G.R. No.

151908 August 12, 2003

SMART COMMUNICATIONS, INC. (SMART) and PILIPINO TELEPHONE CORPORATION

(PILTEL), petitioners,
vs.
NATIONAL TELECOMMUNICATIONS COMMISSION (NTC), respondent.

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

G.R. No. 152063 August 12, 2003

GLOBE TELECOM, INC. (GLOBE) and ISLA COMMUNICATIONS CO., INC.

(ISLACOM), petitioners,
vs.
COURT OF APPEALS (The Former 6th Division) and the NATIONAL TELECOMMUNICATIONS
COMMISSION, respondents.

YNARES-SANTIAGO, J.:

Pursuant to its rule-making and regulatory powers, the National Telecommunications Commission
(NTC) issued on June 16, 2000 Memorandum Circular No. 13-6-2000, promulgating rules and
regulations on the billing of telecommunications services. Among its pertinent provisions are the
following:

(1) The billing statements shall be received by the subscriber of the telephone service not
later than 30 days from the end of each billing cycle. In case the statement is received
beyond this period, the subscriber shall have a specified grace period within which to pay the
bill and the public telecommunications entity (PTEs) shall not be allowed to disconnect the
service within the grace period.

(2) There shall be no charge for calls that are diverted to a voice mailbox, voice prompt,
recorded message or similar facility excluding the customer's own equipment.

(3) PTEs shall verify the identification and address of each purchaser of prepaid SIM cards.
Prepaid call cards and SIM cards shall be valid for at least 2 years from the date of first use.
Holders of prepaid SIM cards shall be given 45 days from the date the prepaid SIM card is
fully consumed but not beyond 2 years and 45 days from date of first use to replenish the
SIM card, otherwise the SIM card shall be rendered invalid. The validity of an invalid SIM
card, however, shall be installed upon request of the customer at no additional charge except
the presentation of a valid prepaid call card.

(4) Subscribers shall be updated of the remaining value of their cards before the start of
every call using the cards.

(5) The unit of billing for the cellular mobile telephone service whether postpaid or prepaid
shall be reduced from 1 minute per pulse to 6 seconds per pulse. The authorized rates per
minute shall thus be divided by 10.1

The Memorandum Circular provided that it shall take effect 15 days after its publication in a
newspaper of general circulation and three certified true copies thereof furnished the UP Law
Center. It was published in the newspaper, The Philippine Star, on June 22, 2000.2 Meanwhile, the
provisions of the Memorandum Circular pertaining to the sale and use of prepaid cards and the unit
of billing for cellular mobile telephone service took effect 90 days from the effectivity of the
Memorandum Circular.

On August 30, 2000, the NTC issued a Memorandum to all cellular mobile telephone service
(CMTS) operators which contained measures to minimize if not totally eliminate the incidence of
stealing of cellular phone units. The Memorandum directed CMTS operators to:

a. strictly comply with Section B(1) of MC 13-6-2000 requiring the presentation and
verification of the identity and addresses of prepaid SIM card customers;

b. require all your respective prepaid SIM cards dealers to comply with Section B(1) of MC
13-6-2000;

c. deny acceptance to your respective networks prepaid and/or postpaid customers using
stolen cellphone units or cellphone units registered to somebody other than the applicant
when properly informed of all information relative to the stolen cellphone units;

d. share all necessary information of stolen cellphone units to all other CMTS operators in
order to prevent the use of stolen cellphone units; and

e. require all your existing prepaid SIM card customers to register and present valid
identification cards.3

This was followed by another Memorandum dated October 6, 2000 addressed to all public
telecommunications entities, which reads:

This is to remind you that the validity of all prepaid cards sold on 07 October 2000 and
beyond shall be valid for at least two (2) years from date of first use pursuant to MC 13-6-
2000.

In addition, all CMTS operators are reminded that all SIM packs used by subscribers of
prepaid cards sold on 07 October 2000 and beyond shall be valid for at least two (2) years
from date of first use. Also, the billing unit shall be on a six (6) seconds pulse effective 07
October 2000.

For strict compliance.4

On October 20, 2000, petitioners Isla Communications Co., Inc. and Pilipino Telephone Corporation
filed against the National Telecommunications Commission, Commissioner Joseph A. Santiago,
Deputy Commissioner Aurelio M. Umali and Deputy Commissioner Nestor C. Dacanay, an action for
declaration of nullity of NTC Memorandum Circular No. 13-6-2000 (the Billing Circular) and the NTC
Memorandum dated October 6, 2000, with prayer for the issuance of a writ of preliminary injunction
and temporary restraining order. The complaint was docketed as Civil Case No. Q-00-42221 at the
Regional Trial Court of Quezon City, Branch 77.5

Petitioners Islacom and Piltel alleged, inter alia, that the NTC has no jurisdiction to regulate the sale
of consumer goods such as the prepaid call cards since such jurisdiction belongs to the Department
of Trade and Industry under the Consumer Act of the Philippines; that the Billing Circular is
oppressive, confiscatory and violative of the constitutional prohibition against deprivation of property
without due process of law; that the Circular will result in the impairment of the viability of the prepaid
cellular service by unduly prolonging the validity and expiration of the prepaid SIM and call cards;
and that the requirements of identification of prepaid card buyers and call balance announcement
are unreasonable. Hence, they prayed that the Billing Circular be declared null and void ab initio.

Soon thereafter, petitioners Globe Telecom, Inc and Smart Communications, Inc. filed a joint Motion
for Leave to Intervene and to Admit Complaint-in-Intervention.6 This was granted by the trial court.

On October 27, 2000, the trial court issued a temporary restraining order enjoining the NTC from
implementing Memorandum Circular No. 13-6-2000 and the Memorandum dated October 6, 2000.7

In the meantime, respondent NTC and its co-defendants filed a motion to dismiss the case on the
ground of petitioners' failure to exhaust administrative remedies.

Subsequently, after hearing petitioners' application for preliminary injunction as well as respondent's
motion to dismiss, the trial court issued on November 20, 2000 an Order, the dispositive portion of
which reads:

WHEREFORE, premises considered, the defendants' motion to dismiss is hereby denied for
lack of merit. The plaintiffs' application for the issuance of a writ of preliminary injunction is
hereby granted. Accordingly, the defendants are hereby enjoined from implementing NTC
Memorandum Circular 13-6-2000 and the NTC Memorandum, dated October 6, 2000,
pending the issuance and finality of the decision in this case. The plaintiffs and intervenors
are, however, required to file a bond in the sum of FIVE HUNDRED THOUSAND PESOS
(P500,000.00), Philippine currency.

SO ORDERED.8

Defendants filed a motion for reconsideration, which was denied in an Order dated February 1,
2001.9

Respondent NTC thus filed a special civil action for certiorari and prohibition with the Court of
Appeals, which was docketed as CA-G.R. SP. No. 64274. On October 9, 2001, a decision was
rendered, the decretal portion of which reads:

WHEREFORE, premises considered, the instant petition for certiorari and prohibition is
GRANTED, in that, the order of the court a quo denying the petitioner's motion to dismiss as
well as the order of the court a quo granting the private respondents' prayer for a writ of
preliminary injunction, and the writ of preliminary injunction issued thereby, are hereby
ANNULLED and SET ASIDE. The private respondents' complaint and complaint-in-
intervention below are hereby DISMISSED, without prejudice to the referral of the private
respondents' grievances and disputes on the assailed issuances of the NTC with the said
agency.

SO ORDERED.10

Petitioners' motions for reconsideration were denied in a Resolution dated January 10, 2002 for lack
of merit.11

Hence, the instant petition for review filed by Smart and Piltel, which was docketed as G.R. No.
151908, anchored on the following grounds:
 A.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE

NATIONAL TELECOMMUNICATIONS COMMISSION (NTC) AND NOT THE REGULAR
COURTS HAS JURISDICTION OVER THE CASE.

B.

THE HONORABLE COURT OF APPEALS ALSO GRAVELY ERRED IN HOLDING THAT

THE PRIVATE RESPONDENTS FAILED TO EXHAUST AN AVAILABLE ADMINISTRATIVE
REMEDY.

C.

THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE BILLING
CIRCULAR ISSUED BY THE RESPONDENT NTC IS UNCONSTITUTIONAL AND
CONTRARY TO LAW AND PUBLIC POLICY.

D.

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRIVATE

RESPONDENTS FAILED TO SHOW THEIR CLEAR POSITIVE RIGHT TO WARRANT THE
ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION.12

Likewise, Globe and Islacom filed a petition for review, docketed as G.R. No. 152063, assigning the
following errors:

1. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE

DOCTRINES OF PRIMARY JURISDICTION AND EXHAUSTION OF ADMINISTRATIVE
REMEDIES DO NOT APPLY SINCE THE INSTANT CASE IS FOR LEGAL NULLIFICATION
(BECAUSE OF LEGAL INFIRMITIES AND VIOLATIONS OF LAW) OF A PURELY
ADMINISTRATIVE REGULATION PROMULGATED BY AN AGENCY IN THE EXERCISE
OF ITS RULE MAKING POWERS AND INVOLVES ONLY QUESTIONS OF LAW.

2. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE

DOCTRINE ON EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES NOT APPLY
WHEN THE QUESTIONS RAISED ARE PURELY LEGAL QUESTIONS.

3. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE

DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES NOT APPLY
WHERE THE ADMINISTRATIVE ACTION IS COMPLETE AND EFFECTIVE, WHEN
THERE IS NO OTHER REMEDY, AND THE PETITIONER STANDS TO SUFFER GRAVE
AND IRREPARABLE INJURY.

4. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE

PETITIONERS IN FACT EXHAUSTED ALL ADMINISTRATIVE REMEDIES AVAILABLE TO
THEM.

5. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED IN ISSUING ITS

QUESTIONED RULINGS IN THIS CASE BECAUSE GLOBE AND ISLA HAVE A CLEAR
RIGHT TO AN INJUNCTION.13
The two petitions were consolidated in a Resolution dated February 17, 2003.14

On March 24, 2003, the petitions were given due course and the parties were required to submit
their respective memoranda.15

We find merit in the petitions.

Administrative agencies possess quasi-legislative or rule-making powers and quasi-judicial or

administrative adjudicatory powers. Quasi-legislative or rule-making power is the power to make
rules and regulations which results in delegated legislation that is within the confines of the granting
statute and the doctrine of non-delegability and separability of powers.16

The rules and regulations that administrative agencies promulgate, which are the product of a
delegated legislative power to create new and additional legal provisions that have the effect of law,
should be within the scope of the statutory authority granted by the legislature to the administrative
agency. It is required that the regulation be germane to the objects and purposes of the law, and be
not in contradiction to, but in conformity with, the standards prescribed by law.17 They must conform
to and be consistent with the provisions of the enabling statute in order for such rule or regulation to
be valid. Constitutional and statutory provisions control with respect to what rules and regulations
may be promulgated by an administrative body, as well as with respect to what fields are subject to
regulation by it. It may not make rules and regulations which are inconsistent with the provisions of
the Constitution or a statute, particularly the statute it is administering or which created it, or which
are in derogation of, or defeat, the purpose of a statute. In case of conflict between a statute and an
administrative order, the former must prevail.18

Not to be confused with the quasi-legislative or rule-making power of an administrative agency is its
quasi-judicial or administrative adjudicatory power. This is the power to hear and determine
questions of fact to which the legislative policy is to apply and to decide in accordance with the
standards laid down by the law itself in enforcing and administering the same law. The administrative
body exercises its quasi-judicial power when it performs in a judicial manner an act which is
essentially of an executive or administrative nature, where the power to act in such manner is
incidental to or reasonably necessary for the performance of the executive or administrative duty
entrusted to it. In carrying out their quasi-judicial functions, the administrative officers or bodies are
required to investigate facts or ascertain the existence of facts, hold hearings, weigh evidence, and
draw conclusions from them as basis for their official action and exercise of discretion in a judicial
nature.19

In questioning the validity or constitutionality of a rule or regulation issued by an administrative

agency, a party need not exhaust administrative remedies before going to court. This principle
applies only where the act of the administrative agency concerned was performed pursuant to its
quasi-judicial function, and not when the assailed act pertained to its rule-making or quasi-legislative
power. In Association of Philippine Coconut Dessicators v. Philippine Coconut Authority,20 it was
held:

The rule of requiring exhaustion of administrative remedies before a party may seek judicial review,
so strenuously urged by the Solicitor General on behalf of respondent, has obviously no application
here. The resolution in question was issued by the PCA in the exercise of its rule- making or
legislative power. However, only judicial review of decisions of administrative agencies made in the
exercise of their quasi-judicial function is subject to the exhaustion doctrine.

Even assuming arguendo that the principle of exhaustion of administrative remedies apply in this
case, the records reveal that petitioners sufficiently complied with this requirement. Even during the
drafting and deliberation stages leading to the issuance of Memorandum Circular No. 13-6-2000,
petitioners were able to register their protests to the proposed billing guidelines. They submitted their
respective position papers setting forth their objections and submitting proposed schemes for the
billing circular.21 After the same was issued, petitioners wrote successive letters dated July 3,
200022 and July 5, 2000,23 asking for the suspension and reconsideration of the so-called Billing
Circular. These letters were not acted upon until October 6, 2000, when respondent NTC issued the
second assailed Memorandum implementing certain provisions of the Billing Circular. This was
taken by petitioners as a clear denial of the requests contained in their previous letters, thus
prompting them to seek judicial relief.

In like manner, the doctrine of primary jurisdiction applies only where the administrative agency
exercises its quasi-judicial or adjudicatory function. Thus, in cases involving specialized disputes, the
practice has been to refer the same to an administrative agency of special competence pursuant to
the doctrine of primary jurisdiction. The courts will not determine a controversy involving a question
which is within the jurisdiction of the administrative tribunal prior to the resolution of that question by
the administrative tribunal, where the question demands the exercise of sound administrative
discretion requiring the special knowledge, experience and services of the administrative tribunal to
determine technical and intricate matters of fact, and a uniformity of ruling is essential to comply with
the premises of the regulatory statute administered. The objective of the doctrine of primary
jurisdiction is to guide a court in determining whether it should refrain from exercising its jurisdiction
until after an administrative agency has determined some question or some aspect of some question
arising in the proceeding before the court. It applies where the claim is originally cognizable in the
courts and comes into play whenever enforcement of the claim requires the resolution of issues
which, under a regulatory scheme, has been placed within the special competence of an
administrative body; in such case, the judicial process is suspended pending referral of such issues
to the administrative body for its view.24

However, where what is assailed is the validity or constitutionality of a rule or regulation issued by
the administrative agency in the performance of its quasi-legislative function, the regular courts have
jurisdiction to pass upon the same. The determination of whether a specific rule or set of rules
issued by an administrative agency contravenes the law or the constitution is within the jurisdiction of
the regular courts. Indeed, the Constitution vests the power of judicial review or the power to declare
a law, treaty, international or executive agreement, presidential decree, order, instruction, ordinance,
or regulation in the courts, including the regional trial courts.25 This is within the scope of judicial
power, which includes the authority of the courts to determine in an appropriate action the validity of
the acts of the political departments.26 Judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government.27

In the case at bar, the issuance by the NTC of Memorandum Circular No. 13-6-2000 and its
Memorandum dated October 6, 2000 was pursuant to its quasi-legislative or rule-making power. As
such, petitioners were justified in invoking the judicial power of the Regional Trial Court to assail the
constitutionality and validity of the said issuances. In Drilon v. Lim,28 it was held:

We stress at the outset that the lower court had jurisdiction to consider the constitutionality of
Section 187, this authority being embraced in the general definition of the judicial power to
determine what are the valid and binding laws by the criterion of their conformity to the
fundamental law. Specifically, B.P. 129 vests in the regional trial courts jurisdiction over all
civil cases in which the subject of the litigation is incapable of pecuniary estimation, even as
the accused in a criminal action has the right to question in his defense the constitutionality
of a law he is charged with violating and of the proceedings taken against him, particularly as
they contravene the Bill of Rights. Moreover, Article X, Section 5(2), of the Constitution vests
 in the Supreme Court appellate jurisdiction over final judgments and orders of lower courts in
all cases in which the constitutionality or validity of any treaty, international or executive
agreement, law, presidential decree, proclamation, order, instruction, ordinance, or
regulation is in question.29

In their complaint before the Regional Trial Court, petitioners averred that the Circular contravened
Civil Code provisions on sales and violated the constitutional prohibition against the deprivation of
property without due process of law. These are within the competence of the trial judge. Contrary to
the finding of the Court of Appeals, the issues raised in the complaint do not entail highly technical
matters. Rather, what is required of the judge who will resolve this issue is a basic familiarity with the
workings of the cellular telephone service, including prepaid SIM and call cards – and this is
judicially known to be within the knowledge of a good percentage of our population – and expertise
in fundamental principles of civil law and the Constitution.

Hence, the Regional Trial Court has jurisdiction to hear and decide Civil Case No. Q-00-42221. The
Court of Appeals erred in setting aside the orders of the trial court and in dismissing the case.

WHEREFORE, in view of the foregoing, the consolidated petitions are GRANTED. The decision of
the Court of Appeals in CA-G.R. SP No. 64274 dated October 9, 2001 and its Resolution dated
January 10, 2002 are REVERSED and SET ASIDE. The Order dated November 20, 2000 of the
Regional Trial Court of Quezon City, Branch 77, in Civil Case No. Q-00-42221 is REINSTATED. This
case is REMANDED to the court a quo for continuation of the proceedings.

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

ALFREDO L. AZARCON, petitioner,

vs.
SANDIGANBAYAN, PEOPLE OF THE PHILIPPINES and JOSE C. BATAUSA, respondents.

PANGANIBAN, J.:

Does the Sandiganbayan have jurisdiction over a private individual who is charged with malversation
of public funds as a principal after the said individual had been designated by the Bureau of Internal
Revenue as a custodian of distrained property? Did such accused become a public officer and
therefore subject to the graft court's jurisdiction as a consequence of such designation by the BIR?

These are the main questions in the instant petition for review of Respondent Sandiganbayan's
Decision1 in Criminal Case No. 14260 promulgated on March 8, 1994, convicting petitioner of
malversation of public funds and property, and Resolution2 dated June 20, 1994, denying his motion
for new trial or reconsideration thereof.

The Facts

Petitioner Alfredo Azarcon owned and operated an earth-moving business, hauling "dirt and
ore."3 His services were contracted by the Paper Industries Corporation of the Philippines (PICOP) at
its concession in Mangagoy, Surigao del Sur. Occasionally, he engaged the services of sub-
contractors like Jaime Ancla whose trucks were left at the former's premises.4 From this set of
circumstances arose the present controversy.

. . . It appears that on May 25, 1983, a Warrant of Distraint of Personal Property was
issued by the Main Office of the Bureau of Internal Revenue (BIR) addressed to the
Regional Director (Jose Batausa) or his authorized representative of Revenue
Region 10, Butuan City commanding the latter to distraint the goods, chattels or
effects and other personal property of Jaime Ancla, a sub-contractor of accused
Azarcon and, a delinquent taxpayer. The Warrant of Garnishment was issued to
accused Alfredo Azarcon ordering him to transfer, surrender, transmit and/or remit to
BIR the property in his possession owned by taxpayer Ancla. The Warrant of
Garnishment was received by accused Azarcon on June 17, 1985.5

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 — 6
 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 BIR's Regional
Director for Revenue Region 10 B, Butuan City stating that

. . . 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. . . . 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. . . .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 truck's 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
petitioner's 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 latter's tax
liabilities shall be deemed satisfied. . . 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. Calo's
report. 10

Provincial Fiscal Pretextato Montenegro "forwarded the records of the complaint . . . to the Office of
the Tanodbayan" on May 18, 1988. He was deputized Tanodbayan prosecutor and granted authority
to conduct preliminary investigation on August 22, 1988, in a letter by Special Prosecutor Raul
Gonzales approved by Ombudsman (Tanodbayan) Conrado Vasquez. 11

Along with his co-accused Jaime Ancla, Petitioner Azarcon was charged before the Sandiganbayan
with the crime of malversation of public funds or property under Article 217 in relation to Article 222
of the Revised Penal Code (RPC) in the following Information 12 filed on January 12, 1990, by Special
Prosecution Officer Victor Pascual:

That on or about June 17, 1985, in the Municipality of Bislig, Province of Surigao del
Sur, Philippines, and within the jurisdiction of this Honorable Court, accused Alfredo
L. Azarcon, a private individual but who, in his capacity as depository/administrator of
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 reinvestigation
on May 22, 1991. 14 After the reinvestigation, Special Prosecution Officer Roger Berbano, Sr.,
recommended the "withdrawal of the information" 15 but was "overruled by the Ombudsman." 16

A motion to dismiss was filed by petitioner on March 25, 1992 on the ground that the Sandiganbayan
did not have jurisdiction over the person of the petitioner since he was not a public officer. 17 On May
18, 1992; the Sandiganbayan denied the motion. 18

When the prosecution finished presenting its evidence, the petitioner then filed a motion for leave to
file demurrer to evidence which was denied on November 16, 1992, "for being without merit." 19 The
petitioner then commenced and finished presenting his evidence on February 15, 1993.

The Respondent Court's Decision

On March 8, 1994, Respondent Sandiganbayan 20 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.

Considering that accused Jaime Ancla has not yet been brought within the
jurisdiction of this Court up to this date, let this case be archived as against him
without prejudice to its revival in the event of his arrest or voluntary submission to the
jurisdiction of this Court.

SO ORDERED.

Petitioner, through new counsel, 22 filed a motion for new trial or reconsideration on March 23, 1994,
which was denied by the Sandiganbayan in its Resolution 23 dated December 2, 1994.

Hence, this petition.

The Issues

The petitioner submits the following reasons for the reversal of the Sandiganbayan's 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 government's right to the subject property has not
been established.

IV. The procedure provided for in the National Internal Revenue Code
concerning the disposition of distrained property was not followed by
the B.I.R., hence the distraint of personal property belonging to Jaime
C. Ancla and found allegedly to be in the possession of the petitioner
is therefore invalid.

V. The B.I.R. has only itself to blame for not promptly selling the
distrained property of accused Jaime C. Ancla in order to realize the
amount of back taxes owed by Jaime C. Ancla to the Bureau. 24

In fine, the fundamental issue is whether the Sandiganbayan had jurisdiction over the subject matter
of the controversy. Corollary to this is the question of whether petitioner can be considered a public
officer by reason of his being designated by the Bureau of Internal Revenue as a depositary of
distrained property.

The Court's Ruling

The petition is meritorious.

Jurisdiction of the Sandiganbayan

It is hornbook doctrine that in order "(to) ascertain whether a court has jurisdiction or not, the
provisions of the law should be inquired into." 25 Furthermore, "the jurisdiction of the court must
appear clearly from the statute law or it will not be held to exist. It cannot be presumed or
implied." 26 And for this purpose in criminal cases, "the jurisdiction of a court is determined by the law
at the time of commencement of the action." 27

In this case, the action was instituted with the filing of this information on January 12, 1990; hence,
the applicable statutory provisions are those of P.D. No. 1606, as amended by P.D. No. 1861 on
March 23, 1983, but prior to their amendment by R.A. No. 7975 on May 16, 1995. At that time,
Section 4 of P.D. No. 1606 provided that:

Sec. 4. Jurisdiction. — The Sandiganbayan shall exercise:

(a) Exclusive original jurisdiction in all cases involving:

(1) Violations of Republic Act No. 3019, as amended, otherwise

known as the Anti-Graft and Corrupt Practices Act, Republic Act No.
1379, and Chapter II, Section 2, Title VII of the Revised Penal Code;

(2) Other offenses or felonies committed by public officers and

employees in relation to their office, including those employed in
government-owned or controlled corporations, whether simple or
complexed with other crimes, where the penalty prescribed by law is
higher than prision correccional or imprisonment for six (6) years, or a
fine of P6,000.00: 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.

xxx xxx xxx

In case private individuals are charged as co-principals, accomplices or accessories

with the public officers or employees, including those employed in government-
owned or controlled corporations, they shall be tried jointly with said public officers
and employees.

xxx xxx xxx

The foregoing provisions unequivocally specify the only instances when the Sandiganbayan will
have jurisdiction over a private individual, i.e. when the complaint charges the private individual
either as a co-principal, accomplice or accessory of a public officer or employee who has been
charged with a crime within its jurisdiction.

Azarcon: A Public Officer or A Private Individual?

The Information does not charge petitioner Azarcon of being a co-principal, accomplice or accessory
to a public officer committing an offense under the Sandiganbayan's jurisdiction. Thus, unless
petitioner be proven a public officer, the Sandiganbayan will have no jurisdiction over the crime
charged. Article 203 of the RPC determines who are public officers:

Who are public officers. — For the purpose of applying the provisions of this and the
preceding titles of the book, any person who, by direct provision of the law, popular
election, popular election or appointment by competent authority, shall take part in
the performance of public functions in the Government of the Philippine Islands, or
shall perform in said Government or in any of its branches public duties as an
employee, agent, or subordinate official, of any rank or classes, shall be deemed to
be a public officer.

Thus,

(to) be a public officer, one must be —

(1) Taking part in the performance of public functions in the government, or

Performing in said Government or any of its branches public duties as

an employee, agent, or subordinate official, of any rank or class; and

(2) That his authority to take part in the performance of public functions or to perform
public duties must be —

a. by direct provision of the law, or

b. by popular election, or
 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 petitioner's designation by
the BIR as a custodian of distrained property qualifies as appointment by direct provision of law, or
by competent authority. 29 We answer in the negative.

The Solicitor General contends that the BIR, in effecting constructive distraint over the truck
allegedly owned by Jaime Ancla, and in requiring 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 BIR's
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) . . . . 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 BIR's 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 court's 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, . . ." 35the 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:

xxx xxx xxx

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.
 xxx xxx xxx

However, we find no provision in the NIRC constituting such person a public officer by reason of
such requirement. The BIR's 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 . . . defines the individuals covered by the term 'officers' under Article
217 39 . . ." 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 . . . ." 41

The Court is not persuaded. Article 222 of the RPC reads:

Officers included in the preceding provisions. — The provisions of this chapter shall
apply to private individuals who, in any capacity whatever, have charge of any
insular, provincial or municipal funds, revenues, or property and to any administrator
or depository of funds or property attached, seized or deposited by public authority,
even if such property belongs to a private individual.

"Legislative intent is determined principally from the language of a statute. Where the language of a
statute is clear and unambiguous, the law is applied according to its express terms, and
interpretation would be resorted to only where a literal interpretation would be either impossible or
absurd or would lead to an injustice." 42 This is particularly observed in the interpretation of penal
statutes which "must be construed with such strictness as to carefully safeguard the rights of the
defendant . . . ." 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 Sandiganbayan's taking
cognizance of this case is of no moment since "(j)urisdiction cannot be conferred by . . . erroneous
belief of the court that it had jurisdiction." 44 As aptly and correctly stated by the petitioner in his
memorandum:

From the foregoing discussion, it is evident that the petitioner did not cease to be a
private individual when he agreed to act as depositary of the garnished dump truck.
Therefore, when the information charged him and Jaime Ancla before the
Sandiganbayan for malversation of public funds or property, the prosecution was in
fact charging two private individuals without any public officer being similarly charged
as a co-conspirator. Consequently, the Sandiganbayan had no jurisdiction over the
controversy and therefore all the proceedings taken below as well as the Decision
rendered by Respondent Sandiganbayan, are null and void for lack of jurisdiction. 45

WHEREFORE, the questioned Resolution and Decision of the Sandiganbayan are hereby SET
ASIDE and declared NULL and VOID for lack of jurisdiction. No costs.

SO ORDERED.
G.R. No. 114711 February 13, 1997

GARMENTS and TEXTILE EXPORT BOARD (GTEB), petitioner,

vs.
COURT OF APPEALS and AMERICAN INTER-FASHION CORPORATION, respondents.

G.R. No. 115889 February 13, 1997

AMERICAN INTER-FASHION CORPORATION, petitioner,

vs.
GLORIOUS SUN FASHION GARMENTS MANUFACTURING (PHILS.), INC. and GARMENTS and
TEXTILE EXPORT BOARD (GTEB), respondents.

HERMOSISIMA, JR., J.:

The doctrine of "primary jurisdiction" of Government administrative agencies has herein come into
play. Should courts of justice interfere with their purely administrative and discretionary functions and
have supervisory powers over their proceedings and actions involving the exercise of judgment and
findings of fact? Verily, over matters falling under their jurisdiction, we have repeatedly held that
administrative agencies are in a better position to pass judgment thereon and their findings of fact in
that regard are generally accorded respect, if not finality, by the courts.1

In this connection, the Garments and Textile Export Board (GTEB) filed the herein petition
for Certiorari from the January 21, 1994 Decision and the March 22, 1994 Resolution of the Court of
Appeals in CA-G.R. SP No. 31596 (G.R. No. 114711). Up for our resolution likewise is the petition
for Certiorari filed by the American Inter-Fashion Corporation (AIFC) against the GTEB Resolution of
June 21, 1994 (G.R. No. 115889). These petitions, being interrelated, were ordered consolidated.

Antecedent facts to set us on a proper perspective are those lucidly set out by the Court of Appeals:

Petitioner American Inter-Fashion Corporation (AIFC) was a corporation organized

under Philippine Laws engaged in the business of manufacturing and exporting
garments. Prior to its incorporation, the original incorporators of AIFC were awarded
the initial export quota (EQ) allocation by virtue of the resolution of the Garments &
Export Textile Board (GTEB) dated July 30, 1984.

Before AIFC's incorporation, Glorious Sun, a corporation organized under Philippine

Laws sometime in 1977, was a recipient of a substantial number of EQ allocations
from the GTEB. On April 27, 1984, Glorious Sun was charged before the GTEB in
OSC No. 84-B-1 with, and was found guilty of, misdeclaration of values of its
imported raw materials resulting in dollar salting, and other related frauds, in
connection with its importations in 1983. As a result, the EQs of Glorious Sun as well
as its license to operate a bonded manufacturing warehouse were cancelled and its
stockholders and officers were disqualified from engaging in garment exports. Its
export quotas were thereafter given to two newly-formed corporations — the De
Soleil Apparel Manufacturing Corporation (De Soleil) and the herein petitioner
American Inter-Fashion Corporation (AIFC). These corporations were joint ventures
of Hongkong investors and majority stockholders of Glorious Sun on one hand and,
allegedly, one member of the family and one crony of President Marcos on the other
(American Inter-Fashion Corp. vs. Office of the President, 197 SCRA 409, 413 & 414
[1991]). The cancelled EQs of Glorious Sun which were given to AIFC pertains to
those under Cat 347/8 equivalent to 113,341-3 dozens which are the subject of
dispute between GTEB and petitioner. Glorious Sun continues to claim its rights over
the aforementioned EQ.

In the meantime, AIFC was able to maintain its EQ from 1984 up to the time of the
filing of this petition (except for a brief period between 1986 and 1989 when AIFC
was placed under sequestration) by continuously exporting or shipping out at least
95% of its current allocation as required by the rules and regulations of the GTEB.
This fact was not denied by the respondents.

With the establishment of a new government in 1986, Glorious Sun, on September 7,

1989, filed an appeal with the Office of the President, which, in turn, set aside the
GTEB decision adverse to Glorious Sun and remanded the case for genuine
hearings where due process would be accorded both parties (supra). This decision
was upheld by the Supreme Court in a petition docketed as G.R. No. 92422 and
entitled American Inter-Fashion Corporation vs. Office of the President, GTEB and
Glorious Sun. On May 23, 1991 and July 2, 1991, the Supreme Court, after finding
that ". . . American Inter-Fashion . . . was created obviously to be the recipient of
export quotas arbitrarily removed from the rightful owner [Glorious Sun]", affirmed the
decision of the Office of the President remanding the case for further proceedings to
the GTEB (supra, p. 426).

Pending its appeal to the Office of the President, Glorious Sun filed before the
Securities and Exchange Commission (SEC) a Petition to Declare the Forfeiture of
the Registration of AIFC on June 16, 1987. This was docketed as SEC-AC No. 319.
On May 24, 1990, the PED ordered there revocation of AIFC's registration on the
ground of "fraud". AIFC thereafter appealed to the SEC en banc, but the latter upheld
the revocation on May 22, 1992. The subsequent Motion for Reconsideration of AIFC
was also denied by the SEC on September 16, 1992.

On September 30, 1992, the Petition for Review filed by AIFC before this Court
docketed as CA-G.R. No. 29017 was denied for having been filed beyond the
reglementary period. This denial was upheld by the Supreme Court (3rd Division) in
a Petition for Review docketed as G.R. No. 107742. AIFC's subsequent Motion for
Reconsideration was likewise denied on February 17, 1993 and on July 1, 1993, the
Supreme Court, en banc, upheld the cancellation of petitioner's certificate of
registration withfinality.

Meanwhile, on August 20, 1992, after further proceedings were conducted in OSC
No. 84-B-1 concerning Glorious Sun's alleged violations and frauds, the GTEB
adopted a resolution which reads as follows:

"NOW THEREFORE, BE IT RESOLVED, as it is hereby resolved:

1. The instant case is hereby terminated with prejudice;

2. The disqualification of Glorious Sun and its principal stockholders

and officers from engaging in the garments export business is hereby
lifted;
 3. The bonded manufacturing warehouse license of Glorious Sun
shall be restored subject to the condition that it shall within a
reasonable period of time, comply with the requirements for the
operation of a BMW, and

4. The Board hereby awards to Glorious Sun the cancelled EQs of De Soleil Apparel
Manufacturing Corporation as follows:

1.1 US Cat 347/348 = 63.839 dozens

1.2 Cat 2 Canada = 123.587 pieces

5. The Board, under existing rules, regulations and policies, is not in a position to
restore the balance of the cancelled quotas.

(NOTE): Because:

1.1 Subject quota is currently being performed by AIF;

1.2 AIF vigorously contests Glorious Sun's claim for restoration, on

the ground that AIF has already acquired vested rights over the
quota;

1.3 The pending case with SEC (SEC-AC319) filed by Glorious Sun
for cancellation of AIFC's corporate registration;

1.4 May 22, 1992-SEC, en banc Resolution cancelling AIFC's

registration;

1.5 Pendency of AIFC's appeal with the Court of Appeals filed on

September 25, 1992. (Comments, Rollo, p. 78).

Incidentally, Glorious Sun also filed on September 21, 1992, GTEB Case No. 92-50
for the cancellation of the subject quotas allotted to AIFC and for restoration of the
same to Glorious Sun. This case has not yet been resolved by GTEB.

AIFC, on the other hand, prior to the Supreme Court denial of its petition for review of
the cancellation of its registration, requested the GTEB to release its EQ allocation
for 1993. This request was, however, refused by the GTEB in a resolution dated
January 11, 1993, for the following reasons:

". . . relative to the request of American Inter-Fashion Corp. for the

release of its 1993 Initial EQ/CEA entitlements under Cat. 347/8:

After a thorough discussion on the matter and, upon motion duly

made and seconded, it was —

RESOLVED, That pending final decision/resolution of the Supreme

Court in the case of American Inter-Fashion Corp. (AIFC) vs. SEC,
the request of AIFC for release of its 1993 Initial EQ/CEA
entitlements under Cat. 347/8, be, as it is hereby DEFERRED,
 pending study by the Committee created under GTEB Office Order
No. 92-1, dated September 11, 1992, and superseded by Office
Order No. 92-2, dated November 7, 1992, to study and attend to the
request of AIFC pertaining to the release of its export quotas which
shall submit its findings/comments and recommendation on the
matter to the Board in its next meeting. However, with regard to
subject firm's goods ready for shipment, it can participate in the EQ
allocation (flexibility) when the same is offered to enable them to fulfill
their commitments."

The above-quoted resolution was the subject of the petition filed by AIFC before the
respondent Judge after GTEB refused to lift said order. This case which was
docketed as Special Civil Action Case No. 93-1173 for Certiorari, prayed for the
annulment of GTEB's aforementioned order, for the issuance of a temporary
injunction restraining the implementation of said order, and for the immediate release
of the regular EQ of AIFC for 1993. A temporary restraining order (Annex D) was
thereafter issued by respondent Judge on April 13, 1993, enjoining GTEB from
implementing its questioned order and from otherwise delaying the release of AIFC's
EQ entitlement for 1993.

On April 20, 1993, GTEB filed a Motion to Dismiss and also moved to quash the
above-mentioned temporary restraining order. Thereafter, on May 3, 1993, the
respondent Judge issued one of the Orders herein questioned which reads as
follows:

"For resolution is the petitioner's prayer for the issuance of a writ of a

preliminary prohibitory injunction . . . enjoining the GTEB and all
persons acting under them from implementing the resolution of the
respondent GTEB, suspending the petitioner's export quota
entitlement for 1993 and, a writ of preliminary mandatory injunction
commanding the GTEB to release the petitioner's 1993 initial export
quotas.

xxx xxx xxx

It is clear from the express terms of the questioned Resolution of the

respondent Garments & Textile Export Board that the petitioner's
export quota has not been "suspended" as claimed by the petitioner
but was merely "deferred" pending a study of certain matters by the
committee created by GTEB. Said resolution further made provisions
for the petitioner's goods which are ready for shipment by stating in
the questioned resolution that "with regard to subject firm's goods
ready for shipment, it can participate in the REA flexibility when the
same is offered to enable them to fulfill their commitments.

Thus it is clear that the respondent GTEB has not as of this time,
suspended or cancelled the petitioner's Export Quota but merely
deferred its release to the petitioner pending the resolution of certain
matters. As a further indication that the GTEB has not suspended the
petitioner's export quota, is the fact that it has provided for temporary
measures which allows the petitioner to ship its products which are
 ready for shipment in order not to unduly cause damage to the
petitioner.

WHEREFORE, in view of all the foregoing, the petitioner's prayer for

writs of preliminary prohibitory and mandatory injunctions are hereby
DENIED." (Annex A; Rollo, pp. 23-24)

AIFC's subsequent motion for reconsideration was likewise denied (Annex D).
Hence, the instant petition.

Despite the Supreme Court's final decision upholding the cancellation of AIFC's
certificate of registration, the latter, on July 13, 1993, filed another Petition
for Certiorari before the Supreme Court docketed as SC-G.R. No. 110771, against
SEC and Glorious Sun, assailing the SEC decision dated May 22, 1992 which
ordered the revocation of AIFC's certificate of registration, and seeking to stop the
cancellation of its certificate of registration. This petition (G.R. No. 110771) was
denied by the Supreme Court on August 11, 1992 on the ground that the questioned
decision of the SEC "is the same decision assailed in a petition for review
on certiorari filed with [the Supreme Court] on 23 November 1992 under Rule 45 of
the Rules of Court, docketed as G.R. No. 107742. Records show that the petition (in
G.R. No. 107742) was denied and a motion for reconsideration of said denial
was denied with finality in the resolution of the Court en banc, dated 01 July 1993'
(Annex A to Respondent's Memorandum; Rollo, p. 326). Petitioner's Motion for
Reconsideration in G.R. No. 110771 is still pending resolution by the Supreme Court.

In the meantime, AIFC was awarded by the GTEB a REA-Flexibility quota of exactly
the same category and amount as that which is the subject of this petition the release
of which was deferred by the GTEB. This was done by the GTEB allegedly so as not
to prejudice AIFC's export commitments pending any action on its request for the
release of its 1993 EQs. AIFC had allegedly performed on the REA-Flex quota since
January 1993 up to the present (Annex B to Respondent's Memorandum). The
GTEB also allowed AIFC to continue importing raw materials "to service the balance
of its REA-Flex quota" (Annex C; Respondents' Memorandum, p. 17). Incidentally,
the difference between the REA-Flex quota and the regular quota entitlement, is that
the latter may be subject to restoration for the next quota year depending on
performance of and compliance while the former is only good for one-time use and
may not be carried over to the next quota year (Respondent's Memorandum, p.
16; Rollo,
p. 326).

On September 10, 1993, this Court in the instant petition and through the former
Seventeenth Division, required petitioner to amend its petition to include AIFC-
International Fashion Corporation (hereinafter, AIFC-International) as co-petitioner
considering AIFC's manifestation that it underwent a business reorganization which
resulted in the establishment of AIFC-International as its wholly-owned subsidiary
and the transfer to the latter of AIFC's regular export allocation with the GTEB (p.
167, Rollo).

Respondent GTEB objected to AIFC's motion to join AIFC-International as co-

petitioner because the latter allegedly does not have any interest in the case at
bar. Furthermore, the SEC had issued a restraining order on August 31, 1993
enjoining AIFC or any of its agents from transferring and conveying its assets to
 AIFC-International or any other subsidiary of AIFC (Annex A; p. 220, Rollo). The
restraining order was issued in connection with SEC Case No. 08-93-4546 filed by
Yeung Chun Kam, Yeung Chun Ho, and Archie Chan vs. American Inter-Fashion
Crop. (Annex B, p. 221, Rollo).

