, pp. 173-176), respectively,
averring developments that transpired after the
filing of the petition and stressing the urgency for
Admin. Law | 204

the issuance of the writ of preliminary injunction

or temporary restraining order.
On September 22, 1992, this Court ". . . Resolved
to REQUIRE the respondents to MAINTAIN in the
meantime, the STATUS QUO pending filing of
comments by said respondents on the original
supplemental manifestation" (Rollo, p. 177).
On September 29, 1992, petitioners filed a motion
to direct respondent Secretary of Health to comply
with the Resolution dated September 22, 1992
(Rollo, pp. 182-192, Annexes, pp. 192-203). In a
Resolution dated October 1, 1992, this Court
required respondent Secretary of Health to
comment on the said motion.
On September 29, 1992, in a pleading entitled
"Omnibus Submission," respondent NCMH Nurses
Association submitted its Comment to the Petition,
Supplemental Petition and Urgent Supplemental
Manifestation. Included in said pleadings were the
motions to hold the lawyers of petitioners in
contempt and to disbar them (Rollo, pp. 210-267).
Attached to the "Omnibus Submission" as annexes
were the orders and pleadings filed in
Administrative Case No. OBM-ADM-0-91-1051
against petitioners (Rollo, pp. 268-480).
The Motion for Disbarment charges the lawyers of
petitioners
with:
(1) unlawfully advising or otherwise causing or
inducing their clients petitioners Buenaseda, et
al., to openly defy, ignore, disregard, disobey or
otherwise violate, maliciously evade their
preventive suspension by Order of July 7, 1992 of
the Ombudsman . . ."; (2) "unlawfully interfering
with and obstructing the implementation of the said
order (Omnibus Submission, pp. 50-52; Rollo, pp.
259-260); and (3) violation of the Canons of the
Code of Professional Responsibility and of
unprofessional and unethical conduct "by foisting
blatant lies, malicious falsehood and outrageous
deception" and by committing subornation of
perjury, falsification and fabrication in their
pleadings (Omnibus Submission, pp. 52-54; Rollo,
pp. 261-263).

On November 11, 1992, petitioners filed a

"Manifestation and Supplement to 'Motion to
Direct Respondent Secretary of Health to Comply
with
22
September
1992
Resolution'"
(Manifestation
attached
to Rollo without
pagination between pp. 613 and 614 thereof).
On November 13, 1992, the Solicitor General
submitted its Comment dated November 10, 1992,
alleging that: (a) "despite the issuance of the
September 22, 1992 Resolution directing
respondents to maintain the status quo, respondent
Secretary refuses to hold in abeyance the
implementation
of
petitioners'
preventive
suspension; (b) the clear intent and spirit of the
Resolution dated September 22, 1992 is to hold in
abeyance the implementation of petitioners'
preventive suspension, the status quo obtaining the
time of the filing of the instant petition; (c)
respondent Secretary's acts in refusing to hold in
abeyance implementation of petitioners' preventive
suspension and in tolerating and approving the acts
of Dr. Abueva, the OIC appointed to replace
petitioner Buenaseda, are in violation of the
Resolution dated September 22, 1992; and
(d) therefore, respondent Secretary should be
directed to comply with the Resolution dated
September 22, 1992 immediately, by restoring
the status quo ante contemplated by the aforesaid
resolution" (Comment attached to Rollowithout
paginations between pp. 613-614 thereof).
In the Resolution dated November 25, 1992, this
Court required respondent Secretary to comply
with the aforestated status quo order, stating inter
alia, that:
It appearing that the status quo ante litem motam,
or the last peaceable uncontested status which
preceded the present controversy was the situation
obtaining at the time of the filing of the petition at
bar on September 7, 1992 wherein petitioners were
then actually occupying their respective positions,
the Court hereby ORDERS that petitioners be
allowed to perform the duties of their respective
positions and to receive such salaries and benefits
as they may be lawfully entitled to, and that
respondents and/or any and all persons acting
Admin. Law | 205

under their authority desist and refrain from

performing any act in violation of the
aforementioned Resolution of September 22, 1992
until further orders from the Court (Attached
to Rollo after p. 615 thereof).
On December 9, 1992, the Solicitor General,
commenting on the Petition, Supplemental Petition
and Supplemental Manifestation, stated that (a)
"The authority of the Ombudsman is only to
recommend suspension and he has no direct power
to suspend;" and (b) "Assuming the Ombudsman
has the power to directly suspend a government
official or employee, there are conditions required
by law for the exercise of such powers; [and] said
conditions have not been met in the instant case"
(Attached to Rollo without pagination).
In the pleading filed on January 25, 1993,
petitioners adopted the position of the Solicitor
General that the Ombudsman can only suspend
government officials or employees connected with
his office. Petitioners also refuted private
respondents' motion to disbar petitioners' counsel
and to cite them for contempt (Attached
to Rollo without pagination).
The crucial issue to resolve is whether the
Ombudsman has the power to suspend government
officials and employees working in offices other
than the Office of the Ombudsman, pending the
investigation of the administrative complaints filed
against said officials and employees.
In upholding the power of the Ombudsman to
preventively suspend petitioners, respondents
(Urgent Motion to Lift Status Quo, etc, dated
January 11, 1993, pp. 10-11), invoke Section 24 of
R.A. No. 6770, which provides:
Sec. 24. Preventive Suspension. The
Ombudsman or his Deputy may preventively
suspend any officer or employee under his
authority pending an investigation, if in his
judgment the evidence of guilt is strong, and (a)
the charge against such officer or employee
involves dishonesty, oppression or grave
misconduct or neglect in the performance of duty;

(b) the charge would warrant removal from the

service; or (c) the respondent's continued stay in
office may prejudice the case filed against him.
The preventive suspension shall continue until the
case is terminated by the Office of Ombudsman but
not more than six months, without pay, except
when the delay in the disposition of the case by the
Office of the Ombudsman is due to the fault,
negligence or petition of the respondent, in which
case the period of such delay shall not be counted
in computing the period of suspension herein
provided.
Respondents argue that the power of preventive
suspension given the Ombudsman under Section
24 of R.A. No. 6770 was contemplated by Section
13 (8) of Article XI of the 1987 Constitution,
which provides that the Ombudsman shall exercise
such other power or perform such functions or
duties as may be provided by law."
On the other hand, the Solicitor General and the
petitioners claim that under the 1987 Constitution,
the Ombudsman can only recommend to the heads
of the departments and other agencies the
preventive suspension of officials and employees
facing administrative investigation conducted by
his office. Hence, he cannot order the preventive
suspension himself.
They invoke Section 13(3) of the 1987
Constitution which provides that the Office of the
Ombudsman shall have inter alia the power,
function, and duty to:
Direct the officer concerned to take appropriate
action against a public official or employee at fault,
and recommend his removal, suspension,
demotion, fine, censure or prosecution, and ensure
compliance therewith.
The Solicitor General argues that under said
provision of the Constitutions, the Ombudsman has
three distinct powers, namely: (1) direct the officer
concerned to take appropriate action against public
officials or employees at fault; (2) recommend
their removal, suspension, demotion fine, censure,
Admin. Law | 206

or prosecution; and (3) compel compliance with

the recommendation (Comment dated December 3,
1992, pp. 9-10).
The line of argument of the Solicitor General is a
siren call that can easily mislead, unless one bears
in mind that what the Ombudsman imposed on
petitioners was not a punitive but only a preventive
suspension.
When the constitution vested on the Ombudsman
the power "to recommend the suspension" of a
public official or employees (Sec. 13 [3]), it
referred to "suspension," as a punitive measure. All
the words associated with the word "suspension" in
said provision referred to penalties in
administrative cases, e.g. removal, demotion, fine,
censure. Under the rule of Noscitor a sociis, the
word "suspension" should be given the same sense
as the other words with which it is associated.
Where a particular word is equally susceptible of
various meanings, its correct construction may be
made specific by considering the company of terms
in which it is found or with which it is associated
(Co Kim Chan v. Valdez Tan Keh, 75 Phil. 371
[1945]; Caltex (Phils.) Inc. v. Palomar, 18 SCRA
247 [1966]).
Section 24 of R.A. No. 6770, which grants the
Ombudsman the power to preventively suspend
public
officials
and
employees
facing
administrative charges before him, is a procedural,
not a penal statute. The preventive suspension is
imposed after compliance with the requisites
therein set forth, as an aid in the investigation of
the administrative charges.
Under the Constitution, the Ombudsman is
expressly authorized to recommend to the
appropriate official the discipline or prosecution of
erring public officials or employees. In order to
make an intelligent determination whether to
recommend such actions, the Ombudsman has to
conduct an investigation. In turn, in order for him
to conduct such investigation in an expeditious and
efficient manner, he may need to suspend the
respondent.

The need for the preventive suspension may arise

from several causes, among them, the danger of
tampering or destruction of evidence in the
possession of respondent; the intimidation of
witnesses, etc. The Ombudsman should be given
the discretion to decide when the persons facing
administrative charges should be preventively
suspended.
Penal statutes are strictly construed while
procedural statutes are liberally construed
(Crawford, Statutory Construction, Interpretation
of Laws, pp. 460-461; Lacson v. Romero, 92 Phil.
456 [1953]). The test in determining if a statute is
penal is whether a penalty is imposed for the
punishment of a wrong to the public or for the
redress of an injury to an individual (59 Corpuz
Juris, Sec. 658; Crawford, Statutory Construction,
pp. 496-497). A Code prescribing the procedure in
criminal cases is not a penal statute and is to be
interpreted liberally (People v. Adler, 140 N.Y.
331; 35 N.E. 644).
The purpose of R.A. No. 6770 is to give the
Ombudsman such powers as he may need to
perform efficiently the task committed to him by
the Constitution. Such being the case, said statute,
particularly its provisions dealing with procedure,
should be given such interpretation that will
effectuate the purposes and objectives of the
Constitution. Any interpretation that will hamper
the work of the Ombudsman should be avoided.
A statute granting powers to an agency created by
the Constitution should be liberally construed for
the advancement of the purposes and objectives for
which it was created (Cf. Department of Public
Utilities v. Arkansas Louisiana Gas. Co., 200 Ark.
983, 142 S.W. (2d) 213 [1940]; Wallace v. Feehan,
206 Ind. 522, 190 N.E., 438 [1934]).
In Nera v. Garcia, 106 Phil. 1031 [1960], this
Court, holding that a preventive suspension is not a
penalty, said:
Suspension is a preliminary step in an
administrative investigation. If after such
investigation, the charges are established and the
Admin. Law | 207

person investigated is found guilty of acts

warranting his removal, then he is removed or
dismissed. This is the penalty.
To support his theory that the Ombudsman can
only preventively suspend respondents in
administrative cases who are employed in his
office, the Solicitor General leans heavily on the
phrase "suspend any officer or employee under his
authority" in Section 24 of R.A. No. 6770.
The origin of the phrase can be traced to Section
694 of the Revised Administrative Code, which
dealt with preventive suspension and which
authorized the chief of a bureau or office to
"suspend any subordinate or employee in his
bureau or under his authority pending an
investigation . . . ."
Section 34 of the Civil Service Act of 1959 (R.A.
No. 2266), which superseded Section 694 of the
Revised Administrative Code also authorized the
chief of a bureau or office to "suspend any
subordinate officer or employees, in his bureau or
under his authority."
However, when the power to discipline
government officials and employees was extended
to the Civil Service Commission by the Civil
Service Law of 1975 (P.D. No. 805), concurrently
with the President, the Department Secretaries and
the heads of bureaus and offices, the phrase
"subordinate officer and employee in his bureau"
was deleted, appropriately leaving the phrase
"under his authority." Therefore, Section 41 of said
law only mentions that the proper disciplining
authority may preventively suspend "any
subordinate officer or employee under his authority
pending an investigation . . ." (Sec. 41).
The Administrative Code of 1987 also empowered
the proper disciplining authority to "preventively
suspend any subordinate officer or employee under
his authority pending an investigation" (Sec. 51).
The Ombudsman Law advisedly deleted the words
"subordinate" and "in his bureau," leaving the
phrase to read "suspend any officer or employee

under his authority pending an investigation . . . ."

