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

108461 October 21, 1996 PHILIPPINE INTERNATIONAL TRADING CORPORATION, petitioner, vs. HON. PRESIDING JUDGE ZOSIMO Z. ANGELES, BRANCH 58, RTC, MAKATI; REMINGTON INDUSTRIAL SALES CORPORATION; AND FIRESTONE CERAMIC, INC., respondents. TORRES, JR., J.:p The PHILIPPINE INTERNATIONAL TRADING CORPORATION (PITC, for brevity) filed this Petition for Review on Certiorari, seeking the reversal of the Decision dated January 4, 1993 of public respondent Hon. Zosimo Z. Angeles, Presiding Judge of the Regional Trial Court of Makati, Branch 58, in Civil Case No. 92158 entitled Remington Industrial Sales Corporation, et. al. vs. Philippine Industrial Trading Corporation. The said decision upheld the Petition for Prohibition and Mandamus of REMINGTON INDUSTRIAL SALES CORPORATION (Remington, for brevity) and FIRESTONE CERAMICS, INC. (Firestone, for brevity), and, in the process, declared as null and void and unconstitutional, PITCs Administrative Order No. SOCPEC 8908-01 and its appurtenant regulations. The dispositive portion of the decision reads: WHEREFORE, premises considered, judgment is hereby rendered in favor of Petitioner and Intervenor and against the Respondent, as follows: 1) Enjoining the further implementation by the respondent of the following issuances relative to the applications for importation of products from the Peoples Republic of China, to wit: a) Administrative Order No. SOCPEC 89-08-01 dated August 30, 1989 (Annex A, Amended Petition); b) Prescribed Export Undertaking Form (Annex B, Id.); c) Prescribed Importer-Exporter Agreement Form for non-exporter-importer (Annex C, Id.); d) Memorandum dated April 16, 1990 relative to amendments of Administrative Order No. SOCPEC 8908-01 (Annex D, Id.); e) Memorandum dated May 6, 1991 relative to Revised Schedule of Fees for the processing of import applications (Annexes E, E-1., Ind.); f) Rules and Regulations relative to liquidation of unfulfilled Undertakings and expired export credits (Annex Z, Supplemental Petition), the foregoing being all null and void and unconstitutional; and, 2) Commanding respondent to approve forthwith all the pending applications of, and all those that may hereafter be filed by, the petitioner and the Intervenor, free from and without the requirements prescribed in the above-mentioned issuances. IT IS SO ORDERED. The controversy springs from the issuance by the PITC of Administrative Order No. SOCPEC 89-0801, 1 under which, applications to the PITC for importation from the Peoples Republic of China (PROC, for brevity) must be accompanied by a viable and confirmed Export Program of Philippine Products to PROC carried out by the improper himself or through a tie-up with a legitimate importer in an amount equivalent to the value of the importation from PROC being applied for, or, simply, at one is to one ratio. Pertinent provisions of the questioned administrative order read:

2 3. COUNTERPART EXPORTS TO PROC In addition to existing requirements for the processing of import application for goods and commodities originating from PROC, it is declared that: 3.1 All applications covered by these rules must be accompanied by a viable and confirmed EXPORT PROGRAM of Philippine products to PROC in an amount equivalent to the value of the importation from PROC being applied for. Such export program must be carried out and completed within six (6) months from date of approval of the Import Application by PITC. PITC shall reject/deny any application for importation from PROC without the accompanying export program mentioned above. 3.2 The EXPORT PROGRAM may be carried out by any of the following: a. By the IMPORTER himself if he has the capabilities and facilities to carry out the export of Philippine products to PROC in his own name; or b. Through a tie-up between the IMPORTER and a legitimate exporter (of Philippine products) who is willing to carry out the export commitments of the IMPORTER under these rules. The tie-up shall not make the IMPORTER the exporter of the goods but shall merely ensure that the importation sought to be approved is matched one-to-one (1:1) in value with a corresponding export of Philippine products to PROC. 2 3.3 EXPORT PROGRAM DOCUMENTS which are to be submitted by the improper together with his Import Application are as follows: a) Firm Contract, Sales Invoice or Letter of Credit. b) Export Performance Guarantee (See Article 4 hereof). c) IMPORTER-EXPORTER AGREEMENT for non-exporter IMPORTER (PITC Form No. M-1006). This form should be used if IMPORTER has tie-up with an exporter for the export of Philippine Products to PROC. 4. EXPORT GUARANTEE To ensure that the export commitments of the IMPORTER are carried out in accordance with these rules, all IMPORTERS concerned are required to submit an EXPORT PERFORMANCE GUARANTEE (the Guarantee) at the time of filing of the Import Application. The amount of the guarantee shall be as follows: For essential commodities: 15% of the value of the imports applied for. For other commodities: 50% of the value of the imports applied for. 4.1 The guarantee may be in the form of (i) a non-interest bearing cash deposit; (ii) Bank hold-out in favor of PITC (PITC Form No. M-1007) or (iii) a Domestic Letter of Credit (with all bank opening charges for account of Importer) opened in favor of PITC as beneficiary. 4.2 The guarantee shall be made in favor of PITC and will be automatically forfeited in favor of PITC, fully or partially, if the required export program is not completed by the importer within six (6) months from date of approval of the Import Application. 4.3 Within the six (6) months period above stated, the IMPORTER is entitled to a (i) refund of the cash deposited without interest; (ii) cancellation of the Bank holdout or (iii) Cancellation of the Domestic Letter of Credit upon showing that he has completed the export commitment pertaining to his importation and provided further that the following documents are submitted to PITC:

3 a) Final b) Bill of lading c) Bank Certificate d) PITC EXPORT APPLICATION FOR NO. M-1005 Sales or of Inward Invoice bill Remittance

Airway

5. MISCELLANEOUS 5.1 All other requirements for importations of goods and commodities from PROC must be complied with in addition to the above. 5.2 PITC shall have the right to disapprove any and all import applications not in accordance with the rules and regulations herein prescribed. 5.3 Should the IMPORTER or any of his duly authorized representatives make any false statements or fraudulent misrepresentations in the Import/Export Application, or falsify, forge or simulate any document required under these rules and regulations, PITC is authorized to reject all pending and future import/export applications of said IMPORTER and/or disqualify said IMPORTER from doing any business with SOCPEC through PITC. Desiring to make importations from PROC, private respondents Remington and Firestone, both domestic corporations, organized and existing under Philippine laws, individually applied for authority to import from PROC with the petitioner. They were granted such authority after satisfying the requirements for importers, and after they executed respective undertakings to balance their importations from PROC with corresponding export of Philippine products to PROC. Private respondent Remington was allowed to import tools, machineries and other similar goods. Firestone, on the other hand, imported Calcine Vauxite, which it used for the manufacture of fire bricks, one of its products. Subsequently, for failing to comply with their undertakings to submit export credits equivalent to the value of their importations, further import applications were withheld by petitioner PITC from private respondents, such that the latter were both barred from importing goods from PROC. 3 Consequently, Remington filed a Petition for Prohibition and Mandamus, with prayer for issuance of Temporary Restraining Order and/or Writ of Preliminary Injunction on January 20, 1992, against PITC in the RTC Makati Branch 58. 4 The court issued a Temporary Restraining Order on January 21, 1992, ordering PITC to cease from exercising any power to process applications of goods from PROC. 5 Hearing on the application for writ of preliminary injunction ensued. Private respondent Firstone was allowed to intervene in the petition on July 2, 1992, 6 thus joining Remington in the latters charges against PITC. It specifically asserts that the questioned Administrative Order is an undue restriction of trade, and hence, unconstitutional. Upon trial, it was agreed that the evidence adduced upon the hearing on the Preliminary Injunction was sufficient to completely adjudicate the case, thus, the parties deemed it proper that the entire case be submitted for decision upon the evidence so far presented. The court rendered its Decision 7 on January 4, 1992. The court ruled that PITCs authority to process and approve applications for imports from SOCPEC and to issue rules and regulations pursuant to LOI 444 and P.D. No. 1071, has already been repealed by EO No. 133, issued on February 27, 1987 by President Aquino. The court observed: Given such obliteration and/or withdrawal of what used to be PITCs regulatory authority under the Special provisions embodied in LOI 444 from the enumeration of power that it could exercise effective February 27, 1987 in virtue of Section 16 (d), EO No. 133, it may now be successfully argued that the