It seems that Yeung Chun Kam, Yeung Chun Ho and Archie Chan are among the
stockholders of petitioner AIFC known as the "Hongkong Investors" who allegedly
own an aggregate thirty-three percent (33%) of the total subscription of AIFC's capital
stock of P2.5 Million. They alleged in their petition that they voted against the
resolution adopted by AIFC which increased the corporation's capital stock from P2
Million to P60 Million, which resolved that the authorized capital stock be paid-up with
the advances of the Campa Group representing 63% of the subscription of the
capital stock of AIFC, and which also resolved that the corporation's creditors-
stockholders would be given the right to subscribe to the authorized capital stocks by
converting their advances to the Corporation into equity.

The Hongkong group allegedly disagreed with and voted against the resolution since
they wanted the additional paid-up capital to be entirely in cash with all the
stockholders infusing new money. The resolution was allegedly not implemented,
instead, the Hongkong group claims to have discovered that without their knowledge
the Campa group organized and registered a partnership called American Inter-
fashion Ltd., Co., as well as another subsidiary, the AIFC-International. Claiming that
these acts of establishing the two business entities violated their rights as minority
stockholders of AIFC, Yeung Chun Ho, Yeung Chun Kam and Archie Chan filed SEC
Case No. 08-93-4546 seeking to restrain the transfer and conveyance of AIFC's
assets to AIFC-International and American Inter-Fashion Ltd., Co.; to cause the
appointment of trustees for the purpose of the liquidation of AIFC under Sec. 122 of
the Corporation Code; and to order AIFC to provide Yeung Chun Kam company
copies of its financial statements from 1989 to 1993 and to render an accounting of
its operations during the said years (Rollo, pp. 222 to 235). This case is still pending
before the SEC.2

As can be seen, there were triggered by the controversy of the parties herein innumerable pleadings
and interminable complaints:

On April 7, 1993, AIFC filed a petition for certiorari, prohibition and mandamus under Rule 65 against
the GTEB with the Regional Trial Court of Makati, Branch 138, entitled "American Inter-Fashion
Corporation, Petitioner, v. Garments and Textile Export Board, Respondent" docketed as Civil Case
No. 93-1173 (Annex "D" of GTEB's petition).

In the said petition AIFC sought to annul, on the alleged ground of lack of jurisdiction or grave abuse
of discretion, the GTEB's Resolution dated January 11, 1993 deferring AIFC's request for the
release of its 1993 EQs (Initial EQ/CEA entitlements under Cat. 347/8) for the reasons therein
stated. Said Resolution provided in part:

RESOLVED, that pending final decision/resolution of the Supreme Court on the case
of American Inter-Fashion Corp. (AIFC) vs. SEC, the request of AIFC for release of
its 1993 Initial EQ/CEA entitlements under Cat. 347/8, be, as it is hereby
DEFERRED pending study by the Committee created under GTEB Office Order No.
92-1, dated September 11, 1992, and superseded by Office Order No. 92-2, dated
November 17, 1992, to study and attend to the request of AIFC pertaining to the
release of its export quotas which shall submit its findings/comments and
 recommendation on the matter to the Board in its next meeting. However, with regard
to subject firm's goods ready for shipment, it can participate in the REA flexibility
when the same is offered to enable them to fulfill their commitments.

On April 13, 1993, the trial court issued a temporary restraining order against GTEB pending hearing
on AIFC's application for the issuance of a writ of preliminary prohibitory injunction.

On April 24, 1993, GTEB filed its "1. Motion to Dismiss the Instant Petition and 2. Motion to Quash or
Recall the Temporary Restraining Order."3

On April 29, 1993, GTEB filed its "Motion to Resolve Motion to Dismiss Prior to Hearing of the
Petition for Injunction."4

On or about 19 April 1993, Glorious Sun Fashion Garments Manufacturing (Phils.), Inc. (Glorious
Sun) filed an "Urgent 1) Motion for Leave to Intervene and File Answer as Respondent-Intervenor
and 2) Motion to Quash or Recall Temporary Restraining Order." This motion was opposed by AIFC.

In its Order dated May 3, 1993, the trial court denied AIFC's application for the issuance of the writs
of preliminary prohibitory and mandatory injunction. The pertinent portions of the May 3, 1993
Order5 state:

It is clear from the express terms of the questioned Resolution of the respondent
Garments and Textile Export Board that the petitioner's export quota has not been
"suspended" as claimed by the petitioner but was only "Deferred" pending a study of
certain matters by the committee created by GTEB. Said resolution further made
provisions for the petitioner's goods which are ready for shipment by stating in the
questioned resolution that "with regard to subject firm's goods ready for shipment, it
can participate in the REA flexibility when the same is offered to enable them to fulfill
their commitments."

Thus, it is clear that the respondent GTEB has not as of this time, suspended or
cancelled the petitioner's Export Quota but merely deferred its release to the
petitioner pending the resolution of certain matters. As a further indication that the
GTEB has not suspended the petitioner's export quota, is the fact that it has provided
for temporary measures which allows the petitioner to ship its products which are
ready for shipment in order not to unduly cause damage to the petitioner.

WHEREFORE, in view of all the foregoing, the petitioner's prayer for writs of
preliminary prohibitory and mandatory injunctions are hereby DENIED.

Through its Order dated May 25, 1993,6 the trial court denied AIFC's motion for reconsideration of
the May 3, 1993 Order. As a result thereof, AIFC filed with the Court of Appeals a petition
for certiorari and mandamus from the aforementioned Orders of the trial court in Civil Case No. 93-
1173 (docketed as CA-G.R. SP No. 31596) where it prayed that the May 3, 1993 and May 25, 1993
Orders be set aside and a writ of mandamus be issued directing the GTEB to release AIFC's EQs for
1993.

Thereafter, AIFC filed a "Manifestation" where it alleged that in July 1993, it underwent a business
reorganization which resulted in the establishment of a wholly-owned subsidiary, the AIFC
International Fashion Corporation. AIFC further alleged that its regular export quota allocation with
the GTEB was transferred to the aforesaid subsidiary, for which reason, the said subsidiary may be
joined as a co-petitioner in CA-G.R. SP No. 31596.
After the GTEB filed its "Comments" on the petition in CA-G.R. SP No. 31596 on August 19,
1993,7 AIFC filed a "Motion"8 where it prayed that AIFC International Fashion Corporation be joined
as a co-petitioner. Thereafter, on or about August 26, 1993, AIFC (and AIFC International) filed a
"Reply" to the Comments of GTEB.9

Subsequent to the above, on September 14, 1993, upon being directed by the Court of Appeals to
amend its petition to include "AIFC International Fashion Corporation" as co-petitioner, AIFC filed an
amended petition. 10

After hearing the oral arguments of the GTEB and AIFC, and after receiving their respective
memoranda, 11 as well as other additional pleadings (including an "Addendum To Respondent's
Memorandum" 12 filed by the GTEB for purposes of informing the Court of Appeals of this Court's
September 22, 1993 Resolution issued in G.R. No. 110771 denying with finality AIFC's motion for
reconsideration of the August 11, 1993 Resolution dismissing the said petition, and affirmed the
revocation of AIFC's certificate of corporate registration), or on January 21, 1994, the Court of
Appeals rendered the Decision subject of GTEB's petition in G.R. No. 114711 in favor of AIFC and
AIFC International, 13 annulling the trial court's Orders of May 3, 1993 and May 25, 1993 in this wise:

WHEREFORE, the instant petition is GRANTED and the Orders of the respondent
Judge dated May 3, 1993 and May 25, 1993 are hereby annuled and set aside with
no pronouncement as to costs.

On February 11, 1994, the GTEB filed a "Motion For Reconsideration" 14 of the 21 January 1994
Decision.

Shortly thereafter, motions to intervene as well as motions for reconsideration of the said Decision
were filed by Glorious Sun Fashion Garments Manufacturing Co., (Phils.) Inc. and by the minority
stockholders of AIFC (Yeung Chun Kam, Yeung Chun Ho and Archie Chan).

On or about January 31, 1994, on the ground that the Court of Appeals in its January 21, 1994
Decision had granted the petition, AIFC and AIFC International filed a "Motion For Issuance Of Writ
Of Mandamus" 15 asking that a writ of mandamus be issued to compel the GTEB to release EQs for
1993 to AIFC.

On February 15, 1994, the GTEB filed its "Opposition To Petitioners' Motion for Issuance of Writ
of Mandamus. 16

On March 22, 1994, the Court of Appeals issued its Resolution 17 denying (1) AIFC and AIFC
International's motion for the issuance of a writ of mandamus, (2) the motions for intervention filed by
Glorious Sun, and Yeung Chun Kam, et al., and (3) GTEB's motion for reconsideration. The more
pertinent portions of said Resolution read:

It bears stressing that the subject matter of the petition as well as of the decision
sought to be reconsidered was only the 1993 allocation. Our decision herein did not
concern itself with, nor was it called upon to rule upon, any future allocations the
grant or release of which is the prerogative of the GTEB in accordance with law.

We never ordered the GTEB to release the 1993 allocation to AIFC, since the lapse
of the year 1993 had rendered this issue moot and academic.
We wish to make it clear that this Court is not intruding in, nor are we adjudicating
upon ourselves, the powers and functions of the GTEB. The decision to annul the
orders in question was called for in view of the grave abuse of discretion exercised
both by GTEB and the lower court in refusing to release petitioner's 1993 allocations
despite the fact that it was clearly entitled to such release. This is well within the
jurisdiction of this Court which has the authority to check the abuses which may have
been committed by any officer, board or tribunal exercising judicial functions (Sec. 1,
Rule 65, Rules of Court).

Neither are we ordering the GTEB to release or grant export quota allocations to the
transferee of AIFC's 1993 EQ allocations. The decision never granted such right to
the transferee since we know that this issue is solely within the jurisdiction of the
GTEB. What the decision discussed was petitioner's act of transferring the interest
and assets of the former AIFC to its transferee. We do not consider this as an
adjudication of GTEB functions.

As regards the Motions to Intervene filed by Glorious Sun and Yeung Chun Kam and
company, we find said motions improper. Intervention is not an independent action
but is auxiliary and supplemental to existing litigation (Clareza vs. Rosales, 2 SCRA
455). The office of a petition for certiorari is only to check abuses or excesses in the
exercise by a tribunal, board or officer, of its judicial functions and not to determine
the respective rights and interests of the parties in the subject matter of the litigation.
This petition is therefore not the proper forum for the discussion of the respective
rights either or Glorious Sun or Yeung Chun Kam, and company. Whether or not
Glorious Sun is entitled to quota allocations is an issue which could be properly
raised before the GTEB. And regarding the interests of Yeung Chun Kam and
company vis-a-vis those of AIFC's, the same should be properly ventilated in another
appropriate proceeding.

Moreover, intervention is generally allowed only before or during trial (Sec. 2, Rule
12, Rules of Court) unless there are strong considerations to allow such intervention.
None exists in this case.

In view of the denial of the Motions to Intervene filed by Glorious Sun, Yeung Chun
Kam and company, there is no reason for us to discuss their motions for
reconsideration.

WHEREFORE, premises considered, petitioner's Motion for the issuance of a Writ

of Mandamus is DENIED. GTEB's motion for reconsideration is also DENIED as well
as the Motions for Intervention filed by Glorious Sun, Yeung Chun Kam, Yeung Chun
Ho, and Archie Chan.

GTEB thus filed its petition in G.R. No. 114711, where it prayed:

WHEREFORE, premises considered, it is respectfully prayed that the 21 January

1994 Decision and 22 March 1994 Resolution of the Court of Appeals (except insofar
as the latter correctly denied AIFC and AIFC International Fashion Corporation's
"Motion For Issuance Of Writ Of Mandamus') BE ANNULLED AND SET ASIDE; and
that instead a Resolution be issued DISMISSING the petition in CA-G.R. SP No.
31596 in its entirety for being moot and academic and/or for lack of merit.
AIFC's petition in G.R. No. 115889, on the other hand, is an offshoot of the petition filed by Glorious
Sun with the GTEB on 21 September 1992. 18 In said GTEB petition, 19 Glorious Sun prayed that the
export quotas which the GTEB had earlier awarded to AIFC on August 1, 1984 pursuant to its April
27, 1984 Decision in Adm. Case No. OSC 84-B-1, be cancelled and returned to Glorious Sun, on the
alleged ground that AIFC was not qualified to the said awards under the policies, rules and
regulations of the GTEB, and more specifically because:

a. AIFC, at the time of the award on August 1, 1984, did not have its own in-house
production capacity; in this connection, AIFC, to this date, still has no in-house
production capacity as it has continued not owning any factory, plant, or even a
single sewing machine, nor can it show any lease agreement for the use of any
manufacturing facilities;

b. AIFC had no personality at the time of the award on August 1, 1984 as it was not
yet a corporation, its incorporation having been effected only on September 6, 1984;
in this connection, on May 22, 1992, the certificate of registration of AIFC was
revoked by order of the Securities and Exchange Commission on the ground that the
same was secured through fraud; and

c. AIFC, upon its incorporation, included as stockholders persons who were at the
time disqualified from engaging in the garments export business.

The events leading to the filing of GTEB Case No. 92-50 are in turn summed up in the succeeding
paragraphs of Glorious Sun's "Comment on Petition with Memorandum" dated August 1, 1995: 20

8. On 27 April 1984, the GTEB, on the basis of trumped-up charges of misdeclaration

of importations, issued a Decision in Adm. Case No. OSC 84-B-1, cancelling the
export quotas and export authorizations of Glorious Sun, and on 01 August 1984
illegally awarded part thereof to AIFC. The dispositive portion of said Decision reads
thus:

WHEREFORE, the Board finds that the Respondent firm violated its
rules and regulations on importations and hereby imposes the
following administrative penalties:

1. Cancellation of Export Quotas and Export Authorizations of the firm

and disqualification of the firm and the major stockholders and
officers from engaging in garment exports;

2. Cancellation of the firm's license to operate a bonded

manufacturing warehouse.

The Board will likewise endorse the case to the Presidential Anti-
Dollar Salting Task Force for further investigation and prosecution
and will request the Bureau of Customs to seal the firm's bonded
manufacturing warehouse and to conduct an inventory of the
contents thereof.

9. Subsequently, Glorious Sun appealed the said Decision to the Office of the
President. On September 7, 1989, the Office of the President, in O.P. Case No.
3781, nullified the Decision of the GTEB in the succeeding manner:
 WHEREFORE, the case is hereby remanded to the Garments and
Textile Export Board for further proceedings, affording the Appellant
an opportunity (a) of full disclosure of all the evidence and/or GTEB
records relative to the charges in the Show Cause Order dated
February 14, 1984, which evidence/records must be properly
identified and their due execution and existence duly established by
appropriate competent witnesses, and (b) of rebutting the same
evidence/records through the presentation of additional evidence,
after which the Board may, on the basis of said evidence and
records, maintain or revise its decision in this case.

10. Thereafter, acting on Motions for Reconsideration of its September 7, 1989

decision, the Office of the President, on February 20, 1990, expanded its previous
decision. The pertinent portion of the Resolution denying said motions are hereunder
quoted, to wit:

It is, however, insisted by the movants that the GTEB decision of April
27, 1984 had already become final and that Glorious Sun abandoned
its right when it elevated the case to the Supreme Court by way
of certiorari, docketed as G.R. No. 67180, "Glorious Sun Fashion
Garments and Textile Manufacturing Company (Philippines), Inc. vs.
Garments and Textile Export Board, etc. et al." We disagree. For, as
explicitly shown by the resolution promulgated on June 4, 1984 by the
Supreme Court in the said case and as found by this Office in the
decision presently sought to be reconsidered, the said April 27, 1984
decision was rendered by the GTEB in flagrant violation of Glorious
Sun's right to due process. Hence, the GTEB may be said to have
"acted without or in excess of jurisdiction and with grave abuse of
discretion" (Barranza vs. Campos, Jr. 120 SCRA 881, 888-889) and,
therefore, the said decision is null and void (Bacus vs. Ople, 132
SCRA 690, 710; Free Employees and Workers Assn. [FEWA] vs.
Court of Industrial Relations, 14 SCRA 781, 784-787) as if it was not
rendered at all. As succinctly held by the Supreme Court:

In this jurisdiction, a void judgment or order is in legal

effect no judgment or order. By it no rights are
divested. From it no rights can be obtained. Being
worthless, it neither binds nor bars anyone. All acts
performed under it and all claims flowing out of it are
void (Paredes vs. Moya, 61 SCRA 525, 533, citing
Chavez vs. Court of Appeals, 24 SCRA 663, 685;
Comia vs. Nicolas, 29 SCRA 492, 503-504, quoting
Chavez vs. CA, supra, and Gomez vs. Concepcion,
47 Phil. 717, 722).

Thus, being null and void, rendered as it was in

violation of the due process clause (Bacus vs.
Ople, supra) and consequently for want of jurisdiction
(Barranza vs. Campos, Jr., supra), the GTEB decision
of April 27, 1984 "is not a decision in contemplation of
law" (Planas vs. Collector of Internal Revenue, 3
SCRA 395, 399) and is, therefore, "inexistent" (Free
Telephone Workers Union vs. PLDT, 160 SCRA 43,
 46). Consequently, the same decision can "never
become final" (Manila Railroad Company vs. Moya,
14 SCRA 358, 363-364), much less executory
(Planas vs. Collector of Internal Revenue, supra).
Indeed, the parties attempting to enforce (such void
judgment) may be responsible as "trespassers"
(Comia vs. Nicolas, supra, at p. 504).

What right then could Glorious Sun have abandoned

when, as illustrated by the aforecited authorities, the
void and inexistent GTEB decision of April 27, 1984
neither vests nor divests any rights, neither binds nor
bars anyone?

11. The Decision of the Office of the President was in turn upheld by the Supreme
Court in a Resolution dated May 23, 1991 and another Resolution dated July 2, 1991
in American Inter-Fashion Corporation v. Office of the President (197 SCRA 409
[1991]). In said case, the Supreme Court, citing Mabuhay Textile Mills Corporation v.
Ongpin (141 SCRA 437 [1986]), ruled that the export quota allocations of Glorious
Sun had evolved into some form of property right, which should not be removed from
it arbitrarily and without due process. Thus:

Contrary to the petitioner's posture, the record clearly manifests that

in cancelling the export quotas of the private respondent GTEB
violated the private respondent's constitutional right to due process.
Before the cancellation in 1984, the private respondent had been
enjoying export quotas granted to it since 1977. In effect the private
respondent's export quota allocation which initially was a privilege
evolved into some form of property right which should not be
removed from it arbitrarily and without due process only to hurriedly
confer it on another. Thus, in the case of Mabuhay Textile Mills
Corporation v. Ongpin (Ibid), we stated:

In the case at bar, the petitioner was never given the

chance to present its side before its export quota
allocations were revoked and its officers
suspended. While it is true that such allocations as
alleged by the Board are mere privileges which it can
revoke and cancel as it may deem fit, these privileges
have been accorded to petitioner for so long that they
have become impressed with property rights
especially since not only do these privileges
determine the continued existence of the petitioner
with assets of over P80,000,000.00 but also the
livelihood of some 700,000 workers who are
employed by the petitioner and their families. . . .
(Emphasis supplied).

The decision penned by Deputy Executive Secretary

Magdangal B. Elma and the resolution penned by
Acting Deputy Executive Secretary Mariano
Sarmiento II are not tainted in the slightest by any
 grave abuse of discretion. They outline in detail why
the private respondent was denied due process when
its export quotas were cancelled by GTEB. The
findings are supported by the records.

Finally, American Inter-Fashion is hardly the proper

party to question the Malacañang decision. It was
incorporated after the incidents in this case
happened. It was created obviously to be the recipient
of export quotas arbitrarily removed from the rightful
owner. It was sequestered precisely because of the
allegation that it is a crony corporation which profited
from an act of injustice inflicted on another private
corporation.

xxx xxx xxx

PREMISES CONSIDERED, the motion for

reconsideration is GRANTED. The instant petition is
DISMISSED. The questioned decision and resolution
of the Office of the President are hereby AFFIRMED
(American Inter-Fashion Corporation v. Office of the
President, 197 SCRA 409 [1991]).

12. After the aforementioned Decision of the Office of the President was affirmed by
the Supreme Court, and pursuant to the directive embodied in the said O.P.
Decision, the case was remanded to the GTEB for further proceedings. However,
while Glorious Sun presented additional evidence in support of its position, the GTEB
did not, as it could not, present any evidence relative to the charges in the show
Cause Order dated 14 February 1984. Instead, and in view of this dearth of evidence
against Glorious Sun, the GTEB encouraged the latter to enter into a compromise
agreement.

13. Glorious Sun assented to the execution of a compromise agreement primarily on

the basis of an understanding with the GTEB that insofar as the balance of the export
quotas due to Glorious Sun was concerned (which quotas AIFC was illegally and
obstinately holding on to), Glorious Sun would be allowed to initiate separate
proceedings for the recovery thereof against AIFC. Incidentally, this arrangement
was rendered necessary by the fact that AIFC was never a proper party to, and had
no personality to participate in Adm. Case No. OSC 84-B-1.

14. On August 20, 1992, the GTEB finally dismissed the complaint against Glorious
Sun which formed the basis for the April 27, 1984 decision, restoring part of the
export quota allocations of Glorious Sun. The dispositive portion of the said
Resolution reads:

NOW THEREFORE, BE IT RESOLVED, as it is hereby resolved that:

a) The instant case is hereby terminated with prejudice;

 b) The disqualification of Glorious Sun and its principal stockholders
and officers from engaging in the garments export business is hereby
lifted;

c) The bonded manufacturing warehouse license of Glorious Sun

shall be restored subject to the condition that it shall within a
reasonable period of time, comply with the requirements for the
operations of a BMW, and

d) The Board hereby awards to Glorious Sun the canceled EQs of De

Soleil Apparel Manufacturing Corporation as follows:

1. US Cat. 347/348-63,839 dzs.

2. Cat. 2 Canada-123,587 pcs.

e) The Board, under existing rules, regulations and policies, is not in

a position to restore the balance of the cancelled quotas (p. 4, GTEB
Resolution dated August 20, 1992).

15. It will be noted that the Board restored to Glorious Sun the portion of the export
quotas illegally taken away from Glorious Sun and given to DE Soleil Apparel
Manufacturing Corporation (DSA), the same having been already taken back by the
Board by cancellation. But, as stated above, with respect to the balance of the export
quotas illegally taken away from Glorious Sun still being stubbornly illegally held on
to by AIFC, additional steps became necessary for the recovery thereof.

16. Accordingly, on September 21, 1992, Glorious Sun filed GTEB Case No. 92-50
for the cancellation of the quotas illegally awarded to AIFC and for the restoration of
the said quotas to Glorious Sun.

17. On August 3, 1993, the Hearing Officer submitted his Report with the
recommendation that AIFC's export quotas he revoked/cancelled and the same be
returned or awarded to Glorious Sun subject to GTEB rules and regulations on
performance and forfeiture. However, instead of approving the Report of the Hearing
Officer assigned to hear the case and who conducted the proceedings, the GTEB
appointed a committee to prepare a Report.

18. The Committee submitted its Report and Recommendation under date of May
10, 1994. On June 21, 1994, the GTEB issued a Resolution adopting and approving
in toto the Report and Recommendation. The pertinent portion of the Resolution
reads:

THE FOREGOING PREMISES CONSIDERED, the Board hereby RESOLVES:

1. That the export quotas and export authorizations awarded to AIFC

be cancelled;

2. That the petition of Glorious Sun to be restored the export quota

allocations which were awarded to AIFC be denied;
 3. That said export quotas and export authorizations of AIFC be
reverted to the allocable balance (open basket) which shall be made
available to other garment manufacturers, including Glorious Sun, for
application therefor; and

4. That AIFC's motion to dismiss be denied for lack of any merit.

19. AIFC filed the instant petition to annul the above-quoted June 21, 1994
Resolution of the GTEB, as well as to compel the latter to restore the cancelled
export authorizations which AIFC claims it is entitled to.

After Glorious Sun presented evidence in support of its petition in GTEB Case No. 92-50, AIFC filed
a motion to dismiss the same for lack of jurisdiction. 21 On June 21, 1994, the GTEB issued its
resolution subject of AIFC's petition in G.R. No. 115889, 22 the entirety whereof reads as follows:

RESOLVED, that the findings and recommendation of the Committee on

Administrative Case No. 92-50, as contained in Annex "C", be, as they are hereby
ADOPTED and APPROVED, in toto, wit:

1. That the export quotas and export authorizations awarded to AIFC

be cancelled;

2. That the petition of Glorious Sun to be restored the export

allocations which were awarded to AIFC be denied;

3. That the said export quotas and export authorizations of AIFC be

reverted to the allocable balance which shall be made available to
other garment manufacturers, including Glorious Sun, for application
therefor;

4. That AIFC's motion to dismiss be denied for lack of merit.

Consequently, on 6 July 1994, AIFC filed its petition in G.R. No. 115889, where it sought to:

(a) annul and set aside the respondent Garments and Textile Export Board's
(GTEB's) resolution dated 21 June 1994 in GTEB Case No. 92-0, entitled Glorious
Sun vs. AIFC, for having been issued without or in excess of jurisdiction, or in grave
abuse of discretion; and

(b) have respondent GTEB commanded to restore or release petitioner AIFC's

regular export quota entitlement for 1994. 23

Simultaneous with the filing of its petition, AIFC filed a motion to consolidate the said petition with
GTEB's petition in G.R. No. 114711. On July 20, 1994, after praying for time for the filing thereof,
Glorious Sun filed, in G.R. No. 115889, a "Motion for Outright Dismissal of the Petition (with
Opposition to Motion to Consolidate)", where it sought the dismissal of said petition on the grounds
that (1) AIFC has no personality to file the petition; (2) AIFC failed to exhaust administrative
remedies; and (3) AIFC is guilty of forum-shopping.

In view of Our July 20, 1994 Resolution: (1) requiring the respondents in G.R. No. 115889 to
comment on the petition, and not to file a motion to dismiss, and (2) granting AIFC's motion to
consolidate, Glorious Sun filed a "Manifestation" on August 15, 1994 whereby it withdrew the
aforesaid "Motion for Outright Dismissal of the Petition (with Opposition to Motion to Consolidate)."
At the same time it made manifest its intention to file a motion for reconsideration of the same July
20, 1994 Resolution insofar as it ordered AIFC's petition in G.R. No. 115889 consolidated with the
GTEB's petition in G.R. No. 114711.

Accordingly, on September 7, 1994, Glorious Sun filed a "Motion for Reconsideration 24 with Motion
to Suspend Period to File Comment."

However, prior to the filing of Glorious Sun's aforesaid "Motion for Reconsideration, etc.," or on
September 5, 1994, we issued our Resolution in the above-numbered cases, where we resolved to:

(a) NOTE WITHOUT ACTION the motions filed by: (1) Glorious Sun Fashion
Garments Manufacturing in G.R. No. 115889 for first and second extensions totalling
fifteen (15) days from July 13, 1994 within which to file motion to dismiss petition and
opposition to the motion to consolidate; and (2) American Inter-Fashion Corporation
[N.B. this should have read "Glorious Sun Fashion Garments Manufacturing" in G.R.
No. 114711 for the outright dismissal of the case with opposition to the motion to
consolidate, it appearing that the: (1) motion for outright dismissal with opposition to
the motion to consolidate was withdrawn by private respondent Glorious Sun
Fashion Garments Manufacturing in G.R. No. 115889 through its manifestation dated
August 11, 1994; and (2) motion to consolidate these cases was granted by the
Second Division on July 20, 1994;

(b) GRANT the motions of: (1) private respondent American Inter-Fashion
corporation: (aa) for a fourth (final) extension of five (5) days from July 23, 1994
within which to file comment on the petition for review on certiorari; and (bb) to admit
comment on the petition in G.R. No. 114711;

(c) NOTE the: (1) urgent motion of petitioner in G.R. No. 115889 to resolve
application for temporary restraining order or injunction; and (2) comment on the
petition with motion for the issuance of a show cause order filed by private
respondent American Inter-Fashion Corporation in G.R. No. 114711;

(d) require the petitioners [N.B. this should have read petitioner] to file a REPLY
within ten (10) days from notice hereof to the comment on the petition filed by
American Inter-Fashion Corporation; and

(e) NOTE the manifestation dated August 12, 1994 by Atty. Benjamin D. de Asis,
manifesting his withdrawal as counsel for petitioner Garments and Textile Export
Board in G.R. No. 114711 but require aforesaid counsel to SUBMIT the conformity of
his client within five (5) days from notice hereof. 25

Thereafter, Glorious Sun filed on September 22, 1994 with the First Division of this Court, its
"Manifestation and Motion to Suspend Further Proceedings Until After Resolution by Second
Division of Motion for Reconsideration of Order of July 20, 1994 on Consolidation." 26 On the other
hand, the GTEB, pursuant to Our above directive, filed its Reply to AIFC's Comment in G.R. No.
115889.

AIFC, as petitioner in G.R. No. 114711, filed with the Second Division of this Court an "Urgent
Motion to Resolve Application for Injunction," 27 which it followed up with an "Urgent Motion to
Restore Status Quo Ante." 28 The latter motion was filed with the Third Division of this Court, to whom
the above-numbered petitions had, in the meantime, been assigned. In response to these urgent
motions, Glorious Sun filed, also with the Third Division of this Court, its "Comment (Re: Petitioner's
Urgent Motions: [1] to Resolve Application for Injunction; and [2] to Restore Status Quo Ante)" where
it argued that:

I. The First Division of this Honorable Court, as far back as 05 September 1994, had
already acted upon petitioner's urgent motion for the issuance of a temporary
restraining order or injunction, by merely noting the same.

II. In any event, the instant motions should nevertheless be denied, there being
absolutely no showing that petitioner is clearly entitled to injunctive relief. 29

Subsequent to the filing of the above pleadings, AIFC filed yet another "Urgent Motion to Resolve,"
to which Glorious Sun replied through a pleading denominated as "Manifestation (Re: Petitioner's
March 30, 1995 Urgent Motion to Resolve) with Motion for Summary Dismissal and Motion to Cite
Petitioner for Direct Contempt (For Violation of SC Revised Circular 28-91)." 30

On April 3, 1995, we issued a resolution, the pertinent portions whereof reads:

Considering the allegations contained, the issues raised and the arguments adduced
in the petitions for review on certiorari, as well as the respective comments of the
private respondents thereon and the replies of petitioner to said comments, the Court
Resolved to give DUE COURSE to the petition, and to require the parties to FILE
their respective MEMORANDA in both cases, within twenty (20) days from notice.

The Court further Resolved:

xxx xxx xxx

(b) to NOTE:

(1) the urgent motion to resolve application for injunction, dated

March 2, 1995, filed by counsel for petitioner American Inter-Fashion
Corporation; and

(2) the urgent motion to restore status quo ante, dated March 14,
1995, filed by counsel for petitioner.

Thereafter, both American Inter-Fashion Corporation and the GTEB filed their respective
Memoranda. On the other hand, on August 4, 1995, Glorious Sun filed its "Comment on Petition with
Memorandum," 31 which pleading included the succeeding explanatory remarks:

1. At the outset, it should be mentioned that contrary to the 05 April 1995 Resolution
of the Honorable Court, Glorious Sun has not yet filed its comment to American Inter-
Fashion Corporation's (AIFC's) petition in the above-numbered case.

2. On 07 September 1994, Glorious Sun filed a motion for reconsideration of the

order of this Honorable Court which consolidated the instant petition with the petition
of the Garments and Textile Export Board (GTEB) in G.R. No. 114711. Glorious Sun
included in said motion for reconsideration a "Motion to Suspend Period to File
Comment," pending resolution by the Honorable Court of the consolidation incident.
 3. Subsequent thereto, or on 22 September 1994, Glorious Sun filed a "Manifestation
and Motion to Suspend Further Proceedings Until After Resolution by Second
Division of Motion for Reconsideration of Order of July 20, 1994 on Consolidation.

4. In view of the filing of the aforementioned motions, Glorious Sun held off the filing
of its comment to the petition until said motions were resolved by the Honorable
Court. To this day, however, no resolution has as yet been rendered by the
Honorable Court relative to the above-stated motions.

5. We surmise that the comment being referred to by the Honorable Court as having
been filed by Glorious Sun is that which the latter filed in connection with AIFC's
Urgent Motions (1) to Resolve Application for Injunction; and (2) to Restore Status
Quo Ante.

6. Be that as it may, Glorious Sun is filing the instant pleading which it prays be
treated as its comment and memorandum. 32

A "Motion for Leave to Intervene and Submit Manifestation" 33 in the above-entitled cases was
subsequently filed by Messrs. Yeung Chun Kam and Yeung Chun Ho, who purport to be the
Hongkong investors referred to by American Inter-Fashion Corporation in its 23 June 1995
Memorandum.

On July 19, 1996, Glorious Sun filed a "Manifestation," whereby it informed this Court of the May 20,
1996 Order of the Securities and Exchange Commission (SEC), the entirety whereof reads thus:

The articles of incorporation of American Inter-Fashion Corporation (the new AIFC,

for short) with SEC Reg. No. AS093-008101-A reveal that said corporation was
formed for the purpose of re-registering American Inter-Fashion Corporation (the old
AIFC) with SEC Reg. No. 12236 registered with the SEC on July 16, 1985 and that
the same appear to have been approved by the Commission en banc in its
Commission meeting held on October 14, 1993. What was actually approved in said
meeting was the "registration of a new corporation" and that it was not the intention
of this Commission to approve the re-registration of the old AIFC.

American Inter-Fashion Corporation (SEC Reg. 12236), whose corporate registration

had been ordered revoked, cannot avoid liquidation by reason of the revocation of its
franchise and it cannot also be allowed to continue its business by virtue of its so-
called "re-registration."

Viewed in this light, this Commission en banc hereby RECALLS the certificate of
registration issued to American Inter-Fashion Corporation on October 14, 1993 under
SEC Reg. No. AS093-008101-A without prejudice to the registration of a new
corporation. 34

In the same "Manifestation," Glorious Sun prayed, among others, for the dismissal of the above-
entitled petitions, citing as ground therefor the above-quoted SEC Order recalling American Inter-
Fashion Corporation's certificate of registration. Thereafter, American Inter-Fashion Corporation filed
its "Counter Manifestation (To Glorious Sun's Manifestation dated July 15, 1996)," 35 to which
Glorious Sun responded by way of its "Reply (Re: Counter
-Manifestation). 36

In G.R. No. 114711, the GTEB made the following assignment of errors:
 I. The respondent Court of Appeals erred gravely in failing to rule that it had no
jurisdiction over the petition in CA-G.R. SP No. 31596.

II. The respondent Court of Appeals erred gravely in failing to rule that the petition in
CA-G.R. SP No. 31596 did not state a cause of action against GTEB.

III. The respondent Court of Appeals erred gravely in failing to hold that the 11
January 1993 Resolution issued by GTEB was valid and in the proper exercise of its
administrative discretion and jurisdiction.

IV. The respondent Court of Appeals erred gravely in failing to hold that the petition
in CA-G.R. SP No. 31596 was rendered moot and academic in its entirety by the
mere passage of the year 1993.

V. The respondent Court of Appeals erred gravely in failing to deny and/or to dismiss
the petition in CA-G.R. SP No. 31596 for lack of merit. 37

On the other hand, AIFC makes the following assignment of errors in its petition: 38

The GTEB has no jurisdiction to take cognizance of Glorious Sun's action against
AIFC for "recovery" of property. 39

In any case, the GTEB's issuance of a resolution deciding the action on its "merits"
without hearing AIFC's evidence is a violation of AIFC's right to due process. 40

The GTEB's cancellation of AIFC's EQs is a confiscation of property without due

process of law. 41

THE ISSUES

1. Considering that AIFC's Certificate of Registration had been effectively revoked by the Securities
and Exchange Commission on May 22, 1990, may AIFC still engage in business and claim
entitlement to the export allocations subject of these petitions?

2. Does the Garments and Textile Export Board (GTEB) have the power and authority to grant or
cancel export quotas or authorizations?

3. Did the GTEB, in issuing the assailed Resolutions, afford AIFC the right to due process?

This is not the first time that we have been asked to resolve an issue relative to AIFC's corporate
personality. In G.R. No. 110711, entitled "American Inter-Fashion Corporation v. Securities and
Exchange Commission, et al.," this Court en banc upheld the resolutions of the Prosecution and
Enforcement Department (PED) of the Securities and Exchange Commission (SEC) in PED Case
No. 87-0321 revoking AIFC's certificate of registration, on the basis of Glorious Sun's assertions that
AIFC committed fraud and misrepresentation in securing said certificate of registration, after we had
likewise effectively upheld the very same resolutions in an earlier petition filed by AIFC, entitled
"American Inter-Fashion Corporation v. Court of Appeals, et al." 42
In said G.R. No. 110711, we recounted the factual circumstances pertinent to the revocation of
AIFC's certificate of registration in the succeeding manner:

The complaint was assigned for investigation and hearing to SEC's Prosecution and
Enforcement Department (PED). On 14 May 1990, PED issued a resolution
recommending the revocation of petitioner's SEC certificate of registration; however,
on 24 May 1990, PED issued an amended resolution this time revoking the said
certificate on the basis of its ruling that "there was in effect no payment of at least
P1,657,000.00 of the P2,500,000.00 supposed payment on subscription, contrary to
the treasurer's affidavit that the subscription of P2,500,000.00 was fully paid and the
payment had been fully received." In PED's resolution of 15 October 1990,
petitioner's motion for reconsideration was denied.

Acting on petitioner's appeal (docketed as Sec-AC No. 319) from the said resolutions
of PED, the SEC affirmed the same, in its decisions of 22 May 1992. A copy of which
was received by petitioner on 25 May 1992. Petitioner's motion for reconsideration
was denied by the SEC in the latter's order dated September 16, 1992, copy of which
order was received by petitioner's counsel on September 18, 1992(three [3] SEC
commissioners concurred; two [2] dissented). On September 25, 1992, petitioner
then filed a petition for review with the Court of Appeals docketed as CA-G.R. SP No.
29017. But on September 30, 1992, the Court of Appeals dismissed the petition on
the ground that it was filed late (last day to file petition was on September 19, 1992,
but petition was filed only on September 25, 1992, thus, petition was filed six [6] days
late).

On November 23, 1992, petitioner filed a petition for review (under Rule 45 of the
Rules of Court) with this Court, docketed as G.R. No. 107742 assailing the resolution
of the Court of Appeals in said CA-G.R. SP No. 29017, and questioning the SEC
decision of 22 May 1992 in SEC-AC No. 319. On January 13, 1993, this Court (Third
Division) denied AIFC's petition, thus affirming the Court of Appeals' assailed
resolution of September 30, 1992, on the ground that the appellate court committed
no reversible error in dismissing the petition in CA-G.R. SP No. 29017. Petitioner's
motion for reconsideration was referred to the Court en banc. On July 1, 1993 the
Court en banc denied with finality petitioner's motion for reconsideration and held that
the reason given by petitioner's counsel for late filing of its petition (i.e. petition was
filed late with the Court of Appeals because petitioner's counsel Atty. Ceniza of Sycip
Law got seriously ill) was not a valid excuse and not a compelling reason to
reconsider the Court's resolution of January 13, 1993.

Petitioner's counsel has filed the present petition (filed on 13 July 1993) under Rule
65 of the Rules of Court, assailing the same PED resolutions and SEC decision
assailed in G.R. No. 107742 (filed under Rule 45 of the Rules), this time on the
ground that they were issued or rendered without jurisdiction.

As earlier noted, substantially and even principally the same issues and subject
matter are raised and involved in the present petition (filed under Rule 65 of the
Rules of Court) and those in the petition in G.R. No. 107742 (filed under Rule 45 of
the Rules).

In said G.R. No. 107742, petitioner had availed of the remedy of appeal
by certiorari, i.e., appealing from the decision of the Court of Appeals in CA-G.R. SP
No. 29017. Settled is the rule that a special civil action of certiorari (under Rule 65) is
 not a substitute for a lost appeal (Bank of America, et al., vs. CA, G.R. No. 78917,
June 8, 1990, 186 SCRA 417).

By the resolution of this Court en banc, dated July 1, 1993, rendered in G.R. No.
107742, the petitioner's privilege (or opportunity) to question the SEC decision dated
May 22, 1993 rendered in SEC-AC No. 319 was lost when the Court sitting en
banc denied with finality the motion of petitioner to reconsider this Court's resolution
of 13 January 1993, denying its petition for review (G.R. No. 107742).