The conclusion that can be deduced from the
deletion of the word "subordinate" before and the
words "in his bureau" after "officer or employee" is
that the Congress intended to empower the
Ombudsman to preventively suspend all officials
and employees under investigation by his office,
irrespective of whether they are employed "in his
office" or in other offices of the government. The
moment a criminal or administrative complaint is
filed with the Ombudsman, the respondent therein
is deemed to be "in his authority" and he can
proceed to determine whether said respondent
should be placed under preventive suspension.
In their petition, petitioners also claim that the
Ombudsman committed grave abuse of discretion
amounting to lack of jurisdiction when he issued
the suspension order without affording petitioners
the opportunity to confront the charges against
them during the preliminary conference and even
after petitioners had asked for the disqualification
of Director Arnaw and Atty. Villa-Rosero (Rollo,
pp. 6-13). Joining petitioners, the Solicitor General
contends
that
assuming arguendo that
the
Ombudsman has the power to preventively
suspend erring public officials and employees who
are working in other departments and offices, the
questioned order remains null and void for his
failure to comply with the requisites in Section 24
of the Ombudsman Law (Comment dated
December 3, 1992, pp. 11-19).
Being a mere order for preventive suspension, the
questioned order of the Ombudsman was validly
issued even without a full-blown hearing and the
formal presentation of evidence by the parties.
In Nera, supra, petitioner therein also claimed that
the Secretary of Health could not preventively
suspend him before he could file his answer to the
administrative complaint. The contention of
petitioners herein can be dismissed perfunctorily
by holding that the suspension meted out was
merely preventive and therefore, as held in Nera,
there was "nothing improper in suspending an
officer pending his investigation and before tho

Admin. Law | 208

charges against him are heard . . . (Nera v.

Garcia., supra).
There is no question that under Section 24 of R.A.
No. 6770, the Ombudsman cannot order the
preventive suspension of a respondent unless the
evidence of guilt is strong and (1) the charts
against such officer or employee involves
dishonesty, oppression or grave misconduct or
neglect in the performance of duty; (2) the charge
would warrant removal from the service; or (3) the
respondent's continued stay in office may prejudice
the case filed against him.
The same conditions for the exercise of the power
to preventively suspend officials or employees
under investigation were found in Section 34 of
R.A. No. 2260.
The import of the Nera decision is that the
disciplining authority is given the discretion to
decide when the evidence of guilt is strong. This
fact is bolstered by Section 24 of R.A. No. 6770,
which expressly left such determination of guilt to
the "judgment" of the Ombudsman on the basis of
the administrative complaint. In the case at bench,
the Ombudsman issued the order of preventive
suspension only after: (a) petitioners had filed their
answer to the administrative complaint and the
"Motion for the Preventive Suspension" of
petitioners, which incorporated the charges in the
criminal complaint against them (Annex 3,
Omnibus Submission, Rollo, pp. 288-289; Annex
4, Rollo,
pp. 290-296); (b) private respondent had filed a
reply to the answer of petitioners, specifying 23
cases of harassment by petitioners of the members
of the private respondent (Annex 6, Omnibus
Submission, Rollo, pp. 309-333); and (c) a
preliminary conference wherein the complainant
and the respondents in the administrative case
agreed to submit their list of witnesses and
documentary evidence.

Petitioners herein submitted on November 7, 1991

their list of exhibits (Annex 8 of Omnibus
Submission, Rollo, pp. 336-337) while private
respondents submitted their list of exhibits (Annex
9 of Omnibus Submission, Rollo, pp. 338-348).
Under these circumstances, it can not be said that
Director Raul Arnaw and Investigator Amy de
Villa-Rosero acted with manifest partiality and bias
in recommending the suspension of petitioners.
Neither can it be said that the Ombudsman had
acted with grave abuse of discretion in acting
favorably on their recommendation.
The Motion for Contempt, which charges the
lawyers of petitioners with unlawfully causing or
otherwise inducing their clients to openly defy and
disobey the preventive suspension as ordered by
the Ombudsman and the Secretary of Health can
not prosper (Rollo, pp. 259-261). The Motion
should be filed, as in fact such a motion was filed,
with the Ombudsman. At any rate, we find that the
acts alleged to constitute indirect contempt were
legitimate measures taken by said lawyers to
question the validity and propriety of the
preventive suspension of their clients.
On the other hand, we take cognizance of the
intemperate language used by counsel for private
respondents hurled against petitioners and their
counsel (Consolidated: (1) Comment on Private
Respondent"
"Urgent
Motions,
etc.;
(2) Adoption of OSG's Comment; and (3) Reply to
Private Respondent's Comment and Supplemental
Comment, pp. 4-5).
A lawyer should not be carried away in espousing
his client's cause. The language of a lawyer, both
oral or written, must be respectful and restrained in
keeping with the dignity of the legal profession and
with his behavioral attitude toward his brethren in
the profession (Lubiano v. Gordolla, 115 SCRA
459 [1982]). The use of abusive language by
counsel against the opposing counsel constitutes at
the same time a disrespect to the dignity of the
court of justice. Besides, the use of impassioned
language in pleadings, more often than not, creates
more heat than light.
Admin. Law | 209

The Motion for Disbarment (Rollo, p. 261) has no

place in the instant special civil action, which is
confined to questions of jurisdiction or abuse of
discretion for the purpose of relieving persons from
the arbitrary acts of judges and quasi-judicial
officers. There is a set of procedure for the
discipline of members of the bar separate and apart
from the present special civil action.
WHEREFORE, the petition is DISMISSED and
the Status quo ordered to be maintained in the
Resolution dated September 22, 1992 is LIFTED
and SET ASIDE.
SO ORDERED.

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

ALFREDO
L.
AZARCON, petitioner,
vs. SANDIGANBAYAN, PEOPLE OF THE
PHILIPPINES
and
JOSE
C.
BATAUSA, respondents.
DECISION
PANGANIBAN, J.:
Does the Sandiganbayan have jurisdiction over a
private individual who is charged with
malversation of public funds as a principal after the
said individual had been designated by the Bureau
of Internal Revenue as a custodian of distrained
property? Did such accused become a public
officer and therefore subject to the graft courts
jurisdiction as a consequence of such designation
by the BIR?
These are the main questions in the instant petition
for review of respondent Sandiganbayans
Decision[1] in Criminal Case No. 14260
promulgated on March 8, 1994, convicting
petitioner of malversation of public funds and
property, and Resolution[2] dated June 20, 1994,
denying his motion for new trial or reconsideration
thereof.

Petitioner Alfredo Azarcon owned and operated an

earth-moving business, hauling dirt and ore. [3] His
services were contracted by the Paper Industries
Corporation of the Philippines (PICOP) at its
concession
in
Mangagoy,
Surigao
del
Sur. Occasionally, he engaged the services of subcontractors like Jaime Ancla whose trucks were left
at the formers premises.[4] From this set of
circumstances arose the present controversy.
x x x It appears that on May 25, 1983, a Warrant of
Distraint of Personal Property was issued by the
Main Office of the Bureau of Internal Revenue
(BIR) addressed to the Regional Director (Jose
Batausa) or his authorized representative of
Revenue Region 10, Butuan City commanding the
latter to distraint the goods, chattels or effects and
other personal property of Jaime Ancla, a subcontractor of accused Azarcon and, a delinquent
taxpayer. The Warrant of Garnishment was issued
to accused Alfredo Azarcon ordering him to
transfer, surrender, transmit and/or remit to BIR the
property in his possession owned by taxpayer
Ancla. The Warrant of Garnishment was received
by accused Azarcon on June 17, 1985.[5]
Petitioner Azarcon, in signing the Receipt for
Goods, Articles, and Things Seized Under
Authority of the National Internal Revenue,
assumed the undertakings specified in the receipt
the contents of which are reproduced as follows:
(I), the undersigned, hereby acknowledge to have
received from Amadeo V. San Diego, an Internal
Revenue Officer, Bureau of Internal Revenue of
the Philippines, the following described goods,
articles, and things:
Kind of property

---

Isuzu dump truck

Motor number

---

E120-229598

Chassis No.

---

SPZU50-1772440

Number of CXL

---

The Facts
Admin. Law | 210

Admin. Law | 211

Color

---

Blue

Owned By

---

Mr. Jaime Ancla

the same having been this day seized and left in

(my) possession pending investigation by the
Commissioner of Internal Revenue or his duly
authorized representative. (I) further promise that
(I) will faithfully keep, preserve, and, to the best of
(my) ability, protect said goods, articles, and things
seized from defacement, demarcation, leakage,
loss, or destruction in any manner; that (I) will
neither alter nor remove, nor permit others to alter
or remove or dispose of the same in any manner
without the express authority of the Commissioner
of Internal Revenue; and that (I) will produce and
deliver all of said goods, articles, and things upon
the order of any court of the Philippines, or upon
demand of the Commissioner of Internal Revenue
or any authorized officer or agent of the Bureau of
Internal Revenue.[6]
Subsequently, Alfredo Azarcon wrote a letter dated
November 21, 1985 to the BIRs Regional Director
for Revenue Region 10 B, Butuan City stating that
x x x while I have made representations to retain
possession of the property and signed a receipt of
the same, it appears now that Mr. Jaime Ancla
intends to cease his operations with us. This is
evidenced by the fact that sometime in August,
1985 he surreptitiously withdrew his equipment
from my custody. x x x In this connection, may I
therefore formally inform you that it is my desire
to immediately relinquish whatever responsibilities
I have over the above-mentioned property by virtue
of the receipt I have signed. This cancellation shall
take effect immediately. x x x .[7]
Incidentally, the petitioner reported the taking of
the truck to the security manager of PICOP, Mr.
Delfin Panelo, and requested him to prevent this
truck from being taken out of the PICOP
concession. By the time the order to bar the trucks
exit was given, however, it was too late. [8]

Regional Director Batausa responded in a letter

dated May 27, 1986, to wit:
An analysis of the documents executed by you
reveals that while you are (sic) in possession of the
dump truck owned by JAIME ANCLA, you
voluntarily assumed the liabilities of safekeeping
and preserving the unit in behalf of the Bureau of
Internal Revenue. This is clearly indicated in the
provisions of the Warrant of Garnishment which
you have signed, obliged and committed to
surrender and transfer to this office. Your failure
therefore, to observe said provisions does not
relieve you of your responsibility.[9]
Thereafter, the Sandiganbayan found that
On 11 June 1986, Mrs. Marilyn T. Calo, Revenue
Document Processor of Revenue Region 10 B,
Butuan City, sent a progress report to the Chief of
the Collection Branch of the surreptitious taking of
the dump truck and that Ancla was renting out the
truck to a certain contractor by the name of Oscar
Cueva at PICOP (Paper Industries Corporation of
the Philippines, the same company which engaged
petitioners earth moving services), Mangagoy,
Surigao del Sur. She also suggested that if the
report were true, a warrant of garnishment be
reissued against Mr. Cueva for whatever amount of
rental is due from Ancla until such time as the
latters tax liabilities shall be deemed satisfied. x x
x However, instead of doing so, Director Batausa
filed a letter-complaint against the (herein
Petitioner) and Ancla on 22 January 1988, or after
more than one year had elapsed from the time of
Mrs. Calos report.[10]
Provincial Fiscal Pretextato Montenegro forwarded
the records of the complaint x x x to the Office of
the Tanodbayan on May 18, 1988. He was
deputized Tanodbayan prosecutor and granted
authority to conduct preliminary investigation on
August 22, 1988, in a letter by Special Prosecutor
Raul Gonzales approved by Ombudsman
(Tanodbayan) Conrado Vasquez.[11]
Along with his co-accused Jaime Ancla, petitioner
Azarcon was charged before the Sandiganbayan
Admin. Law | 212

with the crime of malversation of public funds or

property under Article 217 in relation to Article
222 of the Revised Penal Code (RPC) in the
following Information[12]filed on January 12, 1990,
by Special Prosecution Officer Victor Pascual:
That on or about June 17, 1985, in the Municipality
of Bislig, Province of Surigao del Sur, Philippines,
and within the jurisdiction of this Honorable Court,
accused Alfredo L. Azarcon, a private individual
but
who,
in
his
capacity
as
depository/administrator of property seized or
deposited by the Bureau of Internal Revenue,
having voluntarily offered himself to act as
custodian of one Isuzu Dumptruck (sic) with Motor
No. E120-22958, Chasis No. SPZU 50-1772440,
and number CXL-6 and was authorized to be such
under the authority of the Bureau of Internal
Revenue, has become a responsible and
accountable officer and said motor vehicle having
been seized from Jaime C. Ancla in satisfaction of
his tax liability in the total sum of EIGHTY
THOUSAND EIGHT HUNDRED THIRTY ONE
PESOS and 59/100 (P80,831.59) became a public
property and the value thereof as public fund, with
grave abuse of confidence and conspiring and
confederating with said Jaime C. Ancla, likewise, a
private individual, did then and there wilfully, (sic)
unlawfully and feloniously misappropriate,
misapply and convert to his personal use and
benefit the aforementioned motor vehicle or the
value thereof in the aforestated amount, by then
and there allowing accused Jaime C. Ancla to
remove, retrieve, withdraw and tow away the said
Isuzu Dumptruck (sic) with the authority, consent
and knowledge of the Bureau of Internal Revenue,
Butuan City, to the damage and prejudice of the
government in the amount of P80,831.59 in a form
of unsatisfied tax liability.
CONTRARY TO LAW.
The petitioner filed a motion for reinvestigation
before the Sandiganbayan on May 14, 1991,
alleging that: (1) the petitioner never appeared in
the preliminary investigation;and (2) the petitioner
was not a public officer, hence a doubt exists as to
why he was being charged with malversation under