4 PITC can no longer exercise such specific regulatory power in question conformably with the legal precept expresio unius est exclusio alterius. Moreover, the court continued, none of the Trade protocols of 1989, 1990 or 1991, has empowered the PITC, expressly or impliedly to formulate or promulgate the assailed Administrative Order. This fact, makes the continued exercise by PITC of the regulatory powers in question unworthy of judicial approval. Otherwise, it would be sanctioning an undue exercise of legislative power vested solely in the Congress of the Philippines by Section, 1, Article VII of the 1987 Philippine Constitution. The lower court stated that the subject Administrative Order and other similar issuances by PITC suffer from serious constitutional infirmity, having been promulgated in pursuance of an international agreement (the Memorandum of Agreement between the Philippines and PROC), which has not been concurred in by at least 2/3 of all the members of the Philippine Senate as required by Article VII, Section 21, of the 1987 Constitution, and therefore, null and void. Sec. 21. No treaty or international agreement shall be valid and effective unless concurred in by at least two-thirds of all the Members of the Senate. Furthermore, the subject Administrative Order was issued in restraint of trade, in violation of Sections 1 and 19, Article XII of the 1987 Constitution, which reads: Sec. 1. The goals of the national economy are a more equitable distribution of opportunities, income and wealth; a sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and, an expanding productivity as the key to raising the equality of life for all, especially the underprivileged. Sec. 19. The State shall regulate or prohibit monopolies when the public interest so requires. No combination in restraint of trade or unfair competition shall be allowed. Lastly, the court declared the Administrative Order to be null and void, since the same was not published, contrary to Article 2 of the New Civil Code which provides, that: Art. 2. Laws shall take effect fifteen (15) days following the completion of their publication in the Official Gazette, unless the law otherwise provides. . . . Petitioner now comes to use on a Petition for Review on Certiorari, 8 questioning the courts decision particularly on the propriety of the lower courts declarations on the validity of Administrative Order No. 89-08-01. The Court directed the respondents to file their respective Comments. Subsequent events transpired, however, which affect to some extent, the submissions of the parties to the present petition. Following President Fidel V. Ramos trip to Beijing, Peoples Republic of China (PROC), from April 25 to 30, 1993, a new trade agreement was entered into between the Philippines and PROC, encouraging liberalization of trade between the two countries. In line therewith, on April 20, 1993, the President, through Chief Presidential Legal Counsel Antonio T. Carpio, directed the Department of Trade and Industry and the PITC to cease implementing Administrative Order No. SOCPEC 89-08-01, as amended by PITC Board Resolution Nos. 92-01-05 and 92-03-08. 9 In the implementation of such order, PITC President Jose Luis U. Yulo, Jr. issued a corporate Memorandum 10 instructing that all import applications for the PROC filed with the PITC as of April 20, 1993 shall no longer be covered by the trade balancing program outlined in the Administrative Order. Forthwith, the PITC allowed the private respondents to import anew from the PROC, without being required to comply anymore with the lifted requirement of balancing its imports with exports of Philippine products to PROC. 11 In its Constancia 12 filed with the Court on November 22, 1993,

5 Remington expressed its desire to have the present action declared moot and academic considering the new supervening developments. For its part, respondent Firestone made a Manifestation 13 in lieu of its Memorandum, informing the court of the aforesaid developments of the new trade program of the Philippines with China, and prayed for the courts early resolution of the action. To support its submission that the present action is now moot and academic, respondent Remington cites Executive Order No. 244, 14 issued by President Ramos on May 12, 1995. The Executive Order states: WHEREAS, continued coverage of the Peoples Republic of China by Letter of Instructions No. 444 is no longer consistent with the countrys national interest, as coursing Republic of the Philippines-Peoples Republic China Trade through the Philippine International Trading Corporations as provided for under Letter of Instructions No. 444 is becoming an unnecessary barrier to trade; NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by virtue of the powers vested in me by law, do hereby order; The Committee on Scientific and Technical Cooperation with Socialist Countries to delete the Peoples Republic of China from the list of countries covered by Letter of Instructions No. 444. Done in the City of Manila, this 12th day of May in the year of Our Lord, Nineteen Hundred and NinetyFive. PITC filed its own Manifestation 15 on December 15, 1993, wherein it adopted the arguments raised in its Petition as its Memorandum. PITC disagrees with Remington on the latters submission that the case has become moot and academic as a result of the abrogation of Administrative Order SOCPEC No. 89-08-01, since respondent Remington had incurred obligations to the petitioner consisting of charges for the 0.5% Counter Export Development Service provided by PITC to Remington, which obligations remain outstanding. 16 The propriety of such charges must still be resolved, petitioner argues, thereby maintaining the issue of the validity of SOCPEC Order No. 89-08-01, before it was abrogated by Executive fiat. There is no question that from April 20, 1993, when trading balancing measures with PROC were lifted by the President, Administrative Order SOCPEC No. 89-08-01 no longer has force and effect, and respondents are thus entitled anew to apply for authority to import from the PROC, without the trade balancing requirements previously imposed on proposed importers. Indeed, it appears that since the lifting of the trade balancing measures, Remington had been allowed to import anew from PROC. There remains, however, the matter of the outstanding obligations of the respondent for the charges relating to the 0.5% Counter Export Development Service in favor of PITC, for the period when the questioned Administrative Order remained in effect. Is the obligation still subsisting, or are the respondents freed from it? To resolve this issue, we are tasked to consider the constitutionality of Administrative Order No. SOCPEC 89-08-01, based on the arguments set up by the parties in their Petition and Comment. In so doing, we must inquire into the nature of the functions of the PITC, in the light of present realities. The PITC is a government owned or controlled corporation created under P.D. No. 252 17 dated August 6, 1973. P.D. No. 1071, 18 issued on May 9, 1977 which revised the provisions of P.D. 252. The purposes and powers of the said governmental entity were enumerated under Section 5 and 6 thereof. 19 On August 9, 1976, the late President Ferdinand Marcos issued Letter of Instruction (LOI) No. 444, 20 directing, inter alia, that trade (export or import of all commodities), whether direct or indirect, between the Philippines and any of the Socialist and other Centrally Planned Economy Countries (SOCPEC), including the Peoples Republic of China (PROC) shall be undertaken or coursed through the

6 PITC. Under the LOI, PITC was mandated to: 1) participate in all official trade and economic discussions between the Philippines and SOCPEC; 2) adopt such measures and issue such rules and regulations as may be necessary for the effective discharge of its functions under its instructions; and, 3) undertake the processing and approval of all applications for export to or import from the SOCPEC. Pertinent provisions of the Letter of Instruction are herein reproduced: LETTER OF INSTRUCTION 444 xxx xxx xxx II. CHANNELS OF TRADE 1. The trade, direct or indirect, between the Philippines and any of the Socialist and other centrallyplanned economy countries shall upon issuance hereof, be undertaken by or coursed through the Philippine International Trading Corporation. This shall apply to the export and import of all commodities of products including those specified for export or import by expressly authorized government agencies. xxx xxx xxx 4. The Philippine International Trading Corporation shall participate in all official trade and economic discussions between the Philippines and other centrally-planned economy countries. xxx xxx xxx V. SPECIAL PROVISIONS The Philippine International Trading Corporation shall adopt such measures and issue such rules and regulations as may be necessary for the effective discharge of its functions under these instructions. In this connection, the processing and approval of applications for export to or import from the Socialist and other centrally-planned economy countries shall, henceforth, be performed by the said Corporation. (Emphasis ours) After the EDSA Revolution, or more specifically on February 27, 1987, then President Corazon C. Aquino promulgated Executive Order (EO) No. 21 133 reorganizing the Department of Trade and Industry (DTI) empowering the said department to be the primary coordinative, promotive, facilitative and regulatory arm of the government for the countrys trade, industry and investment activities (Sec. 2, EO 133). The PITC was made one of DTIs line agencies. 22 The Executive Order reads in part: EXECUTIVE ORDER NO. 133 xxx xxx xxx Sec. 16. Line Corporate Agencies and Government Entities. The following line corporate agencies and government entities defined in Section 9 (c) of this Executive Order that will perform their specific regulatory functions, particularly developmental responsibilities and specialized business activities in a manner consonant with the Department mandate, objectives, policies, plans and programs: xxx xxx xxx d) Philippine International Trading Corporation. This corporation, which shall be supervised by the Undersecretary for International Trade, shall only engage in both export and trading on new or nontraditional products and markets not normally pursued by the private business sector; provide a wide