Thus, since petitioner had already lost its privilege to question the SEC resolution
dated May 22, 1992, petitioner can no longer assail the same SEC resolution, not
even by certiorari under Rule 65 of the Rules of Court. A contrary rule would swamp
this Court with petitions for certiorari under Rule 65 after an appeal is lost under Rule
45 of the Rules. This would subvert the long established public policy that litigations
must come to an end at one time or other.

But even granting ex gratia arguendo that petitioner can still avail itself of the remedy
of a special civil action of certiorari (under Rule 65) said remedy should be availed of
within a reasonable period from the date of receipt of the assailed order/decision.
In Reas vs. Bonife, we held that "a petition for certiorari under Rule 65 is required to
be filed within a reasonable period, no time frame being provided in the Rules within
which such petition has to be filed." In the subsequent case of Philsec Workers'
Union vs. Hon. Romeo A. Young (Resolution dated 22 January 1992, G.R. No.
101734), it was held that ninety (90) days from notice of the questioned
order/decision is a reasonable period within which to file a petition for certiorari under
Rule 65.

In the present petition, the assailed decision of the respondent SEC dated May 22,
1992, was received by petitioner's counsel on May 25, 1992, and the SEC's
resolution denying petitioner's motion for reconsideration was received by petitioner
on September 18, 1992. The present petition was filed on July 13, 1993. From
September 18, 1992 to July 13, 1993, almost ten (10) months had lapsed.
Undoubtedly, said period of ten (10) months is no longer a "reasonable period" within
which a petition for certiorari under Rule 65 may be filed.

As earlier said the denial of the petition in G.R. No. 107742 is final. We must all be
reminded of the settled rule that once a judgment has become final, the issues raised
therein should be laid to rest. Hence, the issues raised anew regarding the again
assailed decision of SEC, dated May 22, 1992, in SEC-AC No. 319, are no longer
open to debate and/or adjudication.

ACCORDINGLY, the present petition is DISMISSED. 43

It appears that subsequent to the revocation of AIFC's certificate of registration, or on October 14,
1993, AIFC registered anew with the SEC, this time under SEC Reg. No. AS093-008101-A under
the name and style: AIFC International Fashion Corporation. Evidently then, the AIFC which filed the
petition in G.R. No. 115889 is the AIFC which was "re-registered" on the above date,
the original AIFC's certificate of registration having been revoked with finality by virtue of our
resolutions referred to in our above-quoted 11 August 1993 Resolution. 44 In the same manner, the
AIFC which the GTEB refers to in its petition in G.R. No. 114711 could not have been any one other
than this same "re-registered" AIFC, said petition having been filed subsequent to the revocation of
the original AIFC's certificate of registration.
It is obvious that the "re-registered" AIFC does not possess the legal personality necessary for it to
prosecute these petitions. In view of the May 20, 1990 Order of the SEC, "the certificate of
registration issued to American Inter-Fashion Corporation on October 14, 1993 under SEC Reg. No.
AS093-008101-A" 45 was revoked. For all legal intents and purposes. AIFC no longer exists, and it
may no longer claim to be entitled to the export allocations subject of these petitions. After all, it
stands to reason that where there is no claimant, there can be no claim. The AIFC International is a
personality separate and distinct from AIFC. For this reason, we cannot grant to AIFC International
Fashion Corporation the personality to pursue the petition in G.R. No. 114711. It has not applied for
and is thus equally devoid of any personality to lay claim on the export allocations subject of said
petition.

In fine, if only for AIFC's lack of legal personality to maintain its claim relative to the export
allocations subject of these petitions, its petition in G.R. No. 115889 is rendered dismissible. On the
other hand, and in view likewise of this lack of legal personality, we would be justified in annulling the
January 26, 1994 and March 22, 1994 Resolutions of the Court of Appeals in CA-G.R. SP No.
31596, and in dismissing the said petition, as prayed for by the GTEB in G.R. No. 114711.

II

In support of its assertion that it is "the sole entity possessed with the power, jurisdiction and
discretion to grant and disapprove export allocations such as export quotas," the GTEB makes
reference to Executive Order No. 537, as amended, including its implementing rules and regulations,
and the fact that among the functions of the GTEB therein enumerated are "the approval of export
allocations, as well as the monitoring, administration and regulation thereof." 46 Citing the doctrine of
primary jurisdiction, the GTEB further argues that being "a highly specialized administrative agency
endowed with regulatory and quasi-judicial powers . . . it enjoys the fundamental presumption that it
has the technical expertise and mastery over such specialized matters, so much so that its findings
as to the latter would ordinarily deserve the respect of the courts." 47

AIFC, on the other hand, argues that inasmuch as none of the powers specified in Executive Order
537, specifically Section 3 thereof, gives the GTEB any judicial powers, nor any specific jurisdiction
to hear and decide actions, as the term is understood under Section 1, Rule 2 of the Rules of Court,
and inasmuch as GTEB Case No. 92-50 is such an action between private litigants, the GTEB has
no jurisdiction over said case. 48 To reinforce its argument, AIFC cites our ruling in Globe Wireless
Ltd. v. PSC. 49 In said case, we held:

Too basic in administrative law to need citation of jurisprudence is the rule that the
jurisdiction and powers of administrative agencies . . . 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 . . . . 50

For its part, Glorious Sun joins the GTEB in the latter's assertion that it is the GTEB which has the
jurisdiction to act and rule on Glorious Sun's petition for the cancellation and restoration to it of the
quotas awarded to AIFC. Thus it argues:

48. Contrary to AIFC's assertions, it is beyond dispute that the GTEB has the
jurisdiction to act and rule on Glorious Sun's Petition for the cancellation and
restoration to it of the quotas illegally awarded to AIFC. A simple reference to the
pertinent provisions of the various Executive Orders (E.O.s) relative to the functions
of the GTEB easily reveals as much.

49. Under E.O. No. 952, which amended E.O. Nos. 537 and 823, it is provided:
 Sec 1. Section 3 subparagraphs (a), (h), and (i) of Executive Order
No. 537 [on the powers and functions of the Board] is hereby
amended to read as follows:

xxx xxx xxx

(h) In case of violations of its rules and regulations, cancel or

suspend quota allocations, export authorizations and licenses for the
operations of bonded garment manufacturing warehouses or
disqualify the firm and/or its principal stockholders and officers from
engaging in garment exports and from doing business with the Board;
...

50. Thus, if only on the basis of the above-quoted provision, and even in the face of
the criteria set forth in Globe, it is at once evident that the power to adjudicate on the
question of the AIFC's entitlement to the subject EQs is "necessarily implied" from
the Board's power to "cancel or suspend quota allocations, export authorizations and
licenses."

xxx xxx xxx

51. However, in addition to the above, E.O. No. 913, entitled "Strengthening the
Rule-Making and Adjudicatory Powers of the Minister of Trade and Industry in Order
to Further Protect Consumers,' was likewise issued, which E.O., we respectfully
submit, made the GTEB's power to adjudicate on the question of the AIFC's
entitlement to the subject EQs more than just being merely "necessarily implied."

52. Thus, Section 5 of Article III of the above-numbered E.O. reads:

Sec. 5. Formal investigation. — (a) Whenever the Minister has

verified that violation/s of "Trade and Industry Laws" has/have been
committed, he may motu proprio charge said violator/s, and thereafter
proceed with a formal investigation, independent of the corresponding
criminal or civil action for the said violation/s. The imposition of
administrative penalties in the formal investigation is without prejudice
to the imposition of penalties in the criminal action and/or judgment in
the civil action, and vice versa. Provided, however, that in deciding
the case the Minister or the judge, as the case may be, shall consider
the decision of the other and impose further penalties, or consider the
penalties imposed by the other as already sufficient, as his sense of
justice dictates.

(b) The Minister may proceed to hear and determine the violation in
the absence of any party who has been served with notice to appear
in the hearing.

(c) The Minister shall use every and all reasonable means to
ascertain the facts of the case speedily and objectively without regard
to technicalities of law or procedure and strict rules of evidence
prevailing in courts of law and equity. The Minister shall decide the
case within thirty working days from the time the formal investigation
was terminated.
 (d) The minister shall have the same power to punish direct and
indirect contempts granted to superior courts under Rule 71 of the
Rules of Court and the power to issue subpoena duces tecum.

(e) When the "trade and industry law" violated provides for its own
administrative procedure and penalties, including a procedure where
a Board Council, Authority, or Committee takes part as a body, the
Minister shall have the option of selecting that procedure and
penalties or the procedure and penalties provided in this Executive
Order. If he opts for the latter, the approval of such Board, Council,
Authority, or Committee of the Minister's decision shall not be
necessary.

53. The above-quoted provisions are very significant in light of the definition of the
"Ministry" as the Ministry of Trade and Industry "and/or any of its bureaus, offices, or
attached agencies, or any other office, unit or committee by whatever name which is
placed under or attached to the Ministry of Trade and Industry (Section 1, Article I,
E.O. 913; Emphasis supplied)." The GTEB is one such bureau, office or agency.

54. In this connection, AIFC's statement to the effect that GTEB Case No. 92-50 is
an action by one party against another for the enforcement or protection of a right, is
not entirely accurate. It will be remembered that said GTEB case was initiated
principally for the purpose of securing the cancellation of EQs being illegally held
onto by AIFC, a proceeding which is undoubtedly within the ambit of the Board's
powers; that Glorious Sun stood to benefit from such cancellation was merely
incidental to said proceeding. 51

After examining the arguments raised by all parties concerned, we find the arguments of the GTEB
and Glorious Sun to be impressed with merit, and accordingly hold that the power and jurisdiction to
adjudicate on the question of AIFC's entitlement to the export allocations subject of the above-
entitled petitions (be they export quotas or export authorizations), which includes the discretion to
grant and disapprove said export allocations, belongs solely to the GTEB, and not to the regular
courts.

Semantics notwithstanding, it cannot be denied that GTEB Case No. 92-50 was instituted by
Glorious Sun for the purpose of securing the cancellation of EQs then alleged by it as being illegally
held by AIFC. This being the case, it likewise cannot be denied that, as Glorious Sun correctly
observes, such a proceeding is clearly within the ambit of the GTEB's powers, more specifically, the
power granted to it by Section 3 subparagraph (h) of Executive Order No. 537 (as amended by E.O.
No. 952) to "cancel or suspend quota allocations, export authorizations and licenses for the
operations of bonded garment manufacturing warehouses or disqualify the firm and/or its principal
stockholders and officers from engaging in garment exports and from doing business with the
Board," in case of violations of its rules and regulations.

In light of the above, AIFC's reliance on our ruling in Globe Wireless Ltd. v. PSC, 52 is clearly
misplaced. On the basis of the provisions of law cited by both the GTEB and Glorious Sun, that the
power to adjudicate on the question of an entity's entitlement to export allocations was expressly
granted to the GTEB, or at the very least, was necessarily implied from the power to cancel or
suspend quota allocations, is beyond cavil.
In addition, we must take judicial notice of the fact that AIFC, in cases involving the same
controversy as that in the above-entitled petitions, has recognized the exclusive jurisdiction of the
GTEB to award or cancel export allocations to deserving entities.

AIFC categorically declared in its "Motion to Dismiss," Civil Case No. 93-138 53 that "Executive Order
No. 537, as amended by Executive Order Nos. 823 and 952, vests upon defendant GTEB exclusive
jurisdiction to grant export quota allocations," and that "(u)nder the doctrine of primary jurisdiction,
only defendant GTEB has the authority to award/cancel export quotas." In fact, it is noteworthy that
in said motion to dismiss, AIFC relied upon the very principles cited by both the GTEB and Glorious
Sun in the above-entitled petitions in support of their argument that it is the GTEB which has
jurisdiction over the export allocations subject of said petitions, to wit:

Courts of justice should not generally interfere with purely administrative and
discretionary functions; that courts have no supervisory power over the proceedings
and actions of the administrative departments of the government involving the
exercise of judgment and findings of fact, because by reason of their special
knowledge and expertise over matters falling under their jurisdiction, the latter are in
a better position to pass judgment on such matters and their findings of facts in that
regard are generally accorded respect, if not finality, by the courts. (Ateneo de Manila
v. CA, 145 SCRA 105) 54

AIFC reiterated this stance in its "Motion to Dismiss" in Civil Case No. 64010 55 in this wise:

As stated above, this Court cannot grant the reliefs sought in the Complaint without
first deciding that AIFC is not entitled to EQs, and that, in effect, the EQs now in
AIFC's name should be cancelled. This power, however, has been granted not to the
courts but to the GTEB, which is vested with jurisdiction —

[i]n case of violations of its rules and regulations, [to] cancel or

suspend quota allocations, export authorizations and licenses for the
operations of bonded garment manufacturing warehouses and/or to
disqualify the firm and/or its principal stockholders and officers from
engaging in garment exports and from doing business with the Board
(Section 3[h], Exec. Order No. 537 [1979], as amended by Exec.
Order No. 823 [1982] and Exec. Order No. 952 [1984]).

And even assuming for argument that it is indeed vested with original jurisdiction
to cancel EQs, under the doctrine of primary jurisdiction, this Court cannot at this
time take cognizance of the Complaint (Supra, at pp. 14-15).

Having already invoked the jurisdiction of the GTEB in earlier actions involving the same controversy
as that before us, AIFC cannot now be heard to question that same jurisdiction simply because it
was unable to obtain the reliefs prayed for by it from the GTEB. We have warned against such a
practice on more than one occasion in the past. Most recently, in St. Luke's Medical
Center, Inc. v. Torres, 56 we reiterated such warning:

It is a settled rule that a party cannot invoke the jurisdiction of a court to secure
affirmative relief against his opponent and after failing to obtain such relief, repudiate
or question that same jurisdiction. A party cannot invoke jurisdiction at one time and
reject it at another in the same controversy to suit its interests and convenience. The
Court frowns upon and does not tolerate the undesirable practice of some litigants
who submit voluntarily a cause and then accepting the judgment when favorable to
 them and attacking it for lack of jurisdiction when adverse (Tajonera v. Lamaroza,
110 SCRA 447, citing Tijam v. Sibonghanoy, 23 SCRA 35) 57

III

As to the allegations of AIFC that it was deprived of due process, we find no merit to this contention.
With respect to the June 21, 1994 Resolution of the GTEB which AIFC assails in its petition in G.R.
No. 115889, it is AIFC's contention that the GTEB issued said resolution 58 without giving AIFC the
opportunity to be heard and without receiving its evidence in any form.

We disagree.

Insofar as the supposed failure of the GTEB to issue a show cause order to AIFC is concerned, we
hold that the GTEB committed no grave abuse of discretion in instituting an action against AIFC on
the basis of the allegations in Glorious Sun's petition in GTEB Case No. 92-50. It is apparent from
the rule cited by AIFC 59 that the same was aimed primarily at ensuring that if any action is to be filed
against a respondent, the same must have sufficient basis in fact. Consequently, for so long as this
goal is achieved, albeit through some other means, no undue prejudice can be caused by the non-
issuance of a show-cause order. In fact, as correctly pointed out by Glorious Sun, the GTEB, as a
bureau, office or agency attached to the Ministry of Trade and Industry, may even motu
proprio charge violators of "Trade and Industry Laws," and thereafter proceed with a formal
investigation. 60

Anent AIFC's claim that it was not afforded the opportunity to present evidence in GTEB Case No.
92-50, we find such claim unworthy of belief. The GTEB, as an administrative agency, has in its
favor the presumption that it has regularly performed its official duties, including those which are
quasi-judicial in nature. In the absence of clear facts to rebut the same, said presumption of
regularity must be upheld. This is also but in keeping with the doctrine of primary jurisdiction.

We are inclined to give credence instead to Glorious Sun's assertions relative to AIFC's presentation
of evidence in GTEB Case No. 92-50, there being ample basis in the records therefor. Thus, after
examining the "Motion to Dismiss" filed by AIFC in GTEB Case No. 92-50, 61 we find nothing therein
to indicate that AIFC reserved its right to present evidence in said GTEB case, contrary to AIFC's
claims. On the other hand, as correctly pointed out by Glorious Sun, if any reservation was made by
AIFC in its "Sur Rejoinder (Re: Motion to Dismiss)," attached to AIFC's petition as Annex "E," this
was limited to the reservation "to raise the question of jurisdiction." 62

More importantly, it is apparent that not only was AIFC afforded the opportunity to present evidence,
it actually took advantage of this opportunity by presenting documentary evidence, as asserted by
Glorious Sun, an assertion which AIFC most notably failed to refute. As we have declared time and
again, what is repugnant to due process is the denial of the opportunity to be heard. 63 That AIFC
was afforded this opportunity is beyond question.

From what has been discussed the following conclusions are made:

(1) AIFC no longer has the legal personality to prosecute the above-entitled petitions and may
therefore no longer claim entitlement to the export allocations subject of these petitions;

(2) It is the GTEB, and not the regular courts, nor the Court of Appeals, has the jurisdiction to
adjudicate on the question of AIFC's entitlement to the export allocations subject to these petitions;
and
(3) AIFC's right to due process was in no wise violated by the GTEB, the former not having taken
advantage of the opportunity afforded to it to present evidence in its behalf.

WHEREFORE, AIFC's petition in G.R. No. 115889 is hereby DENIED for lack of merit, as well as for
being moot and academic, AIFC having lost the legal personality to prosecute the same. GTEB's
petition is GRANTED, and the assailed January 21, 1994 Decision and March 22, 1994 Resolution
of the Court of Appeals in CA-G.R. SP No. 31596 is hereby ANNULLED AND SET ASIDE (except
insofar as it denied AIFC and AIFC International Fashion Corporation's "Motion for Issuance of Writ
of Mandamus"). Said CA-G.R. SP No. 31596 is likewise ordered annulled and set aside.

SO ORDERED.
G.R. No. 153660 June 10, 2003

PRUDENCIO BANTOLINO, NESTOR ROMERO, NILO ESPINA, EDDIE LADICA, ARMAN

QUELING, ROLANDO NIETO, RICARDO BARTOLOME, ELUVER GARCIA, EDUARDO GARCIA
and NELSON MANALASTAS,petitioners,
vs.
COCA-COLA BOTTLERS PHILS., INC., respondent.

BELLOSILLO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Decision
of the Court of Appeals1 dated 21 December 2001 which affirmed with modification the decision of
the National Labor Relations Commission promulgated 30 March 2001.2

On 15 February 1995 sixty-two (62) employees of respondent Coca-Cola Bottlers, Inc., and its
officers, Lipercon Services, Inc., People's Specialist Services, Inc., and Interim Services, Inc., filed a
complaint against respondents for unfair labor practice through illegal dismissal, violation of their
security of tenure and the perpetuation of the "Cabo System." They thus prayed for reinstatement
with full back wages, and the declaration of their regular employment status.

For failure to prosecute as they failed to either attend the scheduled mandatory conferences or
submit their respective affidavits, the claims of fifty-two (52) complainant-employees were dismissed.
Thereafter, Labor Arbiter Jose De Vera conducted clarificatory hearings to elicit information from the
ten (10) remaining complainants (petitioners herein) relative to their alleged employment with
respondent firm.

In substance, the complainants averred that in the performance of their duties as route helpers,
bottle segregators, and others, they were employees of respondent Coca-Cola Bottlers, Inc. They
further maintained that when respondent company replaced them and prevented them from entering
the company premises, they were deemed to have been illegally dismissed.

In lieu of a position paper, respondent company filed a motion to dismiss complaint for lack of
jurisdiction and cause of action, there being no employer-employee relationship between
complainants and Coca-Cola Bottlers, Inc., and that respondents Lipercon Services, People's
Specialist Services and Interim Services being bona fide independent contractors, were the real
employers of the complainants.3 As regards the corporate officers, respondent insisted that they
could not be faulted and be held liable for damages as they only acted in their official capacities
while performing their respective duties.

On 29 May 1998 Labor Arbiter Jose De Vera rendered a decision ordering respondent company to
reinstate complainants to their former positions with all the rights, privileges and benefits due regular
employees, and to pay their full back wages which, with the exception of Prudencio Bantolino whose
back wages must be computed upon proof of his dismissal as of 31 May 1998, already amounted to
an aggregate of P1,810,244.00.4

In finding for the complainants, the Labor Arbiter ruled that in contrast with the negative declarations
of respondent company's witnesses who, as district sales supervisors of respondent company
denied knowing the complainants personally, the testimonies of the complainants were more
credible as they sufficiently supplied every detail of their employment, specifically identifying who
their salesmen/drivers were, their places of assignment, aside from their dates of engagement and
dismissal.
On appeal, the NLRC sustained the finding of the Labor Arbiter that there was indeed an employer-
employee relationship between the complainants and respondent company when it affirmed in
toto the latter's decision.

In a resolution dated 17 July 2001 the NLRC subsequently denied for lack of merit respondent's
motion for consideration.

Respondent Coca-Cola Bottlers appealed to the Court of Appeals which, although affirming the
finding of the NLRC that an employer-employee relationship existed between the contending parties,
nonetheless agreed with respondent that the affidavits of some of the complainants, namely,
Prudencio Bantolino, Nestor Romero, Nilo Espina, Ricardo Bartolome, Eluver Garcia, Eduardo
Garcia and Nelson Manalastas, should not have been given probative value for their failure to affirm
the contents thereof and to undergo cross-examination. As a consequence, the appellate court
dismissed their complaints for lack of sufficient evidence. In the same Decision however,
complainants Eddie Ladica, Arman Queling and Rolando Nieto were declared regular employees
since they were the only ones subjected to cross-examination.5 Thus -

x x x (T)he labor arbiter conducted clarificatory hearings to ferret out the truth between the
opposing claims of the parties thereto. He did not submit the case based on position papers
and their accompanying documentary evidence as a full-blown trial was imperative to
establish the parties' claims. As their allegations were poles apart, it was necessary to give
them ample opportunity to rebut each other's statements through cross-examination. In fact,
private respondents Ladica, Quelling and Nieto were subjected to rigid cross-examination by
petitioner's counsel. However, the testimonies of private respondents Romero, Espina, and
Bantolino were not subjected to cross-examination, as should have been the case, and no
explanation was offered by them or by the labor arbiter as to why this was dispensed with.
Since they were represented by counsel, the latter should have taken steps so as not to
squander their testimonies. But nothing was done by their counsel to that effect.6

Petitioners now pray for relief from the adverse Decision of the Court of Appeals; that, instead, the
favorable judgment of the NLRC be reinstated.

In essence, petitioners argue that the Court of Appeals should not have given weight to respondent's
claim of failure to cross-examine them. They insist that, unlike regular courts, labor cases are
decided based merely on the parties' position papers and affidavits in support of their allegations and
subsequent pleadings that may be filed thereto. As such, according to petitioners, the Rules of Court
should not be strictly applied in this case specifically by putting them on the witness stand to be
cross-examined because the NLRC has its own rules of procedure which were applied by the Labor
Arbiter in coming up with a decision in their favor.

In its disavowal of liability, respondent commented that since the other alleged affiants were not
presented in court to affirm their statements, much less to be cross-examined, their affidavits should,
as the Court of Appeals rightly held, be stricken off the records for being self-serving, hearsay and
inadmissible in evidence. With respect to Nestor Romero, respondent points out that he should not
have been impleaded in the instant petition since he already voluntarily executed a Compromise
Agreement, Waiver and Quitclaim in consideration of P450,000.00. Finally, respondent argues that
the instant petition should be dismissed in view of the failure of petitioners7 to sign the petition as
well as the verification and certification of non-forum shopping, in clear violation of the principle laid
down in Loquias v. Office of the Ombudsman.8

The crux of the controversy revolves around the propriety of giving evidentiary value to the affidavits
despite the failure of the affiants to affirm their contents and undergo the test of cross-examination.
The petition is impressed with merit. The issue confronting the Court is not without precedent in
jurisprudence. The oft-cited case of Rabago v. NLRC9 squarely grapples a similar challenge
involving the propriety of the use of affidavits without the presentation of affiants for cross-
examination. In that case, we held that "the argument that the affidavit is hearsay because the
affiants were not presented for cross-examination is not persuasive because the rules of evidence
are not strictly observed in proceedings before administrative bodies like the NLRC where decisions
may be reached on the basis of position papers only."

In Rase v. NLRC,10 this Court likewise sidelined a similar challenge when it ruled that it was not
necessary for the affiants to appear and testify and be cross-examined by counsel for the adverse
party. To require otherwise would be to negate the rationale and purpose of the summary nature of
the proceedings mandated by the Rules and to make mandatory the application of the technical
rules of evidence.

Southern Cotabato Dev. and Construction Co. v. NLRC11 succinctly states that under Art. 221 of the
Labor Code, the rules of evidence prevailing in courts of law do not control proceedings before the
Labor Arbiter and the NLRC. Further, it notes that the Labor Arbiter and the NLRC are authorized to
adopt reasonable means to ascertain the facts in each case speedily and objectively and without
regard to technicalities of law and procedure, all in the interest of due process. We find no
compelling reason to deviate therefrom.

To reiterate, administrative bodies like the NLRC are not bound by the technical niceties of law and
procedure and the rules obtaining in courts of law. Indeed, the Revised Rules of Court and prevailing
jurisprudence may be given only stringent application, i.e., by analogy or in a suppletory character
and effect. The submission by respondent, citing People v. Sorrel,12 that an affidavit not testified to in
a trial, is mere hearsay evidence and has no real evidentiary value, cannot find relevance in the
present case considering that a criminal prosecution requires a quantum of evidence different from
that of an administrative proceeding. Under the Rules of the Commission, the Labor Arbiter is given
the discretion to determine the necessity of a formal trial or hearing. Hence, trial-type hearings are
not even required as the cases may be decided based on verified position papers, with supporting
documents and their affidavits.

As to whether petitioner Nestor Romero should be properly impleaded in the instant case, we only
need to follow the doctrinal guidance set by Periquet v. NLRC13 which outlines the parameters for
valid compromise agreements, waivers and quitclaims -

Not all waivers and quitclaims are invalid as against public policy. If the agreement was
voluntarily entered into and represents a reasonable settlement, it is binding on the parties
and may not later be disowned simply because of a change of mind. It is only where there is
clear proof that the waiver was wangled from an unsuspecting or gullible person, or the
terms of settlement are unconscionable on its face, that the law will step in to annul the
questionable transaction. But where it is shown that the person making the waiver did so
voluntarily, with full understanding of what he was doing, and the consideration for the
quitclaim is credible and reasonable, the transaction must be recognized as a valid and
binding undertaking.

In closely examining the subject agreements, we find that on their face the Compromise
Agreement14 and Release, Waiver and Quitclaim15 are devoid of any palpable inequity as the terms
of settlement therein are fair and just. Neither can we glean from the records any attempt by the
parties to renege on their contractual agreements, or to disavow or disown their due execution.
Consequently, the same must be recognized as valid and binding transactions and, accordingly, the
instant case should be dismissed and finally terminated insofar as concerns petitioner Nestor
Romero.

We cannot likewise accommodate respondent's contention that the failure of all the petitioners to
sign the petition as well as the Verification and Certification of Non-Forum Shopping in contravention
of Sec. 5, Rule 7, of the Rules of Court will cause the dismissal of the present appeal. While
the Loquias case requires the strict observance of the Rules, it however provides an escape hatch
for the transgressor to avoid the harsh consequences of non-observance. Thus -

x x x x We find that substantial compliance will not suffice in a matter involving strict
observance of the rules. The attestation contained in the certification on non-forum shopping
requires personal knowledge by the party who executed the same. Petitioners must show
reasonable cause for failure to personally sign the certification. Utter disregard of the rules
cannot justly be rationalized by harking on the policy of liberal construction (underscoring
supplied).

In their Ex Parte Motion to Litigate as Pauper Litigants, petitioners made a request for a
fifteen (15)-day extension, i.e., from 24 April 2002 to 8 May 2002, within which to file their
petition for review in view of the absence of a counsel to represent them.16 The records also
reveal that it was only on 10 July 2002 that Atty. Arnold Cacho, through the UST Legal Aid
Clinic, made his formal entry of appearance as counsel for herein petitioners. Clearly, at the
time the instant petition was filed on 7 May 2002 petitioners were not yet represented by
counsel. Surely, petitioners who are non-lawyers could not be faulted for the procedural
lapse since they could not be expected to be conversant with the nuances of the law, much
less knowledgeable with the esoteric technicalities of procedure. For this reason alone, the
procedural infirmity in the filing of the present petition may be overlooked and should not be
taken against petitioners.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals

is REVERSED and SET ASIDE and the decision of the NLRC dated 30 March 2001 which affirmed
in toto the decision of the Labor Arbiter dated 29 May 1998 ordering respondent Coca-Cola Bottlers
Phils., Inc., to reinstate Prudencio Bantolino, Nilo Espina, Eddie Ladica, Arman Queling, Rolando
Nieto, Ricardo Bartolome, Eluver Garcia, Eduardo Garcia and Nelson Manalastas to their former
positions as regular employees, and to pay them their full back wages, with the exception of
Prudencio Bantolino whose back wages are yet to be computed upon proof of his dismissal,
is REINSTATED, with the MODIFICATION that herein petition is DENIED insofar as it concerns
Nestor Romero who entered into a valid and binding Compromise Agreement and Release, Waiver
and Quitclaim with respondent company.

SO ORDERED.
G.R. No. L-26803 October 14, 1975

AMERICAN TOBACCO COMPANY, CARNATION COMPANY, CURTISS CANDY COMPANY,

CUDAHY PACKING CO., CLUETT, PEABODY & CO., INC., CANNONMILLS COMPANY,
FORMICA CORPORATION, GENERALMOTORS CORPORATION, INTERNATIONAL LATEX
CORPORATION, KAYSER-ROTH CORPORATION, M and R DIETETIC LABORATORIES, INC.,
OLIN MATHIESON, PARFUM CIRO, INC., PROCTER and GAMBLE COMPANY, PROCTER and
GAMBLE PHILIPPINE MANUFACTURING CORPORATION, PARFUMS PORVIL DENTRIFICES
DU DOCTEUR PIERRE REUNIS SOCIETE ANONYME, R.J. REYNOLDS TOBACCO COMPANY,
SWIFT AND COMPANY, STERLING PRODUCTS INTERNATIONAL, THE CLOROX COMPANY,
WARNER LAMBERT PHARMACEUTICALS COMPANY and ZENITH RADIO
CORPORATION, petitioners,
vs.
THE DIRECTOR OF PATENTS, ATTYS. AMANDO L. MARQUEZ, TEOFILO P. VELASCO,
RUSTICO A. CASIA and HECTOR D. BUENALUZ, respondents.

Lichauco, Picazo and Agcaoili for petitioners.

Office of the Solicitor General for respondents.

ANTONIO, J.:

In this petition for mandamus with preliminary injunction, petitioners challenge the validity of Rule
168 of the "Revised Rules of Practice before the Philippine Patent Office in Trademark Cases" as
amended, authorizing the Director of Patents to designate any ranking official of said office to
hear "inter partes" proceedings. Said Rule likewise provides that "all judgments determining the
merits of the case shall be personally and directly prepared by the Director and signed by him."
These proceedings refer to the hearing of opposition to the registration of a mark or trade name,
interference proceeding instituted for the purpose of determining the question of priority of adoption
and use of a trade-mark, trade name or service-mark, and cancellation of registration of a trade-
mark or trade name pending at the Patent Office.

Petitioners are parties, respectively, in the following opposition, interference and cancellation
proceedings in said Office: Inter Partes Cases Nos. 157, 392, 896, 282, 247, 354, 246,332, 398,
325, 374, 175, 297, 256, 267, 111, 400, 324, 114, 159, 346, and 404.

Under the Trade-mark Law (Republic Act No. 166 ), the Director of Patents is vested with jurisdiction
over the above-mentioned cases. Likewise, the Rules of Practice in Trade-mark Cases contains a
similar provision, thus:

168. Original jurisdiction over inter partes proceeding. — the Director of Patents shall
have original jurisdiction over inter partes proceedings. In the event that the Patent
Office should be provided with an Examiner of Interferences, this Examiner shall
have the original jurisdiction over these cases, instead of the Director. In the case
that the Examiner of Interferences takes over the original jurisdiction over inter
partes proceedings, his final decision subject to appeal to the Director of Patents
within three months of the receipt of notice of decisions. Such appeals shall be
governed by sections 2, 3, 4, 6, 7, 8, 10, 11, 12, 13, 14, 15 and 22 of Rule 41 of the
Rules of Court insofar as said sections are applicable and appropriate, and the
appeal fee shall be P25.00.
The Rules of Practice in Trade-mark Cases were drafted and promulgated by the Director of Patents
and approved by the then Secretary of Agriculture and Commerce.. 1

Subsequently, the Director of Patents, with the approval of the Secretary of Agriculture and Commerce, amended the afore-quoted Rule 168
to read as follows:

168. Original Jurisdiction over inter partes proceedings. — The Director of Patents
shall have original jurisdiction over inter partes proceedings, [In the event that the
Patent Office is provided with an Examiner of Interferences, this Examiner shall then
have the original jurisdiction over these cases, instead of the Director. In the case
that the Examiner of Interferences takes over the original jurisdiction over inter
partes proceedings, his final decisions shall be subject to appeal to the Director of
Patents within three months of the receipt of notice decision. Such appeals shall be
governed by Sections 2, 3, 4, 6, 7, 8,10, 11, 12, 13, 14, 15, and 22 of Rule 41 of the
Rules of Court insofar as said sections are applicable and appropriate, and the
appeal fee shall be [P25.00.] Such inter partes proceedings in the Philippine Patent
Office under this Title shall be heard before the Director of Patents, any hearing
officer, or any ranking official designated by the Director, but all judgments
determining the merits of the case shall be personally and directly prepared by the
Director and signed by him. (Emphasis supplied.)

In accordance with the amended Rule, the Director of Patents delegated the hearing of petitioners'
cases to hearing officers, specifically, Attys. Amando Marquez, Teofilo Velasco, Rustico Casia and
Hector Buenaluz, the other respondents herein.

Petitioners filed their objections to the authority of the hearing officers to hear their cases, alleging
that the amendment of the Rule is illegal and void because under the law the Director must
personally hear and decide inter partes cases. Said objections were overruled by the Director of
Patents, hence, the present petition for mandamus, to compel The Director of Patents to personally
hear the cases of petitioners, in lieu of the hearing officers.

It would take an extremely narrow reading of the powers of the Director of Patents under the general
law2 and Republic Acts Nos. 1653 and 166 3 * to sustain the contention of petitioners. Under section 3
of RA 165, the Director of Patents is "empowered to obtain the assistance of technical, scientific or
other qualified officers or employees of other departments, bureaus, offices, agencies and
instrumentalities of the Government, including corporations owned, controlled or operated by the
Government, when deemed necessary in the consideration of any matter submitted to the Office
relative to the enforcement of the provisions" of said Act. Section 78 of the same Act also empowers
"the Director, subject to the approval of the Department Head," to "promulgate the necessary rules
and regulations, not inconsistent with law, for the conduct of all business in the Patent Office." The
aforecited statutory authority undoubtedly also applies to the administration and enforcement of the
Trade-mark Law (Republic Act No. 166).

It has been held that power-conferred upon an administrative agency to which the administration of a
statute is entrusted to issue such regulations and orders as may be deemed necessary or proper in
order to carry out its purposes and provisions maybe an adequate source of authority to delegate a
particular function, unless by express provisions of the Act or by implication it has been
withheld.4 There is no provision either in Republic Act No. 165 or 166 negativing the existence of
such authority, so far as the designation of hearing examiners is concerned. Nor can the absence of
such authority be fairly inferred from contemporaneous and consistent Executive interpretation of the
Act.
The nature of the power and authority entrusted to The Director of Patents suggests that the
aforecited laws (Republic Act No. 166, in relation to Republic Act No. 165) should be construed so
as to give the aforesaid official the administrative flexibility necessary for the prompt and expeditious
discharge of his duties in the administration of said laws. As such officer, he is required, among
others, to determine the question of priority in patent interference proceedings,5 decide applications
for reinstatement of a lapsed patent,6 cancellations of patents under Republic Act No. 165,7 inter
partes proceedings such as oppositions,8 claims of interference, 9 cancellation cases under the Trade-mark
Law 10and other matters in connection with the enforcement of the aforesaid laws. It could hardly be expected, in view of the magnitude of his
responsibility, to require him to hear personally each and every case pending in his Office. This would leave him little time to attend to his
other duties. 11 For him to do so and at the same time attend personally to the discharge of every other duty or responsibility imposed upon
his Office by law would not further the development of orderly and responsible administration. The reduction of existing delays in regulating
agencies requires the elimination of needless work at top levels. Unnecessary and unimportant details often occupy far too much of the time
and energy of the heads of these agencies and prevent full and expeditious consideration of the more important issues. the remedy is a far
wider range of delegations to subordinate officers. This sub-delegation of power has been justified by "sound principles of organization"
which demand that "those at the top be able to concentrate their attention upon the larger and more important questions of policy and
practice, and their time be freed, so far as possible, from the consideration of the smaller and far less important matters of detail." 12

Thus, it is well-settled that while the power to decide resides solely in the administrative agency
vested by law, this does not preclude a delegation of the power to hold a hearing on the basis of
which the decision of the administrative agency will be
made. 13

The rule that requires an administrative officer to exercise his own judgment and discretion does not
preclude him from utilizing, as a matter of practical administrative procedure, the aid of subordinates
to investigate and report to him the facts, on the basis of which the officer makes his decisions. 14 It is
sufficient that the judgment and discretion finally exercised are those of the officer authorized by law.
Neither does due process of law nor the requirements of fair hearing require that the actual taking of
testimony be before the same officer who will make the decision in the case. As long as a party is
not deprived of his right to present his own case and submit evidence in support thereof, and the
decision is supported by the evidence in the record, there is no question that the requirements of
due process and fair trial are fully met. 15 In short, there is no abnegation of responsibility on the part
of the officer concerned as the actual decision remains with and is made by said officer. 16 It is,
however, required that to "give the substance of a hearing, which is for the purpose of making
determinations upon evidence the officer who makes the determinations must consider and appraise
the evidence which justifies them." 17

In the case at bar, while the hearing officer may make preliminary rulings on the myriad of questions
raised at the hearings of these cases, the ultimate decision on the merits of all the issues and
questions involved is left to the Director of Patents. Apart from the circumstance that the point
involved is procedural and not jurisdictional, petitioners have not shown in what manner they have
been prejudiced by the proceedings.

Moreover, as the Solicitor General Antonio P. Barredo, now a Member of this Court has correctly
pointed out, the repeated appropriations by Congress for hearing officers of the Philippine Patent
Office form 1963 to 1968 18 not only confirms the departmental construction of the statute, but also
constitutes a ratification of the act of the Director of Patents and the Department Head as agents of
Congress in the administration of the law. 19

WHEREFORE, the instant petition is hereby dismissed, with costs against petitioners.

Castro (Actg., C.J.), Muñoz Palma, Aquino and Martin, JJ., concur.

Fernando, J, is on le
G.R. No. 111953 December 12, 1997

HON. RENATO C. CORONA, in his capacity as Assistant Secretary for Legal Affairs, HON.
JESUS B. GARCIA, in his capacity as Acting Secretary, Department of Transportation and
Communications, and ROGELIO A. DAYAN, in his capacity as General Manager of Philippine
Ports Authority, petitioners,
vs.
UNITED HARBOR PILOTS ASSOCIATION OF THE PHILIPPINES and MANILA PILOTS
ASSOCIATION, respondents.

ROMERO, J.:

In issuing Administrative Order No. 04-92 (PPA-AO No. 04-92), limiting the term of appointment of
harbor pilots to one year subject to yearly renewal or cancellation, did the Philippine Ports Authority
(PPA) violate respondents' right to exercise their profession and their right to due process of law?

The PPA was created on July 11, 1974, by virtue of Presidential Decree No. 505. On December 23,
1975, Presidential Decree No. 857 was issued revising the PPA's charter. Pursuant to its power of
control, regulation, and supervision of pilots and the pilotage profession,1 the PPA promulgated PPA-
AO-03-852 on March 21, 1985, which embodied the "Rules and Regulations Governing Pilotage
Services, the Conduct of Pilots and Pilotage Fees in Philippine Ports." These rules mandate, inter
alia, that aspiring pilots must be holders of pilot licenses3 and must train as probationary pilots in
outports for three months and in the Port of Manila for four months. It is only after they have
achieved satisfactory performance4 that they are given permanent and regular appointments by the
PPA itself5to exercise harbor pilotage until they reach the age of 70, unless sooner removed by
reason of mental or physical unfitness by the PPA General Manager.6 Harbor pilots in every harbor
district are further required to organize themselves into pilot associations which would make
available such equipment as may be required by the PPA for effective pilotage services. In view of
this mandate, pilot associations invested in floating, communications, and office equipment. In fact,
every new pilot appointed by the PPA automatically becomes a member of a pilot association and is
required to pay a proportionate equivalent equity or capital before being allowed to assume his
duties, as reimbursement to the association concerned of the amount it paid to his predecessor.