Article 217 of the Revised Penal Code. [13] The

Sandiganbayan
granted
the
motion
for
[14]
reinvestigation on May 22, 1991. After the
reinvestigation, Special Prosecution Officer Roger
Berbano, Sr., recommended the withdrawal of the
information[15] but was overruled by the
Ombudsman.[16]
A motion to dismiss was filed by petitioner on
March 25, 1992 on the ground that the
Sandiganbayan did not have jurisdiction over the
person of the petitioner since he was not a public
officer.[17] On May 18, 1992, the Sandiganbayan
denied the motion.[18]
When the prosecution finished presenting its
evidence, the petitioner then filed a motion for
leave to file demurrer to evidence which was
denied on November 16, 1992, for being without
merit.[19] The petitioner then commenced and
finished presenting his evidence on February 15,
1993.
The Respondent Courts Decision
On
March
8,
1994,
respondent
[20]
Sandiganbayan rendered
a
Decision,[21] the
dispositive portion of which reads:
WHEREFORE, the Court finds accused Alfredo
Azarcon y Leva GUILTY beyond reasonable doubt
as principal of Malversation of Public Funds
defined and penalized under Article 217 in relation
to Article 222 of the Revised Penal Code and,
applying the Indeterminate Sentence Law, and in
view of the mitigating circumstance of voluntary
surrender, the Court hereby sentences the accused
to suffer the penalty of imprisonment ranging from
TEN (10) YEARS and ONE (1) DAY of prision
mayor in its maximum period to SEVENTEEN
(17) YEARS, FOUR (4) MONTHS and ONE (1)
DAY of Reclusion Temporal. To indemnify the
Bureau of Internal Revenue the amount
of P80,831.59; to pay a fine in the same amount
without subsidiary imprisonment in case of
insolvency;
to
suffer
special
perpetual
disqualification; and, to pay the costs.

Admin. Law | 213

Considering that accused Jaime Ancla has not yet

been brought within the jurisdiction of this Court
up to this date, let this case be archived as against
him without prejudice to its revival in the event of
his arrest or voluntary submission to the
jurisdiction of this Court.
SO ORDERED.
Petitioner, through new counsel, [22] filed a motion
for new trial or reconsideration on March 23, 1994,
which was denied by the Sandiganbayan in its
Resolution[23] dated December 2, 1994.
Hence, this petition.

governments right to the subject property has not

been established.
IV. The procedure provided for in the National
Internal Revenue Code concerning the disposition
of distrained property was not followed by the
B.I.R., hence the distraint of personal property
belonging to Jaime C. Ancla and found allegedly to
be in the possession of the petitioner is therefore
invalid.
V. The B.I.R. has only itself to blame for not
promptly selling the distrained property of accused
Jaime C. Ancla in order to realize the amount of
back taxes owed by Jaime C. Ancla to the Bureau.
[24]

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

In fine, the fundamental issue is whether the

Sandiganbayan had jurisdiction over the subject
matter of the controversy. Corollary to this is the
question of whether petitioner can be considered a
public officer by reason of his being designated by
the Bureau of Internal Revenue as a depositary of
distrained property.
The Courts Ruling
The petition is meritorious.
Jurisdiction of the Sandiganbayan
It is hornbook doctrine that in order (to) ascertain
whether a court has jurisdiction or not, the
provisions of the law should be inquired into.
[25]
Furthermore, the jurisdiction of the court must
appear clearly from the statute law or it will not be
held to exist. It cannot be presumed or implied.
[26]
And for this purpose in criminal cases, the
jurisdiction of a court is determined by the law at
the time of commencement of the action.[27]
In this case, the action was instituted with the filing
of this information on January 12, 1990; hence, the
applicable statutory provisions are those of P.D.
No. 1606, as amended by P.D. No. 1861 on March
23, 1983, but prior to their amendment by R.A. No.
7975 on May 16, 1995. At that time, Section 4 of
P.D. No. 1606 provided that:
Admin. Law | 214

SEC. 4. Jurisdiction. -- The Sandiganbayan shall

exercise:
(a) Exclusive original jurisdiction in all cases
involving:
(1) Violations of Republic Act No. 3019, as
amended, otherwise known as the Anti-Graft and
Corrupt Practices Act, Republic Act No. 1379, and
Chapter II, Section 2, Title VII of the Revised
Penal Code;
(2) Other offenses or felonies committed by public
officers and employees in relation to their office,
including those employed in government-owned or
controlled corporations, whether simple or
complexed with other crimes, where the penalty
prescribed by law is higher than prision
correccional or imprisonment for six (6) years, or a
fine of P6,000.00: PROVIDED, HOWEVER, that
offenses or felonies mentioned in this paragraph
where the penalty prescribed by law does not
exceed prision correccional or imprisonment for
six (6) years or a fine of P6,000.00 shall be tried by
the proper Regional Trial Court, Metropolitan Trial
Court, Municipal Trial Court and Municipal Circuit
Trial Court.
xxxxxxxxx
In case private individuals are charged as coprincipals, accomplices or accessories with the
public officers or employees, including those
employed in government-owned or controlled
corporations, they shall be tried jointly with said
public officers and employees.
x x x x x x x x x.

Public

Who are public officers. -- For the purpose of

applying the provisions of this and the preceding
titles of the book, any person who, by direct
provision of the law, popular election, popular
election or appointment by competent authority,
shall take part in the performance of public
functions in the Government of the Philippine
Islands, or shall perform in said Government or in
any of its branches public duties as an employee,
agent, or subordinate official, of any rank or
classes, shall be deemed to be a public officer.
Thus,
(to) be a public officer, one must be -(1) Taking part in the performance of public
functions in the government, or
Performing in said Government or any of its
branches public duties as an employee, agent, or
subordinate official, of any rank or class; and
(2) That his authority to take part in the
performance of public functions or to perform
public duties must be -a. by direct provision of the law, or
b. by popular election, or

The foregoing provisions unequivocally specify the

only instances when the Sandiganbayan will have
jurisdiction over a private individual, i.e. when the
complaint charges the private individual either as a
co-principal, accomplice or accessory of a public
officer or employee who has been charged with a
crime within its jurisdiction.
Azarcon: A
Individual?

The Information does not charge petitioner

Azarcon of being a co-principal, accomplice or
accessory to a public officer committing an offense
under the Sandiganbayans jurisdiction. Thus,
unless petitioner be proven a public officer, the
Sandiganbayan will have no jurisdiction over the
crime charged. Article 203 of the RPC determines
who are public officers:

Officer

or

Private

c. by appointment by competent authority.[28]

Granting arguendo that the petitioner, in signing
the receipt for the truck constructively distrained
by the BIR, commenced to take part in an activity
constituting public functions, he obviously may not
be deemed authorized by popular election. The
next logical query is whether petitioners
designation by the BIR as a custodian of distrained
Admin. Law | 215

property qualifies as appointment by direct

provision of law, or by competent authority.[29] We
answer in the negative.
The Solicitor General contends that the BIR, in
effecting constructive distraint over the truck
allegedly owned by Jaime Ancla, and in requiring
the petitioner Alfredo Azarcon who was in
possession thereof to sign a pro forma receipt for
it, effectively designated petitioner a depositary
and, hence, citing U.S. vs. Rastrollo,[30] a public
officer.[31] This is based on the theory that
(t)he power to designate a private person who has
actual possession of a distrained property as a
depository of distrained property is necessarily
implied in the BIRs power to place the property of
a delinquent tax payer (sic) in distraint as provided
for under Sections 206, 207 and 208 (formerly
Sections 303, 304 and 305) of the National Internal
Revenue Code, (NIRC) x x x.[32]
We disagree. The case of U.S. vs. Rastrollo is not
applicable to the case before us simply because the
facts therein are not identical, similar or analogous
to those obtaining here. While the cited case
involved a judicial deposit of the proceeds of the
sale of attached property in the hands of the debtor,
the case at bench dealt with the BIRs
administrative act of effecting constructive
distraint over alleged property of taxpayer Ancla in
relation to his back taxes, property which was
received by petitioner Azarcon. In the cited case, it
was clearly within the scope of that courts
jurisdiction and judicial power to constitute the
judicial deposit and give the depositary a character
equivalent to that of a public official. [33] However,
in the instant case, while the BIR had authority to
require petitioner Azarcon to sign a receipt for the
distrained truck, the NIRC did not grant it power to
appoint Azarcon a public officer.
It is axiomatic in our constitutional framework,
which mandates a limited government, that its
branches and administrative agencies exercise only
that power delegated to them as defined either in
the Constitution or in legislation or in both.
[34]
Thus, although the appointing power is the

exclusive prerogative of the President, x x x [35] the

quantum of powers possessed by an administrative
agency forming part of the executive branch will
still be limited to that conferred expressly or by
necessary or fair implication in its enabling
act. Hence, (a)n administrative officer, it has been
held, has only such powers as are expressly granted
to him and those necessarily implied in the
exercise thereof.[36]Corollarily, implied powers are
those which are necessarily included in, and are
therefore of lesser degree than the power
granted. It cannot extend to other matters not
embraced therein, nor are not incidental thereto.
[37]
For to so extend the statutory grant of power
would be an encroachment on powers expressly
lodged in Congress by our Constitution. [38] It is true
that Sec. 206 of the NIRC, as pointed out by the
prosecution, authorizes the BIR to effect a
constructive distraint by requiring any person to
preserve a distrained property, thus:
xxxxxxxxx
The constructive distraint of personal property
shall be effected by requiring the taxpayer or any
person having possession or control of such
property to sign a receipt covering the property
distrained and obligate himself to preserve the
same intact and unaltered and not to dispose of the
same in any manner whatever without the express
authority of the Commissioner.
xxxxxxxxx
However, we find no provision in the NIRC
constituting such person a public officer by reason
of such requirement. The BIRs power authorizing a
private individual to act as a depositary cannot be
stretched to include the power to appoint him as a
public officer. The prosecution argues that Article
222 of the Revised Penal Code x x x defines the
individuals covered by the term officers under
Article 217[39] x x x of the same Code. [40] And
accordingly, since Azarcon became a depository of
the truck seized by the BIR he also became a
public officer who can be prosecuted under Article
217 x x x.[41]