7 range of export oriented auxiliary services to the private sector; arrange for or establish comprehensive system and physical facilities for handling the collection, processing, and distribution of cargoes and other commodities; monitor or coordinate risk insurance services for existing institutions; promote and organize, whenever warranted, production enterprises and industrial establishments and collaborate or associate in joint venture with any person, association, company or entity, whether domestic or foreign, in the fields of production, marketing, procurement, and other relate businesses; and provide technical advisory, investigatory, consultancy and management services with respect to any and all of the functions, activities, and operations of the corporation. Sometime in April, 1988, following the State visit of President Aquino to the PROC, the Philippines and PROC entered into a Memorandum of Understanding 23 (MOU) wherein the two countries agreed to make joint efforts within the next five years to expand bilateral trade to US $600 US $800 Million by 1992, and to strive for a steady progress towards achieving a balance between the value of their imports and exports during the period, agreeing for the purpose that upon the signing of the Memorandum, both sides shall undertake to establish the necessary steps and procedures to be adopted within the framework of the annual midyear review meeting under the Trade Protocol, in order to monitor and ensure the implementation of the MOU. Conformably with the MOU, the Philippines and PROC entered into a Trade Protocol for the years 1989, 1990 and 1991, 24 under which was specified the commodities to be traded between them. The protocols affirmed their agreement to jointly endeavor between them. The protocols affirmed their agreement to jointly endeavor to achieve more or less a balance between the values of their imports and exports in their bilateral trade. It is allegedly in line with its powers under LOI 444 and in keeping with the MOU and Trade Protocols with PROC that PITC issued its now assailed Administrative Order No. SOCPEC 89-08-01 25 on August 30, 1989 (amended in March, 1992). Undoubtedly, President Aquino, in issuing EO 133, is empowered to modify and amend the provisions of LOI 444, which was issued by then President Marcos, both issuances being executive directives. As observed by us in Philippine Association of Services Exporters, Inc. vs. Torres, 26 there is no need for legislative delegation of power to the President to revoke the Letter of Instruction by way of an Executive Order. This is notwithstanding the fact that the subject LOI 1190 was issued by President Marcos, when he was extraordinarily empowered to exercise legislative powers, whereas EO 450 was issued by Pres. Aquino when her transitional legislative powers have already ceased, since it was found that LOI 1190 was a mere administrative directive, hence, may be repealed, altered, or modified by EO 450. We do not agree, however, with the trial courts ruling PITCs authority to issue rules and regulations pursuant to the Special Provision of LOI 444 and P.D. No. 1071, have already been repealed by EO 133. While PITCs power to engage in commercial import and export activities is expressly recognized and allowed under Section 16 (d) of EO 133, the same is not limited only to new or non-traditional products and markets not normally pursued by the private business sector. There is not indication in the law of the removal of the powers of the PITC to exercise its regulatory functions in the area of importations from SOCPEC countries. Though it does not mention the grant of regulatory power, EO 133, as worded, is silent as to the abolition or limitation of such powers, previously granted under P.D. 1071, from the PITC. Likewise, the general repealing clause in EO 133 stating that all laws, ordinances, rules, and regulations, or other parts thereof, which are inconsistent with the Executive Order are hereby repealed or modified accordingly, cannot operate to abolish the grant of regulatory powers to the PITC. There can be no

8 repeal of the said powers, absent any cogency of irreconcilable inconsistency or repugnancy between the issuances, relating to the regulatory power of the PITC. The President, in promulgating EO 133, had not intended to overhaul the functions of the PITC. The DTI was established, and was given powers and duties including those previously held by the PITC as an independent government entity, under P.D. 1071 and LOI 444. The PITC was thereby attached to the DTI as an implementing arm of the said department. EO 133 established the DTI as the primary coordinative, promotive, facilitative and regulatory arm of government for the countrys trade, industry and investment activities, which shall act as a catalyst for intensified private sector activity in order to accelerate and sustain economic growth. 27 In furtherance of this mandate, the DTI was empowered, among others, to plan, implement, and coordinate activities of the government related to trade industry and investments; to formulate and administer policies and guidelines for the investment priorities plan and the delivery of investment incentives; to formulate country and product export strategies which will guide the export promotion and development thrusts of the government. 28 Corollarily, the Secretary of Trade and Industry is given the power to promulgate rules and regulations necessary to carry out the departments objectives, policies, plans, programs and projects. The PITC, on the other hand, was attached as an integral part to the said department as one of its line agencies, 29 and given the focal task of implementing the departments programs. 30 The absence of the regulatory power formerly enshrined in the Special Provision of LOI 444, from Section 16 of EO 133, and the limitation of its previously wide range of functions, is noted. This does not mean, however, that PITC has lost the authority to issue the questioned Administrative Order. It is our view that PITC still holds such authority, and may legally exercise it, as an implementing arm, and under the supervision of, the Department of Trade and Industry. Furthermore, the lower courts ruling to the effect that the PITCs authority to process and approve applications for imports from SOCPEC and to issue rules and regulations pursuant to LOI 444 and P.D. 1071 has been repealed by EO 133, is misplaced, and did not consider the import behind the issuance of the later presidential edict. The President could not have intended to deprive herself of the power to regulate the flow of trade between the Philippines and PROC under the two countries Memorandum of Understanding, a power which necessarily flows from her office as Chief Executive. In issuing Executive Order 133, the President intended merely to reorganize the Department of Trade and Industry to cope with the need of a streamlined bureaucracy. 31 Thus, there is not real inconsistency between LOI 444 and EO 133. There is, admittedly, a rearranging of the administrative functions among the administrative bodies affective by the edict, but not an abolition of executive power. Consistency in statutes as in executive issuances, is of prime importance, and, in the absence of a showing to the contrary, all laws are presumed to be consistent with each other. Where it is possible to do so, it is the duty of courts, in the construction of statutes, to harmonize and reconcile them, and to adopt a construction of a statutory provision which harmonizes and reconciles it with other statutory provisions. 32 The fact that a later enactment may relate to the same subject matter as that of an earlier statute is not of itself sufficient to cause an implied repeal of the latter, since the law may be cumulative or a continuation of the old one. 33 Similarly, the grant of quasi-legislative powers in administrative bodies is not unconstitutional. Thus, as a result of the growing complexity of the modern society, it has become necessary to create more and more administrative bodies to help in the regulation of its ramified activities. Specialized in the particular field assigned to them, they can deal within the problems thereof with more expertise and dispatch than can be expected from the legislature or the courts of justice. This is the reason for the increasing vesture of quasi-legislative and quasi-judicial powers in what is now not unreasonably called