Subsequently, then PPA General Manager Rogelio A. Dayan issued PPA-AO No. 04-927 on July 15,
1992, whose avowed policy was to "instill effective discipline and thereby afford better protection to
the port users through the improvement of pilotage services." This was implemented by providing
therein that "all existing regular appointments which have been previously issued either by the
Bureau of Customs or the PPA shall remain valid up to 31 December 1992 only" and that "all
appointments to harbor pilot positions in all pilotage districts shall, henceforth, be only for a term of
one (1) year from date of effectivity subject to yearly renewal or cancellation by the Authority after
conduct of a rigid evaluation of performance."

On August 12, 1992, respondents United Harbor Pilots Association and the Manila Pilots
Association, through Capt. Alberto C. Compas, questioned PPA-AO No. 04-92 before the
Department of Transportation and Communication, but they were informed by then DOTC Secretary
Jesus B. Garcia that "the matter of reviewing, recalling or annulling PPA's administrative issuances
lies exclusively with its Board of Directors as its governing body."

Meanwhile, on August 31, 1992, the PPA issued Memorandum Order No. 08-928 which laid down
the criteria or factors to be considered in the reappointment of harbor pilot, viz.: (1) Qualifying
Factors:9 safety record and physical/mental medical exam report and (2) Criteria for
Evaluation:10 promptness in servicing vessels, compliance with PPA Pilotage Guidelines, number of
years as a harbor pilot, average GRT of vessels serviced as pilot, awards/commendations as harbor
pilot, and age.

Respondents reiterated their request for the suspension of the implementation of PPA-AO No. 04-
92, but Secretary Garcia insisted on his position that the matter was within the jurisdiction of the
Board of Directors of the PPA. Compas appealed this ruling to the Office of the President (OP),
reiterating his arguments before the DOTC.

On December 23, 1992, the OP issued an order directing the PPA to hold in abeyance the
implementation of PPA-AO No. 04-92. In its answer, the PPA countered that said administrative
order was issued in the exercise of its administrative control and supervision over harbor pilots under
Section 6-a (viii), Article IV of P.D. No. 857, as amended, and it, along with its implementing
guidelines, was intended to restore order in the ports and to improve the quality of port services.

On March 17, 1993, the OP, through then Assistant Executive Secretary for Legal Affairs Renato C.
Corona, dismissed the appeal/petition and lifted the restraining order issued earlier.11 He concluded
that PPA-AO No. 04-92 applied to all harbor pilots and, for all intents and purposes, was not the act
of Dayan, but of the PPA, which was merely implementing Section 6 of P.D. No. 857, mandating it
"to control, regulate and supervise pilotage and conduct of pilots in any port district."

On the alleged unconstitutionality and illegality of PPA-AO No. 04-92 and its implementing
memoranda and circulars, Secretary Corona opined that:

The exercise of one's profession falls within the constitutional guarantee against wrongful
deprivation of, or interference with, property rights without due process. In the limited context
of this case. PPA-AO 04-92 does not constitute a wrongful interference with, let alone a
wrongful deprivation of, the property rights of those affected thereby. As may be noted, the
issuance aims no more than to improve pilotage services by limiting the appointment to
harbor pilot positions to one year, subject to renewal or cancellation after a rigid evaluation of
the appointee's performance.

PPA-AO 04-92 does not forbid, but merely regulates, the exercise by harbor pilots of their
profession in PPA's jurisdictional area. (Emphasis supplied)

Finally, as regards the alleged "absence of ample prior consultation" before the issuance of the
administrative order, Secretary Corona cited Section 26 of P.D. No. 857, which merely requires the
PPA to consult with "relevant Government agencies." Since the PPA Board of Directors is composed
of the Secretaries of the DOTC, the Department of Public Works and Highways, the Department of
Finance, and the Department of Environment and Natural Resources, as well as the Director-
General of the National Economic Development Agency, the Administrator of the Maritime Industry
Authority (MARINA), and the private sector representative who, due to his knowledge and expertise,
was appointed by the President to the Board, he concluded that the law has been sufficiently
complied with by the PPA in issuing the assailed administrative order.

Consequently, respondents filed a petition for certiorari, prohibition and injunction with prayer for the
issuance of a temporary restraining order and damages, before Branch 6 of the Regional Trial Court
of Manila, which was docketed as Civil Case No. 93-65673. On September 6, 1993, the trial court
rendered the following judgment:12

WHEREFORE, for all the foregoing, this Court hereby rules that:
 1. Respondents (herein petitioners) have acted excess jurisdiction and with grave abuse of
discretion and in a capricious, whimsical and arbitrary manner in promulgating PPA
Administrative Order 04-92 including all its implementing Memoranda, Circulars and Orders;

2. PPA Administrative Order 04-92 and its implementing Circulars and Orders are declared
null and void;

3. The respondents are permanently enjoined from implementing PPA Administrative Order
04-92 and its implementing Memoranda, Circulars and Orders.

No costs.

SO ORDERED.

The court a quo pointed out that the Bureau of Customs, the precursor of the PPA, recognized
pilotage as a profession and, therefore, a property right under Callanta v. Carnation Philippines,
Inc.13 Thus, abbreviating the term within which that privilege may be exercised would be an
interference with the property rights of the harbor pilots. Consequently, any "withdrawal or alteration"
of such property right must be strictly made in accordance with the constitutional mandate of due
process of law. This was apparently not followed by the PPA when it did not conduct public hearings
prior to the issuance of PPA-AO No. 04-92; respondents allegedly learned about it only after its
publication in the newspapers. From this decision, petitioners elevated their case to this Court
on certiorari.

After carefully examining the records and deliberating on the arguments of the parties, the Court is
convinced that PPA-AO No. 04-92 was issued in stark disregard of respondents' right against
deprivation of property without due process of law. Consequently, the instant petition must be
denied.

Section 1 of the Bill of Rights lays down what is known as the "due process clause" of the
Constitution, viz.:

Sec. 1. No person shall be deprived of life, liberty, or property without due process of law, . . .

In order to fall within the aegis of this provision, two conditions must concur, namely, that there is a
deprivation and that such deprivation is done without proper observance of due process. When one
speaks of due process of law, however, a distinction must be made between matters of procedure
and matters of substance. In essence, procedural due process "refers to the method or manner by
which the law is enforced," while substantive due process "requires that the law itself, not merely the
procedures by which the law would be enforced, is fair, reasonable, and just."14 PPA-AO No. 04-92
must be examined in light of this distinction.

Respondents argue that due process was not observed in the adoption of PPA-AO No. 04-92
allegedly because no hearing was conducted whereby "relevant government agencies" and the
pilots themselves could ventilate their views. They are obviously referring to the procedural aspect of
the enactment. Fortunately, the Court has maintained a clear position in this regard, a stance it has
stressed in the recent case of Lumiqued v. Hon. Exevea,15 where it declared that "(a)s long as a
party was given the opportunity to defend his interests in due course, he cannot be said to have
been denied due process of law, for this opportunity to be heard is the very essence of due process.
Moreover, this constitutional mandate is deemed satisfied if a person is granted an opportunity to
seek reconsideration of the action or ruling complained of."
In the case at bar, respondents questioned PPA-AO No. 04-92 no less than four times16 before the
matter was finally elevated to this Tribunal. Their arguments on this score, however, fail to persuade.
While respondents emphasize that the Philippine Coast Guard, "which issues the licenses of pilots
after administering the pilots' examinations," was not consulted,17 the facts show that the MARINA,
which took over the licensing function of the Philippine Coast Guard, was duly represented in the
Board of Directors of the PPA. Thus, petitioners correctly argued that, there being no matters of
naval defense involved in the issuance of the administrative order, the Philippine Coast Guard need
not be consulted.18

Neither does the fact that the pilots themselves were not consulted in any way taint the validity of the
administrative order. As a general rule, notice and hearing, as the fundamental requirements of
procedural due process, are essential only when an administrative body exercises its quasi-
judicial function. In the performance of its executive or legislative functions, such as issuing rules
and regulations, an administrative body need not comply with the requirements of notice and
hearing.19

Upon the other hand, it is also contended that the sole and exclusive right to the exercise of harbor
pilotage by pilots is a settled issue. Respondents aver that said right has become vested and can
only be "withdrawn or shortened" by observing the constitutional mandate of due process of law.
Their argument has thus shifted from the procedural to one of substance. It is here where PPA-AO
No. 04-92 fails to meet the condition set by the organic law.

There is no dispute that pilotage as a profession has taken on the nature of a property right. Even
petitioner Corona recognized this when he stated in his March 17, 1993, decision that "(t)he exercise
of one's profession falls within the constitutional guarantee against wrongful deprivation of, or
interference with, property rights without due process."20 He merely expressed the opinion the "(i)n
the limited context of this case, PPA-AO 04-92 does not constitute a wrongful interference with, let
alone a wrongful deprivation of, the property rights of those affected thereby, and that "PPA-AO 04-
95 does not forbid, but merely regulates, the exercise by harbor pilots of their profession." As will be
presently demonstrated, such supposition is gravely erroneous and tends to perpetuate an
administrative order which is not only unreasonable but also superfluous.

Pilotage, just like other professions, may be practiced only by duly licensed individuals. Licensure is
"the granting of license especially to practice a profession." It is also "the system of granting licenses
(as for professional practice) in accordance with establishment standards."21 A license is a right or
permission granted by some competent authority to carry on a business or do an act which, without
such license, would be illegal.22

Before harbor pilots can earn a license to practice their profession, they literally have to pass
through the proverbial eye of a needle by taking, not one but five examinations, each followed by
actual training and practice. Thus, the court a quo observed:

Petitioners (herein respondents) contend, and the respondents (herein petitioners) do not
deny, the here (sic) in this jurisdiction, before a person can be a harbor pilot, he must pass
five (5) government professional examinations, namely, (1) For Third Mate and after which
he must work, train and practice on board a vessel for at least a year; (2) For Second Mate
and after which he must work, train and practice for at least a year; (3) For Chief Mate and
after which he must work, train and practice for at least a year; (4) For a Master Mariner and
after which he must work as Captain of vessel for at least two (2) years to qualify for an
examination to be a pilot; and finally, of course, that given for pilots.
Their license is granted in the form of an appointment which allows them to engage in pilotage until
they retire at the age 70 years. This is a vested right. Under the terms of PPA-AO No. 04-92, "(a)ll
existing regular appointments which have been previously issued by the Bureau of Customs or the
PPA shall remain valid up to 31 December 1992 only," and "(a)ll appointments to harbor pilot
positions in all pilotage districts shall, henceforth, be only for a term of one (1) year from date of
effectivity subject to renewal or cancellation by the Authority after conduct of a rigid evaluation of
performance."

It is readily apparent that PPA-AO No. 04-92 unduly restricts the right of harbor pilots to enjoy their
profession before their compulsory retirement. In the past, they enjoyed a measure of security
knowing that after passing five examinations and undergoing years of on-the-job training, they would
have a license which they could use until their retirement, unless sooner revoked by the PPA for
mental or physical unfitness. Under the new issuance, they have to contend with an annual
cancellation of their license which can be temporary or permanent depending on the outcome of
their performance evaluation. Veteran pilots and neophytes alike are suddenly confronted with one-
year terms which ipso facto expire at the end of that period. Renewal of their license is now
dependent on a "rigid evaluation of performance" which is conducted only after the license has
already been cancelled. Hence, the use of the term "renewal." It is this pre-evaluation cancellation
which primarily makes PPA-AO No. 04-92 unreasonable and constitutionally infirm. In a real sense,
it is a deprivation of property without due process of law.

The Court notes that PPA-AO No. 04-92 and PPA-MO No. 08-92 are already covered by PPA-AO
No. 03-85, which is still operational. Respondents are correct in pointing out that PPA-AO No. 04-92
is a "surplusage"23 and, therefore, an unnecessary enactment. PPA-AO 03-85 is a comprehensive
order setting forth the "Rules and Regulations Governing Pilotage Services, the Conduct of Pilots
and Pilotage Fees in Philippine Ports." It provides, inter alia, for the qualification, appointment,
performance evaluation, disciplining and removal of harbor pilots — matters which are duplicated in
PPA-AO No. 04-92 and its implementing memorandum order. Since it adds nothing new or
substantial, PPA-AO No. 04-92 must be struck down.

Finally, respondents' insinuation that then PPA General Manager Dayan was responsible for the
issuance of the questioned administrative order may have some factual basis; after all, power and
authority were vested in his office to propose rules and regulations. The trial court's finding of
animosity between him and private respondents might likewise have a grain of truth. Yet the number
of cases filed in court between private respondents and Dayan, including cases which have reached
this Court, cannot certainly be considered the primordial reason for the issuance of PPA-AO No. 04-
92. In the absence of proof to the contrary, Dayan should be presumed to have acted in accordance
with law and the best of professional motives. In any event, his actions are certainly always subject
to scrutiny by higher administrative authorities.

WHEREFORE, the instant petition is hereby DISMISSED and the assailed decision of the court a
quo dated September 6, 1993, in Civil Case No. 93-65673 is AFFIRMED. No pronouncement as to
costs.

SO ORDERED.
G.R. No. L-49711 November 7, 1979

ZAMBALES CHROMITE MINING CO., GONZALO P. NAVA, VIOLA S. NAVA, FEDERICO S.

NAVA, PERLA NAVA, HONORATO P. NAVA, ALEJANDRO S. NAVA, PURIFICACION SISON, A.
TORDESILLAS, GUIDO ADVINCULA, PEDRO ANGULO and TOMAS MARAMBA, petitioners-
appellants,
vs.
COURT OF APPEALS, SECRETARY OF AGRICULTURE AND NATURAL RESOURCES,
DIRECTOR OF MINES, GREGORIO E. MARTINEZ, ALEJANDRO MENDEZ, NICANOR MARTY,
VICENTE MISOLES, GUILLERMO YABUT, ANDRES R. FIAGOY, MIGUEL A. MANIAGO,
CASIMIRO N. EBIDO, ENRIQUE RIVERA, SEVERINO MIVA, ELENITO B. MARTINEZ, LUCAS
EDURAIN, FELIMON ENCIO, EMILIO ILOCO, DIOSDADO MISOLA, ERNESTO VALVERDE,
PABLO PABILONA, ARMANDO MINAS, BARTOLOME MARAVE and CECILIO
OOVILLA, respondents-appellees.

Tordesilla & Advincula for petitioners-appellants.

Mariano M. Lozada for private respondents-appellees.

AQUINO, J.:

This is a mining case. The petitioners appealed from the second decision of the Court of
Appeals, reversing its first decision and holding that it was improper from Benjamin M. Gozon, as
Secretary of Agriculture and Natural Resources, to affirm his own decision as Director of Mines.

The Court of Appeals further held that the trial court's judgment, confirming the Secretary's decision,
should be set aside and that the Minister of Natural Resources should review anew the decision of
the Director of Mines "and, thereafter, further proceedings will be taken in the trial court". The
antecedental proceedings are as follows:

(1) In Mines Administrative Case No. V-227, Director Gozon issued an order dated October 5, 1960
wherein he dismissed the case filed by the petitioners or protestants (Zambales Chromite Mining
Co., Inc. or the group of Gonzalo P. Nava). In that case, they sought to be declared the rightful and
prior locators and possessors of sixty-nine mining claims located in Santa Cruz, Zambales.

On the basis of petitioners' evidence (the private respondents did not present any evidence and they
filed a demurrer to the evidence or motion to dismiss the protest), Director Gozon found that the
petitioners did not discover any mineral nor staked and located mining claims in accordance with
law.

In that same order, Director Gozon ruled that the mining claims of the groups of Gregorio Martinez
and Pablo Pabilona, now the private respondents-appellees, were duly located and registered (pp.
224-231, Record on Appeal).

(2) The petitioners appealed from that order to the Secretary of Agriculture and Natural Resources.
While the appeal was pending, Director Gozon was appointed Secretary of Agriculture and Natural
Resources. Instead of inhibiting himself, he decided the appeal, DANR Case No. 2151, on August
16, 1963 as it he was adjudicating the case for the first time. 'Thus, Secretary Gozon exercised
appellate jurisdiction over a case which he had decided as Director of Mines. He acted as reviewing
authority in the appeal from his own decision. Or, to use another analogy, he acted as trial judge and
appellate judge in the same case.

He ruled that the petitioners had abandoned the disputed mining claims, while, on the other hand,
the Martinez and Pabilona groups had validly located the said claims. Hence, he dismissed the
appeal from his own decision (pp. 340-341, Record on Appeal).

(3) On September 20, 1963, the petitioners filed a complaint in the Court of First Instance of
Zambales, assailing Secretary Gozon's decision and praying that they be declared the prior locators
and possessors of the sixty-nine mineral claims in question. Impleaded as defendants in the case
were the Secretary of Agriculture and Natural Resources, the Director of Mines and the members of
the Martinez and Pabilona groups.

After hearing, the lower court sustained Secretary Gozon's decision and dismissed the case. It held
that the disqualification petition of a judge to review his own decision or ruling (Sec. 1, Rule 137,
Rules of Court) does not apply to administrative bodies; that there is no provision in the Mining Law,
disqualifying the Secretary of Agriculture and Natural Resources from deciding an appeal from a
case which he had decided as Director of Mines; that delicadeza is not a ground for disqualification;
that the petitioners did not seasonably seek to disqualify Secretary Gozon from deciding their
appeal, and that there was no evidence that the Secretary acted arbitrarily and with bias, prejudice,
animosity or hostility to the petitioners (pp. 386-9, Record on Appeal).

(4) The petitioners appealed to the Court of Appeals. The Sixth Division of that Court (Pascual,
Agcaoili and Climaco, JJ.) in its decision dated February 15, 1978 reversed the judgment of the trial
court and declared that the petitioners were the rightful locators and possessors of the said sixty-
nine mining claims and held as invalid the mining claims overlapping the same.

That Division found that the petitioners (Nava group) had discovered minerals and had validly
located the said sixty-nine mining claims and that there was no sufficient basis for Secretary Gozon's
finding that the mining claims of the Martinez and Pabilona groups were validly located.

(5) The defendants, now the private respondents-appellees, filed a motion for reconsideration based
principally on the ground that the Court of Appeals should have respected the factual findings of the
Director of Mines and the Secretary of Agriculture and Natural Resources on the theory that the facts
found in administrative decisions cannot be disturbed on appeal to the courts, citing Republic Act
No. 4388 which amended section 61 of the Mining Law effective June 19, 1965; Pajo vs. Ago, 108
Phil. 905; Palanan Lumber & Plywood Co., Inc. vs. Arranz 65 O.G. 8473; Timbancaya vs. Vicente,
119 Phil. 169, Ortua vs. Singson Encarnacion, 59 Phil. 440.

The defendants-movants prayed that the appeal be dismissed, meaning that the decisions of the
lower court and of Director and Secretary Gozon be affirmed.

The petitioners opposed that motion for reconsideration. In their opposition, they reiterated the
contention in their brief that Secretary Gozon's decision was void and, therefore, the factual findings
therein are not binding on the courts.

As already stated, the same Sixth Division (composed of Pascula, Agrava and Maco, JJ.) in its
second decision of October 13, 1978, set aside its first decision and granted the motion for curiously
enough, the first decision was reconsidered not on the ground advanced by the movants-
defendants, now the private respondents (Martinez and Pabilona groups), which was that the factual
findings of the administrative officials should be upheld, but on the ground raised in petitioners'
opposition, namely, that Secretary Gozon's decision was void because he was disqualified to review
his own decision as Director of Mines.

So, as already noted, the Court of Appeals in its second decision remanded the case to the Minister
of Natural Resources for another review of Director Gozon's decision. This was the prayer of the
petitioners in their brief but in their opposition to the motion for reconsideration, they prayed that the
first decision of the Court of Appeals in their favor be maintained.

(6) The second decision did not satisfy the parties. They filed motions for reconsideration. The
petitioners in their motion reiterated their prayer that the first decision be reinstated. They
abandoned their prayer that the case be returned to the Minister of Natural Resources. On the other
hand, the private respondents in their motion insisted that the trial court's decision be affirmed on the
basis of the factual findings of the Director of Mines and the Secretary of Agriculture and Natural
Resources. The Court of Appeals denied both motions in its resolutions of December 27, 1978 and
January 15, 1979.

Only the petitioners appealed from the second decision of the Court of Appeals. There is an
arresting and noteworthy peculiarity in the present posture of this case now on appeal to this Court
(as arresting and noteworthy as the peculiarity that Secretary Gozon reviewed his own decision as
Director of Mines),

That twist or peculiarity is that while the petitioners (Nava group) in their appellants' brief in the Court
of Appeals prayed that Secretary Gozon's decision, alleged to be biased, be declared void and that
the case be returned to the Secretary of Agriculture and Natural Resources for another review of
Director Gozon's order, in their appellants' brief in this Court, they changed that relief and they now
pray that the second decision of the Court of Appeals, referring this case to the Minister of Natural
Resources for another review, be declared void and that its first decision be affirmed.

In contrast, the private respondents, who did not appeal from the second decision of the Court of
Appeals, instead of sustaining its holding that this case be referred to the Minister of Natural
Resources or instead of defending that second decision, they being appellees, pray for the
affirmance of the trial court's judgment sustaining the decisions of Director and Secretary Gozon.

The inconsistent positions of the parties, which were induced by the contradictory decisions of the
Court of Appeals, constitute the peculiar twist of this case in this Court.

We hold that Secretary Gozon acted with grave abuse of discretion in reviewing his decision as
Director of Mines. The palpably flagrant anomaly of a Secretary of Agriculture and Natural
Resources reviewing his own decision as Director of Mines is a mockery of administrative justice.
The Mining Law, Commonwealth Act No. 13-i, provides:

SEC. 61. Conflicts and disputes arising out of mining locations shall be submitted to
the Director of Mines for decision:

Provided, That the decision or order of the Director of Mines may be appealed to the
Secretary of Agriculture and Natural Resources within thirty days from the date of its
receipt.

In case any one of the parties should disagree from the decision or order of the
Director of Mines or of the Secretary of Agriculture and Natural Resources, the
matter may be taken to the court of competent jurisdiction within thirty days from the
receipt of such decision or order; otherwise the said decision or order shag be final
 and binding upon the parties concerned. (As amended by Republic Act No. 746
approved on June 18,1952).*

Undoubtedly, the provision of section 61 that the decision of the Director of Mines may be appealed
to the Secretary of Agriculture and Natural Resources contemplates that the Secretary should be a
person different from the Director of Mines.

In order that the review of the decision of a subordinate officer might not turn out to be a farce the
reviewing officer must perforce be other than the officer whose decision is under review; otherwise,
there could be no different view or there would be no real review of the case. The decision of the
reviewing officer would be a biased view; inevitably, it would be the same view since being human,
he would not admit that he was mistaken in his first view of the case.

That is the obvious, elementary reason behind the disqualification of a trial judge, who is promoted
to the appellate court, to sit in any case wherein his decision or ruling is the subject of review (Sec.
1, Rule 137, Rules of Court: secs. 9 and 27, Judiciary Law).

A sense of proportion and consideration for the fitness of things should have deterred Secretary
Gozon from reviewing his own decision as Director of Mines. He should have asked his
undersecretary to undertake the review.

Petitioners-appellants were deprived of due process, meaning fundamental fairness, when Secretary
Gozon reviewed his own decision as Director of Mines. (See Amos Treat & Co. vs. Securities and
Exchange Commission, 306 F. 2nd 260, 267.)

WHEREFORE, we set aside the order of the Secretary of Agriculture and Natural Resources dated
August 16, 1963 as affirmed by the trial court as well as the first decision of the Court of Appeals.

We affirm its second decision, returning the case to the Minister of Natural Resources, with the
directive that petitioners' appeal to the Minister be resolved de novo with the least delay as provided
for in Presidential Decree No. 309, "establishing rules and procedures for the speedy disposition or
settlement of conflicting mining claims".

We reverse the second part of that second decision stating that "thereafter, further proceedings will
be taken in the trial court". That portion is unwarranted because the trial court does not retain any
jurisdiction over the case once it is remanded to the Minister of Natural Resources. No costs.

SO ORDERED
G.R. No. 76118 March 30, 1993

THE CENTRAL BANK OF THE PHILIPPINES and RAMON V. TIAOQUI, petitioners,

vs.
COURT OF APPEALS and TRIUMPH SAVINGS BANK, respondents.

Sycip, Salazar, Hernandez & Gatmaitan for petitioners.

Quisumbing, Torres & Evangelista for Triumph Savings Bank.

BELLOSILLO, J.:

May a Monetary Board resolution placing a private bank under receivership be annulled on the
ground of lack of prior notice and hearing?

This petition seeks review of the decision of the Court of Appeals in CA G.R. S.P. No. 07867 entitled
"The Central Bank of the Philippines and Ramon V. Tiaoqui vs. Hon. Jose C. de Guzman and
Triumph Savings Bank," promulgated 26 September 1986, which affirmed the twin orders of the
Regional Trial Court of Quezon City issued 11 November 19851 denying herein petitioners' motion to
dismiss Civil Case No. Q-45139, and directing petitioner Ramon V. Tiaoqui to restore the private
management of Triumph Savings Bank (TSB) to its elected board of directors and officers, subject to
Central Bank comptrollership.2

The antecedent facts: Based on examination reports submitted by the Supervision and Examination
Sector (SES), Department II, of the Central Bank (CB) "that the financial condition of TSB is one of
insolvency and its continuance in business would involve probable loss to its depositors and
creditors,"3 the Monetary Board (MB) issued on 31 May 1985 Resolution No. 596 ordering the
closure of TSB, forbidding it from doing business in the Philippines, placing it under receivership,
and appointing Ramon V. Tiaoqui as receiver. Tiaoqui assumed office on 3 June 1985.4

On 11 June 1985, TSB filed a complaint with the Regional Trial Court of Quezon City, docketed as
Civil Case No. Q-45139, against Central Bank and Ramon V. Tiaoqui to annul MB Resolution No.
596, with prayer for injunction, challenging in the process the constitutionality of Sec. 29 of R.A. 269,
otherwise known as "The Central Bank Act," as amended, insofar as it authorizes the Central Bank
to take over a banking institution even if it is not charged with violation of any law or regulation, much
less found guilty thereof.5

On 1 July 1985, the trial court temporarily restrained petitioners from implementing MB Resolution
No. 596 "until further orders", thus prompting them to move for the quashal of the restraining order
(TRO) on the ground that it did not comply with said Sec. 29, i.e., that TSB failed to show convincing
proof of arbitrariness and bad faith on the part of petitioners;' and, that TSB failed to post the
requisite bond in favor of Central Bank.

On 19 July 1985, acting on the motion to quash the restraining order, the trial court granted the relief
sought and denied the application of TSB for injunction. Thereafter, Triumph Savings Bank filed with
Us a petition for certiorariunder Rule 65 of the Rules of Court6 dated 25 July 1985 seeking to enjoin
the continued implementation of the questioned MB resolution.
Meanwhile, on 9 August 1985; Central Bank and Ramon Tiaoqui filed a motion to dismiss the
complaint before the RTC for failure to state a cause of action, i.e., it did not allege ultimate facts
showing that the action was plainly arbitrary and made in bad faith, which are the only grounds for
the annulment of Monetary Board resolutions placing a bank under conservatorship, and that TSB
was without legal capacity to sue except through its receiver.7

On 9 September 1985, TSB filed an urgent motion in the RTC to direct receiver Ramon V. Tiaoqui to
restore TSB to its private management. On 11 November 1985, the RTC in separate orders denied
petitioners' motion to dismiss and ordered receiver Tiaoqui to restore the management of TSB to its
elected board of directors and officers, subject to CB comptrollership.

Since the orders of the trial court rendered moot the petition for certiorari then pending before this
Court, Central Bank and Tiaoqui moved on 2 December 1985 for the dismissal of G.R. No. 71465
which We granted on 18 December 1985.8

Instead of proceeding to trial, petitioners elevated the twin orders of the RTC to the Court of Appeals
on a petition for certiorari and prohibition under Rule 65.9 On 26 September 1986, the appellate
court, upheld the orders of the trial court thus —

Petitioners' motion to dismiss was premised on two grounds, namely, that the
complaint failed to state a cause of action and that the Triumph Savings Bank was
without capacity to sue except through its appointed receiver.

Concerning the first ground, petitioners themselves admit that the Monetary Board
resolution placing the Triumph Savings Bank under the receivership of the officials of
the Central Bank was done without prior hearing, that is, without first hearing the side
of the bank. They further admit that said resolution can be the subject of judicial
review and may be set aside should it be found that the same was issued with
arbitrariness and in bad faith.

The charge of lack of due process in the complaint may be taken as constitutive of
allegations of arbitrariness and bad faith. This is not of course to be taken as
meaning that there must be previous hearing before the Monetary Board may
exercise its powers under Section 29 of its Charter. Rather, judicial review of such
action not being foreclosed, it would be best should private respondent be given the
chance to show and prove arbitrariness and bad faith in the issuance of the
questioned resolution, especially so in the light of the statement of private
respondent that neither the bank itself nor its officials were even informed of any
charge of violating banking laws.

In regard to lack of capacity to sue on the part of Triumph Savings Bank, we view
such argument as being specious, for if we get the drift of petitioners' argument, they
mean to convey the impression that only the CB appointed receiver himself may
question the CB resolution appointing him as such. This may be asking for the
impossible, for it cannot be expected that the master, the CB, will allow the receiver it
has appointed to question that very appointment. Should the argument of petitioners
be given circulation, then judicial review of actions of the CB would be effectively
checked and foreclosed to the very bank officials who may feel, as in the case at bar,
that the CB action ousting them from the bank deserves to be set aside.

xxx xxx xxx

 On the questioned restoration order, this Court must say that it finds nothing
whimsical, despotic, capricious, or arbitrary in its issuance, said action only being in
line and congruent to the action of the Supreme Court in the Banco Filipino Case
(G.R. No. 70054) where management of the bank was restored to its duly elected
directors and officers, but subject to the Central Bank comptrollership.10

On 15 October 1986, Central Bank and its appointed receiver, Ramon V. Tiaoqui, filed this petition
under Rule 45 of the Rules of Court praying that the decision of the Court of Appeals in CA-G.R. SP
No. 07867 be set aside, and that the civil case pending before the RTC of Quezon City, Civil Case
No.
Q-45139, be dismissed. Petitioners allege that the Court of Appeals erred —

(1) in affirming that an insolvent bank that had been summarily closed by the
Monetary Board should be restored to its private management supposedly because
such summary closure was "arbitrary and in bad faith" and a denial of "due process";

(2) in holding that the "charge of lack of due process" for "want of prior hearing" in a
complaint to annul a Monetary Board receivership resolution under Sec. 29 of R.A.
265 "may be taken as . . allegations of arbitrariness and bad faith"; and

(3) in holding that the owners and former officers of an insolvent bank may still act or
sue in the name and corporate capacity of such bank, even after it had been ordered
closed and placed under receivership.11

The respondents, on the other hand, allege inter alia that in the Banco Filipino case,12 We held that
CB violated the rule on administrative due process laid down in Ang Tibay vs. CIR (69 Phil. 635)
and Eastern Telecom Corp. vs. Dans, Jr. (137 SCRA 628) which requires that prior notice and
hearing be afforded to all parties in administrative proceedings. Since MB Resolution No. 596 was
adopted without TSB being previously notified and heard, according to respondents, the same is
void for want of due process; consequently, the bank's management should be restored to its board
of directors and officers.13

Petitioners claim that it is the essence of Sec. 29 of R.A. 265 that prior notice and hearing in cases
involving bank closures should not be required since in all probability a hearing would not only cause
unnecessary delay but also provide bank "insiders" and stockholders the opportunity to further
dissipate the bank's resources, create liabilities for the bank up to the insured amount of P40,000.00,
and even destroy evidence of fraud or irregularity in the bank's operations to the prejudice of its
depositors and creditors. 14 Petitioners further argue that the legislative intent of Sec. 29 is to repose
in the Monetary Board exclusive power to determine the existence of statutory grounds for the
closure and liquidation of banks, having the required expertise and specialized competence to do so.

The first issue raised before Us is whether absence of prior notice and hearing may be considered
acts of arbitrariness and bad faith sufficient to annul a Monetary Board resolution enjoining a bank
from doing business and placing it under receivership. Otherwise stated, is absence of prior notice
and hearing constitutive of acts of arbitrariness and bad faith?

Under Sec. 29 of R.A. 265,15 the Central Bank, through the Monetary Board, is vested with exclusive
authority to assess, evaluate and determine the condition of any bank, and finding such condition to
be one of insolvency, or that its continuance in business would involve probable loss to its depositors
or creditors, forbid the bank or non-bank financial institution to do business in the Philippines; and
shall designate an official of the CB or other competent person as receiver to immediately take
charge of its assets and liabilities. The fourth paragraph,16 which was then in effect at the time the
action was commenced, allows the filing of a case to set aside the actions of the Monetary Board
which are tainted with arbitrariness and bad faith.

Contrary to the notion of private respondent, Sec. 29 does not contemplate prior notice and hearing
before a bank may be directed to stop operations and placed under receivership. When par. 4 (now
par. 5, as amended by E.O. 289) provides for the filing of a case within ten (10) days after the
receiver takes charge of the assets of the bank, it is unmistakable that the assailed actions should
precede the filing of the case. Plainly, the legislature could not have intended to authorize "no prior
notice and hearing" in the closure of the bank and at the same time allow a suit to annul it on the
basis of absence thereof.

In the early case of Rural Bank of Lucena, Inc. v. Arca [1965],17 We held that a previous hearing is
nowhere required in Sec. 29 nor does the constitutional requirement of due process demand that the
correctness of the Monetary Board's resolution to stop operation and proceed to liquidation be first
adjudged before making the resolution effective. It is enough that a subsequent judicial review be
provided.

Even in Banco Filipino, 18 We reiterated that Sec. 29 of R.A. 265 does not require a previous hearing
before the Monetary Board can implement its resolution closing a bank, since its action is subject to
judicial scrutiny as provided by law.

It may be emphasized that Sec. 29 does not altogether divest a bank or a non-bank financial
institution placed under receivership of the opportunity to be heard and present evidence on
arbitrariness and bad faith because within ten (10) days from the date the receiver takes charge of
the assets of the bank, resort to judicial review may be had by filing an appropriate pleading with the
court. Respondent TSB did in fact avail of this remedy by filing a complaint with the RTC of Quezon
City on the 8th day following the takeover by the receiver of the bank's assets on 3 June 1985.

This "close now and hear later" scheme is grounded on practical and legal considerations to prevent
unwarranted dissipation of the bank's assets and as a valid exercise of police power to protect the
depositors, creditors, stockholders and the general public.

In Rural Bank of Buhi, Inc. v. Court of Appeals,19 We stated that —

. . . due process does not necessarily require a prior hearing; a hearing or an

opportunity to be heard may be subsequent to the closure. One can just imagine the
dire consequences of a prior hearing: bank runs would be the order of the day,
resulting in panic and hysteria. In the process, fortunes may be wiped out and
disillusionment will run the gamut of the entire banking community.

We stressed in Central Bank of the Philippines v. Court of Appeals20 that —

. . . the banking business is properly subject to reasonable regulation under the

police power of the state because of its nature and relation to the fiscal affairs of the
people and the revenues of the state (9 CJS 32). Banks are affected with public
interest because they receive funds from the general public in the form of deposits.
Due to the nature of their transactions and functions, a fiduciary relationship is
created between the banking institutions and their depositors. Therefore, banks are
under the obligation to treat with meticulous care and utmost fidelity the accounts of
those who have reposed their trust and confidence in them (Simex International
[Manila], Inc., v. Court of Appeals, 183 SCRA 360 [1990]).
 It is then the Government's responsibility to see to it that the financial interests of
those who deal with the banks and banking institutions, as depositors or otherwise,
are protected. In this country, that task is delegated to the Central Bank which,
pursuant to its Charter (R.A. 265, as amended), is authorized to administer the
monetary, banking and credit system of the Philippines. Under both the 1973 and
1987 Constitutions, the Central Bank is tasked with providing policy direction in the
areas of money, banking and credit; corollarily, it shall have supervision over the
operations of banks (Sec. 14, Art. XV, 1973 Constitution, and Sec. 20, Art. XII, 1987
Constitution). Under its charter, the CB is further authorized to take the necessary
steps against any banking institution if its continued operation would cause prejudice
to its depositors, creditors and the general public as well. This power has been
expressly recognized by this Court. In Philippine Veterans Bank Employees Union-
NUBE v. Philippine Veterans Banks (189 SCRA 14 [1990], this Court held that:

. . . [u]nless adequate and determined efforts are taken by the

government against distressed and mismanaged banks, public faith
in the banking system is certain to deteriorate to the prejudice of the
national economy itself, not to mention the losses suffered by the
bank depositors, creditors, and stockholders, who all deserve the
protection of the government. The government cannot simply cross
its arms while the assets of a bank are being depleted through
mismanagement or irregularities. It is the duty of the Central Bank in
such an event to step in and salvage the remaining resources of the
bank so that they may not continue to be dissipated or plundered by
those entrusted with their management.

Section 29 of R.A. 265 should be viewed in this light; otherwise, We would be subscribing to a
situation where the procedural rights invoked by private respondent would take precedence over the
substantive interests of depositors, creditors and stockholders over the assets of the bank.

Admittedly, the mere filing of a case for receivership by the Central Bank can trigger a bank run and
drain its assets in days or even hours leading to insolvency even if the bank be actually solvent. The
procedure prescribed in Sec. 29 is truly designed to protect the interest of all concerned, i.e., the
depositors, creditors and stockholders, the bank itself, and the general public, and the summary
closure pales in comparison to the protection afforded public interest. At any rate, the bank is given
full opportunity to prove arbitrariness and bad faith in placing the bank under receivership, in which
event, the resolution may be properly nullified and the receivership lifted as the trial court may
determine.

The heavy reliance of respondents on the Banco Filipino case is misplaced in view of factual
circumstances therein which are not attendant in the present case. We ruled in Banco Filipino that
the closure of the bank was arbitrary and attendant with grave abuse of discretion, not because of
the absence of prior notice and hearing, but that the Monetary Board had no sufficient basis to arrive
at a sound conclusion of insolvency to justify the closure. In other words, the arbitrariness, bad faith
and abuse of discretion were determined only after the bank was placed under conservatorship and
evidence thereon was received by the trial court. As this Court found in that case, the Valenzuela,
Aurellano and Tiaoqui Reports contained unfounded assumptions and deductions which did not
reflect the true financial condition of the bank. For instance, the subtraction of an uncertain amount
as valuation reserve from the assets of the bank would merely result in its net worth or the
unimpaired capital and surplus; it did not reflect the total financial condition of Banco Filipino.
Furthermore, the same reports showed that the total assets of Banco Filipino far exceeded its total
liabilities. Consequently, on the basis thereof, the Monetary Board had no valid reason to liquidate
the bank; perhaps it could have merely ordered its reorganization or rehabilitation, if need be.
Clearly, there was in that case a manifest arbitrariness, abuse of discretion and bad faith in the
closure of Banco Filipino by the Monetary Board. But, this is not the case before Us. For here, what
is being raised as arbitrary by private respondent is the denial of prior notice and hearing by the
Monetary Board, a matter long settled in this jurisdiction, and not the arbitrariness which the
conclusions of the Supervision and Examination Sector (SES), Department II, of the Central Bank
were reached.

Once again We refer to Rural Bank of Buhi, Inc. v. Court of Appeals,21 and reiterate Our
pronouncement therein that —

. . . the law is explicit as to the conditions prerequisite to the action of the Monetary
Board to forbid the institution to do business in the Philippines and to appoint a
receiver to immediately take charge of the bank's assets and liabilities. They are: (a)
an examination made by the examining department of the Central Bank; (b) report by
said department to the Monetary Board; and (c) prima facie showing that its
continuance in business would involve probable loss to its depositors or creditors.

In sum, appeal to procedural due process cannot just outweigh the evil sought to be prevented;
hence, We rule that Sec. 29 of R.A. 265 is a sound legislation promulgated in accordance with the
Constitution in the exercise of police power of the state. Consequently, the absence of notice and
hearing is not a valid ground to annul a Monetary Board resolution placing a bank under
receivership. The absence of prior notice and hearing cannot be deemed acts of arbitrariness and
bad faith. Thus, an MB resolution placing a bank under receivership, or conservatorship for that
matter, may only be annulled after a determination has been made by the trial court that its issuance
was tainted with arbitrariness and bad faith. Until such determination is made, the status quo shall
be maintained, i.e., the bank shall continue to be under receivership.