Admin. Law | 216

The Court is not persuaded. Article 222 of the RPC

reads:
Officers included in the preceding provisions.
-- The provisions of this chapter shall apply to
private individuals who, in any capacity whatever,
have charge of any insular, provincial or municipal
funds, revenues, or property and to any
administrator or depository of funds or property
attached, seized or deposited by public authority,
even if such property belongs to a private
individual.
Legislative intent is determined principally from
the language of a statute. Where the language of a
statute is clear and unambiguous, the law is applied
according to its express terms, and interpretation
would be resorted to only where a literal
interpretation would be either impossible or absurd
or would lead to an injustice. [42] This is particularly
observed in the interpretation of penal statutes
which must be construed with such strictness as to
carefully safeguard the rights of the defendant x x
x.[43] The language of the foregoing provision is
clear. A private individual who has in his charge
any of the public funds or property enumerated
therein and commits any of the acts defined in any
of the provisions of Chapter Four, Title Seven of
the RPC, should likewise be penalized with the
same
penalty
meted
to
erring
public
officers. Nowhere in this provision is it expressed
or implied that a private individual falling under
said Article 222 is to be deemed a public officer.
After a thorough review of the case at bench, the
Court thus finds petitioner Alfredo Azarcon and his
co-accused Jaime Ancla to be both private
individuals erroneously charged before and
convicted by Respondent Sandiganbayan which
had no jurisdiction over them. The Sandiganbayans
taking cognizance of this case is of no moment
since (j)urisdiction cannot be conferred by x x x
erroneous belief of the court that it had jurisdiction.
[44]
As aptly and correctly stated by the petitioner in
his memorandum:
From the foregoing discussion, it is evident that the
petitioner did not cease to be a private individual

when he agreed to act as depositary of the

garnished dump truck. Therefore, when the
information charged him and Jaime Ancla before
the Sandiganbayan for malversation of public
funds or property, the prosecution was in fact
charging two private individuals without any
public officer being similarly charged as a coconspirator. Consequently, the Sandiganbayan had
no jurisdiction over the controversy and therefore
all the proceedings taken below as well as the
Decision rendered by Respondent Sandiganbayan,
are null and void for lack of jurisdiction. [45]
WHEREFORE, the questioned Resolution and
Decision
of
the
Sandiganbayan
are
hereby SET ASIDE and declared NULL and VOID
for lack of jurisdiction. No costs.
SO ORDERED.

G.R. No. L-13827

September 28, 1962

BENJAMIN
MASANGCAY, petitioner,
vs.
THE
COMMISSION
ON
ELECTIONS, respondent.
Godofredo A. Ramos and Ruby Salazar-Alberto for
petitioner.
Office of the Solicitor General and Dominador D.
Dayot for respondent.

BAUTISTA ANGELO, J.:

Benjamin Masangcay, with several others, was on
October 14, 1957 charged before the Commission
on Election with contempt for having opened three
boxes bearing serial numbers l-8071, l-8072 and l8073 containing official and sample ballots for the
municipalities of the province of Aklan, in
violation of the instructions of said Commission
embodied in its resolution promulgated September
2, 1957, and its unnumbered resolution date March
5, 1957, inasmuch as he opened said boxes not the
Admin. Law | 217

presence of the division superintendent of schools

of Aklan, the provincial auditor, and the authorized
representatives of the Nacionalista Party, the
Liberal Party and the Citizens' Party, as required in
the aforesaid resolutions, which are punishable
under Section 5 of the Revised Election Code and
Rule 64 of the Rules of Court. Masangcay was
then the provincial treasurer of Aklan designated
by the Commission in its resolution in Case CENo. 270, part II 2 (b) thereof, to take charge of the
receipt and custody of the official ballots, election
forms and supplies, as well as of their distribution,
among the different municipalities of the province.
In compliance with the summons issued to
Masangcay and his co-respondents to appear and
show cause why they should not be punished for
contempt on the basis of the aforementioned
charge, they all appeared before the Commission
on October 21, 1957 and entered a plea of not
guilty. Thereupon, evidence was presented by both
the prosecution and the defense, and on December
16, 1957 the Commission rendered its decision
finding Masangcay and his co-respondent Molo
guilty as charged and sentencing each of them to
suffer three months imprisonment and pay a fine of
P500, with subsidiary imprisonment of two months
in case of insolvency, to be served in the provincial
jail of Aklan. The other respondents were
exonerated for lack of evidence.
Masangcay brought the present petition for review
raising as main issue the constitutionality of
Section 5 of the Revised Election Code which
grants the Commission on Elections as well as its
members the power to punish acts of contempt
against said body under the same procedure and
with the same penalties provided for in Rule 64 of
the Rules of Court in that the portion of said
section which grants to the Commission and
members the power to punish for contempt is
unconstitutional for it infringes the principle
underlying the separation of powers that exists
among the three departments of our constitutional
form of government. In other words, it is
contended that, even if petitioner can be held guilty
of the act of contempt charged, the decision is null

and void for lack of valid power on the part of the

Commission to impose such disciplinary penalty
under the principle of separation of powers. There
is merit in the contention that the Commission on
Elections lacks power to impose the disciplinary
penalty meted out to petitioner in the decision
subject of review. We had occasion to stress in the
case of Guevara v. The Commission on
Elections 1 that under the law and the constitution,
the Commission on Elections has only the duty to
enforce and administer all laws to the conduct of
elections, but also the power to try, hear and decide
any controversy that may be submitted to it in
connection with the elections. In this sense, said,
the Commission, although it cannot be classified a
court of justice within the meaning of the
Constitution (Section 30, Article VIII), for it is
merely an administrative body, may however
exercise quasi-judicial functions insofar as
controversies that by express provision law come
under its jurisdiction. The difficulty lies in drawing
the demarcation line between the duty which
inherently is administrative in character and a
function which calls for the exercise of the quasijudicial function of the Commission. In the same
case, we also expressed the view that when the
Commission exercises a ministerial function it
cannot exercise the power to punish contempt
because such power is inherently judicial in nature,
as can be clearly gleaned from the following
doctrine we laid down therein:
. . . In proceeding on this matter, it only discharged
a ministerial duty; it did not exercise any judicial
function. Such being the case, it could not exercise
the power to punish for contempt as postulated in
the law, for such power is inherently judicial in
nature. As this Court has aptly said: 'The power to
punish for contempt is inherent in all courts; its
existence is essential to the preservation of order in
judicial proceedings, and to the enforcement of
judgments, orders and mandates courts, and,
consequently, in the administration of justice
(Slade Perkins v. Director of Prisons, 58 Phil., 271;
U.S. v. Lee Hoc, 36 Phil., 867; In Re Sotto, 46
O.G., 2570; In Re Kelly, Phil., 944). The exercise
of this power has always been regarded as a
Admin. Law | 218

necessary incident and attribute of courts (Slade

Perkins v. Director of Prisons, Ibid.). Its exercise
by administrative bodies has been invariably
limited to making effective the power to elicit
testimony (People v. Swena, 296 P., 271). And the
exercise of that power by an administrative body in
furtherance of its administrative function has been
held invalid (Langenberg v. Lecker, 31 N.E.,
190; In Re Sims, 37 P., 135; Roberts v. Hacney, 58
SW., 810).1awphl.nt

WHEREFORE, the decision appealed from insofar

as petitioner Benjamin Masangcay is concerned, as
well as the resolution denying petitioner's motion
for reconsideration, insofar as it concerns him, are
hereby reversed, without pronouncement as to
costs.

In the instant case, the resolutions which the

Commission tried to enforce and for whose
violation the charge for contempt was filed against
petitioner Masangcay merely call for the exercise
of an administrative or ministerial function for they
merely concern the procedure to be followed in the
distribution of ballots and other election
paraphernalia among the different municipalities.
In fact, Masangcay, who as provincial treasurer of
Aklan was the one designated to take charge of the
receipt, custody and distribution of election
supplies in that province, was charged with having
opened three boxes containing official ballots for
distribution among several municipalities in
violation of the instructions of the Commission
which enjoin that the same cannot be opened
except in the presence of the division
superintendent of schools, the provincial auditor,
and the authorized representatives of the
Nacionalista Party, the Liberal Party, and the
Citizens' Party, for he ordered their opening and
distribution not in accordance with the manner and
procedure laid down in said resolutions. And
because of such violation he was dealt as for
contempt of the Commission and was sentenced
accordingly. In this sense, the Commission has
exceeded its jurisdiction in punishing him for
contempt, and so its decision is null and void.

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

Having reached the foregoing conclusion, we deem

it unnecessary to pass on the question of
constitutionality raised by petitioner with regard to
the portion of Section 5 of the Revised Election
Code which confers upon the Commission on
Elections the power to punish for contempt for acts
provided for in Rule 64 of our rules of court.

G.R. No. 110265 July 7, 1994

Abelardo G. Luzano for petitioner.

Benito O. Ching, Jr. for private respondents.

BELLOSILLO, J.:
This petition for certiorari filed under Rule 65 of
the Rules of Court seeks to annul and set aside the
order of respondent Securities and Exchange
Commission dated 7 January 1993 in SEC-EB No.
308 denying the action of petitioners to nullify the
7 January 1992 order of the Securities and
Exchange Commission in SEC Case No. 3577.
Sometime in 1986 and 1987, Freeman, Inc.
(FREEMAN), was granted a loan by Equitable
Banking Corporation (EQUITABLE) as evidenced
by two (2) promissory notes, P.N. No. 125957
dated 8 December 1986 for P1,700,000.00 payable
8 December 1987, and P.N. No. TL-369 dated 24
April 1987 for P6,000,000.00 payable 24 April
1988. Saw Chiao Lian, President of Freeman, Inc.,
signed as co-maker in both promissory notes.

Admin. Law | 219

When FREEMAN failed to pay its obligations,

EQUITABLE instituted collection suit against
FREEMAN and Saw Chiao Lian. 1 EQUITABLE
also prayed for preliminary attachment.
On 27 May 1988, private respondents Saw Mui,
Ruben Saw, Dionisio Saw, Lina S. Chua, Lucila S.
Ruste and Evelyn Saw filed an answer in
intervention claiming that they owned the minority
interest in FREEMAN.
On 12 October 1988, the trial court denied the
intervention of private respondents. The denial was
affirmed by the Court of Appeals and thereafter by
this Court. 2
The collection case was terminated when the
parties entered into a compromise agreement duly
approved by the court and a decision rendered
thereon on 5 December 1988. However, Freeman,
Inc. (FREEMAN) and Saw Chiao Lian, defendants
in the trial court, failed to comply with the
judgment.
On 30 January 1989, a writ of execution was
issued. Two (2) parcels of land belonging to
FREEMAN covered by TCT Nos. 34219 and
34220 were levied upon and sold at public auction
on 31 March 1989. The highest bidder was one of
the petitioners, Freeman Management and
Development
Corporation
(FREEMAN
MANAGEMENT), which thereafter registered its
certificate of sale with the Register of Deeds.

between EQUITABLE on one hand and defendants

FREEMAN and Saw Chiao Lian on the other, as
well as the promissory notes executed by Saw
Chiao Lian, the auction sale, and the sheriff's
certificate of sale of the lots covered by TCT Nos.
34219 and 34220.
Petitioners moved for the dismissal of the
complaint on the ground that the same was a
duplication of the case pending in the SEC. But the
motion was denied. Petitioners went up
on certiorari to the Court of Appeals which
reversed the trial court and directed the dismissal
of the complaint by reason of the pendency of the
case. 5
On 7 January 1992, on motion on private
respondents
in
SEC
Case
No. 3577, and despite the opposition thereto by
petitioners, SEC Hearing Officer Juanito B.
Almosa, Jr., issued a writ of preliminary injunction
to prevent the consolidation of ownership of
petitioner FREEMAN MANAGEMENT over the
properties it acquired in the auction sale of 31
March 1989, the redemption period having expired
on 7 April 1990. 6
Petitioners assailed the order of the SEC Hearing
Officer by filing a petition for certiorari with the
SEC en banc which on 7 January 1993 however
denied the petition. 7 On 15 March 1993,
petitioners' motion for reconsideration was
likewise denied. 8

On 23 May 1989, before FREEMAN

MANAGEMENT could consolidate its title over
the properties purchased at the auction sale, private
respondents,
representing
the
minority
shareholdings of FREEMAN, filed a petition with
the Securities and Exchange Commission (SEC)
seeking the dissolution of FREEMAN, accounting
and reconveyance of the properties covered by
TCT Nos. 34219 and 34220. 3