9 the fourth department of the government. 34 Evidently, in the exercise of such powers, the agency concerned must commonly interpret and apply contracts and determine the rights of private parties under such contracts. One thrust of the multiplication of administrative agencies is that the interpretation of contracts and the determination of private rights thereunder is no longer uniquely judicial function, exercisable only by our regular courts. (Antipolo Realty Corporation vs. National Housing Authority, G.R. No. L-50444, August 31, 1987, 153 SCRA 399). With global trade and business becoming more intricate may even with new discoveries in technology and electronics notwithstanding, the time has come to grapple with legislations and even judicial decisions aimed at resolving issues affecting not only individual rights but also activities of which foreign governments or entities may have interests. Thus, administrative policies and regulations must be devised to suit these changing business needs in a faster rate than to resort to traditional acts of the legislature. This tendency finds support in a well-stated work on the subject, viz.: Since legislatures had neither the time nor the knowledge to create detailed rules, however, it was soon clear that new governmental arrangements would be needed to handle the job of rule-making. The courts, moreover, many of them already congested, would have been swamped if they had to adjudicate all the controversies that the new legislation was bound to create; and the judges, already obliged to handle a great diversity of cases, would have been hard pressed to acquire the knowledge they needed to deal intelligently with all the new types of controversy. So the need to create a large number of specialized administrative agencies and to give them broader powers than administrators had traditionally exercised. These included the power to issue regulations having the force of law, and the power to hear and decide cases powers that had previously been reserved to the legislatures and the courts. (Houghteling/Pierce, Lawmaking by Administrative Agencies, p. 166) The respondents likewise argue that PITC is not empowered to issue the Administrative Order because no grant of such power was made under the Trade Protocols of 1989, 1990 or 1991. We do not agree. The Trade Protocols aforesaid, are only the enumeration of the products and goods which signatory countries have agreed to trade. They do not bestow any regulatory power, for executive power is vested in the Executive Department, 35 and it is for the latter to delegate the exercise of such power among its designated agencies. In sum, the PITC was legally empowered to issue Administrative Orders, as a valid exercise of a power ancillary to legislation. This does not imply however, that the subject Administrative Order is a valid exercise of such quasilegislative power. The original Administrative Order issued on August 30, 1989, under which the respondents filed their applications for importation, was not published in the Official Gazette or in a newspaper of general circulation. The questioned Administrative Order, legally, until it is published, is invalid within the context of Article 2 of Civil Code, which reads: Art. 2. Laws shall take effect fifteen days following the completion of their publication in the Official Gazette (or in a newspaper of general circulation in the Philippines), unless it is otherwise provided. . . . The fact that the amendments to Administrative Order No. SOCPEC 89-08-01 were filed with, and published by the UP Law Center in the National Administrative Register, does not cure the defect related to the effectivity of the Administrative Order. This court, in Tanada vs. Tuvera36 stated, thus:

10 We hold therefore that all statutes, including those of local application and private laws, shall be published as a condition for their effectivity, which shall begin fifteen days after publication unless a different effectivity is fixed by the legislature. Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise of legislative powers or, at present, directly conferred by the Constitution. Administrative Rules and Regulations must also be published if their purpose is to enforce or implement existing law pursuant also to a valid delegation. Interpretative regulations and those merely internal in nature, that is, regulating only the personnel of the administrative agency and not the public, need not be published. Neither is publication required of the so-called letters of instructions issued by administrative superiors concerning the rules or guidelines to be followed by their subordinates in the performance of their duties xxx xxx xxx We agree that the publication must be in full or it is no publication at all since its purpose is to inform the public of the contents of the laws. The Administrative Order under consideration is one of those issuances which should be published for its effectivity, since its purpose is to enforce and implement an existing law pursuant to a valid delegation, i.e., P.D. 1071, in relation to LOI 444 and EO 133. Thus, even before the trade balancing measures issued by the petitioner were lifted by President Fidel V. Ramos, the same were never legally effective, and private respondents, therefore, cannot be made subject to them, because Administrative Order 89-08-01 embodying the same was never published, as mandated by law, for its effectivity. It was only on March 30, 1992 when the amendments to the said Administrative Order were filed in the UP Law Center, and published in the National Administrative Register as required by the Administrative Code of 1987. Finally, it is the declared Policy of the Government to develop and strengthen trade relations with the Peoples Republic of China. As declared by the President in EO 244 issued on May 12, 1995, continued coverage of the Peoples Republic of China by Letter of Instructions No. 444 is no longer consistent with the countrys national interest, as coursing RP-PROC trade through the PITC as provided for under Letter of Instructions No. 444 is becoming an unnecessary barrier to trade. 37 Conformably with such avowed policy, any remnant of the restrained atmosphere of trading between the Philippines and PROC should be done away with, so as to allow economic growth and renewed trade relations with our neighbors to flourish and may be encouraged. ACCORDINGLY, the assailed decision of the lower court is hereby AFFIRMED, to the effect that judgment is hereby rendered in favor of the private respondents, subject to the following MODIFICATIONS: 1) Enjoining the petitioner: a) From further charging the petitioners the Counter Export Development Service fee of 0.5% of the total value of the unliquidated or unfulfilled Undertakings of the private respondents; b) From further implementing the provisions of Administrative Order No. SOCPEC 89-08-01 and its appurtenant rules; and, 2) Requiring petitioner to approve forthwith all the pending applications of, and all those that may hereafter be filed by, the petitioner and the Intervenor, free from and without complying with the requirements prescribed in the above-stated issuances.SO ORDERED

11

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 147096 January 15, 2002

REPUBLIC OF THE PHILIPPINES, represented by NATIONAL TELECOMMUNICATIONS COMMISSION,petitioner, vs. EXPRESS TELECOMMUNICATION CO., INC. and BAYAN TELECOMMUNICATIONS CO., INC., respondents. x---------------------------------------------------------x G.R. No. 147210 January 15, 2002

BAYAN TELECOMMUNICATIONS (Bayantel), INC., petitioner, vs. EXPRESS TELECOMMUNICATION CO., INC. (Extelcom), respondent. YNARES-SANTIAGO, J.: On December 29, 1992, International Communications Corporation (now Bayan Telecommunications, Inc. or Bayantel) filed an application with the National Telecommunications Commission (NTC) for a Certificate of Public Convenience or Necessity (CPCN) to install, operate and maintain a digital Cellular Mobile Telephone System/Service (CMTS) with prayer for a Provisional Authority (PA). The application was docketed as NTC Case No. 92-486.1 Shortly thereafter, or on January 22, 1993, the NTC issued Memorandum Circular No. 4-1-93 directing all interested applicants for nationwide or regional CMTS to file their respective applications before the Commission on or before February 15, 1993, and deferring the acceptance of any application filed after said date until further orders.2 On May 6, 1993, and prior to the issuance of any notice of hearing by the NTC with respect to Bayantel's original application, Bayantel filed an urgent ex-parte motion to admit an amended application.3 On May 17, 1993, the notice of hearing issued by the NTC with respect to this amended application was published in the Manila Chronicle. Copies of the application as well as the notice of hearing were mailed to all affected parties. Subsequently, hearings were conducted on the amended application. But before Bayantel could complete the presentation of its evidence, the NTC issued an Order dated December 19, 1993 stating: In view of the recent grant of two (2) separate Provisional Authorities in favor of ISLACOM and GMCR, Inc., which resulted in the closing out of all available frequencies for the service being applied for by herein applicant, and in order that this case may not remain pending for an indefinite period of time, AS PRAYED FOR, let this case be, as it is, hereby ordered ARCHIVED without prejudice to its reinstatement if and when the requisite frequency becomes available. SO ORDERED.4 On June 18, 1998, the NTC issued Memorandum Circular No. 5-6-98 re-allocating five (5) megahertz (MHz) of the radio frequency spectrum for the expansion of CMTS networks. The re-allocated 5 MHz were taken from the following bands: 1730-1732.5 / 1825-1827.5 MHz and 1732.5-1735 / 1827.5-1830 MHz.5