As regards the second ground, to rule that only the receiver may bring suit in behalf of the bank is, to
echo the respondent appellate court, "asking for the impossible, for it cannot be expected that the
master, the CB, will allow the receiver it has appointed to question that very appointment."
Consequently, only stockholders of a bank could file an action for annulment of a Monetary Board
resolution placing the bank under receivership and prohibiting it from continuing
operations.22 In Central Bank v. Court of Appeals, 23 We explained the purpose of the law —

. . . in requiring that only the stockholders of record representing the majority of the
capital stock may bring the action to set aside a resolution to place a bank under
conservatorship is to ensure that it be not frustrated or defeated by the incumbent
Board of Directors or officers who may immediately resort to court action to prevent
its implementation or enforcement. It is presumed that such a resolution is directed
principally against acts of said Directors and officers which place the bank in a state
of continuing inability to maintain a condition of liquidity adequate to protect the
interest of depositors and creditors. Indirectly, it is likewise intended to protect and
safeguard the rights and interests of the stockholders. Common sense and public
policy dictate then that the authority to decide on whether to contest the resolution
should be lodged with the stockholders owning a majority of the shares for they are
expected to be more objective in determining whether the resolution is plainly
arbitrary and issued in bad faith.
It is observed that the complaint in this case was filed on 11 June 1985 or two (2) years prior to 25
July 1987 when E.O. 289 was issued, to be effective sixty (60) days after its approval (Sec. 5). The
implication is that before E.O

. 289, any party in interest could institute court proceedings to question a Monetary Board resolution
placing a bank under receivership. Consequently, since the instant complaint was filed by parties
representing themselves to be officers of respondent Bank (Officer-in-Charge and Vice President),
the case before the trial court should now take its natural course. However, after the effectivity of
E.O. 289, the procedure stated therein should be followed and observed.

PREMISES considered, the Decision of the Court of Appeals in CA-G.R. SP No. 07867
is AFFIRMED, except insofar as it upholds the Order of the trial court of 11 November 1985 directing
petitioner RAMON V. TIAOQUI to restore the management of TRIUMPH SAVINGS BANK to its
elected Board of Directors and Officers, which is hereby SET ASIDE.

Let this case be remanded to the Regional Trial Court of Quezon City for further proceedings to
determine whether the issuance of Resolution No. 596 of the Monetary Board was tainted with
arbitrariness and bad faith and to decide the case accordingly.

SO ORDERED.
G.R. No. 137266 December 5, 2001

ANTONIO M. BERNARDO, ERNESTO A. DOMINGO, JR. and JESUS C. CRUZ, petitioners,

vs.
BENJAMIN S. ABALOS, SR., BENJAMIN "BENHUR" D. ABALOS, JR., DR. EDEN C. DIAZ,
ROMEO F. ZAPANTA, ARCADIO S. DE VERA and THE COMMISSION ON
ELECTIONS, respondents.

SANDOVAL-GUTIERREZ, J.:

This is a petition for certiorari1 seeking the nullification of Resolution No. 98-3208 of the Commission
on Elections (COMELEC) En Banc promulgated on December 1, 1998 dismissing the complaint for
vote buying filed by petitioners against respondents. 1âwphi 1.nêt

On April 21, 1998, petitioners Antonio M. Bernardo M. Bernardo, Ernesto A. Domingo, Jr. and Jesus
C. Cruz filed with the COMELEC a criminal complaint against respondents Benjamin S. Abalos, Sr.,
Benjamin C. Abalos, Jr., Dr. Eden C. Diaz, Romeo Zapanta and Arcadio de Vera for vote buying in
violation of Section 261, paragraphs (a), (b) and (j) of the Omnibus Election Code (OEC), in relation
to Section 28 of Republic Act 6646 and Section 68 of the OEC. The complaint, docketed as E.O.
Case No. 98-110,2 alleged that:

1. On April 14, 1998 (Tuesday), respondent Mandaluyong City Mayor Benjamin S. Abalos,
Sr., and his son respondent Benjamin "Benhur" C. Abalos, Jr., candidate for City Mayor of
the same city in the May 11, 1998 elections, conspiring with respondents Dr. Eden C. Diaz,
Schools Division Superintendent, Romeo F. Zapanta, Assistant Schools Division
Superintendent, and Arcadio de Vera, President, Mandaluyong Federation of Public School
Teachers, sponsored, arranged and conducted an all-expense-free transportation, food and
drinks affair for the Mandaluyong City public school teachers, registered voters of said city, at
the Tayabas Bay Beach Resort, Sariaya, Quezon Province.

2. Among the identified public school teachers present, brought in around twelve (12) buses,
were Corazon Mayoya, principal of Highway Hills Elementary School, her Assistant Principal
of Highway Hills Elementary School, her Assistant Principal and Mr. Dante del Remigio; Mrs.
Diaz Principal of Mandaluyong City High School and Mr. Alvia; Mrs. Parillo, Andres Bonifacio
Elementary School; Mrs. Gregoria Ignacio, Principal of Doña Pilar Gonzaga Elementary
School; Ms. Magsalin, Principal of Mandaluyong Science High School and Mrs. Rita
Bondayril; Mrs. De Vera, Fabella Elementary School; Ms. Anselmo, Principal of Isaac Lopez
Elementary School and Mrs. Fayton; Mrs. Sylvia Liwanag, District Supervisor, District II, Mrs.
Nalaonan, Principal of Amado T. Reyes Elementary School; Mrs. Teresita Vicencio,
Mandaluyong City Elemtary School; Officers of the Mandaluyong Federation of Public School
Teachers namely; Mrs. Erlinda Ilagan, Treasurer; Ms. Nancy de Leon, Auditor; Ms. Fortunata
Gondran, PRO; Mr. Nenito Pumariga, Business Manager; Mr. Jose Guerrero, Sgt.-at-arms;
and Board Members Ms. Virginia Carillo, Ms. Wilma Fernandez, Mr Arturo Morales and Mr.
Teddy Angeles.

3. During the whole-day affair, the background music loudly and repeatedly played over the
sound system was the political jingle advertisement of Mandaluyong City candidate for
Mayor, Benjamin "Benhur" Abalos, Jr., sang to the tune of the song 'SHALALA LALA'.

4. Some of the participants wore T-shirts with the name of candidate "Benhur" Abalos, Jr.,
printed in oversized colored letters.
 5. Mayor Benjamin Abalos, Sr. delivered a speech wherein he offered and promised the
Mandaluyong City public school teachers and employees a "hazard" pay of P1,000.00, and
increasing their allowances from P1,500.00 to P2,000.00 for food, or with a total of
P3,000.00 which they will get by the end of the month.

6. The offers and promises to said public school teachers, who are members of the Board of
Election Inspectors of Mandaluyong City and registered voters thereat, were made a few
weeks before the election to induce or unduly influence the said teachers and the public in
general (the other guests) to vote for the candidacy of Benjamin "Benhur" Abalos, Jr.,

7. The offers and promises of Mayor Abalos, Sr., and the enthusiastic acceptance of said
monetary increase of allowances by the public school teachers and employees of
Mandaluyong City, is a violation of Section 261 pars. (a), (b) and (j) of the Omnibus Election
Code against vote-buying and vote-selling.3

The Director4 of the Law Department of the COMELEC conducted a preliminary investigation. All the
private respondents filed separate counter-affidavits5 with prayer to dismiss the complaint.

On November 26, 1998, the Director of the Law Department submitted his findings to the
COMELEC En Bancrecommending that the complaint be dismissed for insufficiency of evidence.

On December 1, 1998, the COMELEC En Banc issued the assailed Resolution No. 98-
32086 dismissing the complaint "for insufficiency of evidence to establish a prima facie case,"

"Considering that this complaint, being criminal in nature, must have all its allegations
supported by direct, strong, convincing and indubitable evidence; and that the submitted
evidence of the complainant are mere self-serving statements and uncorroborated audio and
visual recordings and a photograph; and considering further that the evidence of the
respondents have more probative value and believable than the evidence of said
complainants; and that the burden of proof lies with the complainants and not with
respondents."7

On February 09, 1999, petitioners, without first submitting a motion for reconsideration, filed the
instant petition with this Court.

They alleged thereon that the COMELEC En Banc, in issuing Resolution No. 98-3208 dated
December 1, 1998, acted "with apparent grave abuse of dicretion."8

The petition must fail.

Petitioners did not exhaust all the remedies available to them at the COMELEC level. Specifically,
they did not seek a reconsideration of the assailed COMELEC En Banc Resolution as required by
Section 1, Rule 13 of the 1993 COMELEC Rules of Procedure, thus:

"Section 1. What Pleadings are not Allowed. - The following

pleadings are not allowed:

xxx

d) motion for reconsideration of an en banc ruling, resolution,

order or decision except in election offense cases;
 x x x." (Emphasis ours)

It is not disputed that petitioners' complaint before the COMELEC involves an election offense. But in
this petition, they conveniently kept silent why they directly elevated to this Court the questioned
Resolution without first filing a motion for reconsideration with the COMELEC En Banc. It was only
after the respondents had filed their comment on the petition and called this Court's attention to
petitioners' failure to comply with Section 1 of Rule 13 that they, in their Consolidated Reply,
advanced the excuse that they "deemed it best not seek any further dilatory motion for
reconsideration' …, even if allowed by Sec. 1 (d) of COMELEC Rule 13."9

Petitioners' failure to file the required motion for reconsideration utterly disregarded the COMELEC
Rules intended "to achieve an orderly, just, expeditious and inexpensive determination and
disposition of every action and proceeding brought before the Commission."10

Contrary to petitioners' statement that a resort to a motion for reconsideration is "dilatory, " it bears
stressing that the purpose of the said motion is to give the COMELEC an opportunity to correct the
error imputed to it.11 If the error is immediately corrected by way of a motion for reconsideration, then
it is the most expeditious and inexpensive recourse. But if the COMELEC refuses to correct a
patently erroneous act, then it commits a grave abuse of discretion justifying a recourse by the
aggrieved party to a petition for certiorari.

A petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as amended, can only be
resorted to if "there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course
of law."12 Having failed to file the required motion for reconsideration of the challenged Resolution,
petitioners' instant petition is certainly premature.13 Significantly, they have not raised any plausible
reason for their direct recourse to this Court.

In its assailed Resolution, the COMELEC cited a valid reason for dismissing petitioners' complaint
against private respondents for vote buying. The COMELEC found that the evidence of the
respondents have "more probative value and believable than the evidence of the complainants;" and
that the evidence submitted by petitioners are "mere self-serving statements and uncorroborated
audio and visual recording and a photograph."

Moreover, Section 28 of Republic Act 6646 provides:

"SEC. 28. Prosecution of Vote-buying and Vote-selling. - The representation of a

complaint for violations of paragraph (a) or (b) of Section 261 of Batas Pambansa Blg.
881 supported by affidavits of complaining witnesses attesting to the offer or promise
by or of the voter's acceptance of money or other consideration from the relatives,
leaders or sympathizers of candidate, shall be sufficient basis for an investigation to be
immediately conducted by the Commission, directly or through its duly authorized legal
officers, under Section 68 or Section 265 of said Batas Pambansa Blg. 881. 1âw phi 1.nêt

x x x." (Emphasis ours)

Petitioners' complaint expressly states that no supporting affidavits were submitted by the
complaining witness14 to sustain their charge of vote buying. Suffice it to state that the absence of
such supporting affidavits shows the frailty of petitioners' complaint. Indeed, it is vulnerable to
dismissal.

WHEREFORE, the instant petition is DISMISSED.

SO ORDERED.

Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing,
Pardo, Ynares-Santiago, De Leon, Jr., Carpio., JJ., concur.

Buena, on official leave.

G.R. No. 113079 April 20, 2001

ENERGY REGULATORY BOARD, petitioner,

vs.
COURT OF APPEALS and PETROLEUM DISTRIBUTORS AND SERVICES
CORPORATION, respondents.

----------------------------------------

G.R. No. 114923 April 20, 2001

PILIPINAS SHELL PETROLEUM CORPORATION, petitioner,

vs.
COURT OF APPEALS and PETROLEUM DISTRIBUTORS AND SERVICES
CORPORATION, respondents.

YNARES-SANTIAGO, J.:

The propriety of building a state-of-the-art gasoline service station along Benigno Aquino, Jr. Avenue
in Parañaque, Metro Manila is the bone of contention in these consolidated petitions for certiorari
under Rule 45 of the Rules of Court. Petitioners assert that the construction of such a modern edifice
is a necessity dictated by the "emerging economic landscapes." Respondents say otherwise.

The factual antecedents of the case are matters of record or are otherwise uncontroverted.

Petitioner Pilipinas Shell Petroleum Corporation (Shell) is engaged in the business of importing
crude oil, refining the same and selling various petroleum products through a network of service
stations throughout the country.

Private respondent Petroleum Distributors and Service Corporation (PDSC) owns and operates a
Caltex service station at the corner of the MIA and Domestic Roads in Pasay City.

On June 30,1983, Shell filed with the quondam Bureau of Energy Utilization (BEU) an application for
authority to relocate its Shell Service Station at Tambo, Parañaque, Metro Manila, to Imelda Marcos
Avenue of the same municipality. The application, which was docketed as BEU Case No. 83-09-
1319, was initially rejected by the BEU because Shell's old site had been closed for five (5) years
such that the relocation of the same to a new site would amount to a new construction of a gasoline
outlet, which construction was then the subject of a moratorium. Subsequently, however, BEU
relaxed its position and gave due course to the application.

PDSC filed an opposition to the application on the grounds that: 1.] there are adequate service
stations attending to the motorists' requirements in the trading area covered by the application; 2.]
ruinous competition will result from the establishment of the proposed new service station; and 3.]
there is a decline not an increase in the volume of sales in the area. Two other companies, namely
Petrophil and Caltex, also opposed the application on the ground that Shell failed to comply with the
jurisdictional requirements.

In a Resolution dated March 6, 1984, the BEU dismissed the application on jurisdictional grounds
and for lack of "full title" of the lessor over the proposed site. However, on May 7, 1984, the BEU
reinstated the same application and thereafter conducted a hearing thereon.
On June 3, 1986, the BEU rendered a decision denying Shell's application on a finding that there
was "no necessity for an additional petroleum products retail outlet in Imelda Marcos Avenue,
Parañaque." Dissatisfied, Shell appealed to the Office of Energy Affairs (OEA).

Meanwhile, on May 8, 1987, Executive Order No. 172 was issued creating the Energy Regulatory
Board (ERB) and transferring to it the regulatory and adjudicatory functions of the BEU.

On May 9, 1988, the OEA rendered a decision denying the appeal of Shell and affirming the BEU
decision. Shell moved for reconsideration and prayed for a new hearing or the remand of the case
for further proceedings. In a supplement to said motion, Shell submitted a new feasibility study to
justify its application.

The OEA issued an order on July 11, 1988, remanding the case to the ERB for further evaluation
and consideration, noting therein that the "updated survey conducted by Shell" cited new
developments such as the accessibility of Imelda Marcos Avenue, now Benigno Aquino, Jr. Avenue,
to Parañaque residents along Sucat Road and the population growth in the trading area.

After the records of BEU Case No. 83-09-1319 was remanded to the ERB, Shell filed on March 3,
1989 an amended application, intended for the same purpose as its original application, which was
docketed as ERB Case No. 89-57. This amended application was likewise opposed by PDSC.

On September 17, 1991, the ERB rendered a Decision allowing Shell to establish the service station
in Benigno Aquino, Jr. Avenue. The dispositive portion of the Decision reads:

WHEREFORE, premises considered, the application for authority to relocate a Shell service
station from Tambo to Benigno Aquino Avenue, Parañaque, Metro Manila is hereby
approved.

Applicant is hereby directed to:

1. Start the construction and operation of the retail outlet at the actual approved site
appearing in the vicinity map previously submitted to the Board within one (1) year,
from the finality of this Decision and thereafter submit a sworn document of
compliance therewith;

2. Submit photographs showing the left side, right side and front view of the retail
outlet within fifteen (15) days from completion of the construction work;

3. Submit to the Board a report on the total volume of petroleum products sold each
month during the first six (6) months of the operation of the station. The report shall
be submitted in the form of an affidavit within ten (10) days after the end of the six-
month period;

4. Inform the Board in writing and the general public through a notice posted
conspicuously within the premises of the station of the (a) intention of applicant or its
dealer to stop operation of the retail outlet for a period longer than ninety (90) days;
or (b) notice of shutdown of operation of the retail outlet that will likely extend beyond
thirty (30) days. Such notice must be given fifteen (15) days before the actual
cessation of operations in the case of (a) and in the case of (b) within the first five (5)
days of an unplanned stoppage of operations.
 SO ORDERED.

PDSC filed a motion for reconsideration of the foregoing Decision. The motion was, however, denied
by ERB in an Order dated February 14, 1992.

Aggrieved, PDSC elevated its cause on April 1, 1992 to the Court of Appeals, where the same was
docketed as CA-G.R. SP No. 27661.

Thereafter, in a Decision dated November 8, 1993,1 the appellate court's Tenth Division reversed the
ERB judgment thus:

WHEREFORE, the challenged Decision dated September 17, 1991, as well as the Order
dated February 14, 1992, both of the respondent Energy Regulatory Board in ERB Case No.
89-57, are hereby REVERSED and SET ASIDE. Correspondingly, the application of
respondent Pilipinas Shell Petroleum Corporation to construct and operate the petroleum
retail outlet in question is DENIED.

SO ORDERED.

A motion for reconsideration was denied by the Court of Appeals in a Resolution dated 6 April
1994.2 Dissatisfied, both Shell and ERB elevated the matter to this Court by way of these petitions,
which were ordered consolidated by the Court in a Resolution dated July 25,1994.3

It appears, however, from the record that even as the proceedings in CA-G.R. SP No. 27661 were
pending in the appellate court, Caltex filed on January 24, 1992 a similar application for the
construction of a service station in the same area with the ERB, docketed as ERB Case No. 87-393.
This application was likewise opposed by respondent PDSC, citing the same grounds it raised in
opposing Shell's application in ERB Case No. 89-57.

In the aforesaid case, petitioner ERB thereafter rendered a Decision dated June 19, 1992 approving
the application of Caltex. This ERB Decision was challenged by PDSC, again on the same grounds
it raised in CA-G.R. SP No. 27661, in a petition for review filed with the Court of Appeals, where the
same was docketed as CA-G.R. SP No. 29099.

Subsequently, the appellate court's Sixteenth Division dismissed PDSC's petition in a Decision dated
May 14, 1993.4

As grounds for the petition in the instant case, ERB asserts that –

(1) THE EVIDENCE UPON WHICH THE ERB BASED ITS DECISION IS NEITHER STALE
NOR IRRELEVANT AND THE SAME JUSTIFIES THE ESTABLISHMENT OF THE
PROPOSED PETROLEUM OUTLET.

(2) THE EVIDENCE PRESENTED BY APPLICANT SHELL REGARDING VEHICLE

VOLUME AND FUEL DEMAND SUPPORTS THE CONSTRUCTION OF THE PROPOSED
OUTLET.

(3) THE ESTABLISHMENT OF THE SERVICE STATION WILL NOT LEAD TO RUINOUS
COMPETITION.

For its part, Shell avers that –

 I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN MAKING FINDINGS OF

FACTS CONTRARY TO THOSE OF THE ENERGY REGULATORY BOARD WHOSE
FINDINGS WERE BASED ON SUBSTANTIAL EVIDENCE.

II.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE

FEASIBILITY STUDY SUPPORTING PETITIONER'S APPLICATION TO CONSTRUCT A
SERVICE STATION BEFORE THE ENERGY REGULATORY BOARD HAS BECOME
"IRRELEVANT" FOR HAVING BEEN PRESENTED IN EVIDENCE ABOUT TWO (2) YEARS
AFTER IT WAS PREPARED.

III.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN PASSING JUDGMENT

AND MAKING PRONOUNCEMENTS ON PURELY ECONOMIC AND POLICY ISSUES ON
PETROLEUM BUSINESS WHICH ARE WITHIN THE REALM OF THE ENERGY
REGULATORY BOARD WHICH HAS A RECOGNIZED EXPERTISE IN OIL ECONOMICS.

IV.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT THE

PROPOSED SERVICE STATION OF PETITIONER WOULD POSE RUINOUS
COMPETITION TO PRIVATE RESPONDENT'S SERVICE STATION BASED MAINLY ON
EVIDENCE SUBMITTED FOR THE FIRST TIME WITH THE SAID COURT AND WITHOUT
CONDUCTING A HEARING THEREON.

V.

ASSUMING THE HONORABLE COURT OF APPEALS HAS THE POWER TO CONSIDER

NEW EVIDENCE PRESENTED FOR THE FIRST TIME BEFORE SAID COURT, IT
SHOULD HAVE REFERRED SUCH MATTER TO THE ENERGY REGULATORY BOARD
UNDER THE DOCTRINE OF PRIOR RESORT OR PRIMARY JURISDICTION.

The issues raised by the parties in these consolidated cases bring to the fore the necessity of
rationalizing or reconciling two apparently conflicting decisions of the appellate court on the propriety
of building gasoline service stations along Benigno Aquino, Jr. Avenue in Parañaque, Metro Manila.
Considering that the questions raised concern within the oil industry, whose impact on the nation's
economy is pervasive and far-reaching, the Court is constrained to look into the policy and purposes
of its governing statutes to resolve this dilemma.

The policy of the government in this regard has been to allow a free interplay of market forces with
minimal government supervision. The purpose of governing legislation is to liberalize the
downstream oil industry in order to ensure a truly competitive market under a regime of fair prices,
adequate and continuous supply, environmentally clean and high-quality petroleum
products.5 Indeed, exclusivity of any franchise has not been favored by the Court,6which is keen on
promoting free competition and the development of a free market consistent with the legislative
policy of deregulation as an answer to the problems of the oil industry. 7
The Court finds the petitions impressed with merit.

The interpretation of an administrative government agency like the ERB, which is tasked to
implement a statute, is accorded great respect and ordinarily controls the construction of the
courts.8 A long line of cases establish the basic rule that the courts will not interfere in matters which
are addressed to the sound discretion of government agencies entrusted with the regulation of
activities coming under the special technical knowledge and training of such agencies.9 More
explicitly –

Generally, the interpretation of an administrative government agency, which is tasked to

implement a statute, is accorded great respect and ordinarily controls the construction of the
courts.10 The reason behind this rule was explained in Nestle Philippines, Inc. vs. Court of
Appeals,11 in this wise:

'The rationale for this rule relates not only to the emergence of the multifarious needs
of a modern or modernizing society and the establishment of diverse administrative
agencies for addressing and satisfying those needs; it also relates to the
accumulation of experience and growth of specialized capabilities by the
administrative agency charged with implementing a particular statute. In Asturias
Sugar Central, Inc. v. Commissioner of Customs, 12 the Court stressed that executive
officials are presumed to have familiarized themselves with all the considerations
pertinent to the meaning and purpose of the law, and to have formed an
independent, conscientious and competent expert opinion thereon. The courts give
much weight to the government agency or officials charged with the implementation
of the law, their competence, expertness, experience and informed judgment, and
the fact that they frequently are drafters of the law they interpret."

As a general rule, contemporaneous construction is resorted to for certainty and predictability

in the laws,13especially those involving specific terms having technical meanings.

However, courts will not hesitate to set aside such executive interpretation when it is clearly
erroneous, or when there is no ambiguity in the rule,14 or when the language or words used
are clear and plain or readily understandable to any ordinary reader.15

Stated differently, when an administrative agency renders an opinion or issues a statement of policy,
it merely interprets a pre-existing law and the administrative interpretation is at best advisory for it is
the courts that finally determine what the law means.16 Thus, an action by an administrative agency
may be set aside by the judicial department if there is an error of law, abuse of power, lack of
jurisdiction or grave abuse of discretion clearly conflicting with the letter and spirit of the law.17

However, there is no cogent reason to depart from the general rule because the findings of the ERB
conform to, rather than conflict with, the governing statutes and controlling case law on the matter.

Prior to Republic Act No. 8479, the downstream oil industry was regulated by the ERB and from
1993 onwards, the Energy Industry Regulation Board. These regulatory bodies were empowered,
among others, to entertain and act on applications for the establishment of gasoline stations in the
Philippines. The ERB, which used to be the Board of Energy (BOE), is tasked with the following
powers and functions by Executive Order No. 172, which took effect immediately after its issuance
on May 8, 1987:

SEC. 3. Jurisdiction, Powers and Functions of the Board. – When warranted and only
when public necessity requires, the Board may regulate the business of importing, exporting,
 re-exporting, shipping, transporting, processing, refining, marketing and distributing energy
resources. xxx

The Board shall, upon prior notice and hearing, exercise the following, among other powers
and functions:

(a) Fix and regulate the prices of petroleum products;

(b) Fix and regulate the rate schedule or prices of piped gas to be charged by duly
franchised gas companies which distribute gas by means of underground pipe
systems;

(c) Fix and regulate the rates of pipeline concessionaires under the provisions of
Republic Act No. 387, as amended, otherwise know as the 'Petroleum Act of 1949,'
as amended by Presidential Decree No. 1700;

(d) Regulate the capacities of new refineries or additional capacities of existing

refineries and license refineries that may be organized after the issuance of this
Executive Order, under such terms and conditions as are consistent with the national
interest;

(e) Whenever the Board has determined that there is a shortage of any petroleum
product, or when public interest so requires, it may take such steps as it may
consider necessary, including the temporary adjustment of the levels of prices of
petroleum products and the payment to the Oil Price Stabilization Fund created
under Presidential Decree No. 1956 by persons or entities engaged in the petroleum
industry of such amounts as may be determined by the Board, which will enable the
importer to recover its costs of importation.18

A distinct worldwide trend towards economic deregulation has been evident in the past decade. Both
developed and developing countries have seriously considered and extensively adopted various
measures for this purpose. The country has been no exception. Indeed, the buzzwords of the third
millenium are "deregulation", "globalization" and "liberalization."19 It need not be overemphasized that
this trend is reflected in our policy considerations, statutes and jurisprudence. Thus, in Garcia v.
Corona,20 the Court said:

R.A. 8479, the present deregulation law, was enacted to implement Article XII, Section 19 of
the Constitution which provides:

The State shall regulate or prohibit monopolies when the public interest so requires.
No combinations in restraint of trade or unfair competition shall be allowed.

This is so because the Government believes that deregulation will eventually prevent
monopoly. The simplest form of monopoly exists when there is only one seller or producer of
a product or service for which there are no substitutes. In its more complex form, monopoly
is defined as the joint acquisition or maintenance by members of a conspiracy, formed for
that purpose, of the power to control and dominate trade and commerce in a commodity to
such an extent that they are able, as a group, to exclude actual or potential competitors from
the field, accompanied with the intention and purpose to exercise such power.21

xxx xxx xxx xxx

 It bears reiterating at the outset that deregulation of the oil industry is policy determination of
the highest order. It is unquestionably a priority program of Government. The Department of
Energy Act of 199222expressly mandates that the development and updating of the existing
Philippine energy program "shall include a policy direction towards deregulation of the power
and energy industry."

xxx xxx xxx xxx

Our ruling in Tatad23 is categorical that the Constitution's Article XII, Section 19, is anti-trust in
history and spirit. It espouses competition. We have stated that only competition which
is fair can release the creative forces of the market. We ruled that the principle which
underlies the constitutional provision is competition. Thus:

Section 19, Article XII of our Constitution is anti-trust in history and spirit. It espouses
competition. The desirability of competition is the reason for the prohibition against
restraint of trade, the reason for the interdiction of unfair competition, and the reason
for regulation of unmitigated monopolies. Competition is thus the underlying principle
of Section 19, Article XII of our Constitution which cannot be violated by R.A. No.
8180. We subscribe to the observation of Prof. Gellhorn that the objective of anti-
trust law is "to assure a competitive economy based upon the belief that through
competition producers will strive to satisfy consumer wants at the lowest price with
the sacrifice of the fewest resources. Competition among producers allows
consumers to bid for goods and services and, thus matches their desires with
society's opportunity costs." He adds with appropriateness that there is a reliance
upon "the operation of the 'market' system (free enterprise) to decide what shall be
produced, how resources shall be allocated in the production process, and to whom
various products will be distributed. The market system relies on the consumer to
decide what and how much shall be produced, and on competition, among producers
who will manufacture it."24

Tested against the foregoing legal yardsticks, it becomes readily apparent that the reasons relied
upon by the appellate court in rejecting petitioner's application to set up a gasoline service station
becomes tenuous. This is especially clear in the face of such recent developments in the oil industry,
in relation to controlling case law on the matter recently promulgated to address the legal issues
spawned by these events. In other words, recent developments in the oil industry as well as
legislative enactments and jurisprudential pronouncements have overtaken and rendered stale the
view espoused by the appellate court in denying Shell's application to put up the gasoline station.

In reversing the ERB, the Court of Appeals first avers in sum that there is no substantial evidence to
support ERB's finding of public necessity to warrant approval of Shell's application.

The Court disagrees. 1âwphi1.nêt

On the contrary, the record discloses that the ERB Decision approving Shell's application in ERB
Case No. 89-57 was based on hard economic data on developmental projects, residential
subdivision listings, population count, public conveyances, commercial establishments, traffic count,
fuel demand, growth of private cars, public utility vehicles and commercial vehicles, etc.,25 rather than
empirical evidence to support its conclusions. In approving Shell's application, the ERB made the
following factual findings and, on the basis thereof, justified its ruling thus:

In evaluating the merits of the application, the first question that comes to mind is whether
there is indeed an increase in market potential from the time this very same application was
 disapproved by the then Bureau of Energy Utilization up to the present time that would
warrant a reversal of the former decision. The history of this case serves to justify applicant
Shell's position on the matter. After a little over a year from vigorously opposing the original
application, Caltex and Petron filed their respective applications to construct their own
service station within the same vicinity.

The figures in the applicant's feasibility study projects a scenario of growth well up to the
year 1994. Where the applicant listed only thirty-five commercial establishments, oppositor is
servicing sixty-five. The development of subdivisions along the area provides for a buffer of
market potential that could readily be tapped by the applicant service.

Although the applicant's witness could have done better in accentuating this fact, the
oppositor did not do well either in downplaying the potentials of the area. The main gist of
PDSC's contention is premised on the rising overhead cost of (increase in salaries and rent)
in relation to the establishment of new competition. The proposed station expects to target a
total volume of 460,151 liters per month with a projected increase of 2.6% per annum and
presumably expects to make a corresponding profit thereof. Oppositor PDSC, on the other
hand, with its lone Caltex Service Station, expects to suffer income loss even with a
projected volume of 600,000 to 800,000 liters per month (Exhibit 5).

Considering this premise, it should be noted that the Board is tasked to protect existing
petroleum stations from ruinous competition and not to protect existing establishments from
its own ghost. The Board does not exist for the benefit of any individual station but for the
interest of the public and the industry as a whole.

In its first application, the applicant's projection was to realize only 255,000 liters per month
or some 20 percent of the total potential demand. With its amended application, the 460,151
liters it hopes to realize is almost twice the former volume representing a smaller percentage
of the present overall potential demand.

With further growth and development of the businesses in the area, the fuel potential will
tremendously increase and the presence of strategically located service stations will greatly
benefit the local community as well as the transient motoring public.

The Board believes that the construction and operation of the Shell Station will not lead to
ruinous competition since [the] additional retail outlet is necessary.

Time and again this Court has ruled that in reviewing administrative decisions, the findings of fact
made therein must be respected as long as they are supported by substantial evidence, even if not
overwhelming or preponderant; that it is not for the reviewing court to weigh the conflicting evidence,
determine the credibility of the witnesses or otherwise substitute its own judgment for that of the
administrative agency on the sufficiency of evidence; that the administrative decision in matters
within the executive jurisdiction can only be set aside on proof of grave abuse of discretion, fraud or
error of law.26 Petitioner ERB is in a better position to resolve petitioner Shell's application, being
primarily the agency possessing the necessary expertise on the matter. The power to determine
whether the building of a gasoline retail outlet in a trading area would benefit public interest and the
oil industry lies with the ERB not the appellate courts.

In the hierarchy of evidentiary values, proof beyond reasonable doubt is at the highest level, followed
by clear and convincing evidence, preponderance of evidence and substantial evidence, in that
order.27 A litany of cases has consistently held that substantial evidence is all that is needed to
support an administrative finding of fact.28 It means such relevant evidence as a reasonable mind
might accept to support a conclusion.29

Suffice it to state in this regard that the factual landscape, measured within the context of such an
evidentiary matrix, is strewn with well-nigh overwhelming proof of the necessity to build such a
gasoline retail outlet in the vicinity subject of the application.

In denying Shell's application, the Court of Appeals next pointed to the alleged 'staleness' of Shell's
feasibility study because it was submitted in evidence about two (2) years after it was prepared in
early 1988.30

Again, this Court is not persuaded.

The record shows that the feasibility study31 is accompanied by the following data, namely: 1.] Annual
Projection of Estimated Fuel Demand, Base Area; 2.] Projected Volume of the Proposed Shell
Station; 3.] Projected Fuel Volume Derived From Base Area; 4.] Estimated Fuel Demand Base
Projection – 1993; 5.] Estimated Fuel Demand Base Projection – 1994; 6.] Annual Projection of
Population; 7.] Annual Projection Growth of Private Cars in the Area; 8.] Annual Projection Growth of
Public Utilities in the Area; and 9] Annual Projected Growth of Commercial Vehicles in the Area32 –
projects a market scenario from 1989 to 1994.

While the Court of Appeals was initially unconvinced that Shell's feasibility study was up-to-date and
proceeded to render the assailed judgment, its attention was subsequently called, in Shell's motion
for reconsideration, to the ERB's Decision dated June 19, 199233 approving a similar application by
Caltex to build a gasoline retail outlet in the same vicinity. Said decision was appealed by PDSC to
the Court of Appeals (CA-G.R. SP No. 29099), and was affirmed by the latter in a Decision dated
May 14, 1993.34 The Decision in Caltex's application, where PDSC was the lone oppositor, was
challenged before the appellate court on the very same grounds it proffered in opposing Shell's
application.35 In rejecting PDSC's contentions in CA-G.R. SP No. 29099, the Court of Appeals'
Sixteenth Division ruled:

As to the first ground –

xxx xxx xxx xxx

The petitioner had assumed that the entire Sucat Road (starting from as far away as its
intersection with the South Expressway going towards Alabang and further South), Quirino
Avenue, Domestic Road (which passes in front of the Domestic Terminal), MIA Road, and
Ninoy Aquino Avenue, constitute what it refers to as the "trading area." Thus, the herein
petitioner invites attention to the fact that in Sucat Road there are five existing gasoline
stations; two along Quirino Avenue (from Sucat Road); four along Domestic Road; and two
along MIA Road, one of which is the Caltex-Nayong Pilipino station at the corner of MIA
Road and Benigno Aquino Avenue. Except for the gas station at one end of Benigno Aquino
Avenue (located in front of the Nayong Filipino), the petitioner admits that there has been
as yet no gasoline station existing along the entire stretch of the said Benigno Aquino
Avenue, although the ERB had recently approved Shell's application to put up one
therein.

This court is of the view that the aforementioned assumption adopted by petitioner is
fallacious or incorrect considering the conclusion of ERB's Manuel Alvarez in his "Ocular
Inspection Report and In-Depth Analysis of Feasibility Study" that no outlet presently
exists along the whole stretch of the Ninoy Aquino Avenue (Rollo, p. 126) and that the
 outlets along Sucat Road are "far from the proposed site, a distant several kilometers
away along Dr. A. Santos Avenue in Sucat which can already be considered
a different trading area" (ibid., - underscoring supplied)

Assuming in gratia argumenti that the entirety of the above-specified road/avenues may be
considered as a single trading area, the petitioner had failed to show why Caltex's 9.7%
share of the total market potential, as found in Alvarez's Market Study, is not
attainable or that it would result in ruinous competition. As pointed by the respondents
(citing MD Transit & Taxi Co., Inc. v. Pepito, 6 SCRA 140 and Raymundo Trans. Co. v.
Cervo, 91 Phil. 313), even if a new station would bring about a decline in the sales of
the existing outlets, it need not necessarily result in ruinous competition, absent
adequate proof to that effect.

As to the second and third grounds –

Concerning the averment that the evidence of Caltex is stale, this Court notes that the said
evidence refers principally to a revalidation study conducted by ERB's Alvarez who
undertook an ocular inspection of the proposed site on November 23 to 27, 1987. The
hearings of the instant case continued up to early 1992 (ERB Decision, p. 4). The Decision
was rendered on June 19, 1992 (Rollo, p. 36). It may be conceded that substantial time had
elapsed since the time of the aforementioned revalidation study. However, it is this court's
view that unless the petitioner is able to prove by competent evidence that significant
changes have occurred sufficient to invalidate the afore-stated study, the presumption
is that the said study remains valid, as found by the ERB in its decision. Bare and self-
serving manifestations cannot be accepted by Us as proof; especially if We take into
account that hearings (as in the case at bar) would take time and it would be quite
absurd if what was once applicable and acceptable evidence would be ipso
facto rendered stale through mere lapse of time absent any controverting evidence.
Sound procedural policy requires that the burden of proof relative to the present
invalidity of the Alvarez report rests not with Caltex but on the herein petitioner.

The petitioner had attempted to make comparisons between the figures specified in the 1987
study and those of the Bureau of Energy Utilization or BEU (which were given earlier in
1986). Thus, the petitioner points out that while the BEU's decision indicated that 9,034 cars
on the average passed by going in both directions along Ninoy Aquino Avenue, the Alvarez
revalidation study gave an average car traffic of only 8,395 resulting in a decline of 639 cars.
The petitioner, however, conveniently ignored or failed to note that the 9,034 figure was that
given by applicant Shell and not be the government agency itself. The BEU refers to the said
figure as the applicant's estimated potential demand. It is natural to expect that an applicant
would try to give up as high an estimated potential demand as possible to support its
application.

The contention of the petitioner that the Alvarez study/report is hearsay on the ground inter
alia that Alvarez was not presented as a witness deserves scant consideration by this Court.
In the first place, the ERB is not bound by technical rules of procedure as contained in the
Rules of Court, the latter being made applicable to ERB only "in a suppletory character"
(Rule 16 of the Rules of Practice and Procedure Governing Hearings Before the ERB). More
importantly, Section 2, paragraph 2 and Section 7, paragraph 2 of the above-mentioned ERB
Rules provides as follows:
 The Board may, in the disposition of cases, before it, take judicial notice of any data
or information existing in its judicial records, that may be relevant, pertinent or
material to the issues involved, x x x x

The Board may also, on its own initiative or upon a motion of a party, conduct such
investigation or studies on any matter pertinent, related or material to the issues
involved in a case the results of which may be sued by the Board as bases for the
proper evaluation of the said issues. (Rollo, pp. 205-207 – underscoring supplied)

The petitioner asserts that the island divider along Benigno Aquino Avenue in front of the
proposed site was not taken into consideration in the 1987 survey. It could not be denied that
the construction of such divider could have an effect on the matter of potential demand.
Neither can it be denied however that the gas station that would be affected would be Caltex
itself. It is not alleged that there exists a divider along the whole of Sucat Road for example.
Hence, the existing outlets have no reason to complain about the divider.

The contention that when construction is completed (connecting Sucat Road to the coastal
road), a good number of vehicles would pass through the coastal road instead of along
Benigno Aquino [Avenue] appears to Us as speculative. There is no need for the petitioner,
which it failed to do, to show qualitatively and convincingly that the effect would be such as to
make the sales level go down to such an extent that the viability of the existing outlets would
be seriously endangered or threatened.

The foregoing pronouncement of the Court of Appeals' Sixteenth Division is more in keeping with the
policy of the State and the rationale of the statutes enacted to govern the industry.

In denying Shell's application, the Court of Appeals finally states that the proposed service station
would cause ruinous competition to respondent PDSC's outlet in the subject vicinity.

We remain unconvinced.

It must be pointed out that in determining the allowance or disallowance of an application for the
construction of a service station, the appellate court confined the factors thereof within the rigid
standards governing public utilility regulation, where exclusivity, upon the satisfaction of certain
requirements, is allowed. However, exclusivity is more the exception rather than the rule in the
gasoline service station business. Thus, Rule V, Section 1, of the Rules and Regulations Governing
the Establishment, Construction, Operation, Remodelling and/or Refurbishing of Petroleum Products
Retail Outlets issued by the Oil Industry Commission,36 and adopted by the ERB, enumerates the
following factors determining the allowance or disallowance of an application for outlet construction,
to wit:

(a). The operation of the proposed petroleum products retail outlet will promote public
interest in a proper and suitable manner considering the need and convenience of the end-
users.