On 22 April 1993, petitioners filed with this Court

a petition for certiorari questioning the 15 March
1993 order of the SEC. 9 In a Resolution dated 10
May 1993, this Court dismissed the petition for its
failure to state the date when the questioned SEC
Order was received as well as the date when the
order denying the Motion for Reconsideration was
received. 10

On 5 April 1990, private respondent filed a similar

complaint against petitioners with the Regional
Trial Court of Kalookan City. 4 The complaint
sought to annul the compromise agreement

On 4 June 1993, petitioners filed the present

petition containing the matters omitted in the
petition earlier dismissed. Petitioners allege that
the SEC committed grave abuse of discretion and
acted in excess of jurisdiction in sustaining the
Admin. Law | 220

order of its Hearing Officer granting the writ of

injunction enjoining consolidation of ownership in
FREEMAN MANAGEMENT and that the SEC
miscontrued the decisions of the Court of Appeals
in Equitable Banking Corp. v. Hon. Mangay 11 and
of
this
Court
in Saw
v.
Court
12
of Appeals, which in effect ruled the SEC has
jurisdiction to take cognizance of and determine
the rights of petitioners and private respondents as
against each other. Petitioners also argue that the
assailed order of the SEC violated the basic
principle that the SEC, being a coordinate body
with the Regional Trial Court, could not interfere
in the proceedings held therein, and neither could it
review the issues passed upon by the said court.
They likewise maintain that although SEC Case
No. 3577 could still proceed as to the dissolution
of FREEMAN, the two (2) properties of the latter
which were levied upon and sold to FREEMAN
MANAGEMENT are already excluded from the
corporate assets of FREEMAN; and, that these
properties could no longer be the subject of the
action for reconveyance in the SEC because they
had been the subject of execution to enforce the
decision of the trial court in Civil Case No. 8844404 which had already attained finality.
In their comment, private respondents contend that
the present petition was filed beyond the
reglementary period of thirty (30) days within
which to appeal to this Court, citing Sec. 1, Rule
17, of the New Rules of Procedure of the SEC.
Private respondents also allege that the jurisdiction
of the SEC has been resolved by this Court in Saw
v. Court of Appeals 13 when it held that "even with
the denial of petitioners' motion to intervene,
nothing is really lost to them. The denial did not
necessarily prejudice them as their rights are being
litigated in the case (SEC Case No. 3577) now
before the Securities and Exchange Commission
and may be fully asserted and protected in that
separate proceeding."
In its comment, the Office of the Solicitor General
expresses conformity with the allegations in the
petition and prays that the petition be given due
course. It also avers that since the present petition,

which is one under Rule 65 of the Rules of Court,

was filed thirty-five (35) days after receipt of the
assailed resolution of the SEC, the instant petition
was filed within a reasonable time. The Solicitor
General also agrees with petitioners' contention
that the SEC, as a co-equal body with the Regional
Trial Court, cannot modify, reverse or pass upon
the decision of said court. Moreover, private
respondents had the opportunity to submit a bid for
the foreclosed properties during the public auction
and their failure to exercise their right should not
prejudice petitioners.
We sustain petitioners. The present petition seeks
to annul and set aside the order of the SEC for
want of jurisdiction to issue the writ of injunction,
a provisional remedy to the principal action
pending in the SEC for the dissolution of petitioner
FREEMAN. Hence, the petition is not an appeal
from a final order of the SEC but a special civil
action questioning the legal competence of the
latter to issue such interlocutory order. It is covered
by Sec. 1, Rule 65, of the Rules of Court which
allow a person aggrieved to file a verified petition
in the proper court praying that judgment be
rendered annulling or modifying the proceedings,
as the law requires, of the tribunal, board or officer
when the latter, exercising judicial functions, has
acted without or in excess of its or his jurisdiction
or with grave abuse of discretion and there is no
appeal, nor any plain, speedy and adequate remedy
in the ordinary course of law.
We have consistently ruled that petitions
for certiorari must be filed within a reasonable
time. In the instant case, the records show that the
petition at bench was filed on 4 June 1993, or two
(2) months and nineteen (19) days from 17 March
1993, which was the date when petitioners
received copy of the order of the SEC denying
their motion for reconsideration. There is no doubt
that this petition was seasonably filed.
SEC Case No. 3577 arose from the action filed by
private respondents as minority shareholders of
petitioner FREEMAN for the dissolution of the
corporation and reconveyance of the properties
conveyed to another petitioner FREEMAN
Admin. Law | 221

MANAGEMENT in a public auction. The SEC

maintained that it had jurisdiction to issue the writ
of injunction preventing the consolidation of
ownership in FREEMAN MANAGEMENT on the
basis of our ruling in Saw v. Court of Appeals. We
denied the intervention of private respondents in
the trial court in Civil Case No. 88-44404 which
had already been terminated. As we stated therein,
even with the denial of herein private respondents'
motion to intervene nothing could really be lost to
them as their rights were being litigated before the
SEC and would be fully asserted and protected in
that separate proceeding.
Our ruling in Saw v. Court of Appeals should be
understood in the light of two(2) basic legal
principles. First, that administrative agencies like
the SEC are tribunals of limited jurisdiction and as
such can exercise only those powers which are
specifically granted to them by their enabling
statutes. 14 Section 5 of P.D. No. 902-A, as
amended, provides the cases over which the SEC
has original and exclusive jurisdiction to hear and
decide. These include controversies arising out of
intra-corporate or partnership relations between
and among stockholders, members or associates;
between any or all of them and the corporation,
partnership or association of which they are
stockholders, members or associates, respectively;
and, between such corporation, partnership or
association and the state insofar as it concerns their
individual franchise or right to exist as such entity.
Section 6 of the same decree empowers the SEC to
issue preliminary or permanent injunction, whether
prohibitory or mandatory, in all cases in which it
has jurisdiction.
The action for dissolution of FREEMAN filed by
its minority stockholders is well within the
jurisdiction of the SEC to resolve in accordance
with P.D. No. 902-A. However, the inclusion in the
SEC case of FREEMAN MANAGEMENT of
which private respondents are not stockholders for
the purpose of compelling it to reconvey to
FREEMAN the properties originally owned by the
latter but were levied upon and sold to FREEMAN
MANAGEMENT in a public auction is a matter

outside of the limited jurisdiction of the SEC. The

petition for reconveyance of properties against
FREEMAN MANAGEMENT is not an intracorporate controversy since private respondents
have no shares or interests whatsoever in
FREEMAN MANAGEMENT, a corporation
separate and distinct from FREEMAN, which is
undergoing dissolution proceedings in the SEC.
The second basic principle is the doctrine of noninterference which should be regarded as highly
important in judicial stability and in the
administration of justice whereby the judgment of
a court of competent jurisdiction may not be
opened, modified or vacated by any court or
tribunal of concurrent jurisdiction. 15 The SEC is at
the very least co-equal with the Regional Trial
Court. As such, one would have no power to
control the other. 16 Moreover, in the instant case,
judgment was rendered by the trial court in Civil
Case No. 88-44404 approving the compromise
agreement between EQUITABLE on one hand, and
FREEMAN and Saw Chiao Lian on the other. A
writ of execution was issued against the defendants
to enforce the judgment and two (2) properties of
FREEMAN were levied upon and sold to
FREEMAN MANAGEMENT as highest bidder in
the public auction.
Finally, the judgment was fully satisfied and a
certificate of sale was issued to FREEMAN
MANAGEMENT. It is axiomatic that after a
judgment has been fully satisfied, the case is
deemed terminated once and for all. 17 It cannot be
modified or altered. Hence, the properties sold to
FREEMAN MANAGEMENT are now considered
excluded from the corporate assets of FREEMAN
and can no longer be the subject of the proceedings
in the SEC for the dissolution of the latter.
Therefore SEC exceeded its jurisdiction when it
issued a writ of injunction enjoining FREEMAN
MANAGEMENT from consolidating its ownership
over the two (2) parcels of land it acquired as
highest bidder in the execution sale.
WHEREFORE, the petition is GRANTED and the
assailed orders of the Securities and Exchange
Admin. Law | 222

Commission dated 7 January 1993 and 15 March

1993 are REVERSED and SET ASIDE.

area and remove whatever improvements they may

have introduced thereto."2

SO ORDERED.

Attempts to enforce the Order of Execution failed,

prompting Narcisa to file a complaint for ejectment
before the Baguio City Municipal Trial Court in
Cities (MTCC). The MTCC dismissed Narcisas
complaint, however, by Order3of August 7, 1996.

G.R. No. 161811

April 12, 2006

THE CITY OF BAGUIO, MAURICIO

DOMOGAN,
and
ORLANDO
GENOVE, Petitioners,
vs.
FRANCISCO NIO, JOSEFINA NIO,
EMMANUEL
NIO,
and
EURLIE
OCAMPO, Respondents.
DECISION
CARPIO MORALES, J.:
The Bureau of Lands awarded on May 13, 1966 to
Narcisa A. Placino (Narcisa) a parcel of land
identified as Lot No. 10 (the lot) located at Saint
Anthony Road, Dominican-Mirador Barangay,
Baguio City.
Francisco Nio (Nio), one of the herein
respondents, who has been occupying the lot,
contested the award by filing a Petition Protest on
December 23, 1975 before the Bureau of Lands.
The Director of Lands dismissed the Petition
Protest by Order of November 11, 1976.
Nio appealed the dismissal all the way to the
Supreme Court but he did not succeed.
The decision of the Director of Lands dated
November 11, 1976 having become final and
executory,1 the then-Executive Director of the
Department of Environment and Natural
Resources-Cordillera Autonomous Region (DENRCAR), on petition of Narcisa, issued an Order of
Execution dated February 1, 1993 directing the
Community Environment and Natural Resources
Office (CENRO) Officer to enforce the decision
"by ordering Petitioner Nio and those acting in his
behalf to refrain from continuously occupying the

Narcisas counsel, Atty. Edilberto Claravall (Atty.

Claravall), later petitioned the DENR-CAR for the
issuance of a Special Order authorizing the City
Sheriff of Baguio, the City Police Station, and the
Demolition Team of the City Government to
demolish or remove the improvements on the lot
introduced by Nio. The DENR-CAR denied the
petition, citing lack of jurisdiction over the City
Sheriff of Baguio, the City Police Station, and the
Demolition Team of the City Government. The
DENR-CAR also invoked Section 14 (now Section
10 (d)) of Rule 39 of the Rules of Court. 4
Atty. Claravall thereupon moved to have the Order
of Execution previously issued by the DENR-CAR
amended, which was granted. As amended, the
Order of Execution addressed to the CENRO
Officer read:
WHEREFORE, pursuant to the provisions of
Section 1844 of the Revised Administrative Code
as amended by Act No. 3077, you are hereby
enjoined to enforce the aforementioned order, with
the assistance upon request of the City Sheriff of
Baguio City, the Demolition Team of Baguio City
and the Baguio City Police Station, by Ordering
Petitioner Nio and those acting in his behalf to
refrain from continuously occupying the area
and remove whatever improvements they may
have introduced thereto.
xxxx
SO ORDERED.5 (Emphasis
supplied)

and underscoring

The DENR-CENRO, together with the Demolition

Team of Baguio City and the Baguio City police,

Admin. Law | 223

desisted, however, in their earlier attempt to

enforce the Amended Order of Execution.6
On July 16, 1997, the Demolition Team of Baguio
City headed by Engineer Orlando Genove and the
Baguio City Police, on orders of then Baguio City
Police Officer-In-Charge (OIC) Donato Bacquian,
started demolishing the houses of Nio and his
herein co-respondents.7
The demolition was, however, temporarily stopped
upon the instructions of DENR-CENR Officer
Guillermo Fianza, who later advised Nio that the
DENR-CENRO would implement the Amended
Order of Execution on August 4, 1997.8
Nio and his wife Josefina Nio thereupon filed a
Petition9 for Certiorari and Prohibition with Prayer
for Temporary Restraining Order before the
Regional Trial Court (RTC) of Baguio City against
Guillermo Fianza, Teofilo Olimpo of the DENRCENRO, Mayor Mauricio Domogan (hereafter
petitioner), Atty. Claravall, Engr. Orlando Genove
(hereafter petitioner), Rolando Angara, and Police
Officer Donato Bacquian challenging the Amended
Order of Execution issued by the DENRCENRO.1avvphil.net
The Nio spouses later filed an Amended
Petition10 by impleading Emmanuel Nio and
Eurlie Ocampo as therein co-petitioners and the
City of Baguio (hereafter petitioner) and Narcisa as
therein additional respondents, and further praying
for damages.
Branch 6 of the Baguio RTC dismissed the petition
of Nio et al. (hereafter respondents) for lack of
merit.11Respondents
Motion
for
12
Reconsideration having been denied, they filed a
Petition for Review13 under Rule 42 of the Rules
before the Court of Appeals.
By Decision14 of December 11, 2002, the Court of
Appeals granted the Petition for Review, holding
that Sec. 10(d) of Rule 39 of the Rules reading:
SEC. 10. Execution of judgments for specific act.
xxxx