12 Likewise, on March 23, 1999, Memorandum Circular No. 3-3-99 was issued by the NTC re-allocating an additional five (5) MHz frequencies for CMTS service, namely: 1735-1737.5 / 1830-1832.5 MHz; 1737.51740 / 1832.5-1835 MHz; 1740-1742.5 / 1835-1837.5 MHz; and 1742.5-1745 / 1837.5-1840 MHz.6 On May 17, 1999, Bayantel filed an Ex-Parte Motion to Revive Case,7 citing the availability of new frequency bands for CMTS operators, as provided for under Memorandum Circular No. 3-3-99. On February 1, 2000, the NTC granted BayanTel's motion to revive the latter's application and set the case for hearings on February 9, 10, 15, 17 and 22, 2000.8 The NTC noted that the application was ordered archived without prejudice to its reinstatement if and when the requisite frequency shall become available. Respondent Express Telecommunication Co., Inc. (Extelcom) filed in NTC Case No. 92-486 an Opposition (With Motion to Dismiss) praying for the dismissal of Bayantel's application.9 Extelcom argued that Bayantel's motion sought the revival of an archived application filed almost eight (8) years ago. Thus, the documentary evidence and the allegations of respondent Bayantel in this application are all outdated and should no longer be used as basis of the necessity for the proposed CMTS service. Moreover, Extelcom alleged that there was no public need for the service applied for by Bayantel as the present five CMTS operators --- Extelcom, Globe Telecom, Inc., Smart Communication, Inc., Pilipino Telephone Corporation, and Isla Communication Corporation, Inc. --- more than adequately addressed the market demand, and all are in the process of enhancing and expanding their respective networks based on recent technological developments. 1wphi1.nt Extelcom likewise contended that there were no available radio frequencies that could accommodate a new CMTS operator as the frequency bands allocated in NTC Memorandum Circular No. 3-3-99 were intended for and had in fact been applied for by the existing CMTS operators. The NTC, in its Memorandum Circular No. 4-1-93, declared it its policy to defer the acceptance of any application for CMTS. All the frequency bands allocated for CMTS use under the NTC's Memorandum Circular No. 5-1188 and Memorandum Circular No. 2-12-92 had already been allocated to the existing CMTS operators. Finally, Extelcom pointed out that Bayantel is its substantial stockholder to the extent of about 46% of its outstanding capital stock, and Bayantel's application undermines the very operations of Extelcom. On March 13, 2000, Bayantel filed a Consolidated Reply/Comment,10 stating that the opposition was actually a motion seeking a reconsideration of the NTC Order reviving the instant application, and thus cannot dwell on the material allegations or the merits of the case. Furthermore, Extelcom cannot claim that frequencies were not available inasmuch as the allocation and assignment thereof rest solely on the discretion of the NTC. In the meantime, the NTC issued on March 9, 2000 Memorandum Circular No. 9-3-2000, re-allocating the following radio frequency bands for assignment to existing CMTS operators and to public telecommunication entities which shall be authorized to install, operate and maintain CMTS networks, namely: 1745-1750MHz / 1840-1845MHz; 1750-1775MHz / 1845-1850MHz; 1765-1770MHz / 18601865MHz; and 1770-1775MHz / 1865-1870MHz.11 On May 3, 2000, the NTC issued an Order granting in favor of Bayantel a provisional authority to operate CMTS service.12 The Order stated in pertinent part: On the issue of legal capacity on the part of Bayantel, this Commission has already taken notice of the change in name of International Communications Corporation to Bayan Telecommunications, Inc. Thus, in the Decision entered in NTC Case No. 93-284/94-200 dated 19 July 1999, it was recognized that Bayan Telecommunications, Inc., was formerly named International Communications Corp. Bayantel and ICC Telecoms, Inc. are one and the same entity, and it necessarily follows that what legal capacity ICC Telecoms has or has acquired is also the legal capacity that Bayantel possesses. On the allegation that the Commission has committed an error in allowing the revival of the instant application, it appears that the Order dated 14 December 1993 archiving the same was anchored on the non-availability of frequencies for CMTS. In the same Order, it was expressly

13 stated that the archival hereof, shall be without prejudice to its reinstatement "if and when the requisite frequency becomes available." Inherent in the said Order is the prerogative of the Commission in reviving the same, subject to prevailing conditions. The Order of 1 February 2001, cited the availability of frequencies for CMTS, and based thereon, the Commission, exercising its prerogative, revived and reinstated the instant application. The fact that the motion for revival hereof was made ex-parte by the applicant is of no moment, so long as the oppositors are given the opportunity to be later heard and present the merits of their respective oppositions in the proceedings. On the allegation that the instant application is already obsolete and overtaken by developments, the issue is whether applicant has the legal, financial and technical capacity to undertake the proposed project. The determination of such capacity lies solely within the discretion of the Commission, through its applicable rules and regulations. At any rate, the oppositors are not precluded from showing evidence disputing such capacity in the proceedings at hand. On the alleged non-availability of frequencies for the proposed service in view of the pending applications for the same, the Commission takes note that it has issued Memorandum Circular 9-3-2000, allocating additional frequencies for CMTS. The eligibility of existing operators who applied for additional frequencies shall be treated and resolved in their respective applications, and are not in issue in the case at hand. Accordingly, the Motions for Reconsideration filed by SMARTCOM and GLOBE TELECOMS/ISLACOM and the Motion to Dismiss filed by EXTELCOM are hereby DENIED for lack of merit.13 The grant of the provisional authority was anchored on the following findings: COMMENTS: 1. Due to the operational mergers between Smart Communications, Inc. and Pilipino Telephone Corporation (Piltel) and between Globe Telecom, Inc. (Globe) and Isla Communications, Inc. (Islacom), free and effective competition in the CMTS market is threatened. The fifth operator, Extelcom, cannot provide good competition in as much as it provides service using the analog AMPS. The GSM system dominates the market. 2. There are at present two applicants for the assignment of the frequencies in the 1.7 Ghz and 1.8 Ghz allocated to CMTS, namely Globe and Extelcom. Based on the number of subscribers Extelcom has, there appears to be no congestion in its network - a condition that is necessary for an applicant to be assigned additional frequencies. Globe has yet to prove that there is congestion in its network considering its operational merger with Islacom. 3. Based on the reports submitted to the Commission, 48% of the total number of cities and municipalities are still without telephone service despite the more than 3 million installed lines waiting to be subscribed. CONCLUSIONS: 1. To ensure effective competition in the CMTS market considering the operational merger of some of the CMTS operators, new CMTS operators must be allowed to provide the service. 2. The re-allocated frequencies for CMTS of 3 blocks of 5 Mhz x 2 is sufficient for the number of applicants should the applicants be qualified. 3. There is a need to provide service to some or all of the remaining cities and municipalities without telephone service. 4. The submitted documents are sufficient to determine compliance to the technical requirements. The applicant can be directed to submit details such as channeling plans, exact locations of cell sites, etc. as the project implementation progresses, actual area coverage

14 ascertained and traffic data are made available. Applicant appears to be technically qualified to undertake the proposed project and offer the proposed service. IN VIEW OF THE FOREGOING and considering that there is prima facie evidence to show that Applicant is legally, technically and financially qualified and that the proposed service is technically feasible and economically viable, in the interest of public service, and in order to facilitate the development of telecommunications services in all areas of the country, as well as to ensure healthy competition among authorized CMTS providers, let a PROVISIONAL AUTHORITY (P.A.) be issued to Applicant BAYAN TELECOMMUNICATIONS, INC. authorizing it to construct, install, operate and maintain a Nationwide Cellular Mobile Telephone Systems (CMTS), subject to the following terms and conditions without prejudice to a final decision after completion of the hearing which shall be called within thirty (30) days from grant of authority, in accordance with Section 3, Rule 15, Part IV of the Commission's Rules of Practice and Procedure. xxx.14 Extelcom filed with the Court of Appeals a petition for certiorari and prohibition,15 docketed as CA-G.R. SP No. 58893, seeking the annulment of the Order reviving the application of Bayantel, the Order granting Bayantel a provisional authority to construct, install, operate and maintain a nationwide CMTS, and Memorandum Circular No. 9-3-2000 allocating frequency bands to new public telecommunication entities which are authorized to install, operate and maintain CMTS. On September 13, 2000, the Court of Appeals rendered the assailed Decision,16 the dispositive portion of which reads: WHEREFORE, the writs of certiorari and prohibition prayed for are GRANTED. The Orders of public respondent dated February 1, 2000 and May 3, 2000 in NTC Case No. 92-486 are hereby ANNULLED and SET ASIDE and the Amended Application of respondent Bayantel is DISMISSED without prejudice to the filing of a new CMTS application. The writ of preliminary injunction issued under our Resolution dated August 15, 2000, restraining and enjoining the respondents from enforcing the Orders dated February 1, 2000 and May 3, 2000 in the said NTC case is hereby made permanent. The Motion for Reconsideration of respondent Bayantel dated August 28, 2000 is denied for lack of merit. SO ORDERED.17 Bayantel filed a motion for reconsideration of the above decision.18 The NTC, represented by the Office of the Solicitor General (OSG), also filed its own motion for reconsideration.19 On the other hand, Extelcom filed a Motion for Partial Reconsideration, praying that NTC Memorandum Circular No. 9-32000 be also declared null and void.20 On February 9, 2001, the Court of Appeals issued the assailed Resolution denying all of the motions for reconsideration of the parties for lack of merit.21 Hence, the NTC filed the instant petition for review on certiorari, docketed as G.R. No. 147096, raising the following issues for resolution of this Court: A. Whether or not the Order dated February 1, 2000 of the petitioner which revived the application of respondent Bayantel in NTC Case No. 92-486 violated respondent Extelcom's right to procedural due process of law; B. Whether or not the Order dated May 3, 2000 of the petitioner granting respondent Bayantel a provisional authority to operate a CMTS is in substantial compliance with NTC Rules of Practice and Procedure and Memorandum Circular No. 9-14-90 dated September 4, 1990.22 Subsequently, Bayantel also filed its petition for review, docketed as G.R. No. 147210, assigning the following errors:

15 I. THE COURT OF APPEALS SERIOUSLY ERRED IN ITS INTERPRETATION OF THE PRINCIPLE OF "EXHAUSTION OF ADMINISTRATIVE REMEDIES" WHEN IT FAILED TO DISMISS HEREIN RESPONDENT'S PETITION FOR CERTIORARI DESPITE ITS FAILURE TO FILE A MOTION FOR RECONSIDERATION. II. THE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING THAT THE REVIVAL OF NTC CASE NO. 92-486 ANCHORED ON A EX-PARTE MOTION TO REVIVE CASE WAS TANTAMOUNT TO GRAVE ABUSE OF DISCRETION ON THE PART OF THE NTC. III. THE COURT OF APPEALS SERIOUSLY ERRED WHEN IT DENIED THE MANDATE OF THE NTC AS THE AGENCY OF GOVERNMENT WITH THE SOLE DISCRETION REGARDING ALLOCATION OF FREQUENCY BAND TO TELECOMMUNICATIONS ENTITIES. IV. THE COURT OF APPEALS SERIOUSLY ERRED IN ITS INTERPRETATION OF THE LEGAL PRINCIPLE THAT JURISDICTION ONCE ACQUIRED CANNOT BE LOST WHEN IT DECLARED THAT THE ARCHIVED APPLICATION SHOULD BE DEEMED AS A NEW APPLICATION IN VIEW OF THE SUBSTANTIAL CHANGE IN THE CIRCUMSTANCES ALLEGED IN ITS AMENDMENT APPLICATION. V. CONTRARY TO THE FINDING OF THE COURT OF APPEALS, THE ARCHIVING OF THE BAYANTEL APPLICATION WAS A VALID ACT ON THE PART OF THE NTC EVEN IN THE ABSENCE OF A SPECIFIC RULE ON ARCHIVING OF CASES SINCE RULES OF PROCEDURE ARE, AS A MATTER OF COURSE, LIBERALLY CONSTRUED IN PROCEEDINGS BEFORE ADMINISTRATIVE BODIES AND SHOULD GIVE WAY TO THE GREATER HIERARCHY OF PUBLIC WELFARE AND PUBLIC INTEREST. VI. CONTRARY TO THE FINDING OF THE COURT OF APPEALS, THE ARCHIVING OF BAYANTEL'S APPLICATION WAS NOT VIOLATIVE OF THE SUMMARY NATURE OF THE PROCEEDINGS IN THE NTC UNDER SEC. 3, RULE 1 OF THE NTC REVISED RULES OF PROCEDURE. VII. THE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING THAT THE ARCHIVING OF BAYANTEL'S APPLICATION WAS VIOLATIVE OF THE ALLEGED DECLARED POLICY OF THE GOVERNMENT ON THE TRANSPARENCY AND FAIRNESS OF ADMINISTRATIVE PROCESS IN THE NTC AS LAID DOWN IN SEC 4(1) OF R.A. NO. 7925. VIII. THE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING THAT THE NTC VIOLATED THE PROVISIONS OF THE CONSTITUTION PERTAINING TO DUE PROCESS OF LAW. IX. THE COURT OF APPEALS SERIOUSLY ERRED IN DECLARING THAT THE MAY 3, 2000 ORDER GRANTING BAYANTEL A PROVISIONAL AUTHORITY SHOULD BE SET ASIDE AND REVERSED. i. Contrary to the finding of the Court of Appeals, there was no violation of the NTC Rule that the legal, technical, financial and economic documentations in support of the prayer for provisional authority should first be submitted. ii. Contrary to the finding of the Court of Appeals, there was no violation of Sec. 3, Rule 15 of the NTC Rules of Practice and Procedure that a motion must first be filed before a provisional authority could be issued. iii. Contrary to the finding of the Court of Appeals that a plea for provisional authority necessitates a notice and hearing, the very rule cited by the petitioner (Section 5, Rule 4 of the NTC Rules of Practice and Procedure) provides otherwise. iv. Contrary to the finding of the Court of Appeals, urgent public need is not the only basis for the grant of a provisional authority to an applicant; v. Contrary to the finding of the Court of Appeals, there was no violation of the constitutional provision on the right of the public to information when the Common Carrier Authorization Department (CCAD) prepared its evaluation report.23

16 Considering the identity of the matters involved, this Court resolved to consolidate the two petitions.24 At the outset, it is well to discuss the nature and functions of the NTC, and analyze its powers and authority as well as the laws, rules and regulations that govern its existence and operations. The NTC was created pursuant to Executive Order No. 546, promulgated on July 23, 1979. It assumed the functions formerly assigned to the Board of Communications and the Telecommunications Control Bureau, which were both abolished under the said Executive Order. Previously, the NTC's functions were merely those of the defunct Public Service Commission (PSC), created under Commonwealth Act No. 146, as amended, otherwise known as the Public Service Act, considering that the Board of Communications was the successor-in-interest of the PSC. Under Executive Order No. 125-A, issued in April 1987, the NTC became an attached agency of the Department of Transportation and Communications. In the regulatory telecommunications industry, the NTC has the sole authority to issue Certificates of Public Convenience and Necessity (CPCN) for the installation, operation, and maintenance of communications facilities and services, radio communications systems, telephone and telegraph systems. Such power includes the authority to determine the areas of operations of applicants for telecommunications services. Specifically, Section 16 of the Public Service Act authorizes the then PSC, upon notice and hearing, to issue Certificates of Public Convenience for the operation of public services within the Philippines "whenever the Commission finds that the operation of the public service proposed and the authorization to do business will promote the public interests in a proper and suitable manner."25 The procedure governing the issuance of such authorizations is set forth in Section 29 of the said Act, the pertinent portion of which states: All hearings and investigations before the Commission shall be governed by rules adopted by the Commission, and in the conduct thereof, the Commission shall not be bound by the technical rules of legal evidence. xxx. In granting Bayantel the provisional authority to operate a CMTS, the NTC applied Rule 15, Section 3 of its 1978 Rules of Practice and Procedure, which provides: Sec. 3. Provisional Relief. --- Upon the filing of an application, complaint or petition or at any stage thereafter, the Board may grant on motion of the pleader or on its own initiative, the relief prayed for, based on the pleading, together with the affidavits and supporting documents attached thereto, without prejudice to a final decision after completion of the hearing which shall be called within thirty (30) days from grant of authority asked for. (underscoring ours) Respondent Extelcom, however, contends that the NTC should have applied the Revised Rules which were filed with the Office of the National Administrative Register on February 3, 1993. These Revised Rules deleted the phrase "on its own initiative;" accordingly, a provisional authority may be issued only upon filing of the proper motion before the Commission. In answer to this argument, the NTC, through the Secretary of the Commission, issued a certification to the effect that inasmuch as the 1993 Revised Rules have not been published in a newspaper of general circulation, the NTC has been applying the 1978 Rules. The absence of publication, coupled with the certification by the Commissioner of the NTC stating that the NTC was still governed by the 1978 Rules, clearly indicate that the 1993 Revised Rules have not taken effect at the time of the grant of the provisional authority to Bayantel. The fact that the 1993 Revised Rules were filed with the UP Law Center on February 3, 1993 is of no moment. There is nothing in the Administrative Code of 1987 which implies that the filing of the rules with the UP Law Center is the operative act that gives the rules force and effect. Book VII, Chapter 2, Section 3 thereof merely states: Filing. --- (1) Every agency shall file with the University of the Philippines Law Center three (3) certified copes of every rule adopted by it. Rules in force on the date of effectivity of this Code