(b) Reasonable expectation of a commercially viable operation.

(c) The establishment and operation thereof will not result in a monopoly, combination in
restraint of trade and ruinous competition.

(d) The requirements of public safety and sanitation are properly observed.
 (e) Generally, the establishment and operation thereof will help promote and achieve the
purposes of Republic Act No. 6173. 37

While it is probable that the operation of the proposed Shell outlet may, to a certain extent, affect
PDSC's business, private respondent nevertheless failed to show that its business would not have
sufficient profit to have a fair return of its investment. The mere possibility of reduction in the
earnings of a business is not sufficient to prove ruinous competition.38 Indeed –

In order that the opposition based on ruinous competition may prosper, it must be shown that
the opponent would be deprived of fair profits on the capital invested in its business. The
mere possibility of reduction in the earnings of a business is not sufficient to prove
ruinous competition. It must be shown that the business would not have sufficient
gains to pay a fair rate of interest on its capital investment. 39Mere allegations by the
oppositor that its business would be ruined by the establishment of the ice plants proposed
by the applicants are not sufficient to warrant this Court to revoke the order of the Public
Service Commission. 40

It would not be remiss to point out that Caltex, PDSC's principal, whose products are being retailed
by private respondent in the service outlet it operates along the MIA/Domestic Road in Pasay
City, never filed any opposition to Shell's application. All told, a climate of fear and pessimism
generated by unsubstantiated claims of ruinous competition already rejected in the past should not
be made to retard free competition, consistently with legislative policy of deregulating and liberalizing
the oil industry to ensure a truly competitive market under a regime of fair prices, adequate and
continuous supply, environmentally clean and high-quality petroleum products.

WHEREFORE, in view of all the foregoing, the challenged Decision of the Court of Appeals dated
November 8, 1993, as well as the subsequent Resolution dated April 6, 1994, in CA-G.R. SP No.
27661, is REVERSED and SET ASIDE, and another one rendered REINSTATING the Order dated
September 17, 1991 of the Energy Regulatory Board in ERB Case No. 89-57, granting the amended
application of Pilipinas Shell Petroleum Corporation to relocate its service station to Benigno Aquino
Jr., Avenue, Paranaque, Metro Manila.

SO ORDERED.
G.R. Nos. 112708-09 March 29, 1996

REPUBLIC OF THE PHILIPPINES, represented by PRESIDENTIAL COMMISSION ON GOOD

GOVERNMENT, petitioner,
vs.
SANDIGANBAYAN, SIPALAY TRADING CORPORATION and ALLIED BANKING
CORPORATION, respondents.

FRANCISCO, J.:p

Save for slight modification of a specific disquisition made by the SANDIGANBAYAN in its now-assailed judgment dated August 23, 1993,
we affirm the same, as well as its Resolution promulgated on October 7, 1993 denying the Motion For Reconsideration.

The factual background of this case is as follows:

Petitioner PCGG issued separate orders against private respondents Sipalay Trading Corporation
and Allied Banking Corporation (hereinafter referred to as SIPALAY and ALLIED) to effect their
sequestration. Two (2) separate petitions were filed by SIPALAY and ALLIED before this Court
assailing the sequestration orders. After the consolidation of these petitions and the filing of the
comments, other pleadings and certain motions by the parties, this Court referred the cases to public
respondent SANDIGANBAYAN for proper disposition,1 where SIPALAY's petition was docketed as
S.B. 0095, and that of ALLIED as S.B. 0100.

Concerning SIPALAY (S.B. 0095), its 360, 875, 513 shares of stock in Maranaw Hotels and Resort
Corporation which owns the Century Park Sheraton Hotel are, according to the PCGG, part of Lucio
C. Tan's ill-gotten wealth. The PCGG on July 24, 1988 thus sequestered these SIPALAY shares
under a "Sequestration Order and Supervisory Committee" which reads:

24 July 1986

Maranaw Hotels and Resort Corporation

C/O Mr. Lucio C. Tan
Allied Banking Corporation
Allied Bank Center
Ayala Ave., Makati
Metro Manila

Subject: Sequestration Order and Supervisory Committee

Gentlemen:

By virtue of the powers vested in the Presidential Commission on Good Government

by authority of the President of the Republic of the Philippines, we hereby sequester
the shares of stocks in Maranaw Hotels and Resort Corporation held by and/or in the
name of Sipalay Trading Corporation.

We direct you not to cause any transfer, conveyance, encumbrance, concealment, or

liquidation of the aforementioned shares of stocks without any written authority from
the Commission.
 xxx xxx xxx

This sequestration order and formation of the Supervisory Committee shall take
effect upon your receipt of this Order.

For your immediate and strict compliance.

Very truly yours,

FOR THE COMMISSION:

(Sgd.) (Sgd.)

RAMON A. DIAZ QUINTIN S. DOROMAL

Commissioner Commissioner2

SIPALAY was forced to litigate after the PCGG sought to implement the sequestration
without acting on its motions ". . . To Lift Sequestration Order" and ". . . For Hearing For
Specification Of Charges And For Copies Of Evidence". SIPALAY maintained that the
sequestration was without evidentiary substantiation, violative of due process, and deemed
automatically lifted when no judicial proceeding was brought against it within the period
mandated under Article XVIII, Section 26 of the Constitution.

Anent ALLIED (S.B. 0100), its Valenzuela branch on August 13, 1986 was served a "Search and
Seizure Order" by agents of the PCGG, the text of which reads:

The Manager
Allied Banking Corporation
Valenzuela Branch
Valenzuela, Metro Manila

SEARCH AND SEIZURE ORDER

Gentlemen:

By virtue of the powers vested in this Commission by the President of the Republic of
the Philippines, you are hereby directed to submit for search and seizure all bank
documents in the abovementioned premises which our representative may find
necessary and relevant to the investigation being conducted by this Commission.

Atty. Benjamin Alonte is deputized to head the team that will implement this Order.

August 13, 1986, Pasig, Metro Manila.

FOR
THE
COMM
ISSION
:
 (Sgd.)

RAMO
N A.
DIAZ

Commi
ssioner

(Sgd.)

MARY
CONC
EPCIO
N
BAUTI
STA

Commi
ssioner
3

ALLIED went to court for the same reason that the PCGG was bent on implementing the
order. ALLIED contended that this order is not one for sequestration but is particularly a
general search warrant which fails to meet the constitutional requisites for its valid issuance.

The petitions were jointly heard by the SANDIGANBAYAN. Briefly, the more salient events which
transpired therein are as follows:

At the presentation of their evidence, PCGG Secretary Ramon Hontiveros appeared as the lone
witness for SIPALAY and ALLIED. He produced and identified excerpts of the minutes of the PCGG
meetings held on March 13 and 12, 19864 in response to a subpoena duces tecum.

For the PCGG's part, its witnesses were Commissioner Dr. Quintin Doromal, former PCGG
Commissioner Mary Concepcion Bautista, now deceased, and Atty. Benjamin Alonte, Director IV,
Legal Department of the PCGG who headed the team that served the search and seizure order on
ALLIED. Commissioner Doromal identified voluminous documents. Former Commissioner Bautista
died midway her cross-examination. The PCGG almost failed to present Atty. Alonte, had the
SANDIGANBAYAN not reconsidered5 its Order of March 8, 19936 declaring the cases submitted for
decision after the PCGG was deemed to have waived presentation of its evidence for its repeated
postponements of the hearing. After Atty. Alonte's testimony and upon the PCGG's manifestation
that it was no longer presenting any witness, the SANDIGANBAYAN7 gave the PCGG twenty (20)
days (from July 1, 1993) within which to submit its formal evidence in writing. SIPALAY and ALLIED
were given the same period (20 days) from receipt of such written formal offer of evidence within
which to file their formal comments and/or objections thereto, and after which, the incident will be
deemed submitted for resolution.

What the PCGG filed on July 7, 1993 was not a written formal offer of its evidence as directed by the
SANDIGANBAYAN, but a "Motion To Dismiss" the SIPALAY and ALLIED petitions. Admittedly, this
motion to dismiss came nearly seven (7) years after SIPALAY and ALLIED originally filed their
petitions before this Court on September 16, 1986 and August 26, 1986, respectively. The ground
was SIPALAY's and ALLIED's alleged failure to exhaust administrative remedies. The PCGG argued
that SIPALAY and ALLIED should have first appealed the sequestration orders to the Office of the
President before challenging them in court, invoking Sections 5 and 6 of the PCGG Rules and
Regulations. An "Opposition" and a "Reply" were filed in relation to the motion.

At some earlier time (May 21, 1992), the PCGG filed a "Motion For The Consolidation Or Joint Trial"
of SIPALAY's and ALLIED's petitions (S.B. 0095 and S.B. 0100) with Civil Case 0005 — a complaint
for "Reversion, Reconveyance, Restitution, Accounting and Damages" dated July 17, 1987 likewise
filed before the SANDIGANBAYAN by the PCGG against Lucio Tan, Ferdinand and Imelda Marcos,
and other defendants.8 The SANDIGANBAYAN formally denied this motion in an extended
Resolution dated July 6, 1993. The PCGG filed a "Motion for Reconsideration" thereof. This motion
was deemed submitted for resolution when no opposition and reply were filed. SIPALAY and ALLlED
then filed a "Motion To Consider Cases Submitted For Decision", to which an opposition and reply
were filed.

The PCGG lost in these cases below. The SANDIGANBAYAN in its now-assailed August 23, 1993
Decision9 voided the orders issued against SIPALAY and ALLIED. The decretal portion reads:

In S.B. No. 0095

WHEREFORE, in the light of the foregoing, the Court has no judicious recourse but
to declare, as it hereby declares, the writ of sequestration issued against petitioner
Sipalay Trading Corporation's shares of stock in Maranaw Hotel and Resorts
Corporation as deemed automatically lifted for respondent PCGG's failure to implead
the petitioner within the period mandated under Section 26, Article XVIII of the 1987
Constitution. The same writ is likewise declared null and void for having issued
without sufficient evidentiary foundation — respondent PCGG having failed to
adduce and proffer that quantum of evidence necessary for its validity — without
prejudice to the issue of ill-gotten wealth being attributed to petitioner Sipalay Trading
Corporation and/or defendants Lucio C. Tan, et al. being threshed out and litigated in
Civil Case No. 0005.

In S.B. No. 0100

WHEREFORE, premises duly considered, the Court hereby declares the subject
search and seizure order issued by respondent PCGG directed against petitioner
Allied Banking Corporation's Valenzuela branch on August 13, 1986 as null and
void ab initio for having been issued without due process and in contravetion of the
organic law then in force, the Freedom Constitution, under which mantle, the Bill of
Rights found in the 1973 Constitution was amply protected and enforced.
Consequently, all documents, records and other tangible objections (sic) seized
pursuant thereto are hereby ordered returned to petitioner Allied Banking Corporation
through its duly authorized representative, after proper inventory and accounting
shall have been made within thirty (30) days from receipt hereof.

SO ORDERED.

The resolution of PCGG's motions to dismiss and for reconsideration of the denial of its
motion for consolidation or joint trial, as well as SIPALAY's and ALLIED's motion to consider
the cases submitted for decision, was incorporated in the decision. And after its motion for
reconsideration of the decision was denied in a Resolution promulgated on October 7,
1993,10 the PCGG brought the instant petition. A comment, reply, and rejoinder were
subsequently filed.
The key issues, in query form, are:

(1) Was the SANDIGANBAYAN's denial of the PCGG's motion to dismiss proper?

(2) Should the SANDIGANBAYAN have disposed first such motion to dismiss rather than resolving it
as part of the judgment?

(3) Was the nullification of the sequestration order issued against SIPALAY and of the search and
seizure order issued against ALLIED correct?

(4) Were the sequestration and search and seizure orders deemed automatically lifted for failure to
bring an action in court against SIPALAY and ALLIED within the constitutionally prescribed period?

Hardly can it be disputed that a direct action in court without prior exhaustion of administrative
remedies, when required, is premature, warranting its dismissal on a motion to dismiss grounded on
lack of cause of action. The supporting cases cited by the PCGG in its petition indeed spell this out,
to wit: "Pestanas v. Dyogi",11 "Aboitiz v. Coll. of Customs",12 and "Aquino-Sarmiento v. Morato",13 And
in the case of "Ocampo v. Buenaventura"14 likewise cited by PCGG, the Court in essence approves
of the filing of a motion to dismiss based upon failure to state a cause of action at any stage of the
proceedings.

As a general rule, a motion to dismiss is interposed before the defendant pleads

(Section 1, Rule 16, Rules of Court). However, there is no rule or law prohibiting the
defendant from filing a motion to dismiss after an answer had been filed. On the
contrary, Section 2 of Rule 9, expressly authorizes the filing of such motion at any
stage of the proceedings when it is based upon failure to state a cause of action . . .

These principles, at first impression, appear to favor the PCGG. Sections 5 and 6 of the
PCGG Rules and Regulations indeed provide an administrative mechanism for persons or
entities contesting the sequestration orders issued against them.

Sec. 5. — Who may contest — The person against whom a writ of sequestration or
freeze or hold order is directed may request the lifting thereof in writing, either
personally or through counsel within five (5) days from the receipt of the writ of order
...

Sec. 6. — Procedure for Review of writ or order — After due hearing or motu
propio for good cause shown, the Commission may lift the writ or order
unconditionally or subject to such condition as it may deem necessary, taking into
consideration the evidence and circumstances of the case. The resolution of the
Commission may be appealed by the party concerned to the Office of the President
of the Philippines within fifteen (15) days from receipt thereof.

Neither an initial request before the PCGG for the lifting of the sequestration orders nor an
appeal to the Office of the President was made by SIPALAY and ALLIED before they filed
their respective petitions in court. The PCGG's motion to dismiss was anchored on lack of
cause of action, albeit filed beyond the period to answer.

However, the peculiarities of this case preclude the rightful application of the principles aforestated.
The SIPALAY and ALLIED petitions were both filed on the third quarter of 1986 (September 16 and
August 26, respectively), while the PCGG decided to file its motion to dismiss only in the middle of
1993 (July 7). Nearly seven (7) years came to pass in between that so much has already transpired
in the proceedings during the interregnum. SIPALAY and ALLIED had rested their cases, and the
PCGG had finished presenting all its witnesses, not to mention other various motions and incidents
already disposed of by the SANDIGANBAYAN, with special attention to the numerous
postponements granted the PCGG for presentation of its evidence which prevented an earlier
termination of the proceedings. The motion to dismiss came only at the penultimate stage of the
proceedings where the remaining task left for the PCGG was to file its written formal offer of
evidence as required by the SANDIGANBAYAN. This Court, in "Soto v. Jareno"15 has made it quite
clear that:

Failure to observe the doctrine of exhaustion of administrative remedies does not

affect the jurisdiction of the Court. We have repeatedly stressed this in a long line of
decisions. The only effect of non-compliance with this rule is that it will deprive the
complainant of a cause of action, which is a ground for a motion to dismiss. If not
invoked at the proper time, this ground is deemed waived and the court can take
cognizance of the case and try it. (Emphasis supplied).

The length of time the PCGG allowed to drift away and its decision to file its motion to
dismiss only at the homestretch of the trial hardly qualify as "proper time". This factual
scenario largely differs from the "Ocampo" case relied upon by the PCGG. In that case and
the case of "Community Investment & Finance Corp. v. Garcia"16 cited therein, the motions to
dismiss involved were filed just after the filing of the answer, and not at some belated time
nearing the end of the trial. The parties in those cases have not presented any testimonial or
documentary evidence yet, as the trial proper has not commenced, and neither does it
appear that the movants concerned took close to seven (7) years before filing their
respective motions to dismiss. The PCGG therefore cannot seek refuge in the "Ocampo"
case to justify the marked delay in filing its motion to dismiss. Such tarried maneuver made
the PCGG guilty of estoppel by laches — the definition and effect of which this Court,
speaking through Mr. Justice Regalado, had the occasion to visit anew in the relatively
recent case of "Olizon v. CA."17

Laches has been defined as the failure or neglect, for an unreasonable and
unexplained length of time, to do that which by exercising due diligence could nor
should have been done earlier; it is negligence or omission to assert a right within a
reasonable time, warranting a presumption that the party entitled to assert it either
has abandoned it or declined to assert it.

With its undenied belated action, seven (7) years in the making at that, it is only proper to
presume with conclusiveness that the PCGG has abandoned or declined to assert what it
bewailed as the SIPALAY and ALLIED petitions' lack of cause of action. More accurately, the
PCGG should be deemed to have waived such perceived defect in line with the "Soto"
case,18 for "proper time" cannot mean nor sanction an unexplained and unreasonable length
of time such as seven (7) years. The leniency extended by the Rules (Rule 9, Section 2,
Rules of Court) and by jurisprudence ("Ocampo case") in allowing a motion to dismiss based
on lack of cause of action filed after the answer or at any stage of the proceedings cannot be
invoked to cover-up and validate the onset of
laches — or the failure to do something which should be done or to claim or enforce a right
at a proper time19which, in this case, was one of the PCGG's follies. Indeed, in matters of
timeliness, "indecent waste" is just as reprehensible as "indecent haste".

Another equally forceful reason warranting the denial of the PCGG's motion to dismiss is that this
case falls under two recognized exceptions to the general rule of prior exhaustion of administrative
remedies, and the SANDIGANBAYAN's brief but lucid disquisition on one exception merits this
Court's approval.

Two. The rule on non-exhaustion of administrative (sic) remedies does not apply to
petitioners' case. This rule, which is based on sound public policy and practical
considerations, is not inflexible. It is subject to many exceptions, to wit: (i) where
there is estoppel on the part of the party invoking the doctrine; (ii) where the
challenged administrative act is patently illegal amounting to lack of jurisdiction; (iii)
where there is unreasonable delay or official inaction that will irretrievably prejudice
the complainant; and (iv) where the question involved is purely legal and will
ultimately have to be decided by the courts of justice.20

xxx xxx xxx

. . . there was no absolute necessity of appealing respondent PCGG's resolution to

the Office of the President, as purportedly required by Section 6 of the PCGG Rules
and Regulations, inasmuch as respondent PCGG seemed to have exhibited
indifference towards petitioners' pleas for the lifting of the sequestration and search
and seizure orders. Official inaction or unreasonable delay, as heretofore intimated,
is one of the exceptions to the rule on non-exhaustion of administrative remedies.
Hence, under the circumstance, petitioners may not be faulted for seeking relief
directly from the courts.21

The other exception is the first in the enumeration, i.e., "where there is estoppel on the part
of the party invoking the doctrine", consisting in the PCGG's being guilty of estoppel by
laches which has just been discussed in great length. In answer therefore to the first key
issue, this Court rules in the affirmative. The denial of the PCGG's motion to dismiss was in
order.

In respect of the second key issue, the PCGG faults the SANDIGANBAYAN for incorporating in the
judgment the resolution of its motion to dismiss, arguing that said motion should have been resolved
first and separately. That would have been unnecessary and injudicious in the light of the
"peculiarities" of this case where the motion was filed only at the tail end of the trial and when the
PCGG has virtually presented all its evidence. At that stage, there was in fact nothing left for the
parties to do but to await the forthcoming judgment of the SANDIGANBAYAN, save for the
submission of the PCGG's written formal offer of documentary evidence as directed by that court,
which the PCGG failed to do within the 20-day period given it because it filed the motion to dismiss
instead. In this connection, the PCGG's contention that the 20-day period for the submission of its
written formal offer of evidence was suspended upon the filing of the motion to dismiss has no merit.
The SANDIGANBAYAN's observation on this matter, as espoused by private respondents SIPALAY
and ALLIED, is correct.

The Court agrees with petitioners' (SIPALAY and ALLIED) stance that the only period
suspended by a motion to dismiss is the period to file an answer (Section 4, Rule 16
of the Rules of Court)22 and that where a period is to be suspended by the filing of a
pleading, the Rules of Court expressly provides for such suspension (Section 1[b],
Rule 12 of the Rules of Court, for instance, provides for the suspension of the period
to file a responsive pleading if a motion for bill of particulars is filed).23 Consequently,
respondent's (PCGG) filing of a motion to dismiss, without seeking leave of court to
stay or suspend the running of the period for filing its written formal offer of evidence
— as agreed upon and ordered in open court during the hearing on July 1, 1993 —
could not have the effect of suspending the period within which it should submit its
 formal offer of evidence in writing. Without express leave of court, respondent
(PCGG) could not improvidently assume that it has liberty to suspend the running of
the period agreed upon. Respondent (PCGG) should have been prudent enough to
seek the permission of this Court in respect of such matter to avert possible
controversy arising therefrom. More importantly, respondent (PCGG) should not
have made a unilateral presumption of procedural
norm.24

xxx xxx xxx

In view of the foregoing, the Court has no judicious recourse but to sustain
petitioners' (SIPALAY and ALLIED) stance and declare, as it hereby declares, that
respondent (PCGG) is deemed to have waived presentation of further evidence and
to have its evidence rested on the basis of the evidence on record.25

Besides, to insist on a prior and separate resolution of the PCGG's motion to dismiss and the
suspension of the 20-day period for the filing of the written formal offer of its evidence would
have needlessly prolonged further the proceedings below — something that certainly does
not, and will not, sit well with a "just, speedy and inexpensive determination of every action
and proceeding" envisioned by Section 2, Rule 1, of the Rules of Court. The same reasoning
likewise justifies dispensing with a prior determination of the PCGG's "Motion For
Reconsideration" of the SANDIGANBAYAN's Resolution denying consolidation or joint trial of
the SIPALAY and ALLIED petitions with Civil Case 0005, and private respondents' (SIPALAY
and ALLIED) "Motion To Consider Cases Submitted For Decision." Thus, the second key
issue should be resolved against the PCGG. The SANDIGANBAYAN was well-justified in
incorporating in its decision the resolution of the PCGG's motion to dismiss, as well as its
motion for reconsideration of the denial of the motion for consolidation or joint trial and
private respondents' (SIPALAY and ALLIED) motion to consider the cases submitted for
decision.

Going now to the third key issue, the sequestration order and the search and seizure order issued
against SIPALAY and ALLIED, respectively, were nullified by the SANDIGANBAYAN on the ground
of non-compliance with constitutional requirements. Let us examine the SIPALAY and ALLIED cases
separately.

The pertinent constitutional provision in focus in SIPALAY's case is Section 26 of Article XVIII. It
reads in full:

Sec. 26. The authority to issue sequestration or freeze orders under Proclamation
No. 3 dated March 25, 1986 in relation to the recovery of ill-gotten wealth shall
remain operative for not more than eighteen months after the ratification of this
Constitution. However, in the national interest, as certified by the President, the
Congress may extend said period.

A sequestration or freeze order shall be issued only upon showing of a prima

facie case. The order and the list of the sequestered or frozen properties shall
forthwith be registered with the proper court. For orders issued before the ratification
of this Constitution, the corresponding judicial action or proceeding shall be filed
within six months from its ratification. For those issued after such ratification, the
judicial action or proceeding shall be commenced within six months from the
issuance thereof.
 The sequestration or freeze order is deemed automatically lifted if no judicial action
or proceeding is commenced as herein provided.

The SANDIGANBAYAN voided the sequestration order issued against SIPALAY "for lack of
sufficient prima facie factual foundation, . . ."26 In so concluding, it only took into account the
testimonies of PCGG witnesses Doromal, Bautista and Alonte. It appears further that the
SANDIGANBAYAN particularly zeroed in on Commissioner Doromal's testimony,
considering its observations that: 1) "The testimony of former PCGG Commissioner Mary
Concepcion Bautista has no probative value and cannot be admitted in evidence in view of
said witness' untimely demise prior to the completion of her cross-examination by petitioner's
counsel" (citing the cases of "Bachrach Motor Co., Inc. v. CIR, et al." [86 SCRA 27] and
"Ortigas, Jr. v. Lufthansa German Airlines" [64 SCRA 610]),27 and 2) "Neither is
Atty. Benjamin Alonte's testimony relevant. His oral declarations, aside from being hearsay,
do not go into the substance of the cases."28

By way of preface, no serious objection can be raised insofar as the SANDIGANBAYAN's exclusive
reliance on the testimonies of the three (3) PCGG witnesses is concerned. The SANDIGANBAYAN
had no other choice, for these testimonies in fact constitute the entire evidence for the PCGG,
inasmuch as no documentary evidence which might have supported the testimonial evidence were
offered by the PCGG below. The Rules of Court29 and jurisprudence30decree that "The court shall
consider no evidence which has not been formally offered." There is no doubt that the testimonies of
the PCGG witnesses were formally offered as evidence meriting due appreciation by the
SANDIGANBAYAN, since Section 35, Rule 132 of the Rules requires that the offer of testimonial
evidence "must be made at the time the witness is called to testify." With respect to documents,
however, the same Section 35 (second paragraph) provides a different time for their offer, to wit:

Documentary and object evidence shall be offered after the presentation of a party's
testimonial evidence. Such offer shall be done orally unless allowed by the court to
be done in writing.

The twenty (20)-day period from July 1, 1993, or until July 20, for the submission of a written
formal offer of evidence given by the SANDIGANBAYAN to the PCGG after the latter's last
witness (Atty. Alonte) has testified, was intended precisely to accommodate any and all
documentary evidence — even object evidence for that matter, the PCGG would have
wanted to offer. But, as previously discussed under the second key issue, the PCGG waived
such offer when it opted to file a motion to dismiss sans/in lieu of the written formal offer of
evidence within such given period that expired without interruption. Quite accurately
therefore can it be said that due to its lapse in procedure, the PCGG brought it upon itself if
the existence or non-existence of "prima facie factual foundation" had to be determined by
the SANDIGANBAYAN only from what can be drawn from the PCGG's testimonial evidences
— and from no other. And the Court, in reviewing that court's finding that no prima
facie evidence exists to support the sequestration order, likewise has no other choice but to
be similarly confined thereto.

But whose testimony or testimonies? The question becomes significant inasmuch as the
SANDIGANBAYAN found as inadmissible some of the PCGG witnesses' testimonies.

Dr. Doromal's testimony is reviewable as no attack on its admissibility was ever launched by the
SANDIGANBAYAN. With respect to Atty. Alonte's testimony, the SANDIGANBAYAN declared it as
hearsay which finding the PCGG does not contest. The PCGG in fact now appears to do away with
his testimony considering that the PCGG neither quoted in, nor annexed to its petition, such
testimony or any portion thereof. Atty. Alonte's testimony therefore can be dispensed with. However,
the Court disagrees with the SANDIGANBAYAN's ruling that Commissioner Bautista's supervening
death in the course of her cross-examination rendered her entire testimony without probative value
and inadmissible. The SANDIGANBAYAN apparently clung to the principle enunciated in the
"Bachrach" and "Ortigas" cases,31 to wit:

Oral testimony may be taken into account only when it is complete, that is, if the
witness has been wholly cross-examined by the adverse party or the right to cross-
examine is lost wholly or in part thru the fault of such adverse party. But when cross-
examination is not and cannot be done or completed due to causes attributable to
the party offering the witness, the uncompleted testimony is thereby rendered
incompetent.

The right of a party to cross-examine the witness of his adversary is invaluable as it

is inviolable in civil cases, no less than the right of the accused in criminal cases. The
express recognition of such right of the accused in the Constitution does not render
the right thereto of parties in civil cases less constitutionally based, for it is an
indispensable part of the due process guaranteed by the fundamental law. . . . Until
such cross-examination has been finished, the testimony of the witness cannot be
considered as complete and may not, therefore, be allowed to form part of the
evidence to be considered by the court in deciding the case.

But the "Bachrach" and "Ortigas" cases involved different factual features. In those cases,
the witnesses concerned whose testimonies were rightly stricken off the records either left for
abroad or simply failed to appear at the time they were supposed to be cross-examined by
the adverse party. In short, the lack of cross-examination by the opposing parties therein was
occasioned by sudden or unexplained non-appearance, unlike in this case where no less
than the witness Bautista's death prevented the completion of her cross-examination. The
controlling case here is "Fulgado v. C.A., et al."32 where the Court, in allowing the testimony
of therein plaintiff Ruperto Fulgado who died before his cross-examination, to remain in the
record, ruled that:

The wholesale exclusion of testimonies was too inflexible a solution to the procedural
impasse because it prejudiced the party whose only fault during the entire
proceedings was to die before he could be cross-examined. The prudent alternative
should have been to admit the direct examination so far as the loss of cross-
examination could have been shown to be not in that instance a material loss. And
more compellingly so in the instant case where it has become evident that the
adverse party was afforded a reasonable chance for cross-examination but through
his own fault failed to cross-examine the witness.

Where death prevents cross-examination under such circumstances that no

responsibility of any sort can be ascribed to the plaintiff or his witness, it seems a
harsh measure to strike out all that has been obtained in the direct examination.
(Emphasis supplied)

If testimony is inexpungible where the witness dies prior to any cross-examination, with more
reason should testimony partially cross-examined at the time of the witness' death (as in
Commissioner Bautista's case) remain intact. Thus, with the exception of Atty. Alonte's
testimony, Dr. Doromal's and deceased Commissioner Bautista's testimonies, together with
the evidence of SIPALAY and ALLIED, deserve a second scrutiny in determining the
correctness of the SANDIGANBAYAN's finding of "lack of prima facie factual foundation."
Here then are the highlights of Dr. Doromal's and deceased Commissioner Bautista's testimonies.

DR. DOROMAL

(DIRECT)

JUSTICE ESCAREAL:

Purpose please?

ATTY. LEYNES:

The testimony of this witness will cover the fact that at the time of
sequestration there were issued (sic), there were more prima
facie evidence.

xxx xxx xxx

ATTY. LEYNES:

Q Dr. Doromal, do you know the petitioner, Sipalay Trading

Corporation?

A Yes, sir.

Q Why do you know Sipalay Trading Corporation?

A It is one of those companies which we had investigated and

eventually issued a Sequestration Order.

Q Do you you (sic) Maranao Hotels and Resorts?

A Yes, sir.

Q Why do you know this Maranao Hotels and Resorts?

A Again it is one of those we had sequestered because of its relation

with Sipalay Trading Corporation?

Q Do you know the petitioner Allied Banking Corporation?

A Yes, sir.

Q Why do you know it?

A In the same manner that the material of documents we had, we

ended up having a Sequestration Order on Allied Banking
Corporation.

xxx xxx xxx

ATTY. LEYNES:

Q Dr. Doromal at that time that the sequestration order which you
have just recognized was issued and which sequestration order was
signed by you and Commissioner Ramon Diaz, what documents if
any did you consider?

A We considered documents which were gotten from Malacañang

after the previous President had left.

We had also document (sic) which were gotten from the U.S. which
were given by the States Department to the PCGG and whatever had
been gotten by our operation people.

Q If I show to you some of these documents will you be able to

recognize them?

A Yes, some of them I will be able to recognize.

Q I show to you a set of documents, what relation have these set of

documents to those documents which you have mentioned you and
Commissioner Diaz or the Commission considered when the
Sequestration Order dated July 24, 1986 was issued?

Will you please go over these documents?

COURT INTERPRETER:

Witness is going over the voluminous documents.

WITNESS:

A The documents that I have just slipped into here that would have to
do with Sipalay Trading Corporation, this I remember.

ATTY. LEYNES:

Q The question is, what relation has this document to the document
you considered in issuing the Sequestration Order subject matter of
this case?

A This one which I had flipped into this had been considered by the
Commission at the time of the sequestration.

ATTY. LEYNES:

May I request that this document which the witness had identified,
these documents consisted of seventy-six documents and we have
earlier inadvertently marked them as Exhibit A to WWW but if we can
have them marked accordingly as Exhibits 1, 2 to 76 accordingly.
 xxx xxx xxx

ATTY. LEYNES:

Q Doctor Doromal when you issued, when the Sequestration Order

was issued in the judgment of the Commission, what quantum of
evidence do these documents amount to?

ATTY. MENDOZA:

Objection to the question, Your Honors (sic) please.

First of all the witness did not identify all of those documents as he
was going over the folder of documents. He was picking up particular
documents in the folder and it is a question of law.

ATTY. LEYNES:

We are proving that there is more prima facie evidence in the

judgment when he issued the Sequestration Order.

What is the quantum of evidence do these documents represent?

JUSTICE ESCAREAL:

For the purpose of issuance thereof?

ATTY. LEYNES:

Yes, Your Honor.

JUSTICE ESCAREAL:

With that qualification are you willing to accept that qualification?

ATTY. LEYNES:

Yes, Your Honor.

JUSTICE ESCAREAL:

Witness may answer:

WITNESS:

A These documents are more than just prima facie evidence which is
the only thing required of us before issuing the Sequestration Order.

In fact over and above what is needed there are plenty of evidence of
these documents which movant amply justifies our issuing of the
Sequestration Order in the sense that there is just no reason no
question that there is a preponderance of evidence for the
sequestration.

ATTY. LEYNES:

That would be all, Your Honor.

JUSTICE ESCAREAL:

How about this 0095?

ATTY. LEYNES:

In both cases, Your Honor.

JUSTICE ESCAREAL:

Does the document include any reference to the Allied Banking

Corporation?

ATTY. LEYNES:

Yes, Your Honor; but the Sequestration Order was issued by

Commissioner Diaz and Mary Con Bautista.

JUSTICE ESCAREAL:

With respect to?

ATTY. LEYNES:

Allied Banking Corporation.

May I ask additional questions, Your Honor.

JUSTICE ESCAREAL:

Please proceed.

ATTY. LEYNES:

Q Dr. Doromal what if any is your participation in the issuance of the

Sequestration Order or the Search and Seizure Order against Allied
Banking Corporation?

A All these Sequestration Orders were brought by the

Commission in (sic) banc and we are present with the documents that
had been available.
We listen to them and the action is made by the Commission and in
the issuance of the Sequestration Order.

Then whoever is the Commissioner most involved in that particular

company thus signs or do sign the Sequestration Order.

In this particular case that you mentioned about Allied Banking

Corporation, the two other Commissioners who were there ahead of
me were the ones who signed because they are most familiar with
the Allied Banking Corporation.

xxx xxx xxx

ATTY. LEYNES:

Q Specifically what is your participation in the issuance of the

sequestration personally of Allied Banking Corporation?

A I am one of the most who participated in the discussion when I

became a member and that was April in 1986.

xxx xxx xxx

ATTY. LEYNES:

Q When deliberated upon what documents were considered?

xxx xxx xxx

WITNESS:

A First of all when this Search and Seizure Order was issued this was
during the time that I was already a member of the PCGG as
Commissioner and when this is brought before the group before the
Commission there are the attached documents that backed up this
Search and Seizure Order and for that matter other items that have to
do with the sequestration or something similar to that so what I am
saying the materials that go with this would indicate the reason for the
Search and Seizure Order similar to the papers that are needed when
we issued the Sequestration Order.

ATTY. LEYNES:

Q I will show you again this Exhibit 1, these Exhibits 1 to 76 will you
please go over the same and state before this Honorable court what
relation have these documents to the documents which you
mentioned were considered in the deliberation for the issuance of
Search and Seizure Order against Allied Banking Corporation?

xxx xxx xxx

WITNESS:

A I am looking at some of these documents that have to do with the

Allied Banking Corporation and I recognize some of these and the
others I do not see because some of these are materials which were
gathered by other groups and their attachments but the others such
as this letter, this I remember.

xxx xxx xxx

ATTY. LEYNES:

Q Dr. Doromal in your recollection what is the reason or the finding of

the PCGG why the Sequestration Order was issued against Sipalay
Trading Corporation or Maranao Hotels and Resorts?

WITNESS:

A The reason was that in the Maranao Corporation which was the
company which was later on acquired by Sipalay Trading Corporation
which was the holding company it was our judgment that there are
enough indications there that these were acquired because of
closeness to the president and that this was really in fact one of those
that had been gotten from DBP, Development Bank of the Philippines
with the idea being that it was, it could be gotten through the help of
the Office of the President and the President himself.

xxx xxx xxx

ATTY. LEYNES:

Q What if any is the finding of PCGG regarding the ownership of

Sipalay Trading Corporation?

A Sipalay Trading Corporation was holding company and owner. The

people in the ownership is not only Lucio Tan but looks like relatives
of Mr. Tan.

Q In your recollection Doctor Doromal, what is the finding or reason

of companies why it issued the Search and Issue (sic) Order against
Allied Banking Corporation?

WITNESS:

A The Commission wanted to find out documents that would indicate

or prove the relationship between President Marcos and Lucio Tan
and one way to do that is to have access to the papers to the
documents that were in the Allied Banking Corporation.

ATTY. LEYNES:
That would be all, Your Honor.33

MARY CONCEPCION BAUTISTA

(DIRECT)

JUSTICE ESCAREAL:

Purpose, please.

ATTY. LEYNES:

The testimony of the witness is offered for the purpose of proving that
when the Presidential Commission on Good Government issued the
search and seizure order dated August 13, 1988, the Commission
considered ample evidence in the issuance thereof and also to prove
that defendant Lucio Tan in concert with defendants Ferdinand
Marcos and Imelda Marcos acquired General Bank and Trust
Company in violation of existing rules and for remedial consideration
and that later on Genbank was converted by defendant Lucio Tan
and company to Allied Bank of which defendant Lucio Tan and
defendants Ferdinand Marcos owned beneficially.

xxx xxx xxx

ATTY. LEYNES:

Q Madam Witness, what basis or document, if any did the

commission consider when it issued the search and seizure order?

A We had several documents in our possession at that time one of

the documents was a list which have been taken from the office of
Imee M. Araneta on EDSA which contained a listing of the holdings of
the late President Marcos in several corporations and the extent of
his participation on this corporation. And the other, in addition to what
have been given by certain informants, another was an affidavit of Mr.
Gapud which he had issued wherein he had mentioned also the
participation of Mr. Marcos in Allied Banking, I think that affidavit is
here and also the fact that deposits were made from Allied Banking in
the accounts of Mr. Marcos in the Security Bank.

xxx xxx xxx

Q Madam Witness, you mentioned certain documents on the basis of

which the PCGG issued the search and seizure order against Allied
Banking Corporation, I am showing to you a folder containing Exhibit
1 to 18, will you please go over this document and state which of
these documents were considered by the Commission when it issued
the search and seizure order.
A These documents marked Exhibits 1 which is a list, which is a
letter, unfortunately I don't see page two of this but this is the
document which we have addressed principally, as far as we know
addressed to the late President Marcos and together with this we
have Exhibit 2, another letter dated March 28, 1977 addressed to the
Deputy Governor Mr. Briñas about the intention to purchase General
Bank and Trust Company and subsequently documents Exhibit 3
signed by Carlota Valenzuela, Special Assistant to the Governor,
Exhibit 4 another document marked Confidential signed by Mr. Barin
reporting on the action taken regarding Genbank.

xxx xxx xxx

WITNESS:

And another document which has been marked as Exhibit 4, 5, 6, 7,

these documents refers to the acquisition by Lucio Tan of the
Genbank for the amount of P500,000.00, the commission then
considered that plus the fact that the acquisition and transfer of
Genbank to the Lucio Tan group was done in a short time without
proper observance of public bidding which the Commission then
considered to be irregular, so this is one of the documents we look at.
Mr. Tan in the acquisition of Genbank had been given a favored
treatment.

xxx xxx xxx

WITNESS:

This document dated May 17, 1989 under letterhead Allied Banking
Corporation addressed to His Excellency President Marcos,
President and Prime Minister signed by Lucio Tan. In addition we
have a document which has already been marked as Exhibit 12
which is the affidavit of Mr. Rolando Gapud dated January 14, this is
series of 1987, in this document Mr. Gapus (sic) has also made an
enumeration of deposits made by certain individuals from certain
banks among them Allied Banking Corporation for the account of Mr.
Marcos in the Security Bank.

xxx xxx xxx

WITNESS:

Exhibits 13 and 13-a which is a listings (sic) of deposits made and

placements in the bank, in the bank account of Mr. Marcos. In
addition, we have the documents marked up to Exhibits 13-g, h, l, all
showing checks or amounts received from Allied Bank deposited in
the Security Bank and Trust Company. Exhibits up to Exhibit 13-k, l,
m, p, t, v, 2, y and x.34

xxx xxx xxx

ATTY. LEYNES:

Q Chairman Bautista, during the last hearing before it was adjourned

we were going over this folder containing Exhibits 1 to 80 and we are
indicating which of these exhibits were considered by the PCGG
when it issued the Search and Seizure Order against Allied Banking
Corporation;

Will you please go over again this folder and indicate to this Exhibit to
whether what was considered by the Presidential Commission on
Good Government when it issued the Search and Seizure Order
against Allied Banking Corporation.