(d) Removal of improvements on property subject

of execution. When the property subject of the
execution contains improvements constructed or
planted by the judgment obligor or his agent, the
officer shall not destroy, demolish or remove said
improvements except upon special order of the
court, issued upon motion of the judgment obligee
after due hearing and after the former has failed to
remove the same within a reasonable time fixed by
the court. (Underscoring supplied)
applies.
Thus disposed the appellate court:
WHEREFORE, the instant appeal is hereby
GRANTED and the Orders dated September 24,
1997 and November 23, 1998 are hereby SET
ASIDE. Public respondent City Mayor Mauricio
Domogan thru the Demolition Team and City
Engineers Office are hereby ordered to cease and
desist from enforcing the amended order of
executionissued by Oscar N. Hamada, Regional
Executive Director of the Department of
Environmental and Natural Resources, concerning
the demolition or removal of the structures made
by petitioners until private respondent applied for a
special order abovementioned with the proper
court.1avvphil.net
SO ORDERED.15 (Underscoring supplied)
Respondents filed before the appellate court an ExParte Motion for Reconsideration 16 on January 9,
2003, alleging that some of the reliefs they prayed
for in their petition were left unacted
upon.17 Petitioners too filed a Motion for
Reconsideration18 on January 28, 2003, raising the
following grounds:
1. THE HONORABLE COURT FAILED TO
CONSIDER THAT THE CITY MAYOR HAS
THE POWER TO ORDER THE DEMOLITION
OF ILLEGALLY-BUILT STRUCTURES;
2. THE HONORABLE COURT GRAVELY
ERRED IN GIVING DUE COURSE TO THE
PETITION FOR REVIEW;
Admin. Law | 224

3. THE HONORABLE COURT MISAPPLIED

SEC. 10 (d), RULE 39 of the RULES OF
COURT.19(Underscoring supplied)
In support of the first ground, petitioners raised
before the appellate court, in their Motion for
Reconsideration, for the first time, the power of the
City Mayor to validly order the demolition of a
structure constructed without a building permit
pursuant to Sec. 455(b) 3(vi) of the Local
Government Code of 1991 in relation to the
National Building Code of the Philippines.
Alleging that respondents built their house without
the required entry and building permits, petitioners
argued that the City Mayor may order the
demolition of a house without a special court
order.20
The Court of Appeals denied both parties motions
for reconsideration by Resolution21 of December
17, 2003.
Hence, the present petition of the City of Baguio,
Mayor Domogan (now a Congressman), and
Orlando Genove, faulting the appellate court:
1. . . . IN RULING THAT A SPECIAL COURT
ORDER IS NEEDED FOR THE DEMOLITION
OF RESPONDENTS STRUCTURES;
2. . . . IN APPLYING SEC. 10(d) RULE 39 OF
THE RULES OF COURT IN THIS CASE;
3. . . . IN ENTERTAINING RESPONDENTS
PETITION FOR REVIEW.22
The petition fails.
While it is noted that respondents appeal to the
Court of Appeals was erroneously brought under
Rule 42 of the Rules of Court, instead of under
Rule 41, the RTC having rendered the questioned
decision in the exercise of its original, not
appellate, jurisdiction, this Court overlooks the
error in view of the merits of respondents case. 23
Petitioners contention that the enforcement of the
Amended Order of Execution does not need a

hearing and court order which Sec. 10(d) of Rule

39 of the Rules of Court requires does not lie. That
an administrative agency which is clothed with
quasi-judicial functions issued the Amended Order
of Execution is of no moment, since the
requirement in Sec. 10 (d) of Rule 39 of the Rules
of Court echoes the constitutional provision that
"no person shall be deprived of life, liberty or
property without due process of law, nor shall any
person be denied the equal protection of the
laws."24
Antipolo Realty Corporation v. National Housing
Authority teaches:
In general, the quantum of judicial or quasi-judicial
powers which an administrative agency may
exercise is defined in the enabling act of such
agency. In other words, the extent to which an
administrative entity may exercise such powers
depends largely, if not wholly, on the provisions of
the statute creating or empowering such
agency.25(Underscoring supplied)
There is, however, no explicit provision granting
the Bureau of Lands (now the Land Management
Bureau) or the DENR (which exercises control
over the Land Management Bureau) the authority
to issue an order of demolition 26 which the
Amended Order of Execution, in substance, is.
Indeed,
[w]hile the jurisdiction of the Bureau of Lands is
confined to the determination of the respective
rights of rival claimants to public lands or to cases
which involve the disposition of public lands, the
power to determine who has the actual, physical
possession or occupation or the better right of
possession over public lands remains with the
courts.
The rationale is evident. The Bureau of Lands does
not have the wherewithal to police public lands.
Neither does it have the means to prevent disorders
or breaches of peace among the occupants. Its
power is clearly limited to disposition and
alienation and while it may decide disputes over
Admin. Law | 225

possession, this is but in aid of making the proper

awards. The ultimate power to resolve conflicts
of possession is recognized to be within the legal
competence of the civil courts and its purpose is
to extend protection to the actual possessors and
occupants with a view to quell social
unrest.27 (Emphasis added)
Consequently, this Court held:28
x x x the power to order the sheriff to remove
improvements and turn over the possession of
the land to the party adjudged entitled thereto,
belongs only to the courts of justice and not to
the
Bureau
of
Lands.29(Emphasis
and
underscoring supplied)
In fine, it is the court sheriff which is empowered
to remove improvements introduced by
respondents on, and turn over possession of, the lot
to Narcisa.
Petitioners invocation of the City Mayors
authority under Sec. 455(b) 3(vi) of the Local
Government Code to order the demolition or
removal of an illegally constructed house, building,
or structure within the period prescribed by law or
ordinance and their allegation that respondents
structures were constructed without building
permits30 were not raised before the trial court.
Petitioners having, for the first time, invoked said
section of the Local Government Code and
respondents lack of building entry permits in their
Motion for Reconsideration of the Court of
Appeals decision, it was correctly denied of
merit,31 it being settled that matters, theories or
arguments not brought out in the proceedings
below will ordinarily not be considered by a
reviewing court as they cannot be raised for the
first time on appeal.32
WHEREFORE, the petition is DISMISSED. The
questioned Decision and Resolution of the Court of
Appeals are AFFIRMED.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 108310 September 1, 1994

RUFINO O. ESLAO, in his capacity as
President of Pangasinan State
University, petitioner,
vs.
COMMISSION ON AUDIT, respondent.
Mehol K. Sadain for petitioner.

FELICIANO, J.:
In this Petition for Certiorari, Rufino O. Eslao in
his capacity as President of the Pangasinan State
University ("PSU") asks us to set aside
Commission on Audit ("COA") Decisions Nos.
1547 (1990) and 2571 (1992) which
denied honoraria and per diems claimed under
National Compensation Circular No. 53 by certain
PSU personnel including petitioner.
On 9 December 1988, PSU entered into a
Memorandum of Agreement ("MOA") 1 with the
Department of Environment and Natural Resources
("DENR") for the evaluation of eleven (11)
government reforestation operations in
Pangasinan. 2 The evaluation project was part of
the commitment of the Asian Development Bank
("ADB") under the ADB/OECF Forestry Sector
Program Loan to the Republic of the Philippines
and was one among identical project agreements
entered into by the DENR with sixteen (16) other
state universities.
On 9 December 1988, a notice to proceed 3 with
the review and evaluation of the eleven (11)
reforestation operations was issued by the DENR
to PSU. The latter complied with this notice and
did proceed.
On 16 January 1989, per advice of the PSU
Auditor-in-Charge with respect to the payment
of honoraria and per diems of PSU personnel
engaged in the review and evaluation project, PSU
Vice President for Research and Extension and
Assistant Project Director Victorino P. Espero
requested the Office of the President, PSU, to have
the University's Board of Regents ("BOR")
confirm the appointments or designations of
Admin. Law | 226

involved PSU personnel including the rates

of honoraria and per diems corresponding to their
specific roles and functions. 4
The BOR approved the MOA on 30 January
1989 5 and on 1 February 1989, PSU issued
Voucher No. 8902007 6representing the amount of
P70,375.00 for payment of honoraria to PSU
personnel engaged in the project. Later, however,
the approved honoraria rates were found to be
somewhat higher than the rates provided for in the
guidelines of National Compensation Circular
("NCC") No. 53. Accordingly, the amounts were
adjusted downwards to conform to NCC No. 53.
Adjustments were made by deducting amounts
from subsequent disbursements of honoraria. By
June 1989, NCC No. 53 was being complied
with. 7
On 6 July 1989, Bonifacio Icu, COA resident
auditor at PSU, alleging that there were excess
payments of honoraria, issued a "Notice of
Disallowance" 8 disallowing P64,925.00 from the
amount of P70,375.00 stated in Voucher No.
8902007, mentioned earlier. The resident auditor
based his action on the premise that Compensation
Policy Guidelines ("CPG") No. 80-4, dated 7
August 1980, issued by the Department of Budget
and Management which provided for lower rates
than NCC No. 53 dated 21 June 1988, also issued
by the Department of Budget and Management,
was the schedule for honoraria and per
diems applicable to work done under the MOA of 9
December 1988 between the PSU and the DENR.
On 18 October 1989, a letter 9 was sent by PSU
Vice President and Assistant Project Director
Espero to the Chairman of the COA requesting
reconsideration of the action of its resident auditor.
In the meantime, the Department of Budget and
Management ("DBM"), upon request by PSU,
issued a letter 10 clarifying that the basis for the
project's honoraria should notbe CPG No. 80-4
which pertains to locally funded projects but rather
NCC No. 53 which pertains to foreign-assisted
projects. A copy of this clarification was sent to the
COA upon request by PSU.
On 18 September 1990, COA Decision No.
1547 11 was issued denying reconsideration of the
decision of its resident auditor. The COA ruled that
CPG. No. 80-4 is the applicable guideline in
respect of the honoraria as CPG No. 80-4 does not
distinguish between projects locally funded and

projects funded or assisted with monies of foreignorigin.