17 which are not filed within three (3) months from the date shall not thereafter be the basis of any sanction against any party or persons. (2) The records officer of the agency, or his equivalent functionary, shall carry out the requirements of this section under pain or disciplinary action. (3) A permanent register of all rules shall be kept by the issuing agency and shall be open to public inspection. The National Administrative Register is merely a bulletin of codified rules and it is furnished only to the Office of the President, Congress, all appellate courts, the National Library, other public offices or agencies as the Congress may select, and to other persons at a price sufficient to cover publication and mailing or distribution costs.26 In a similar case, we held: This does not imply however, that the subject Administrative Order is a valid exercise of such quasi-legislative power. The original Administrative Order issued on August 30, 1989, under which the respondents filed their applications for importations, was not published in the Official Gazette or in a newspaper of general circulation. The questioned Administrative Order, legally, until it is published, is invalid within the context of Article 2 of Civil Code, which reads: "Article 2. Laws shall take effect after fifteen days following the completion of their publication in the Official Gazette (or in a newspaper of general circulation in the Philippines), unless it is otherwise provided. x x x" The fact that the amendments to Administrative Order No. SOCPEC 89-08-01 were filed with, and published by the UP Law Center in the National Administrative Register, does not cure the defect related to the effectivity of the Administrative Order. This Court, in Taada vs. Tuvera (G.R. No. L-63915, December 29, 1986, 146 SCRA 446) stated, thus: "We hold therefore that all statutes, including those of local application and private laws, shall be published as a condition for their effectivity, which shall begin fifteen days after publication unless a different effectivity is fixed by the legislature. Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise of legislative power or, at present, directly conferred by the Constitution. Administrative Rules and Regulations must also be published if their purpose is to enforce or implement existing law pursuant also to a valid delegation. Interpretative regulations and those merely internal in nature, that is, regulating only the personnel of the administrative agency and not the public, need not be published. Neither is publication required of the so-called letters of instructions issued by administrative superiors concerning the rules or guidelines to be followed by their subordinates in the performance of their duties. xxx We agree that the publication must be in full or it is no publication at all since its purpose is to inform the public of the contents of the laws." The Administrative Order under consideration is one of those issuances which should be published for its effectivity, since its purpose is to enforce and implement an existing law pursuant to a valid delegation, i.e., P.D. 1071, in relation to LOI 444 and EO 133.27 Thus, publication in the Official Gazette or a newspaper of general circulation is a condition sine qua non before statutes, rules or regulations can take effect. This is explicit from Executive Order No. 200, which repealed Article 2 of the Civil Code, and which states that:

18 Laws shall take effect after fifteen days following the completion of their publication either in the Official Gazette or in a newspaper of general circulation in the Philippines, unless it is otherwise provided.28 The Rules of Practice and Procedure of the NTC, which implements Section 29 of the Public Service Act (C.A. 146, as amended), fall squarely within the scope of these laws, as explicitly mentioned in the case Taada v. Tuvera.29 Our pronouncement in Taada vs. Tuvera is clear and categorical. Administrative rules and regulations must be published if their purpose is to enforce or implement existing law pursuant to a valid delegation. The only exceptions are interpretative regulations, those merely internal in nature, or those so-called letters of instructions issued by administrative superiors concerning the rules and guidelines to be followed by their subordinates in the performance of their duties.30 Hence, the 1993 Revised Rules should be published in the Official Gazette or in a newspaper of general circulation before it can take effect. Even the 1993 Revised Rules itself mandates that said Rules shall take effect only after their publication in a newspaper of general circulation.31 In the absence of such publication, therefore, it is the 1978 Rules that governs. In any event, regardless of whether the 1978 Rules or the 1993 Revised Rules should apply, the records show that the amended application filed by Bayantel in fact included a motion for the issuance of a provisional authority. Hence, it cannot be said that the NTC granted the provisional authority motu proprio. The Court of Appeals, therefore, erred when it found that the NTC issued its Order of May 3, 2000 on its own initiative. This much is acknowledged in the Decision of the Court of Appeals: As prayer, ICC asked for the immediate grant of provisional authority to construct, install, maintain and operate the subject service and to charge the proposed rates and after due notice and hearing, approve the instant application and grant the corresponding certificate of public convenience and necessity.32 The Court of Appeals also erred when it declared that the NTC's Order archiving Bayantel's application was null and void. The archiving of cases is a widely accepted measure designed to shelve cases in which no immediate action is expected but where no grounds exist for their outright dismissal, albeit without prejudice. It saves the petitioner or applicant from the added trouble and expense of re-filing a dismissed case. Under this scheme, an inactive case is kept alive but held in abeyance until the situation obtains wherein action thereon can be taken. In the case at bar, the said application was ordered archived because of lack of available frequencies at the time, and made subject to reinstatement upon availability of the requisite frequency. To be sure, there was nothing irregular in the revival of the application after the condition therefor was fulfilled. While, as held by the Court of Appeals, there are no clear provisions in the Rules of the NTC which expressly allow the archiving of any application, this recourse may be justified under Rule 1, Section 2 of the 1978 Rules, which states: Sec. 2. Scope.--- These rules govern pleadings, practice and procedure before the Board of Communications (now NTC) in all matters of hearing, investigation and proceedings within the jurisdiction of the Board. However, in the broader interest of justice and in order to best serve the public interest, the Board may, in any particular matter, except it from these rules and apply such suitable procedure to improve the service in the transaction of the public business. (underscoring ours) The Court of Appeals ruled that the NTC committed grave abuse of discretion when it revived Bayantel's application based on an ex-parte motion. In this regard, the pertinent provisions of the NTC Rules: Sec. 5. Ex-parte Motions. --- Except for motions for provisional authorization of proposed services and increase of rates, ex-parte motions shall be acted upon by the Board only upon

19 showing of urgent necessity therefor and the right of the opposing party is not substantially impaired.33 Thus, in cases which do not involve either an application for rate increase or an application for a provisional authority, the NTC may entertain ex-parte motions only where there is an urgent necessity to do so and no rights of the opposing parties are impaired.1wphi1.nt The Court of Appeals ruled that there was a violation of the fundamental right of Extelcom to due process when it was not afforded the opportunity to question the motion for the revival of the application. However, it must be noted that said Order referred to a simple revival of the archived application of Bayantel in NTC Case No. 92-426. At this stage, it cannot be said that Extelcom's right to procedural due process was prejudiced. It will still have the opportunity to be heard during the fullblown adversarial hearings that will follow. In fact, the records show that the NTC has scheduled several hearing dates for this purpose, at which all interested parties shall be allowed to register their opposition. We have ruled that there is no denial of due process where full-blown adversarial proceedings are conducted before an administrative body.34 With Extelcom having fully participated in the proceedings, and indeed, given the opportunity to file its opposition to the application, there was clearly no denial of its right to due process. In Zaldivar vs. Sandiganbayan (166 SCRA 316 [1988]), we held that the right to be heard does not only refer to the right to present verbal arguments in court. A party may also be heard through his pleadings. where opportunity to be heard is accorded either through oral arguments or pleadings, there is no denial of procedural due process. As reiterated in National Semiconductor (HK) Distribution, Ltd. vs. NLRC (G.R. No. 123520, June 26, 1998), the essence of due process is simply an opportunity to be heard, or as applied to administrative proceedings, an opportunity to explain one's side. Hence, in Navarro III vs. Damaso (246 SCRA 260 [1995]), we held that a formal or trial-type hearing is not at all times and not in all instances essential. Plainly, petitioner was not denied due process.35 Extelcom had already entered its appearance as a party and filed its opposition to the application. It was neither precluded nor barred from participating in the hearings thereon. Indeed, nothing, not even the Order reviving the application, bars or prevents Extelcom and the other oppositors from participating in the hearings and adducing evidence in support of their respective oppositions. The motion to revive could not have possibly caused prejudice to Extelcom since the motion only sought the revival of the application. It was merely a preliminary step towards the resumption of the hearings on the application of Bayantel. The latter will still have to prove its capability to undertake the proposed CMTS. Indeed, in its Order dated February 1, 2000, the NTC set several hearing dates precisely intended for the presentation of evidence on Bayantel's capability and qualification. Notice of these hearings were sent to all parties concerned, including Extelcom. As regards the changes in the personal circumstances of Bayantel, the same may be ventilated at the hearings during Bayantel's presentation of evidence. In fact, Extelcom was able to raise its arguments on this matter in the Opposition (With Motion to Dismiss) anent the re-opening and re-instatement of the application of Bayantel. Extelcom was thus heard on this particular point. Likewise, the requirements of notice and publication of the application is no longer necessary inasmuch as the application is a mere revival of an application which has already been published earlier. At any rate, the records show that all of the five (5) CMTS operators in the country were duly notified and were allowed to raise their respective oppositions to Bayantel's application through the NTC's Order dated February 1, 2000. It should be borne in mind that among the declared national policies under Republic Act No. 7925, otherwise known as the Public Telecommunications Policy Act of the Philippines, is the healthy competition among telecommunications carriers, to wit: A healthy competitive environment shall be fostered, one in which telecommunications carriers are free to make business decisions and to interact with one another in providing