A I recall that we had already pointed to the document marked Exhibit

7 in red which is a letter of Lucio Tan to the Governor Licaros of the
Central Bank and the one marked in red as Exhibit 8 which is the
letter to Mr. Gregorio Licaros signed by T.O. Domingo, the Allied
Banking Report which is marked as Exhibit 9.

xxx xxx xxx

Q Apart from these exhibits which you have just mentioned what
other evidence if any did the Commission consider?

A There were for instance the verbal information given to us by

individuals as well as the information given to us by Mr. Rolando
Gaffud verbally.

xxx xxx xxx

ATTY. LEYNES:

Q What is the finding based on these Exhibits which you mentioned

and the information given by Rolando Gaffud which he later on
formalized in an affidavit.

What finding if any with regards to the Allied Banking Corporation did
the Commission arrive that led to the issuance of the Search and
Seixure (sic) Order?

A The Commission after reviewing al (sic) of these exhibits as with all

the information that had come into its possession had come to the
conclusion that indeed Mr. Lucio Tan was a close associate of the
late President Marcos and they were involved in business associates
and transactions and that the late President had substantial holdings
in this corporation in which Lucio Tan was also involved and therefore
the commission would have to act in accordance to its powers of the
sequestration granted under Executive Order No. 1.

xxx xxx xxx

ATTY. LEYNES:

Q To what corporation do you refer to when you mentioned Mr.

Marcos has equity in the corporation owned by Lucio Tan?

A Among them is precisely Allied Banking Corporation, Asia Brewery

and Sipalay Trading Corporation. I mean these are some of the
corporations.

Q Chairman Bautista, what is the legal basis or authority by the

commission of the Presidential Commission on Good Government
when it issued the Search and Seizure Order against the Allied
Banking Corporation?

A The Commission under Executive Order No. 1, the President has

been given specifically the power to sequester business and property
owned by the late President Marcos, Mrs. Marcos, relatives and
closed business associates and to take possession or take over this
business and assets in order to prevent dissipation of these assets or
removal of these assets and concealment of these assets and also to
take over such documents as the Commission may consider
necessary in order that these documents may be preserved for the
purpose of the filing of the case in order to prosecute or conduct civil
action against President Marcos, Mrs. Marcos, relatives and other
close business associates that is very clearly stated in Executive
Order No. 1.

xxx xxx xxx

ATTY. LEYNES:

0100, Your Honor.

Q Chairman Bautista, the Search and Seizure Order issued by PCGG

dated August 13, 1986 against Allied Banking Corporation reads in
pertinent part and I quote:

"You are hereby directed to submit for Search and Seizure all bank
documents in the above mentioned premises which our
representatives may find necessary and relevant to the investigation
conducted by the Commission."

A Well I think we clearly specify there that we are to seize the bank
documents.

It is specifically stated that the Search and Seizure Order refers to

bank documents precisely because of the information that had been
given to us that these documents could be found in the particular
place.

xxx xxx xxx

 ATTY. LEYNES:

Q Now, Chairman Bautista do you know what happened after the

Search and Seizure Order against Allied Banking Corporation?

WITNESS.

A We were not able to seize any document precisely because of the

objection raised and so what happened is that the parties agreed to
just seal this place so that neither of the parties would be able to
remove any documents.

ATTY. LEYNES:

That will be all, Your Honor.35

Dr. Doromal was basically preoccupied with identifying and referring to documents purportedly
coming from Malacañang, the US State Department and other sources. What his testimony
essentially yields is the fact that theprima facie evidence/s supporting the sequestration order issued
against SIPALAY is/are buried and ascertainable in these documents. But, to repeat, any reference
thereto is unwarranted since there was no offer thereof in evidence. And it must be emphasized at
this point that mere identification of documents and the marking thereof as exhibits do not confer any
evidentiary weight on documents not formally offered. In "People v. Santito, Jr."36 the Court, speaking
through Mr. Justice Regalado once again, thus said that:

Even assuming that the same had been identified in court, it would have no
evidentiary value. Identification of documentary evidence must be distinguished from
its formal offer as an exhibit. The first is done in the course of the trial and is
accompanied by the marking of the evidence as an exhibit. The second is done only
when the party rests its case and not before. The mere fact that a particular
document is identified and marked as an exhibit does not mean it will be or has been
offered as part of the evidence of the party. The party may decide to formally offer it if
it believes this will advance its cause, and then again it may decide not to do so at
all. (Emphasis supplied.)

Verily then, without the PCGG documents having been formally offered, however decisive
and compelling they may otherwise be, it is as if a prima facie case does not exist at all. That
makes Dr. Doromal's testimony by and in itself worthless. The same can be said of
deceased Commissioner Bautista as well who was similarly immersed in the mechanical
process of identification. In fact, her testimony and the documents she referred to were
totally unrelated to the sequestration order issued against SIPALAY, as they chiefly dwelt on
the search and seizure order issued against ALLIED. Being immaterial, nothing therefrom
can shore up aprima facie case against SIPALAY. And it may well be clarified at this juncture
that it is the immateriality of deceased Commissioner Bautista's testimony that justified the
SANDIGANBAYAN into paying particular attention to Dr. Doromal's testimony in its search
for prima facie evidence — not the inadmissibility of her testimony arising from her death
during cross-examination which we have heretofore adjudged to be a faulty observation. The
SANDIGANBAYAN was therefore correct in saying that:

No direct connection or relationship has been established, at least, as far as the

evidence extant on the records of these cases are concerned, between petitioner
Sipalay Trading's acquisition and ownership of the sequestered shares of stock and
 Lucio C. Tan's alleged fraudulent business maneuverings and connivance with the
late President Ferdinand E. Marcos. These oral testimonies are practically
dependent on the existence of official records of respondent PCGG which, due to the
latter's own doing, have not been formally offered. Hence, these oral testimonies
have no leg to stand on. 3 7

xxx xxx xxx

Without credible and competent documentary evidence to fortify the witnesses' bare
allegations as aforestated, it is difficult to sustain a finding of prima facie case in the
proceedings — especially taking into account the fact that petitioner Sipalay Trading
is presumed by law to possess a separate and distinct judicial personality from its
principal stockholders, i.e., Lucio Tan, et al. . . .38

The difficulty is easier to grasp when reckoned with the various but uniform definitions
of prima faciecase/evidence aside from that given by the SANDIGANBAYAN, to wit:

Prima facie evidence has been defined as evidence which, standing alone
unexplained or uncontroverted, is sufficient to maintain the proposition affirmed. It is
such as, in judgment of law, is sufficient to establish the fact, and if not rebutted,
remains sufficient for that purpose.39

xxx xxx xxx

It is evidence which suffices for the proof of a particular fact until contradicted and
overcome by other evidence.40

xxx xxx xxx

It is evidence which, standing alone and unexplained, would maintain the proposition
and warrant the conclusion to support which it is introduced.41

xxx xxx xxx

Prima facie case is such as will suffice until contradicted and overcome by other
evidence.42

xxx xxx xxx

A prima facie case is one which is apparently established by evidence adduced by

plaintiff in support of his case up to the time such evidence stands unexplained and
uncontradicted.43

xxx xxx xxx

A prima facie case is one in which the evidence in favor of a proposition is sufficient
to support a finding in its favor, if all the evidence to the contrary is disregarded.44

xxx xxx xxx

 A litigating party is said to have a prima facie case when the evidence in his favor is
sufficiently strong for his opponent to be called on to answer it. A prima facie case, is
one which is established by sufficient evidence, and can be overthrown only be
rebutting evidence adduced on the other side.45

From whatever definition we look at it, Dr. Doromal's and deceased Commissioner Bautista's
testimonies are by no means sufficiently strong evidence to make up a prima facie case for the
PCGG. What gave them colorable weight were the unoffered documents. But as things stand in the
absence of such documentary evidence, they are empty and crumble on their own even without
counter-explanation or contradiction, as anything that may tend to prove the proposition that the
SIPALAY shares in Maranaw Hotels and Resort Corporation were/are ill-gotten is just nowhere
extractable from these testimonies by and in themselves. These declarations unfortunately fail to
hurdle judicial inspection, proceeding from the principle that a party's evidence is "of necessity
subject to a rigid scrutiny" when he possesses, but does not produce, documentary evidence which
would be far more satisfactory.46 We are thus vividly and fittingly reminded of the proverbial words of
Mr. Justice Story that:

Naked statements must be entitled to little weight when the parties hold better
evidence behind the scenes4 7 and

A party's nonproduction of a document which courts almost invariably expect will be

produced unavoidably throws a suspicion over the cause.48

Corollary to this is that the presumption is always and inevitably against a litigant who fails to
furnish evidence within his reach, and it is the stronger when the documents, writings, etc.,
would be conclusive in establishing his
case. 49 This is indeed an occasion to emphasize once again that the superiority of written
evidence, compared with oral, is so pronounced, obvious and well known, that in most cases
the deliberate and inexcusable withholding of the written evidence, and effort to secure
favorable consideration of oral testimony in the place of it , is an affront to the intelligence of
the court.50

At best, the bare testimonies of Dr. Doromal and deceased Commissioner Bautista, in the eyes of
the Court, yield nothing but mere uncorroborated speculations or suspicions insofar as the PCGG
attempted to establish the "prima facie factual foundation" that would hold up the sequestration order
against SIPALAY. But a fact cannot be found by mere surmise or conjecture.51 Suspicion cannot give
probative force to testimony which in itself is insufficient to establish or to justify an inference of a
particular fact,52 for "the sea of suspicion has no shore, and the court that embarks upon it is without
rudder or compass".53 And as it is not the habit of any courts of justice to yield themselves up in
matters of right to mere conjectures and possibilities, 54 courts are not permitted to render verdicts or
judgments upon guesses or surmises.55

Turning now to the evidence for SIPALAY and ALLIED, it unveiled no "prima facie factual
foundation" either. Former PCGG secretary and lone witness Atty. Hontiveros, in response to two (2)
subpoenas duces tecum56 requested by counsel for both corporations57 which required him to bring
to the court "all records, including minutes of meeting of the PCGG, its resolutions, together with all
supporting evidence or documents of whatever nature" in connection with the issuance of the
sequestration order against SIPALAY and the search and seizure order against ALLIED, could only
produce the following excerpts of minutes of two (2) PCGG meetings held on March 13 and March
12, 1986:
 6. Commissioner Daza also informed the Commissioner that upon the instructions of
Minister Salonga, any Commissioner can file or issue a sequestral order provided the
order has the conformity verbal or written of another Commissioner. These could
include any other order or seizure.58

xxx xxx xxx

6. Commissioner Pedro L. Yap before his departure on a mission, reported the work
he had accomplished during the past days. These included numerous "freeze" and
"sequestration" orders. He asked that the list of orders should not be particularized in
the minutes.59

after admittedly spending no less than two (2) months tracing documents to bring to court:

ATTY. MENDOZA:

xxx xxx xxx

Q I am asking you how many months did it take looking for records?

A I think more than two months, sir.

Q And these were the records you found, marked Exhibits A and B?

A Yes, sir, during the time I devoted to them.60

xxx xxx xxx

ATTY. MENDOZA:

xxx xxx xxx

Q But nonetheless, for two months you tried looking for records
corresponding to the subpoena?

A Yes, sir.61

Other than being informative of PCGG internal procedure on how and by whom
sequestration orders in general are issued and of the "accomplishments" of one of its then
commissioners, the excerpts are absolutely unreflective of any deliberation by PCGG
commissioners particularly concerning the sequestration order against SIPALAY, much less
the factual basis for its issuance. They do not even make the slightest allusion to SIPALAY,
or ALLIED. That Atty. Hontiveros devoted two (2) months for document-searching only to
come up with minutes that are as barren as the testimonial evidences of the PCGG validates
indeed the claim of respondent corporations which may well sum-up the PCGG's case
specifically against SIPALAY, that:

The only logical conclusion that may be reached by Atty. Hontiveros' inability to
produce PCGG records in regard respondent Sipalay is that there was no evidence
before the PCGG or any of its Commissioners which would tend to establish that the
 shares of stock in Maranaw registered in the name of private respondent Sipalay are
ill-gotten.62

There being no evidence, not even a prima facie one, there was therefore no valid
sequestration of the SIPALAY shares in the Maranaw Hotels and Resort Corporation. We
hereby re-emphasize the indispensability of prima facie evidence by adverting to the Court's
pronouncement in "Republic v. Sandiganbayan,"63 to wit:

IV. The issue on the existence of prima facie evidence in support of the issuance of a
sequestration order has likewise been laid to rest in the BASECO case, in this wise:

8. Requisites for Validity

What is indispensable is that, again as in the case of attachment and

receivership, there exist a prima facie factual foundation, at least, for
the sequestration, freeze or takeover order, and adequate and fair
opportunity to contest it and endeavor to cause its negation or
nullification.

Both were assured under the executive orders in question and the
rules and regulations promulgated by the PCGG.

a. Prima Facie Evidence as Basis for Orders

Executive Order No. 14 enjoins that there be "due regard to the

requirements of fairness and due process." Executive Order No. 2
declares that with respect to claims on allegedly "ill-gotten" assets
and properties, "it is the position of the new democratic government
that President Marcos . . . (and other parties affected) be afforded fair
opportunity to contest these claims before appropriate Philippine
authorities." Section 7 of the Commission's Rules and Regulations
provides that sequestration or freeze (and takeover) orders issue
upon the authority of at least two commissioners, based on
the affirmation or complaint of an interested party, or motu
propio when the Commission has reasonable grounds to believe that
the issuance thereof is warranted. A similar requirement is now found
in Section 26, Art. XVIII of the 1987 Constitution, which requires that
a "sequestion or freeze order shall be issued only upon showing of
a prima facie case." (Emphasis in the original text)

Notably the PCGG, in what apparently appears to be a desperate attempt to slither its way
out of its failure to show a prima facie case, would now argue that:

. . . it is worth-mentioning the fact that the FREEDOM CONSTITUTION under which

Executive Order Nos. 1, 2, 14 and 14-A had been issued, categorically authorized
the issuance of writs of sequestration without requiring any finding of prima
facie evidence to support such issuance. Nevertheless, the PCGG saw to it that
before any writ of sequestration was issued, the Commissioners carefully examined
and weighed the evidence on hand that would justify such issuance of sequestration
order. The FREEDOM CONSTITUTION provides under Article II, Section 1, the
following:
 Sec. 1. Until a legislature is elected and convened under a New
Constitution, the President shall continue to exercise legislative
power.

The President shall give priority to measures to achieve the mandate

of the people to:

a) . . .

b) . . .

c) . . . and

d) Recover ill-gotten properties amassed by the leaders and

supporters of the previous regime and protect the interest of the
people through orders of sequestration or freezing of assets or
accounts.

It is only in the 1987 Constitution that the existence or finding of prima facie case was
required before a sequestration order could be issued. The writ of sequestration in
question was issued long before the ratification of the 1987 Constitution; hence, it
was covered by the Freedom Constitution which did not require, the prior finding
of prima facie evidence.64

This argument is clearly without merit in the face of this Court's pronouncement in the
"Baseco" case,65 that:

Parenthetically, even if the requirement for a prima facie showing of ill-gotten wealth
were not expressly imposed by some rule or regulation as a condition to warrant the
sequestration or freezing of property contemplated in the executive orders in
question, it would nevertheless be exigible in this jurisdiction in which the Rule of
Law prevails and official acts which are devoid of rational basis in fact or law, or are
whimsical and capricious, are condemned and struck down.

Going now to the case of ALLIED, the principal objection raised regarding the order issued against it
is that the PCGG made use of an unauthorized and constitutionally defective search warrant to
effect the sequestration. The SANDIGANBAYAN saw and declared it as such. We agree.

There can be no doubt that the order which the PCGG issued against ALLIED typifies a search
warrant (full text of which appears in the early part of this decision). Not only is the order captioned
as SEARCH AND SEIZURE ORDER, the body thereof clearly enjoined the branch manager to make
available to the PCGG team all bank documents precisely for that purpose. It is unauthorized
because nowhere in the same Executive Order No. 166(particularly Section 3) invoked by the PCGG
to justify the search and seizure order was the PCGG expressly empowered to issue such specie of
a process in pursuit of its mandated purpose of recovering ill-gotten/unexplained wealth. Section 3 of
E.O. No. 1 enumerates the following powers of the PCGG:

Sec. 3. — The Commission shall have the power and authority:

(a) To conduct investigation as may be necessary in order to accomplish and carry

out the purposes of this order.
 (b) To sequester or place or cause to be placed under its control or possession any
building or office wherein any ill-gotten wealth or properties may be found, and any
records pertaining thereto, in order to prevent their destruction, concealment or
disappearance which would frustrate or hamper the investigation or otherwise
prevent the Commission from accomplishing its task.

(c) To provisionally take over in the public interest or to prevent its disposal or
dissipation, business enterprises and properties taken over by the government of the
Marcos administration or by entities or persons close to former President Marcos,
until the transactions leading to such acquisition by the latter can be disposed of by
the appropriate authorities.

(d) To enjoin or restrain any actual or threatened commission of acts by any person
or entity that may render moot and academic, or frustrate, or otherwise make
ineffectual the efforts of the Commission to carry out its tasks under this order.

(e) To administer oaths, and issue subpoenas requiring the attendance and
testimony of witnesses and/or the production of such books, papers, contracts,
records, statement of accounts and other documents as may be material to the
investigation conducted by the Commission.

(f) To hold any person in direct or indirect contempt and impose the appropriate
penalties, following the same procedures and penalties provided in the Rules of
Court.

(g) To seek and secure the assistance of any office, agency or instrumentality of the
government.

(h) To promulgate such rules and regulations as may be necessary to carry out the
purposes of this order.

The Court in "Cojuangco, Jr. v. PCGG"67 simplified these powers in this wise:

From the foregoing provisions of law, it is clear that the PCGG has the following
powers and authority:

1. To conduct an investigation including the preliminary investigation and prosecution

of the ill-gotten wealth cases of former President Marcos, relatives and associates,
and graft and corruption cases assigned by the President to it;

2. Issue sequestration orders in relation to property claimed to be ill-gotten;

3. Issue "freeze orders" prohibiting persons in possession of property alleged to be

ill-gotten from transferring or otherwise disposing of the same;

4. Issue provisional takeover orders of the said property;

5. Administer oaths and issue subpoenas in the conduct of investigation;

6. Hold any person in direct or indirect contempt and impose the appropriate
penalties as provided by the rules.
 Neither can it be validly argued by the PCGG that its authority to issue a search and seizure
order possessing the essential features of a search warrant is derivable from subparagraphs
(b) and (c) of Section 3 of E.O. No. 1 or from No. 4 of the simplified enumeration in the
"Cojuangco" case, by implication. "Baseco" has clarified once and for all the essential nature
of the provisional measures of sequestration, freeze orders and provisional takeover that the
PCGG is explicitly equipped with:

As thus described, sequestration, freezing and provisional takeover are akin to the
provisional remedy of preliminary attachment, or receivership. By attachment, a
sheriff seizes property of a defendant in a civil suit so that it may stand as security for
the satisfaction of any judgment that may be obtained, and not disposed of, or
dissipated, or lost intentionally or otherwise, pending the action. By receivership,
property, real or personal, which is subject of litigation, is placed in the possession
and control of a receiver appointed by the Court, who shall conserve it pending final
determination of the title or right or possession over it. All these remedies —
sequestration, freezing, provisional takeover, attachment and receivership — are
provisional, temporary, designed for particular exigencies, attended by no character
or permanency or finality, and always subject to the control of the issuing court or
agency.

Attachment and receivership are legal processes purely conservatory in character, not
involving an active and drastic intrusion into and confiscation of properties as what a search
warrant (or search and seizure order) necessarily entails. All processes that the PCGG is
allowed to issue in discharging the duty for which it was created, therefore, ought to be
viewed strictly in this context. And this finds further support in "Philippine Coconut Producers
Federation, Inc. [COCOFED] v. PCGG"68 where the Court stressed anew that:

The question of the validity of PCGG sequestration and freeze orders as provisional
measures to collect and conserve the assets believed to be ill-gotten wealth has
been laid to rest in BASECO vs. PCGG (150 SCRA 181) where this Court held that
such orders are not confiscatory but only preservative in character, not designed to
effect a confiscation of, but only to conserve propertiesbelieved to be ill-gotten wealth
of the ex-president, his family and associates, and to prevent their concealment,
dissipation, or transfer, pending the determination of their true ownership. (Emphasis
supplied)

Being in fact a search warrant, the SEARCH AND SEIZURE ORDER cannot escape, and must
pass, the acid test for validity as provided by the prevailing constitution under which it was issued —
the FREEDOM CONSTITUTION which adopted verbatim the provision of the 1973 Constitution
(Section 3, Article IV) relating to search warrants, to wit:

The right of the people to be secure in their persons, houses, papers, and effects
against unreasonable searches and seizures of whatever nature and for any purpose
shall not be violated, and no search warrant or warrant of arrest shall issue except
upon probable cause to be determined by the judge, or such other responsible officer
as may be authorized by law, after examination under oath or affirmation of the
complainant and the witnesses he may produce, and particularly describing the place
to be searched, and the person or things to be seized.

Supporting jurisprudence thus outlined the following requisites for a search warrant's validity,
the absence of even one will cause its downright nullification:
(1) it must be issued upon probable cause;

(2) the probable cause must be determined by the judge himself and not by the applicant or any
other person;

(3) in the determination of probable cause, the judge must examine, under oath or affirmation, the
complainant and such witnesses as the latter may produce; and

(4) the warrant issued must particularly describe the place to be searched and persons or things to
be seized.69

In addition to its unauthorized issuance (as just discussed), the SEARCH AND SEIZURE ORDER is
so constitutionally defective.

Firstly, as it suffered from the same inherent weakness or emptiness as that which marred Dr.
Doromal's testimony (as earlier discussed extensively), deceased Commissioner Bautista's in-court
declarations did not in any way establish probable cause which has been consistently defined as:

. . . such facts and circumstances which would lead a reasonably discreet and
prudent man to believe that an offense has been committed, and that objects sought
in connection with the offense are in the place sought to be searched. This probable
cause must be shown to be within the personal knowledge of the complainant or the
witnesses he may produce and not based on mere hearsay.70

This is so because, as what her testimony irresistibly suggested, the purported facts and
circumstances supporting the order are exclusively traceable from documents she identified
but which were never formally offered in evidence in the SANDIGANBAYAN. She never
testified to any fact of her own personal knowledge to bolster the PCGG's claim that ALLIED
was in possession and control of illegally-amassed wealth by Lucio Tan. Her testimony,
therefore, is plain hearsay, self-serving, or uncorroborated suspicion. And the rule is that
search warrants are not issued on loose, vague or doubtful basis of fact, nor on mere
suspicion or belief.71

Secondly, the PCGG has no authority to issue the order in the first place. Only a "judge" and "such
other responsible officer as may be authorized by law" were empowered by the FREEDOM
CONSTITUTION to do so, and the PCGG is neither. It is not a judge, as clarified by the Court in
"Baseco", to wit:

It should also by now be reasonably evident from what has thus far been said that
the PCGG is not, and was never intended to act as, judge. Its general function is to
conduct investigations in order to collect evidence establishing instances of "ill-gotten
wealth"; issue sequestration, and such orders as may be warranted by the evidence
thus collected and as may be necessary to preserve and conserve the assets of
which it takes custody and contral and prevent their disappearance, loss or
dissipation; and eventually file and prosecute in the proper court of competent
jurisdiction all cases investigated by it as may be warranted by its findings. It does
not try and decide, or hear and determine, or adjudicate with any character of finality
or compulsion, cases involving the essential issue of whether or not property should
be forfeited and transferred to the State because "ill-gotten" within the meaning of the
Constitution and the executive orders. This function is reserved to the designated
court, in this case, the Sandiganbayan. There can therefore be no serious regard
 accorded to the accusation, leveled by BASECO, that the PCGG plays the perfidious
role of prosecutor and judge at the same time. (Emphasis supplied.)

And the PCGG cannot be considered as "such other responsible officer as may be
authorized by law" because Executive Order No. 1, to reiterate, did not expressly nor
impliedly grant the PCGG the power to issue search warrants orders.

Thirdly, the order does not provide a specification of the documents sought to be searched/seized
from ALLIED. The body thereof, to quote again, reads:

By virtue of the powers vested in the Commission by the President of the Republic of
the Philippines, you are hereby directed to submit for search and seizure all bank
documents in the aforementioned premises which our representative may find
necessary and relevant to the investigation being conducted by this Commission.

xxx xxx xxx

It expressly refers to "all bank documents" which is too all-embracing, the obvious intent of
which is to subject virtually all records pertaining to all business transactions of ALLIED of
whatever nature, to search and seizure. Such tenor of a seizure warrant is not a particular
description,72 thus contravening the explicit command of the Constitution that there be a
particular description of things to be seized.73 Being a general warrant, the SEARCH AND
SEIZURE ORDER is constitutionally objectionable74 and to be more precise, void for lack of
particularity.75 We end our discussion on this matter with the Court's admonition in "People v.
Veloso":76

A search warrant must conform strictly to the requirements of the constitutional and
statutory provisions under which it was issued. Otherwise, it is void. The proceedings
upon search warrants, it has rightly been held, must be absolutely legal, "for there is
not a description of process known to the law, the execution of which is more
distressing to the citizen. Perhaps there is none which excites such intense feeling in
consequence of its humiliating and degrading effect." The warrant will always be
construed strictly without, however, going the full length of requiring technical
accuracy. No presumptions of regularity are to be invoked in aid of the process when
an officer undertakes to justify under it.

The third key issue should therefore be answered in the affirmative, i.e., the nullification of
the sequestration and search and seizure orders was in order.

The last key issue involves another constitutional imperative — i.e., that the corresponding suit or
suits against a sequestered entity or entities should be brought in the proper court, the
Sandiganbayan to be precise,77 within the prescribed period — failure of which automatically lifts the
sequestration order or orders issued. Up for determination is whether under the factual features of
the case, there was compliance with this rule as professed by the PCGG, or non-observance
thereof, as argued and declared by respondent corporations and the SANDIGANBAYAN,
respectively. Stress should be given to the fact that the Court's resolution of this crucial issue would
particularly apply to SIPALAY inasmuch as it involves a sequestration order — not to ALLIED
against whom was issued a search and seizure order that we have just heretofore declared as void.
Nonetheless, for simplicity's sake, such resolution can be made to cover ALLIED's case as well. We
thus forego with the distinction in this instance and assume that ALLIED was
sequestered via sequestration order similar to that issued against SIPALAY.
At the fore once again is Section 26, Article XVIII of the 1987 Constitution, specifically the second
and third paragraphs:

Sec. 26.

xxx xxx xxx

A sequestration or freeze order shall be issued only upon showing of a prima

facie case. The order and the list of the sequestered or frozen properties shall
forthwith be registered with the proper court. For orders issued before the ratification
of this Constitution, the corresponding judicial action or proceeding shall be filed
within six months from its ratification. For those issued after such ratification, the
judicial action or proceeding shall be commenced within six months from the
issuance thereof.

The sequestration or freeze order is deemed automatically lifted if no judicial action

or proceeding is commenced as herein provided.

And here are the relevant and undisputable facts: The 1987 Constitution was ratified on
February 2, 1987. Counting six (6) months therefrom, August 2, 1987 was the constitutional
deadline for the PCGG to file the corresponding judicial action/proceeding against entity or
entities it sequestered prior to February 2, 1987. Among such entity or entities were
SIPALAY and ALLIED, the dates of their sequestration as appearing from the corresponding
orders issued against them are July 14, 1986 and August 13, 1986, respectively. The PCGG
admittedly did not file any direct complaint either against SIPALAY or ALLIED before the
SANDIGANBAYAN between February 2 and August 2 of 1987. But within such period,
specifically on July 17, 1987, the PCGG filed before the SANDIGANBAYAN a civil case
against Lucio Tan and others, for "Reversion, Reconveyance, Restitution, Accounting and
Damages", docketed as CC No. 0005.78 The original complaint in CC No. 0005 did not name
SIPALAY and ALLIED as defendants, as it enumerated only natural persons, except for
one,79 as such. SIPALAY and ALLIED were impleaded as defendants in CC No. 0005 for the
first time only after the lapse of more than four (4) years from the filing of the original
complaint in July of 1987, under an amended complaint filed by the PCGG in September of
1991.

Given this factual backdrop, two propositions are being bruited by the PCGG:

1) that the July 17, 1987 original complaint against Lucio C. Tan, et al. (CC No. 0005) is the judicial
action required by the 1987 Constitution to justify the continued sequestration of SIPALAY (and
ALLIED), and

2) even assuming arguendo that such original complaint was defective for not naming therein
SIPALAY and ALLIED as defendants, still there was faithful compliance with the constitutional
mandate, since the September, 1991 amended complaint impleading SIPALAY and ALLIED as
defendants — even when filed beyond the August 2, 1987 deadline — retroacted to July 17, 1987
which, thus, cured the defect.

Both propositions have to be rejected.

As to the first, the SANDIGANBAYAN correctly struck it down by following the doctrine laid down in
"PCGG v. International Copra Export Corporation, Interco Manufacturing Corporation and
Sandiganbayan"80 ("INTERCO" case, for short). We thus quote with approval the pertinent
disquisitions, to wit:

. . . On not a few occasions, the Court has sustained the merit and logic of motions
seeking the lifting of writs of sequestration for respondent PCGG's failure to institute
the corresponding judicial action or proceeding against corporations which, either
through sheer oversight or gross neglect, have not been expressly impleaded in the
various civil complaints filed before this Court. The case of "PCGG v. International
Copra Export Corporation, et al." (INTERCO case) is illuminating on this point.
Therein, the Supreme Court made a distinction between the juridical personalities of
a corporation and its stockholders, ruling that if a corporation is not impleaded, it
cannot be deemed to have been sued in an action against its stockholders.

A perusal of the original complaint in Civil Case No. 0005, which was concededly
filed within the six-month period provided for under the organic law, reveals that
petitioner Sipalay Trading was not specifically impleaded therein as party-defendant,
either in a nominal or principal capacity. If at all, the latter has been included therein
as part of principal defendant's ill-gotten assets. Under Rule 3, Section 7 of the Rules
of Court, "(P)arties in interest without whom no final determination can be had of an
action shall be joined either as plaintiffs or defendants."

It bears emphasis along this vein that, as implied from INTERCO, petitioner Sipalay
Trading has a juridical personality separate and distinct from its stockholders. As
such, any civil charge filed against principal defendant Lucio C. Tan and/or his
dummies or agents is not deemed a suit against the former. Neither does mere
inclusion in the list of ill-gotten assets as part of principal defendant's ill-gotten wealth
suffice to comply with the constitutional injunction. Impleading a party means bringing
the suit against it. Listing or annexing it to the complaint, on the other hand, implies
being the object of the action.

xxx xxx xxx

It must be stated with equal respect that the phrase "judicial action or proceeding,"
within the meaning of the organic law, is subject to the ordinary rules of procedure
and is subordinate to the requirements of due process. Failure to implead petitioner
corporation in the action within the constitutional period is, therefore, patently
transgressive of the constitutional mandate against deprivation of life, liberty and
property without due process of law.81

To fortify this ruling, we need only to point out the similarity in factual antecedents obtaining
in "INTERCO" and the instant case. In "INTERCO", no judicial action or proceeding was
instituted by the PCGG directly against respondent corporations therein (International Copra
Export and International Manufacturing) which it sequestered on June 10, 1987 purportedly
upon a prima facie finding that certain shares of stocks in those corporations are beneficially
owned but were acquired with ill-gotten wealth by Eduardo Cojuangco, Jr., within six (6)
months from the date of their sequestration — i.e., between June 10, 1987 and December
10, 1987. And the PCGG in "INTERCO" likewise filed a complaint before the
SANDIGANBAYAN on July 31, 1987 against Eduardo Cojuangco, Jr., among others (Civil
Case No. 0033) without, however, impleading respondent corporations as parties-
defendants. The Court in "INTERCO" rejected the PCGG's contention that the July 31, 1987
complaint against Cojuangco, Jr., et al. was substantial compliance with the requirement
 under Section 26, Article XVIII of the 1987 Constitution, by upholding very fundamental
principles in corporation law:

In this jurisdiction, a corporation has a legal personality distinct and separate from its
stockholders. Thus, a suit against any of the stockholders is not ipso facto a suit
against the corporation.

xxx xxx xxx

There is likewise no merit to petitioner's argument that the doctrine which justifies the
"piercing of the veil of corporate fiction" is applicable to the case at bar. The
Sandiganbayan correctly found the record bereft of sufficient basis from which to
conclude that private respondents' respective corporate identities have been used to
defeat public convenience, protect fraudulent schemes, or evade obligations and
liabilities under statutes. Whether or not Enrique Luy, a major stockholder of private
respondents, acted as a dummy of Eduardo Cojuangco, Jr., and whether or not the
shareholders of Enrique Luy are beneficially owned by Eduardo Cojuangco, Jr., are
matters still to be established in Civil Case No. 0033. But as far as private
respondents are concerned, inclusion of their major stockholder in Civil Case No.
0033 does not detract from, nor excuse, petitioner's failure to file the proper judicial
action against them in compliance with the constitutional requirement under Section
26 of Article XVIII.

And following the rule, elsewise stated, that cases circumstanced identically should be
resolved consistently, adherence to the ruling of the Court in "INTERCO" is necessary and
inescapable.

Regarding its second proposition, the PCGG erroneously relies on "Pangasinan Transportation Co.
v. Philippine Farming Co., Ltd."82 where it was ruled to the effect that:

Where the original complaint states a cause of action, but does it imperfectly, and
afterward an amended complaint is filed, correcting the defect, the plea of statute of
limitations will relate to the time of filing the original complaint.

The "Pangasinan" case dealt solely with a defect in the cause of action stated in the original
complaint filed by therein petitioner Pangasinan Transport against its competitor, respondent
Philippine Farming before the Public Service Commission; for illegal reduction of rates
— i.e., non-specification of the acts constituting the offense. It did not in any way involve a
failure to implead a party-defendant which is an entirely different thing from a defective cause
of action. The scope of the retroactive and curative effect of an amended complaint as
declared in "Pangasinan" therefore ought not be broadened so as to cover infirmities in the
original complaint other than amendable imperfections in a cause of action. In fact, insofar as
the failure to implead a party or parties in the original complaint is specifically concerned, the
Court on at least two occasions said that the rule in "Pangasinan" would not apply to the
party impleaded for the first time in the amended complaint. These are the cases of "Aetna
Insurance Co. v. Luzon Stevedoring Corporation"83 and "Seno, et al., v. Mangubat, et
al."84 cited by herein SIPALAY and ALLIED in their "Comment." In "Aetna", the amended
complaint filed by therein appellant Aetna Insurance Co. as plaintiff before the then CFI of
Manila impleading Barber Line Far East Service as defendant for the first time, was filed
beyond the one-year period fixed in the Carriage of Goods by Sea Act. In "Seno", one
Andres Evangelista and Bienvenido Mangubat were likewise impleaded as defendants for
the first time under an amended complaint filed beyond the ten-year period required under
 Article 1144 of the New Civil Code within which to bring an action upon a written contract.
And in both cases, the Court affirmed the dismissal of the complaints against these newly
impleaded defendants by refusing the application of the "Pangasinan" ruling and decreeing
that the amended complaints did not stall the running of the prescription periods provided
under the applicable laws. Bearing once again similar factual features as the "Aetna" and
"Seno" cases, this particular sub-issue should, perforce, be resolved in accordance
therewith.

This Court is, of course, fully aware of that very recent case of "Republic v. Sandiganbayan, et al.",
240 SCRA 376 [January 23, 1995], where its "Final Dispositions" relating to the judicial
action/proceeding in sequestration cases appear to clash with "INTERCO". In resolving what
appeared to be the "crucial question" involved in that 1995 "Republic v. Sandiganbayan" case, to wit:

DOES INCLUSION IN THE COMPLAINTS FILED BY THE PCGG BEFORE THE

SANDIGANBAYAN OF SPECIFIC ALLEGATIONS OF CORPORATIONS BEING
"DUMMIES" OR UNDER THE CONTROL OF ONE OR ANOTHER OF THE
DEFENDANTS NAMED THEREIN AND USED AS INSTRUMENTS FOR
ACQUISITION, OR AS BEING DEPOSITARIES OR PRODUCTS, OF ILL-GOTTEN
WEALTH; OR THE ANNEXING TO SAID COMPLAINTS OF A LIST OF SAID
FIRMS, BUT WITHOUT ACTUALLY IMPLEADING THEM AS DEFENDANTS,
SATISFY THE CONSTITUTIONAL REQUIREMENT THAT IN ORDER TO
MAINTAIN A SEIZURE EFFECTED IN ACCORDANCE WITH EXECUTIVE ORDER
NO. 1, s. 1986, THE CORRESPONDING "JUDICIAL ACTION OR PROCEEDING"
SHOULD BE FILED WITHIN THE SIX-MONTH PERIOD PRESCRIBED IN
SECTION 26, ARTICLE XVIII, OF THE (1987) CONSTITUTION?

the Court made these conclusions:

It is thus both needful and timely to pronounce that:

1) Section 26, Article XVIII of the Constitution does not, by its terms or any fair
interpretation thereof, require that corporations or business enterprises alleged to be
repositories of "ill-gotten wealth", as the term is used in said provision, be actually
and formally impleaded in the actions for the recovery thereof, in order to maintain in
effect existing sequestrations thereof;

2) complaints for the recovery of ill-gotten wealth which merely identify and/or allege
said corporations or enterprises to be the instruments, repositories or the fruits of ill-
gotten wealth, without more, come within the meaning of the phrase "corresponding
judicial action or proceeding" contemplated by the constitutional provision referred to;
the more so, that normally, said corporations, as distinguished from their
stockholders or members, are not generally suable for the latter's illegal or criminal
actuations in the acquisition of the assets invested by them in the former;

3) even assuming the impleading of said corporations to be necessary and proper so

that judgment may comprehensively and effectively be rendered in the actions,
amendment of the complaints to implead them as defendants may, under existing
rules of procedure, be done at any time during the pendency of the actions thereby
initiated, and even during the pendency of an appeal to the Supreme Court — a
procedure that, in any case, is not inconsistent with or proscribed by the
constitutional time limits to the filing of the corresponding complaints "for" — i.e., with
 regard or in relation to, in respect of, or in connection with, or concerning — orders of
sequestration, freezing, or provisional takeover.

These fresh pronouncements, however, did not reverse, abandon or supplant "INTERCO". What the
Court did was to explain the two apparently colliding dispositions by making this "hairline", but
critical, distinction:

XVI. The "Interco" and "PJI" Rulings

This Court is not unmindful of the fact that its Resolution of July 26, 1991 on the
petitioner's motion for reconsideration in G.R. No. 92755 (PCGG vs. Interco) appears
to sustain the proposition that actual impleading in the recovery action of a
corporation under sequestration for being a repository of illegally-acquired wealth, is
necessary and requisite for such proposed or pending seizure to come under the
protective umbrella of the Constitution. But Interco is to be differentiated from the
cases now under review in that in the former, as already elsewhere herein made
clear, there was a lack of proof, even of the prima facie kind, that Eduardo
Cojuangco, Jr. owned any stock in Interco, the evidence on record being in fact that
said corporation had been organized as a family corporation of the Luys.

So, too, this Court's judgment in the so-called "PJI Case" (Republic of the Philippines
[PCGG] v. Sandiganbayan and Rosario Olivares) may not be regarded as on all
fours with the cases under consideration. The PJI Case involved the shares of stock
in the name of eight (8) natural persons which had never been sequestered at all.
What happened was that the PCGG simply arrogated unto itself the right to vote
those unsequestered shares on the bare claim that the eight (8) registered owners
thereof were "dummies" of Benjamin Romualdez, the real owner of the shares; and
all that the PCGG had done as predicate for that act of appropriation of the stock,
was to include all the shares of PJI in a list (Annex A) appended to its complaint in
Sandiganbayan Case No. 0035, describing them as among the properties illegally
acquired by Romualdez. Unfortunately, as in Interco, the PCGG failed to substantiate
by competent evidence its theory of clandestine ownership of Romualdez; and since
moreover, there had been no sequestration of the alleged dummies' shares of stock,
it was undoubtedly correct for the Sandiganbayan to grant the latter's motion for them
to be recognized and declared as the true owners of the stock in question, which
judgment this Court subsequently pronounced to be free from grave abuse of
discretion.85

We need only to recall at this juncture that, as in "INTERCO", evidence of the PCGG is nil to
even come up with a prima facie case against SIPALAY (and ALLIED). This similitude is the
one decisive factor that draws the instant case away from the "Final Dispositions" made by
the Court in the 1995 "Republic v. Sandiganbayan" case — thus making "INTERCO", as
supported by the "Aetna" and "Seno" cases, the controlling precedent. The principle
of Stare Decisis, indeed, is most compelling, for "when the court has once laid down a
principle of law as applicable to a certain state of facts, it will adhere to that principle and
apply it to all future cases where the facts are substantially the same."86 And it is in this light
that Mr. Justice Padilla's lone "Dissent" in the 1995 "Republic v. Sandiganbayan" case
becomes meaningfully relevant, to wit:

. . . failure to implead these corporations as defendants and merely annexing a list of

such corporations to the complaints is a violation of their right to due process for it
 would in effect be disregarding their distinct and separate personality without a
hearing.