PSU President Eslao sent a letter 12 dated 20 March
1991 requesting reconsideration of COA Decision
No. 1547 (1990) alleging that (a) COA had erred in
applying CPG No. 80-4 and not NCC No. 53 as the
project was foreign-assisted and (b) the decision
was discriminatory honoraria based on NCC
No. 53 having been approved and granted by COA
resident auditors in two (2) other state universities
engaged in the same reforestation project. PSU
then submitted to the COA (a) a
certification 13 from the DENR to the effect that the
DENR evaluation project was foreign- assisted and
(b) the letter of the DBM quoted in the
margin supra.
On 16 November 1992, COA Decision No. 2571
(1992) 14 was issued denying reconsideration.
In the meantime, in December 1990, the DENR
informed petitioner of its acceptance of the PSU
final reports on the review and evaluation of the
government reforestation
projects. 15 Subsequently, honoraria for the period
from January 1989 to January 1990 were disbursed
in accordance with NCC No. 53. A Certificate of
Settlement and Balances (CSB No. 92-0005-184
[DENR]) 16 was then issued by the COA resident
auditor of PSU showing disallowance of alleged
excess payment of honoraria which petitioner was
being required to return.
The instant Petition prays that (a) COA Decision
Nos. 1547 (1990) and 2571 (1992) be set aside; (b)
the COA be ordered to pass in audit the grant
of honoraria for the entire duration of the project
based on the provisions and rates contained in
NCC No. 53; and (c) the COA be held liable for
actual damages as well as petitioner's legal
expenses and attorney's fees.
The resolution of the dispute lies in the
determination of the circular or set of provisions
applicable in respect of the honoraria to be paid to
PSU personnel who took part in the evaluation
project, i.e., NCC No. 53 or CPG No. 80-4.
In asserting that NCC No. 53 supplies the
applicable guideline and that the COA erred in
applying CPG No. 80-4 as the pertinent standard,
petitioner contends that:
Admin. Law | 227

(a) CPG No. 80-4 applies to "special

projects" the definition and scope of which
do not embrace the evaluation project
undertaken by petitioner for the DENR;
(b) NCC No. 53 applies to foreign-assisted
projects ("FAPs") while CPG No. 80-4
applies to locally-funded projects as no
reference to any foreign component
characterizing the projects under its
coverage is made;
(c) the DENR evaluation project is a
foreign-assisted project per certification
and clarification of the DENR and DBM
respectively as well as the implied
admission of the COA in its Comment; and
(d) the DBM's position on the matter
should be respected since the DBM is
vested with authority to (i) classify
positions and determine appropriate
salaries for specific position classes, (ii)
review the compensation benefits programs
of agencies and (iii) design job evaluation
programs.
The Office of the Solicitor General, in lieu of a
Comment on the Petition, filed a
Manifestation 17 stating that (a) since, per
certification of the DENR and Letter/Opinion of
the DBM that the project undertaken by PSU is
foreign-assisted, NCC No. 53 should apply; and (b)
respondent COA's contention that CPG No. 80-4
does not distinguish between projects which are
foreign-funded from locally-funded projects
deserves no merit, since NCC No. 53, a special
guideline, must be construed as an exception to
CPG No. 80-4, a general guideline. The Solicitor
General, in other words, agreed with the position
of petitioner.
Upon the other hand, respondent COA filed its own
comment, asserting that:
(a) while the DBM is vested with
the authority to issue rules and
regulations pertaining to
compensation, this authority is
regulated by Sec. 2 (2) of Art. IX-D
of the 1987 Constitution which
vests respondent COA with the
power to "promulgate accounting
and auditing rules and regulations,

including those for the prevention

and disallowance of irregular,
unnecessary, excessive, extravagant
or unconscionable expenditures, or
uses of government funds and
properties;
(b) the Organizational Arrangement
and Obligations of the Parties
sections of the MOA clearly show
that the evaluation project is an
"inter-agency activity" between the
DENR and PSU and therefore a
"special project";
(c) the issue as to whether the
evaluation project is in fact a
"special project" has become moot
in view of the DBM's
clarification/ruling that the
evaluation project is foreignassisted and therefore NCC No. 53,
not CPG No. 80-4 which applies
only to locally-funded projects,
should apply;
(d) the DBM issuance
notwithstanding, respondent COA
applied CPG No. 80-4 to
effectively rationalize the rates of
additional compensation assigned
to or detailed in "special projects"
as its application is without
distinction as to the source of
funding and any payment therefore
in excess of that provided by CPG
No. 80-4 is unnecessary, excessive
and disadvantageous to the
government;
(e) respondent COA's previous
allowance of payment
of honoraria based on NCC No. 53
or the fact that a full five years had
already elapsed since NCC No. 53's
issuance does not preclude COA
from assailing the circular's validity
as "it is the responsibility of any
public official to rectify every error
he encounters in the performance
of his function" and "he is not dutybound to pursue the same mistake
for the simple reason that such
Admin. Law | 228

mistake had been continuously

committed in the past";
(f) the DBM ruling classifying the
evaluation project as foreignassisted does not rest on solid
ground since loan proceeds,
regardless of source, eventually
become public funds for which the
government is accountable, hence,
any project under the loan
agreement is to be considered
locally-funded;
(g) the DBM ruling constitutes an
unreasonable classification, highly
discriminatory and violative of the
equal protection clause of the
Constitution; and
(h) granting arguendo NCC No. 53
is the applicable criterion,
petitioner received honoraria in
excess of what was provided in the
MOA.

coordination of the evaluation, to

be chaired by a senior officer of the
DENR. The Committee shall [be]
composed [of] the following:
Chairman : Undersecretary for
Planning,
Policy and Project Management
[DENR]
Co-Chairman : Vice-President for
Research
and Development [PSU]
Members : Director of FMB
Dean, PSU Infanta Campus
Associate Dean, PSU Infanta
Campus
Chief, Reforestation
Division
Project Director of the ADB
Program Loan for Forestry
Sector
OBLIGATIONS OF THE
PARTIES

We consider the Petition meritorious.

Obligations of DENR:
Sec. 2.1 of CPG No. 80-4 defines "special project"
as
an inter-agency or intercommittee activity or
an undertaking by a composite
group of officials/employees from
various agencies which [activity or
undertaking] is not among the
regular and primary functions of
the agencies involved. (Emphasis
and brackets supplied)
Respondent COA maintains that the sections of the
MOA detailing the "Organizational Arrangement
and Obligations of the Parties" clearly show that
the evaluation project is an "inter-agency activity."
The pertinent sections of the MOA are as follows:
ORGANIZATIONAL
ARRANGEMENTS
A Coordinating Committee shall be
created which shall be responsible
for the overall administration and

The DENR shall

have the following
obligations:
1. Provide the funds necessary for
the review and reevaluation of
eleven (11) reforestation projects.
xxx xxx xxx
2. Undertake the monitoring of the
study to ascertain its progress and
the proper utilization of funds in
conformity with the agreed work
and financial plan.
3. Reserve the right to accept or
reject the final report and in the
latter case, DENR may request
PSU to make some
revisions/modifications on the
same.
Obligations of the PSU:
Admin. Law | 229

The PSU shall have the following

obligations:
1. Undertake the review and
evaluation of the eleven (11)
DENR-funded reforestation
projects in accordance with the
attached TOR;
2. Submit regularly to DENR
financial status reports apart from
the progress report required to
effect the second release of funds;
3. Submit the final report to DENR
fifteen (15) days after the
completion of the work. The report
should at least contain the
information which appears in
Annex D;
4. Return to DENR whatever
balance is left of the funds after the
completion of work.
Simply stated, respondent COA argues that since
the Coordinating Committee is composed of
personnel from the DENR and PSU, the evaluation
project is an "inter-agency activity" within the
purview of the definition of a "special project".
We are unable to agree with respondent COA.
Examination of the definition in CPG No. 80-4 of a
"special project" reveals that definition has two (2)
components: firstly, there should be an interagency or inter-committee activity or undertaking
by a group of officials or employees who are
drawn from various agencies; and secondly, the
activity or undertaking involved is not part of the
"regular or primary" functions of the participating
agencies. Examination of the MOA and its annexes
reveals that two (2) groups were actually created.
The first group consisted of the coordinating
committee, the membership of which was drawn
from officials of the DENR and of the PSU; and
the second, the evaluation project team itself which
was, in contrast, composed exclusively of PSU
personnel. 18 We believe that the first component of
the CPU No. 80-4's definition of "special project"
is applicable in respect of the group which is
charged with the actual carrying out of the project
itself, rather than to the body or group which

coordinates the task of the operating or

implementing group. To construe the
administrative definition of "special project"
otherwise would create a situation, which we deem
to be impractical and possibly even absurd, under
which any undertaking entered into between the
senior officials of government agencies would have
to be considered an "inter-agency or intercommittee activity," even though the actual
undertaking or operation would be carried out not
by the coordinating body but rather by an separate
group which might not (as in the present case) be
drawn from the agencies represented in the
coordinating group. In other words, an "interagency or inter-committee activity or . . .
undertaking" must be one which is actually carried
out by a composite group of officials and
employees from the two (2) or more participating
agencies.
As already noted, in the case at hand, the project
team actually tasked with carrying out the
evaluation of the DENR reforestation activity
is composed exclusively of personnel from PSU;
the project team's responsibility and undertaking
are quite distinct from the responsibilities of the
coordinating [DENR and PSU] committee. Thus,
the project team is not a "composite group" as
required by the definition of CPG No. 80-4 of
"special projects." It follows that the evaluation
projects here involved do not fall within the ambit
of a "special project" as defined and regulated by
CPG No. 80-4.
We do not consider it necessary to rule on whether
the project at hand involved an undertaking "which
is not among the regular and primary functions of
the agencies involved" since the reforestation
activity evaluation group is not, as pointed out
above, a "special project" within the meaning of
CPG No. 80-4. In any case, this particular issue
was not raised by any of the parties here involved.
It is true, as respondent COA points out, that the
provisions of CPG No. 80-4 do not distinguish
between "a special project" which is funded by
monies of local or Philippine origin and "a special
project" which is funded or assisted by monies
originating from international or foreign agencies.
As earlier noted, CPG No. 80-4 was issued by the
Department of Budget and Management back in 7
August 1980. Upon the other hand, NCC No. 53
was issued also by the Department of Budget and
Management more than eight (8) years later, i.e., 9
Admin. Law | 230

December 1988. Examination of the provisions of

NCC No. 53 makes it crystal clear that the circular
is applicable to foreign-assisted projects only. The
explicit text of NCC No. 53 states that it was
issued to
prescribe/authorize the
classification and compensation
rates of positions in foreignassisted projects(FAPs)
including honoraria rates
for personnel detailed to FAPs and
guidelines in the implementation
thereof pursuant to Memorandum
No. 173 dated 16 May
1988 19 (Emphasis supplied)
and which apply to all positions in foreign-assisted
projects only. Clearly, NCC No. 53 amended the
earlier CPG No. 80-4 by carving out from the
subject matter originally covered by CPG No. 80-4
all "foreign-assisted [special] projects." CPG No.
80-4 was, accordingly, modified so far as "foreignassisted [special] projects (FAPs)" are concerned. It
is this fact or consequence of NCC No. 53 that
respondent COA apparently failed to grasp. Thus,
CPG No. 80-4 does not control, nor even relate to,
the DENR evaluation project for at least two (2)
reasons: firstly, the evaluation project was not a
"special project" within the meaning of CPG No.
80-4; secondly, that same evaluation project was a
Foreign-Assisted Project to which NCC No. 53 is
specifically applicable.
That the instant evaluation project is a ForeignAssisted Project is borne out by the records: (a) the
MOA states that the project is "part of the
commitment with the Asian Development Bank
(ADB) under the Forestry Sector Program Loan";
(b) the certification issued by the DENR certifies
that
. . . the review and evaluation of
DENR reforestation projects
undertaken by State Universities
and Colleges, one of which is
Pangasinan State University, is one
of the components of the
ADB/OECF Forestry Sector
Program Loan which is funded by
the loan. It is therefore a
foreign-assisted
project (Underscoring supplied);
and

(c) the clarification issued by the DBM stating that

The honoraria rates of the detailed
personnel should not be based on
Compensation Policy Guidelines
No. 80-4, which pertains to locally
funded projects. Since the funding
source for this activity come from
loan proceeds, National
Compensation Circular No. 53
should apply.
Even in its Comment respondent COA submits that
. . . the issue as to whether or not
the project was special already
became moot in the face of the
opinion/ruling of the DBM that
since it (the project) is "foreignassisted" NCC 53 should apply, for
CPG No. 80-4 applies only to
"locally-funded projects. 20
Under the Administration Code of 1987, the
Compensation and Position Classification Bureau
of the DBM "shall classify positions and determine
appropriate salaries for specific position classes
and review appropriate salaries for specific
position classes and review the compensation
benefits programs of agencies and shall design job
evaluation programs." 21 In Warren Manufacturing
Workers Union (WMWU) v. Bureau of Labor
Relations, 22 the Court held that "administrative
regulations and policies enacted by administrative
bodies to interpret the law have the force of law
and are entitled to great respect." It is difficult for
the Court to understand why, despite these
certifications, respondent COA took such a rigid
and uncompromising posture that CPG No. 80-4
was the applicable criterion for honoraria to be
given members of the reforestation evaluation
project team of the PSU.
Respondent COA's contention that the DBM
clarification is unconstitutional as that ruling does
not fulfill the requisites of a valid
classification 23 is, in the Court's perception,
imaginative but nonetheless an after-thought and a
futile attempt to justify its action. As correctly
pointed out by petitioner, the constitutional
arguments raised by respondent COA here were
never even mentioned, much less discussed, in
COA Decisions Nos. 1547 (1990) and 2571 (1992)
or in any of the proceedings conducted before it.
Admin. Law | 231

Petitioner also argues that the project's duration

stipulated in the MOA was implicitly extended by
the parties. The DENR's acceptance, without any
comment or objection, of PSU's (a) letter
explaining the delay in its submission of the final
project report and (b) the final project report itself
brought about, according to petitioner, an implied
agreement between the parties to extend the project
duration. It is also contended that by the very
nature of an evaluation project, the project's
duration is difficult to fix and as in the case at bar,
the period fixed in the MOA is merely an initial
estimate subject to extension. Lastly, petitioner
argues that whether the project was impliedly
extended is an inconsequential consideration; the
material consideration being that the project stayed
within its budget. The project having been
extended, petitioner concludes that the evaluation
team should be paid honorariafrom the time it
proceeded with the project and up to the time the
DENR accepted its final report.
Mindful of the detailed provisions of the MOA and
Project Proposal governing project duration and
project financing as regulated by NCC No. 53, the
Court is not persuaded that petitioner can so
casually assume implicit consent on the part of the
DENR to an extension of the evaluation project's
duration.
The "Duration of Work" clause of the MOA
provides that
PSU shall commence the work 10
days from receipt of the Notice to
Proceed and shall be completed
five months thereafter. (Emphasis
supplied)
On 9 December 1988, the DENR advised
PSU President Rufino Eslao that PSU "may
now proceed with the review and
reevaluation as stipulated" in the MOA.
The Notice to Proceed further stated that
Your institution is required to
complete the work within five
months starting ten (10) days upon
receipt of this notice. (Emphasis
supplied)
In respect of the financial aspects of the project,
the MOA provides that

The DENR shall have the

following obligations:
1. Provide the funds necessary for
the review and reevaluation of the
eleven (11) reforestation projects . .
. in the amount not more than FIVE
HUNDRED SIX THOUSAND
TWO HUNDRED TWENTY
FOUR PESOS (P506,224.00)
which shall be spent in accordance
with the work and financial plan
which attached as Annex C. Fund
remittances shall be made on a
staggered basis with the following
schedule:
a. FIRST RELEASE
Twenty percent (20%) of the total
cost to be remitted within fifteen
(15) working days upon submission
of work plan;
b. SECOND RELEASE
Forty percent of the total cost upon
submission of a progress report of
the activities that were so far
undertaken;
c. THIRD RELEASE
Thirty percent (30%) of the total
amount upon submission of the
draft final report;
d. FOURTH RELEASE
Ten percent of the total amount
[upon submission] of the final
report. (Underscoring supplied)
Annex "C" referred to in the MOA is the Project
Proposal. Per the Proposal's "Budget Estimate,"
P175,000.00 and P92,500.00 were allotted for
"Expert Services" and "Support Services"
respectively itemized as follows:
PERSONAL SERVICES
EXPERT SERVICES
Duration
Admin. Law | 232

Expert of Service Rate/ Total

5. Social Forestry Expert 4 -do20,000

Enumerators/Data Gatheres 36,000

360 mandays at P100/manday
including COLA
Coders/Encoders 30,000
300 mandays at P100/manday
including COLA
Cartographer/Illustrator 5,000
50 mandays at P100/manday
including COLA
Documentalist 4,500
45 mandays at P100/manday
including COLA
Typist 5,000
50 mandays at P100/manday
including COLA

6. Management Expert 2 -do10,000

T O T A L P92,500

(mo.) mo.
1. Ecologist 4 P5,000 P20,000
2. Silviculturist 3 -do- 15,000
3. Forestry Economist 4 -do20,000
4. Soils Expert 2 -do- 10,000

7. Horticulturist 2 -do- 10,000

8. Agricultural Engineer 2 -do10,000
9. Systems Analysts/Programer 2
-do- 10,000
10. Statistician 2 -do- 10,000
11. Shoreline Resources Expert 2
-do- 10,000
12. Animal Science Specialist 2
-do- 10,000
13. Policy/Administrative 4 -do20,000
Expert
T O T A L P175,000

Support Services
Research Associates (2) P8,000
Honorarium P1,000/mo. for 4
months
Special Disbursing Officer (1)
4,000
Honorarium P1,000/mo. for 4
months

In addition, the Proposal already provided a

list of identified experts:
EXPERTS
1. Dr. Victorino P. Espero
Enviromental Science
2. Dean Antonio Q. Repollo
Silviculture
3. Prof. Artemio M. Rebugio
Forestry Economics
4. Ms. Naomenida Olermo Soils
5. Dr. Elvira R. Castillo Social
Forestry
6. Dr. Alfredo F. Aquino
Management
7. Dr. Lydio Calonge Horticulture
8. Engr. Manolito Bernabe
Engineering
9. Dr. Elmer C. Vingua Animal
Science
10. Prof. Rolando J. Andico
Systems Analysts
Programming
11. Dr. Eusebio Miclat, Jr.
Statistics/
Instrumentation
12. Dr. Porferio Basilio Shoreline
Resources
13. Dr. Rufino O. Eslao Policy
Administration
who, together with six (6) staff members
namely Henedina M. Tantoco, Alicia
Angelo Yolanda Z. Sotelo, Gregoria Q.
Admin. Law | 233

Calela, Nora A. Caburnay and Marlene S.

Bernebe composed the evaluation project
team. At this point, it should be pointed out
that the " Budget Estimate even provides a
duration for the participation of each and
every person whether rendering expert or
support services.

authorizing or making such

payment. (Underscoring supplied)
Attachment II of NCC No. 53 prescribes the
monthly rates allowed for officials/employees on
assignment to foreign- assisted special projects:
A. Position Level Project
Manager/Project
Director

On the other hand, NCC No. 53 provides:

3.3.1 The approved 0rganization
and staffing shall be valid up to
project completion except for
modifications deemed necessary by
the Project Manager. The Project
Manager shall be given the
flexibility to determine the timing
of hiring personnel provided the
approved man-years for a given
position for the duration of the
project is not exceeded.
xxx xxx xxx
3.6 A regular employee who may
detailed to any FAPs on a part-time
basis shall be entitled to
receive honoraria in accordance
with the schedule shown in
Attachment II hereof.
xxx xxx xxx
3.7 Payment of honoraria shall be
made out of project funds and in no
case shall payment thereof be made
out of regular agency fund.
xxx xxx xxx
3.10 The total amount of
compensation to be paid shall not
exceed the original amount
allocated for personal services of
the individual foreign-assisted
projects. Any disbursement in
excess of the original amount
allotted for personal services of the
individual projects shall be the
personal liability and responsibility
of the officials and employees

Responsibility . .
.
Parttime
P2,000.00
B. Position Level Assistant
Project
Director
Responsibility . . .
Parttime P1,500.00
C. Position Level Project
Consultant
Responsibility . . .
Parttime P1,000.00
D. Position Level
Supervisor/Senior Staff
Member
Responsibility . . .
Parttime P1,000.00
E. Position Level Staff Member
Responsibility . . .
Parttime P700.00
Administrative and Clerical
Support
A. Position Level
Administrative Assistant
Responsibility . . .
Admin. Law | 234

Parttime P500.00
B. Position Level Administrative
Support
Staff
Responsibility . . .
Parttime P400.00
From the clear and detailed provisions of the MOA
and Project Proposal in relation to NCC No. 53,
consent to any extension of the evaluation project,
in this instance, must be more concrete than the
alleged silence or lack of protest on the part of the
DENR. Although tacit acceptance is recognized in
our jurisdiction, 24 as a rule, silence is not
equivalent to consent since its ambiguity lends
itself to error. And although under the Civil Code
there are instances when silence amounts to
consent, 25 these circumstances are wanting in the
case at bar. Furthermore, as correctly pointed out
by the respondent COA, the date when the DENR
accepted the final project report is by no means
conclusive as to the terminal date of the evaluation
project. Examination of the MOA (quoted earlier
on pages 19-20) reveals that the submission of
reports merely served to trigger the phased releases
of funds. There being no explicit agreement
between PSU and the DENR to extend the duration
of the evaluation project, the MOA's "Budget
Estimate" which, among others, provides in detail
the duration of service for each member of the
evaluation project as amended by the rates
provided by NCC No. 53 must be the basis of
the honoraria due to the evaluation team.
The other arguments of respondent COA
appear to us to be insubstantial and as,
essentially, afterthoughts. The COA
apparently does not agree with the policy
basis of NCC No. 53 in relation to CPG
No. 80-4 since COA argues that loan
proceeds regardless of source eventually
become public funds for which the
government is accountable. The result
would be that any provisions under any
[foreign] loan agreement should be
considered locally-funded. We do not
consider that the COA is, under its
constitutional mandate, authorized to
substitute its own judgment for any
applicable law or administrative regulation
with the wisdom or propriety of which,

however, it does not agree, at least not

before such law or regulation is set aside
by the authorized agency of government
i.e., the courts as unconstitutional or
illegal and void. The COA, like all other
government agencies, must respect the
presumption of legality and
constitutionality to which statutes and
administrative regulations are
entitled 26 until such statute or regulation is
repealed or amended, or until set aside in
an appropriate case by a competent court
(and ultimately this Court).
Finally, we turn to petitioner's claim for
moral damages and reimbursement of legal
expenses. We consider that this claim
cannot be granted as petitioner has failed to
present evidence of bad faith or tortious
intent warranting an award thereof. The
presumption of regularity in the
performance of duty must be accorded to
respondent COA; its action should be seen
as its effort to exercise (albeit erroneously,
in the case at bar) its constitutional power
and duty in respect of uses of government
funds and properties.
WHEREFORE, for all the foregoing, the
Petition for Certiorari is hereby
GRANTED. COA Decisions Nos. 1547
and 2571, respectively dated 18 September
1990 and 16 November 1992, are hereby
SET ASIDE. The instant evaluation project
being a Foreign-Assisted Project, the
following PSU personnel involved in the
project shall be paid according to the
Budget Estimate schedule of the MOA as
aligned with NCC No. 53:
A. A. For Experts
Duration Rate/
Expert of month Total
Service (NCC
(mo.) No. 53)
1. Dr. Rufino O. Eslao Policy/Admi- 4
P2,000 P8,000 nistrative
expert*2. Dr. Victorino P. Espero Ecologist** 4
1,500 6,000
3. Dean Antonio Q. Repollo Silvicul- 3
1,000 3,000
Admin. Law | 235

turist***
4. Prof. Artemio M. Rebugio Forestry 4
1,000 4,000
Economist
5. Ms. Naomenida Olermo Soils Expert 2
1,000 2,000
6. Dr. Elvira R. Castillo Social 4 1,000
4,000
Forestry
Expert
7. Dr. Alfredo F. Aquino Management 2
1,000 2,000
Expert
8. Dr. Lydio Calonge Horticul 2 1,000
2,000
turist
9. Engr. Manolito Bernabe Agricultural 2
1,000 2,000
Engineer
10. Prof. Rolando J. Andico Systems 2
1,000 2,000
Analysts/
Programmer
11. Dr. Eusebio Miclat, Jr. Statistician 2
1,000 2,000
12. Dr. Porferio Basilio Shoreline 2 1,000
2,000
Resources
Expert
13. Dr. Elmer C. Vingua Animal 2 1,000
2,000
Science
Specialist
41,000

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

12,098
* Per Attachment to
DBM Clarification
dated 10
November
1989, Rollo, p. 59.
** Staff Member
*** Administrative
Assistants.
No pronouncement as to costs.

* Project Manager/
Project Director
** Assistant Project
Director

SO ORDERED.

Admin. Law | 236