In cases where stocks of a corporation were allegedly the fruits of ill-gotten wealth, it
should be remembered that in most of these cases the stocks involved constitute a
substantial if not controlling interest in the corporations. The basic tenets of fair play
demand that these corporations be impleaded as defendants since a judgment in
favor of the government will undoubtedly substantially and decisively affect the
corporations as distinct entities. The judgment could strip them of everything without
being previously heard as they are not parties to the action in which the judgment is
rendered.

. . . Holding that the "corresponding judicial action or proceeding" contemplated by

the Constitution is any action concerning or involving the corporation under
sequestration is oversimplifying the solution, the result of which is antagonistic to the
principles of justice and fair play.

. . . the actions contemplated by the Constitution should be those which include the
corporation not as a mere annex to the complaint but as defendant. This is the
minimum requirement of the due process guarantee. Short of being impleaded, the
corporation has no standing in the judicial action. It cannot adequately defend itself. It
may not even be heard.

On the . . . opinion that alternatively the corporations can be impleaded as

defendants by amendment of the complaint, Section 26, Article XVIII of the
Constitution would appear to preclude this procedure, for allowing amendment of the
complaint to implead theretofore unimpleaded corporations would in effect allow
complaints against the corporations to be filed beyond the periods fixed by said
Section 26.

Justice Amuerfina Melencio-Herrera in her separate opinion in Bataan Shipyard and

Engineering Corporation, Inc. v. PCGG (150 SCRA 181, 253) correctly stated what
should be the rule, thus:

Sequestration is an extraordinary, harsh and severe remedy. It

should be confined to its lawful parameters and exercised, with due
regard, in the words of its enabling laws, to the requirements
of fairness, due process, and Justice. (Emphasis supplied)

While government efforts to recover illegally amassed wealth should have support
from all its branches, eagerness and zeal should not be allowed to run berserk,
overriding in the process the very principles that it is sworn to uphold. In our legal
system, the ends do not always justify the means. Wrongs are never corrected by
committing other wrongs, and as above-discussed the recovery of ill-gotten wealth
does not and should never justify unreasonable intrusions into constitutionally
forbidden grounds. . . .

In answer therefore to the last key issue, we hold that the sequestration and the search and
seizure orders issued were indeed automatically lifted.

Finally, the PCGG in its "Reply" raises as "additional issue" the bias and partiality of the now-
assailed decision'sponente and Chairman of the SANDIGANBAYAN's SECOND DIVISION, Justice
Romeo Escareal. To bolster this charge, the PCGG harps on alleged prejudicial acts committed by
Justice Escareal affecting CC No. 0005 — the case filed against Lucio C. Tan, and the instant case
(S.B. Nos. 0095 against SIPALAY and 0100 against ALLIED).

This issue deserves no merit at all. Firstly, the PCGG's complaints against Justice Escareal's
purported bias and partiality in CC No. 0005 have no bearing whatsoever to the instant case. That
should be ventilated and passed upon there, not here. And secondly, SIPALAY and ALLIED in their
"Rejoinder" meritoriously parried the PCGG's accusation by arguing that:

1.02. Petitioner apparently overlooks that the Sandiganbayan is a collegiate court

which sits in divisions composed of three (3) members each. The unanimous vote of
all the three (3) members of a division is required for the rendition of a judgment (See
Section 1(b), Rule XVIII, Revised Rules of the Sandiganbayan). The Decision and
Resolution subject of the present appeal, though penned by Justice Romeo
Escareal, the Chairman of the Second Division of the Sandiganbayan, were
concurred in by the two (2) other members of the Sandiganbayan's Second Division.
Such being the case, petitioner's fears of bias or partiality on the part of Justice
Romeo Escareal cannot affect the questioned Decision and Resolution rendered by
the Sandiganbayan (Second Division). As held by this Honorable Court in Miriam
Defensor-Santiago vs. Hon. Justice Francis Garchitorena, et al. (G.R. No. 109226,
December 2, 1993):

Notwithstanding petitioner's misgiving, it should be taken into

consideration that the Sandiganbayan sits in three divisions with
three justices in each division. Unanimity among the three members
is mandatory for arriving at any decision of a division. (P.D. 1606,
Sec. 5). The collegiate character of the Sandiganbayan thus renders
baseless petitioner's fear of prejudice and bias on the part of
Presiding Justice Garchitorena (Paredes vs. Gopenco, 29 SCRA 688
[1969]).

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED.
G.R. No. 149422 April 10, 2003

DEPARTMENT OF AGRARIAN REFORM, petitioner

vs.
APEX INVESTMENT AND FINANCING CORPORATION (now SM Investment
Corporation), respondent.

SANDOVAL-GUTIERREZ, J.:

Before us is a petition for review on certiorari1 filed by the Department of Agrarian Reform (DAR)
assailing the Decision2 of the Court of Appeals dated April 26, 2001 in CA-G.R. SP No. 55052, "Apex
Investment and Financing Corporation vs. Department of Agrarian Reform, et al.;" and its Resolution
dated August 2, 2001 denying petitioner's motion for reconsideration.

Respondent Apex Investment and Financing Corporation (now SM Investments Corporation),

registered under the laws of the Philippines, owns several lots located at Barangay Paliparan,
Dasmariñas, Cavite, covered by Transfer Certificates of Title (TCT) Nos. T-72491, T-90474, T-
90475, T-90476, and T-90477.

On August 24, 1994, the Municipal Agrarian Reform Office (MARO) of Dasmariñas initiated
compulsory acquisition proceedings over those lots pursuant to Republic Act No. 6657, otherwise
known as the Comprehensive Agrarian Reform Law of 1988. The MARO issued a Notice of
Coverage informing respondent of the compulsory acquisition and inviting it to a meeting set on
September 8, 1994; and Notice of Acquisition. Copies of these notices were sent to respondent's
office at 627 Echague Street, Manila. However, respondent denied having received the same
because it was no longer holding office there.

Respondent learned of the compulsory acquisition proceedings from the December 11, 1997 issue
of the Balita stating, among others, that TCT No. T-90476, covering respondent's lot consisting of
23,614 square meters, has been placed under the compulsory acquisition program. Forthwith,
petitioner sent respondent a copy of the Notice of Land Valuation and Acquisition dated July 24,
1997, offering to pay it P229,014.33 as compensation for the lot covered by TCT No. T-90476.

On January 12, 1998, respondent filed with the PARO a Protest rejecting the offer of compensation
and contending that its lands are not covered by R.A. No. 6657 because they were classified as
residential even prior to the effectivity of the law. Attached to its protest are copies of its land titles,
tax declarations, location map and other supporting documents.

On March 27, 1998, respondent filed with the PARO a Supplemental Protest with (a) the Certification
issued by Engineer Baltazar M. Usis, Regional Irrigation Manager of the National Irrigation
Administration, Region IV, stating that respondent's lots are not covered by any irrigation project;
and (b) the Certification issued by Engineer Gregorio Bermejo, Municipal Engineer and Deputized
Zoning Administrator of Dasmariñas, Cavite, attesting that the same lots are within the residential
zone based on the Land Use Plan of the Municipality of Dasmariñas duly approved by the Housing
and Land Use Regulatory Board (HLURB) in its Resolution No. R-42-A-3 dated February 11, 1981.

It was only on February 15, 1999, or more than one year after respondent filed its protest, that the
PARO forwarded to petitioner DAR the said protest together with the records of the compulsory
acquisition proceedings.

On June 21, 1999, respondent received a letter dated May 28, 1999 from petitioner requiring it to
submit certified true copies of the TCTs covering its lots and a Certification from the HLURB
attesting that they are within the residential zone of Dasmariñas based on HLURB Resolution No. R-
42-A-3 dated February 11, 1981.

Thereafter, respondent learned that on June 24, 1999, the Registry of Deeds of Cavite cancelled
one of its titles, TCT No. T-90476, and in lieu thereof, issued TCT No. T-868471 in the name of the
Republic of the Philippines.

On July 26, 1999, respondent came to know that TCT No. T-868471 was cancelled and in lieu
thereof, TCT No. CLOA-2473 was issued in the name of Angel M. Umali, a farmer-beneficiary
allegedly occupying the land. This prompted respondent to file with the Court of Appeals a petition
for certiorari and prohibition praying that the compulsory acquisition proceedings over its
landholdings be declared void and that TCT No. CLOA-2473 issued to Angel Umali be cancelled.

In its comment, petitioner alleged that respondent failed to exhaust all administrative remedies
before filing its petition. Hence, the same should be dismissed.

On April 26, 2001, the Court of Appeals rendered its Decision, the dispositive portion of which reads:

"WHEREFORE, the petition for certiorari is hereby granted and judgment is hereby rendered
as follows:

a) declaring the compulsory acquisition under Republic Act No. 6657 as null and
void ab initio;

b) prohibiting public respondents PARO and DAR from continuing with the
compulsory acquisition proceedings over TCT No. T-72491; TCT No. T-90474; TCT
No. T-90475; and TCT No. T-90477;

compulsory acquisition proceedings over TCT No. T-72491; TCT No. T-90474; TCT
No. T-90475; and TCT No. T-90477;

c) prohibiting public respondent Register of Deeds of Cavite from cancelling the land
titles of petitioner, i.e., TCT No. T-72491; TCT No. T-90474; TCT No. T-90475; and
TCT No. T-90477 and the transferring, conveying and alienation thereof; and

d) ordering the Register of Deeds of Cavite to restore TCT No. T-90476 (now CLOA
2473) in the name of petitioner.

"SO ORDERED."

Petitioner filed a motion for reconsideration but was denied in the Resolution dated August 2, 2001.

Hence, the instant petition for review on certiorari.

Petitioner ascribes to the Court of Appeals the following errors: (a) in ruling that respondent
corporation did not violate the principle of exhaustion of remedies; (b) in holding that respondent was
deprived of its right to due process; and (c) in concluding that the subject parcels of land are
residential, hence, not covered by R.A. No. 6657.

On the first assigned error, this Court has consistently held that the doctrine of exhaustion of
administrative remedies is a relative one and is flexible depending on the peculiarity and uniqueness
of the factual and circumstantial settings of a case.3 Among others, it is disregarded where, as in this
case, (a) there are circumstances indicating the urgency of judicial intervention;4 and (b) the
administrative action is patently illegal and amounts to lack or excess of jurisdiction.5

Records show that the PARO did not take immediate action on respondent's Protest filed on January
12, 1998. It was only on February 15, 1999, or after more than one year, that it forwarded the same
to petitioner DAR. Since then, what petitioner has done was to require respondent every now and
then to submit copies of supporting documents which were already attached to its Protest. In the
meantime, respondent found that the PARO had caused the cancellation of its title and that a new
one was issued to an alleged farmer-beneficiary.

In Natalia Realty vs. Department of Agrarian Reform,6 we held that the aggrieved landowners were
not supposed to wait until the DAR acted on their letter-protests (after it had sat on them for almost a
year) before resorting to judicial process. Given the official indifference which, under the
circumstances could have continued forever, the landowners had to act to assert and protect their
interests. Thus, their petition for certiorari was allowed even though the DAR had not yet resolved
their protests. In the same vein, respondent here could not be expected to wait for petitioner DAR to
resolve its protest before seeking judicial intervention. Obviously, petitioner might continue to
alienate respondent's lots during the pendency of its protest. Hence, the Court of Appeals did not err
in concluding that on the basis of the circumstances of this case, respondent need not exhaust all
administrative remedies before filing its petition for certiorari and prohibition.

As to the second assigned error, we find that petitioner was deprived of its constitutional right to due
process.

Section 16 of R.A. No. 6657, provides:

"Section 16. Procedures for Acquisition of Private Lands. – For purposes of acquisition of
private lands, the following procedures shall be followed:

"(a) After having identified the land, the landowners and the beneficiaries, the DAR shall
send its notice to acquire the land to the owners thereof, by personal delivery or registered
mail, and post the same in a conspicuous place in the municipal building and barangay hall
of the place where the property is located. Said notice shall contain the offer of the DAR to
pay a corresponding value in accordance with the valuation set forth in Sections 17, 18, and
other pertinent provisions hereof.

"x x x"

In Roxas & Co., Inc. vs. Court of Appeals,7 we held:

"For a valid implementation of the CAR program, two notices are required: (1) the Notice of
Coverage and letter of invitation to preliminary conference sent to the landowner, the
representatives of the BARC, LBP, farmer beneficiaries and other interested parties pursuant
to DAR A.O. No. 12, Series of 1989; and (2) the Notice of Acquisition sent to the landowner
under Section 16 of R.A. No. 6657.

"The importance of the first notice, i.e., the Notice of Coverage and the letter of invitation to
the conference, and its actual conduct cannot be understated. They are steps designed to
comply with the requirements of administrative due process. The implementation of the
CARL is an exercise of the State's police power and the power of eminent domain. To the
extent that the CARL prescribes retention limits to the landowners, there is an exercise of
 police power for the regulation of private property in accordance with the Constitution
(Association of Small Landowners in the Philippines vs. Secretary of Agrarian Reform, 175
SCRA 343, 373-374 [1989]). But where, to carry out such regulation, the owners are
deprived of lands they own in excess of the maximum area allowed there is also a taking
under the power of eminent domain. The taking contemplated is not a mere limitation of the
use of the land. What is required is the surrender of the title to and physical possession of
the said excess and all beneficial rights accruing to the owner in favor of the farmer
beneficiary (id.). The Bill of Rights provides that "[n]o person shall be deprived of life, liberty
or property without de process of law" (Section 1, Article III of the 1987 Constitution). The
CARL was not intended to take away property without due process of law (Development
Bank of the Philippines vs. Court of Appeals, 262 SCRA 245, 253 [1996]). The exercise of
the power of eminent domain requires that due process be observed in the taking of private
property."

In the instant case, petitioner does not dispute that respondent did not receive the Notice of
Acquisition and Notice of Coverage sent to the latter's old address. Petitioner explained that its
personnel could not effect personal service of those notices upon respondent because it changed its
juridical name from Apex Investment and Financing Corporation to SM Investment Corporation.
While it is true, that personal service could not be made, however, there is no showing that petitioner
caused the service of the notices via registered mail as required by Section 16(a) of R.A. No. 6657.
On this point, petitioner claimed that the notices were sent "not only by registered mail but also by
personal delivery" and that there was actual receipt by respondent as shown by the signature
appearing at the bottom left-hand corner of petitioner's copies of the notices. But petitioner could not
identify the name of respondent's representative who allegedly received the notices. In fact,
petitioner admitted that the signature thereon is illegible. It is thus safe to conclude that respondent
was not notified of the compulsory acquisition proceedings. Clearly, respondent was deprived of its
right to procedural due process. It is elementary that before a person can be deprived of his
property, he should be informed of the claim against him and the theory on which such claim is
premised.8

On the last assigned error, Section 4 of R.A. No. 6657 provides that the Comprehensive Agrarian
Reform Law shall cover, regardless of tenurial arrangement and commodity produced, "all public and
private agricultural lands." Section 3(c) defines "agricultural land," as "land devoted to agricultural
activity as defined in this Act and not classified as mineral, forest, residential, commercial or
industrial land."

Respondent vehemently insists that its lots had been classified as residential prior to June 15, 1988,
the date of effectivity of R.A. No. 6657. As earlier mentioned, Engineer Gregorio Bermejo, Municipal
Engineer and Deputized Zoning Administrator of Dasmariñas, Cavite, certified that respondent's
lands are within the residential zone of Dasmariñas, based on the Land Use Plan of that municipality
duly approved by the HLURB in its Resolution No. R-42-A-3 dated February 11, 1981. We observe,
however, that this factual issue was never determined below. Thus, we cannot conclude that
respondent's parcels of land are residential.

WHEREFORE, the challenged Decision dated April 26, 2001 of the Court of Appeals in CA-G.R. SP
No. 55052 is AFFIRMED with MODIFICATION in the sense that we allow the DAR to conduct
appropriate proceedings to determine whether the subject parcels of land are indeed residential and
are thus outside the coverage of R.A. No. 6657.

SO ORDERED.
G.R. No. 119509 February 11, 1999

ENRIQUE A. ARBOLEDA, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and MANILA ELECTRIC
COMPANY, respondents.

BELLOSILLO, J.:

This petition for certiorari seeks to reverse and set aside for grave abuse of discretion the decision of
respondent National Labor Relations Commission (NLRC) dated 29 November 1994 reversing that
of the Labor arbiter sustaining petitioner.

Enrique A. Arboleda was an employee of Manila Electric Company (MERALCO) for twenty-five (25)
years. He served from 1963 to 11 February 1988 when he was dismissed by MERALCO under Sec.
7, par. 1, of its Company Code of Employee Discipline for misappropriating or withholding company
funds. His record shows that he rose from the ranks to become branch clerk, and later, radio
operator of MERALCO's Novaliches branch.

On 18 July 1986 a certain Antonio D. Sy applied for electrical service for his residence and for his
hardware store situated in the premises leased to him by the spouses Renato and Sylvia Cruz.
Pending the processing of his application, Sy Was found to have illegal electrical connection, first on
6 March 1987, and then on 8 June 1987.

According to Sy, on 9 June 1987 he went to the MERALCO office in Novaliches to pay for his Found
Connection (FC) bills. 1 There he met petitioner Arboleda who told him that he had to pay his FC bills
amounting to around P2,000.00 for three (3) months before a meter could be installed. Sy demurred
saying he had with him only P1,200.00. Petitioner agreed to accept the amount so Sy handed it to
him who received it without issuing any official receipt. Thereafter petitioner sent over Brigido "Adu"
Anonuevo and ascertain "Mulong" to install the meter. 2

Marcelo P. Umali, then branch manager of MERALCO at Novaliches, narrated that on 16 June 1987
he happened to pass by Sy's house and noticed the illegal connection. He immediately confronted
Sy who protested that he had paid his FC bills to petitioner. 3 Umali then interviewed Sylvia Cruz
about Sy's claims and she confirmed them. 4

Sy immediately settled his FC bills with MERALCO for which he was issued an official receipt. On 18
June 1987, after complying with all the requirements by MERALCO, his application for electrical
service was granted. On the same day, Umali submitted his recommendation to his immediate
supervisor, R. A. Villanueva, to have Arboleda investigated. 5

On 21 October 1987 Atty. Anecito A. Mejorada of MERALCO's Special Presidential Committee wrote
petitioner Arboleda notifying him that on 27 October 1987 an investigation would be conducted
against him for misappropriation of FC bills, 6 but petitioner sought a postponement of the
investigation. 7 On 7 November 1987 he was suspended pending his investigation. 8 On 9 November
1987 the investigation proceeded with Juanito Rivera, Chief Steward and Vice-President of the
employees' labor union, as petitioner's representative. In the investigation, Arboleda made a general
denial about knowing Sy, "Adu" and "Mulong." 9 He claimed that sometime thereafter Brigido
Anonuevo went to his house bringing his Affidavit of Justification, Certificate of Attendance at a
MERALCO Seminar and Sy's Affidavit of Desistance. 10 On 21 November 1987 petitioner wrote the
MERALCO investigators Jose Benalla and Eligio Reonal, Jr., informing them of the visit of Anonuevo
and his wife to Sy's house along with Sylvia Cruz. 11 Despite his suspension which lasted until his
dismissal, petitioner continued to receive his salary of P11,332.50 from 20 December 1987 to 11
February 1988. 12

On 20 April 1988 Arboleda filed a case against MERALCO for illegal dismissal. He was
subsequently sustained by the Labor Arbiter on three (3) grounds: (a) Sy's accusation against him
was only prompted by Umali; (b) Sy's credibility was suspect since he was apprehended thrice for
illegal use of electric current; and, (c) Sy's motive was malicious and his testimony was made only;
to save his own skin. 13

On appeal by MERALCO the NLRC reversed the Labor Arbiter on the ground that there was no
proof of instigation on the part of Umali; Sy's testimony was credible; and, Anonuevo's exculpating
evidence in favor of Arboleda was a ruse. 14

The principle that factual findings of administrative bodies are binding upon this Court may be
sustained only when no issue of credibility is raised. But when the findings of fact of the NLRC do
not agree with those of the Labor Arbiter, this Court must of necessity review the records to
determine which findings should be preferred as more conformable to the evidentiary facts. 15

The main issue being the legality of petitioner's dismissal, it may be worth to look into the requisites
for the validity of a dismissal, namely, (a) the employee must be afforded due process, i.e., he must
be given an opportunity to be heard and defend himself, and (b) the dismissal must be for a valid
cause as provided in Art. 282 of the Labor Code. 16

As regards his right to due process, petitioner contends that he was denied such right during the
investigation conducted by MERALCO as he did not have the opportunity to confront the witnesses
against him.

The essence of due process in administrative proceedings is an opportunity to explain one's side or
an opportunity to seek reconsideration of the action or ruling complained of. Before an employee can
be validly dismissed, the Labor code requires the employer to furnish the employee with two (2)
written notices: (a) a written notice containing a statement of the cause for termination to afford the
employee ample opportunity to be heard and defend himself with the assistance of his
representative, if he so desires; and, (b) if the employer decides to terminate the services of the
employee, the employer must notify him in writing of the decision to dismiss him, stating clearly the
reasons therefor. 17 This MERALCO more than substantially complied with when it notified Arboleda
in a letter dated 21 October 1987 of the charges against him and of his right to be represented by a
lawyer or representative and when it gave him notice by letter dated 11 February 1988 of his
dismissal and the reasons therefor.

The requirement of notice and hearing in termination cases does not connote full adversarial
proceedings as elucidated in numerous cases decided by this Court. Actual adversarial proceedings
become necessary only for clarification or when there is a need to propound searching questions to
witnesses who give vague testimonies. This is a procedural right which the employee must ask for
since it is not an inherent right, and summary proceedings may be conducted thereon. 18

In termination cases the settled rule is that the burden of proving that the termination was for a valid
or authorized cause rests on the employer. 19 Thus, MERALCO must not only rely on the weakness
of petitioner's evidence but must stand on the merits of its own defense.
The core of MERALCO's evidence is the testimony of Alberto Sy who identified petitioner Arboleda
as the one who received P1,200.00 from him for purposes of paying off his FC arrears and for which
Arboleda did not issue an official receipt. This testimony of Sy was discredited by the Labor Arbiter in
his belief that Sy so with the ulterior motive of avoiding criminal prosecution because of his illegal
connection and that he only complained due to the instigation of Umali, The Novaliches branch
manager. But the NLRC believed that Sy categorically denounced Arboleda without any prompting
from Umali and that, despite petitioner's denials, Anonuevo was known to petitioner. For, why else
would Anonuevo come out in defense of the latter? In fact the NLRC explicitly termed the testimony
of Anonuevo as a ruse.

We agree with the NLRC. Sy categorically and spontaneously denounced Arboleda without any
prodding from Umali. 20 It may be recalled that Umali only asked Sy why he had an FC. 21 Perhaps
Umali did not even expect SY to implicate anyone from MERALCO as the culprit, much less think of
Arboleda as the guilty party, especially when there was no showing of any enmity between them.
Apparently, when Sy mentioned Arboleda's name, it was more out of indignation that the electrical
connection should be found to be illegal when he had paid for its proper and legitimate connection.
Sy's alarm was understandable in the light of the two (2) instances when he was found to have
illegal connections. That the testimony of Sy is credible is shown by the fact that his statements were
replete with consistent and positive details congruent with human experience. Testimony is positive
when the witness affirms that a fact did or did not occur, and negative when he says that he did not
see or know of the factual occurrence. Positive testimony is entitled to greater weight than negative
.testimony. 22

There is nothing on records indicate any ulterior motive on the part of Sy to fabricate his testimony.
The finding of the Labor Arbiter that Sy only denounced Arboleda to save his own skin from possible
criminal prosecution may be explained by these questions: Why would Sy implicate Arboleda when,
according Arboleda, seconded by Anonuevo, they had never met before? Why did Sy not name
Anonuevo instead as the one to whom he paid the money? Absent convincing evidence showing
any cogent reason why a witness should testify falsely, his testimony may be accorded full faith and
credit. 23 Proof beyond reasonable doubt is not required for a judgment on the legality of an
employee's dismissal, nor even preponderance of evidence for that matter, substantial evidence
being sufficient. 24Substantial evidence is such relevant evidence as a reasonable mind might accept
as adequate to support a conclusion. 25

The nature of petitioner's testimony is that of a general denial; consequently, as between an

affirmative assertion and a general denial, weight must be accorded to the affirmative assertion. 26

Neither can we extend credence to the testimony of Anonuevo as it is only in the nature of negative
assertions which are obviously in conflict with the affirmative statements of Sy. Besides, Anonuevo's
testimony runs counter to the normal course of human behavior. Anonuevo's act of coming to
Arboleda's rescue with an Affidavit of Justification 27 upon hearing of his investigation makes
Anonuevo speciously suspect. His Affidavit of Justification although notarized on the 19th of
November was actually dated 10 October 1987, or more than twenty (20) days before Arboleda was
confidentially notified of the impending investigation. 28 Anonuevo's explanation that Sy named
Arboleda because he happened to mention the latter's name to Sy is, to say the least, fatuous. He
claimed that he was not on intimate terms or even familiar with Arboleda, having supposedly seen
him only around MERALCO and only knowing his position therein, yet he had the temerity to drop
Arboleda's name to Sy. This defies logic and common experience.

Furthermore, Anonuevo's actuation's regarding his supposed contract with Sy were a little strange.
For one, he seemed confused as to what the contract was all about, whether it was just to follow up
the application for electrical connection, or for payment of FC bills, or for the installation of electric
meters, as he did not seem to know for what was the amount supposedly given to him by
Sy. 29 Stranger still was his installing the electric meter ahead of paying the FC bills or before getting
the go-signal from MERALCO. All these, coupled with the fact that in Anonuevo's affidavit 30 he
admitted having returned the money to SY after learning about Umali's memorandum-complaint
against petitioner when such complaint was supposed to be confidential, clearly demonstrate that
Anonuevo was merely used by the petitioner in an attempt to improve his lot. Thus it is evident that
petitioner was guilty of serious misconduct to warrant his dismissal from the service which, in this
case, was lawfully effected with proper notice and just for a cause.

WHEREFORE, finding no grave abuse of discretion, the petition is DISMISSED. The decision of the
National Labor Relations Commission dismissing petitioner's complaint for illegal dismissal is
AFFIRMED.

SO ORDERED.
G.R. No. 137473 August 2, 2001

ESTELITO V. REMOLONA, petitioner,

vs.
CIVIL SERVICE COMMISSION, respondent.

PUNO, J.:

The present petition seeks to review and set aside the Decision rendered by the Court of Appeals
dated July 31, 19981 upholding the decision of the Civil Service Commission which ordered the
dismissal of petitioner Estelito V. Remolona (Remolona) from the government service for dishonesty,
and the Resolution dated February 5, 19992denying petitioner's motion for reconsideration.

Records show that petitioner Estelito V. Remolona is the Postmaster at the Postal Office Service in
Infanta, Quezon, while his wife Nery Remolona is a teacher at the Kiborosa Elementary School.

In a letter3 dated January 3, 1991, Francisco R. America, District Supervisor of the Department of
Education, Culture & Sports at Infanta, Quezon, inquired from the Civil Service Commission (CSC)
as to the status of the civil service eligibility of Mrs. Remolona who purportedly got a rating of
81.25% as per Report of Rating issued by the National Board for Teachers.4 Mr. America likewise
disclosed that he received information that Mrs. Remolona was campaigning for a fee of P8,000.00
per examinee for a passing mark in the teacher's board examinations. --

On February 11, 1991, then CSC Chairman Patricia A. Sto. Tomas issued an Order directing CSC
Region IV Director Bella Amilhasan to conduct an investigation on Mrs. Remolona's eligibility, after
verification from the Register of Eligibles in the Office for Central Personnel Records revealed "that
Remolona's name is not in the list of passing and failing examinees, and that the list of examinees
for December 10, 1989 does not include the name of Remolona. Furthermore, Examination No.
061285 as indicated in her report of rating belongs to a certain Marlou C. Madelo, who took the
examination in Cagayan de Oro and got a rating of 65.00%."5

During the preliminary investigation conducted by Jaime G. Pasion, Director II, Civil Service Field
Office, Lucena City, Quezon, only petitioner Remolona appeared. He signed a written statement of
facts6 regarding the issuance of the questioned Report of Rating of Mrs. Remolona, which is
summarized in the Memorandum7 submitted by Director Pasion as follows:

"3.1 That sometime in the first week of September, 1990, while riding in a Kapalaran Transit
Bus from Sta. Cruz, Laguna on his way to San Pablo City, he met one Atty. Hadji Salupadin
(this is how it sounded) who happened to be sitting beside him;

3.2 That a conversation broke out between them until he was able to confide his problem to
Atty. Salupadin about his wife having difficulty in acquiring an eligibility;

3.3 That Atty. Salupadin who represented himself as working at the Batasan, offered his help
for a fee of P3,000.00;

3.4 That the following day they met at the Batasan where he gave the amount of P2,000.00,
requirements, application form and picture of his wife;

3.5 That the following week, Thursday, at around 1:00 P.M., they met again at the Batasan
where he handed to Atty. Salupadin the amount of P1,000.00 plus P500.00 bonus who in
 turn handed to him the Report of Rating of one Nery C. Remolona with a passing grade, then
they parted;

3.6 That sometime in the last week of September, he showed the Report of Rating to the
District Supervisor, Francisco America who informed her (sic) that there was no vacancy;

3.7 That he went to Lucena City and complained to Dr. Magsino in writing . . . that Mr.
America is asking for money in exchange for the appointment of his wife but failed to make
good his promise. He attached the corroborating affidavits of Mesdames Carmelinda
Pradillada and Rosemarie P. Romantico and Nery C. Remolona x x x;

3.8 That from 1986 to 1988, Mr. America was able to get six (6) checks at P2,600.00 each
plus bonus of Nery C. Remolona;

3.9 That Mr. America got mad at them. And when he felt that Mr. America would verify the
authenticity of his wife's Report of Rating, he burned the original."

Furthermore, Remolona admitted that he was responsible in acquiring the alleged fake eligibility, that
his wife has no knowledge thereof, and that he did it because he wanted them to be together. Based
on the foregoing, Director Pasion recommended the filing of the appropriate administrative action
against Remolona but absolved Mrs. Nery Remolona from any liability since it has not been shown
that she willfully participated in the commission of the offense.

Consequently, a Formal Charge dated April 6, 1993 was filed against petitioner Remolona, Nery C.
Remolona, and Atty. Hadji Salupadin for possession of fake eligibility, falsification and dishonesty.8 A
formal hearing ensued wherein the parties presented their respective evidence. Thereafter, CSC
Regional Director Bella A. Amilhasan issued a Memorandum dated February 14,
19959 recommending that the spouses Estelito and Nery Remolona be found guilty as charged and
be meted the corresponding penalty.

Said recommendation was adopted by the CSG which issued Resolution No. 95-2908 on April 20,
1995, finding the spouses Estelito and Nery Remolona guilty of dishonesty and imposing the penalty
of dismissal and all its accessory penalties. The case against Atty. Hadji Salupadin was held in
abeyance pending proof of his identity.10 In its Resolution No. 96551011 dated August 27, 1996, the
CSC, acting on the motion for reconsideration filed by the spouses Remolona, absolved Nery
Remolona from liability and held that:

"Further, a review of the records and of the arguments presented fails to persuade this
Commission to reconsider its earlier resolution insofar as Estelito Remolona's culpability is
concerned. The evidence is substantial enough to effect his conviction. His act of securing a
fake eligibility for his wife is proved by substantial evidence. However, in the case of Nery
Remolona, the Commission finds her innocent of the offense charged, for there is no
evidence to show that she has used the fake eligibility to support an appointment or
promotion. In fact, Nery Remolona did not indicate in her Personal Data Sheet that she
possesses any eligibility. It must be pointed out that it was her husband who unilaterally
worked to secure a fake eligibility for her.

WHEREFORE, the instant Motion for Reconsideration is hereby denied insofar as

respondent Estelito Remolona is concerned. However, Resolution No. 95-2908 is modified in
the sense that respondent Nery Remolona is exonerated of the charges. Accordingly, Nery
Remolona is automatically reinstated to her former position as Teacher with back salaries
and other benefits."
On appeal, the Court of Appeals rendered its questioned decision dismissing the petition for review
filed by herein petitioner Remolona. His motion for reconsideration and/or new trial was likewise
denied. Hence, this petition for review.

Petitioner submits that the Court of Appeals erred:

"1. in denying petitioner's motion for new trial;

2. in holding that petitioner is liable for dishonesty; and

3. in sustaining the dismissal of the petitioner for an offense not work connected in relation to
his official position in the government service."

The main issue posed for resolution is whether a civil service employee can be dismissed from the
government service for an offense which is not work-related or which is not connected with the
performance of his official duty. Remolona likewise imputes a violation of his right to due process
during the preliminary investigation because he was not assisted by counsel. He claims that the
extra-judicial admission allegedly signed by him is inadmissible because he was merely made to
sign a blank form. He also avers that his motion for new trial should be granted on the ground that
the transcript of stenographic notes taken during the hearing of the case before the Regional Office
of the CSC was not forwarded to the Court of Appeals. Finally, he pleads that the penalty of
dismissal with forfeiture of all benefits is too harsh considering the nature of the offense for which he
was convicted, the length of his service in government, that this is his first offense, and the fact that
no damage was caused to the government.

The submission of Remolona that his alleged extra-judicial confession is inadmissible because he
was not assisted by counsel during the investigation as required under Section 12 paragraphs 1 and
3, Article III of the 1987 Constitution deserves scant consideration.

The right to counsel under Section 12 of the Bill of Rights is meant to protect a suspect in a criminal
case under custodial investigation. Custodial investigation is the stage where the police investigation
is no longer a general inquiry into an unsolved crime but has begun to focus on a particular suspect
who had been taken into custody by the police to carry out a process of interrogation that lends itself
to elicit incriminating statements. It is when questions are initiated by law enforcement officers after a
person has been taken into custody or otherwise deprived of his freedom of action in any significant
way. The right to counsel attaches only upon the start of such investigation. Therefore, the
exclusionary rule under paragraph (2), Section 12 of the Bill of Rights applies only to admissions
made in a criminal investigation but not to those made in an administrative investigation.12

While investigations conducted by an administrative body may at times be akin to a criminal

proceeding, the fact remains that under existing laws, a party in an administrative inquiry may or
may not be assisted by counsel, irrespective of the nature of the charges and of the respondent's
capacity to represent himself, and no duty rests on such body to furnish the person being
investigated with counsel. In an administrative proceeding, a respondent has the option of engaging
the services of counsel or not. This is clear from the provisions of Section 32, Article VII of Republic
Act No. 2260 (otherwise known as the Civil Service Act) and Section 39, paragraph 2, Rule XIV (on
discipline) of the Omnibus Rules Implementing Book V of Executive Order No. 292 (otherwise known
as the Administrative Code of 1987). Thus, the right to counsel is not always imperative in
administrative investigations because such inquiries are conducted merely to determine whether
there are facts that merit disciplinary measure against erring public officers and employees, with the
purpose of maintaining the dignity of government service. As such, the hearing conducted by the
investigating authority is not part of a criminal prosecution.13
In the case at bar, Remolona was not accused of any crime in the investigation conducted by the
CSC field office. The investigation was conducted for the purpose of ascertaining the facts and
whether there is a prima facie evidence sufficient to form a belief that an offense cognizable by the
CSC has been committed and that Remolona is probably guilty thereof and should be
administratively charged. Perforce, the admissions made by Remolona during such investigation
may be used as evidence to justify his dismissal.

The contention of Remolona that he never executed an extra-judicial admission and that he merely
signed a blank form cannot be given credence. Remolona occupies a high position in government as
Postmaster at Infanta, Quezon and, as such, he is expected to be circumspect in his actions
specially where he is being administratively charged with a grave offense which carries the penalty
of dismissal from service.

Remolona insists that his dismissal is a violation of his right to due process under Section 2(3),
Article XI (B) of the Constitution which provides that "no officer or employee in the Civil Service shall
be removed or suspended except for cause." Although the offense of dishonesty is punishable under
the Civil Service law, Remolona opines that such act must have been committed in the performance
of his function and duty as Postmaster. Considering that the charge of dishonesty involves the
falsification of the certificate of rating of his wife Nery Remolona, the same has no bearing on his
office and hence, he is deemed not to have been dismissed for cause. This proposition is untenable.

It cannot be denied that dishonesty is considered a grave offense punishable by dismissal for the
first offense under Section 23, Rule XIV of the Rules Implementing Book V of Executive Order No.
292. And the rule is that dishonesty, in order to warrant dismissal, need not be committed in the
course of the performance of duty by the person charged. The rationale for the rule is that if a
government officer or employee is dishonest or is guilty of oppression or grave misconduct, even if
said defects of character are not connected with his office, they affect his right to continue in office.
The Government cannot tolerate in its service a dishonest official, even if he performs his duties
correctly and well, because by reason of his government position, he is given more and ample
opportunity to commit acts of dishonesty against his fellow men, even against offices and entities of
the government other than the office where he is employed; and by reason of his office, he enjoys
and possesses a certain influence and power which renders the victims of his grave misconduct,
oppression and dishonesty less disposed and prepared to resist and to counteract his evil acts and
actuations. The private life of an employee cannot be segregated from his public life. Dishonesty
inevitably reflects on the fitness of the officer or employee to continue in office and the discipline and
morale of the service.14

The principle is that when an officer or employee is disciplined, the object sought is not the
punishment of such officer or employee but the improvement of the public service and the
preservation of the public's faith and confidence in the government.15

The general rule is that where the findings of the administrative body are amply supported by
substantial evidence, such findings are accorded not only respect but also finality, and are binding
on this Court.16 It is not for the reviewing court to weigh the conflicting evidence, determine the
credibility of witnesses, or otherwise substitute its own judgment for that of the administrative agency
on the sufficiency of evidence.17 Thus, when confronted with conflicting versions of factual matters, it
is for the administrative agency concerned in the exercise of discretion to determine which party
deserves credence on the basis of the evidence received.18 The rule, therefore, is that courts of
justice will not generally interfere with purely administrative matters which are addressed to the
sound discretion of government agencies unless there is a clear showing that the latter acted
arbitrarily or with grave abuse of discretion or when they have acted in a capricious and whimsical
manner such that their action may amount to an excess of jurisdiction.19
We have carefully scrutinized the records of the case below and we find no compelling reason to
deviate from the findings of the CSC and the Court of Appeals. The written admission of Remolona
is replete with details that could have been known only to him. No ill-motive or bad faith was ever
imputed to Director Pasion who conducted the investigation. The presumption that official duty has
been regularly performed remains unrebutted.

The transmittal of the transcript of stenographic notes taken during the formal hearing before the
CSC is entirely a matter of discretion on the part of the Court of Appeals. Revised Administrative
Circular No. 1-95 of this Court clearly states that in resolving appeals from quasi-judicial agencies, it
is within the discretion of the Court of Appeals to have the original records of the proceedings under
review transmitted to it.20 Verily, the Court of Appeals decided the merits of the case on the bases of
the uncontroverted facts and admissions contained in the pleadings filed by the parties.

We likewise find no merit in the contention of Remolona that the penalty of dismissal is too harsh
considering that there was no damage caused to the government since the certificate of rating was
never used to get an appointment for his wife, Nery Remolona. Although no pecuniary damage was
incurred by the government, there was still falsification of an official document that constitutes gross
dishonesty which cannot be countenanced, considering that he was an accountable officer and
occupied a sensitive position.21 The Code of Conduct and Ethical Standards for Public Officials and
Employees enunciates the State policy of promoting a high standard of ethics and utmost
responsibility in the public service.22

WHEREFORE, the decision appealed from is hereby AFFIRMED in toto.

SO ORDERED.