20 telecommunications services, with the end in view of encouraging their financial viability while maintaining affordable rates.36 The NTC is clothed with sufficient discretion to act on matters solely within its competence. Clearly, the need for a healthy competitive environment in telecommunications is sufficient impetus for the NTC to consider all those applicants who are willing to offer competition, develop the market and provide the environment necessary for greater public service. This was the intention that came to light with the issuance of Memorandum Circular 9-3-2000, allocating new frequency bands for use of CMTS. This memorandum circular enumerated the conditions prevailing and the reasons which necessitated its issuance as follows: - the international accounting rates are rapidly declining, threatening the subsidy to the local exchange service as mandated in EO 109 and RA 7925; - the public telecommunications entities which were obligated to install, operate and maintain local exchange network have performed their obligations in varying degrees; - after more than three (3) years from the performance of the obligations only 52% of the total number of cities and municipalities are provided with local telephone service. - there are mergers and consolidations among the existing cellular mobile telephone service (CMTS) providers threatening the efficiency of competition; - there is a need to hasten the installation of local exchange lines in unserved areas; - there are existing CMTS operators which are experiencing congestion in the network resulting to low grade of service; - the consumers/customers shall be given the freedom to choose CMTS operators from which they could get the service.37 Clearly spelled out is the need to provide enhanced competition and the requirement for more landlines and telecommunications facilities in unserved areas in the country. On both scores, therefore, there was sufficient showing that the NTC acted well within its jurisdiction and in pursuance of its avowed duties when it allowed the revival of Bayantel's application. We now come to the issue of exhaustion of administrative remedies. The rule is well-entrenched that a party must exhaust all administrative remedies before resorting to the courts. The premature invocation of the intervention of the court is fatal to one's cause of action. This rule would not only give the administrative agency an opportunity to decide the matter by itself correctly, but would also prevent the unnecessary and premature resort to courts.38 In the case of Lopez v. City of Manila,39 we held: As a general rule, where the law provides for the remedies against the action of an administrative board, body or officer, relief to courts can be sought only after exhausting all remedies provided. The reason rests upon the presumption that the administrative body, if given the chance to correct its mistake or error, may amend its decision on a given matter and decide it properly. Therefore, where a remedy is available within the administrative machinery, this should be resorted to before resort can be made to the courts, not only to give the administrative agency the opportunity to decide the matter by itself correctly, but also to prevent unnecessary and premature resort to courts. Clearly, Extelcom violated the rule on exhaustion of administrative remedies when it went directly to the Court of Appeals on a petition for certiorari and prohibition from the Order of the NTC dated May 3, 2000, without first filing a motion for reconsideration. It is well-settled that the filing of a motion for reconsideration is a prerequisite to the filing of a special civil action for certiorari. The general rule is that, in order to give the lower court the opportunity to correct itself, a motion for reconsideration is a prerequisite to certiorari. It also basic that petitioner must

21 exhaust all other available remedies before resorting to certiorari. This rule, however, is subject to certain exceptions such as any of the following: (1) the issues raised are purely legal in nature, (2) public interest is involved, (3) extreme urgency is obvious or (4) special circumstances warrant immediate or more direct action.40 This case does not fall under any of the recognized exceptions to this rule. Although the Order of the NTC dated May 3, 2000 granting provisional authority to Bayantel was immediately executory, it did not preclude the filing of a motion for reconsideration. Under the NTC Rules, a party adversely affected by a decision, order, ruling or resolution may within fifteen (15) days file a motion for reconsideration. That the Order of the NTC became immediately executory does not mean that the remedy of filing a motion for reconsideration is foreclosed to the petitioner.41 Furthermore, Extelcom does not enjoy the grant of any vested interest on the right to render a public service. The Constitution is quite emphatic that the operation of a public utility shall not be exclusive. Thus: No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted to citizens of the Philippines or to corporations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteraion, or repeal by the Congress when the common good so requires. xxx xxx xxx.42 In Radio Communications of the Phils., Inc. v. National Telecommunications Commission,43 we held: It is well within the powers of the public respondent to authorize the installation by the private respondent network of radio communications systems in Catarman, Samar and San Jose, Mindoro. Under the circumstances, the mere fact that the petitioner possesses a franchise to put up and operate a radio communications system in certain areas is not an insuperable obstacle to the public respondent's issuing the proper certificate to an applicant desiring to extend the same services to those areas. The Constitution mandates that a franchise cannot be exclusive in nature nor can a franchise be granted except that it must be subject to amendment, alteration, or even repeal by the legislature when the common good so requires. (Art. XII, sec. 11 of the 1986 Constitution). There is an express provision in the petitioner's franchise which provides compliance with the above mandate (RA 2036, sec. 15). Even in the provisional authority granted to Extelcom, it is expressly stated that such authority is not exclusive. Thus, the Court of Appeals erred when it gave due course to Extelcom's petition and ruled that it constitutes an exception to the rule on exhaustion of administrative remedies. Also, the Court of Appeals erred in annulling the Order of the NTC dated May 3, 2000, granting Bayantel a provisional authority to install, operate and maintain CMTS. The general rule is that purely administrative and discretionary functions may not be interfered with by the courts. Thus, in Lacuesta v. Herrera,44 it was held: xxx (T)he powers granted to the Secretary of Agriculture and Commerce (natural resources) by law regarding the disposition of public lands such as granting of licenses, permits, leases and contracts, or approving, rejecting, reinstating, or canceling applications, are all executive and administrative in nature. It is a well recognized principle that purely administrative and discretionary functions may not be interfered with by the courts. (Coloso vs. Board of Accountancy, G.R. No. L-5750, April 20, 1953) In general, courts have no supervising power over the proceedings and actions of the administrative departments of the government. This is generally true with respect to acts involving the exercise of judgement or discretion and findings of fact. (54 Am. Jur. 558-559) xxx.

22 The established exception to the rule is where the issuing authority has gone beyond its statutory authority, exercised unconstitutional powers or clearly acted arbitrarily and without regard to his duty or with grave abuse of discretion.45 None of these obtains in the case at bar. Moreover, in petitions for certiorari, evidentiary matters or matters of fact raised in the court below are not proper grounds nor may such be ruled upon in the proceedings. As held in National Federation of Labor v. NLRC:46 At the outset, it should be noted that a petition for certiorari under Rule 65 of the Rules of Court will prosper only if there is a showing of grave abuse of discretion or an act without or in excess of jurisdiction on the part of the National Labor Relations Commission. It does not include an inquiry as to the correctness of the evaluation of evidence which was the basis of the labor official or officer in determining his conclusion. It is not for this Court to re-examine conflicting evidence, re-evaluate the credibility of witnesses nor substitute the findings of fact of an administrative tribunal which has gained expertise in its special field. Considering that the findings of fact of the labor arbiter and the NLRC are supported by evidence on record, the same must be accorded due respect and finality. This Court has consistently held that the courts will not interfere in matters which are addressed to the sound discretion of the government agency entrusted with the regulation of activities coming under the special and technical training and knowledge of such agency.47 It has also been held that the exercise of administrative discretion is a policy decision and a matter that can best be discharged by the government agency concerned, and not by the courts.48 In Villanueva v. Court of Appeals,49 it was held that findings of fact which are supported by evidence and the conclusion of experts should not be disturbed. This was reiterated in Metro Transit Organization, Inc. v. National Labor Relations Commission,50 wherein it was ruled that factual findings of quasi-judicial bodies which have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but even finality and are binding even upon the Supreme Court if they are supported by substantial evidence.1wphi1.nt Administrative agencies are given a wide latitude in the evaluation of evidence and in the exercise of its adjudicative functions. This latitude includes the authority to take judicial notice of facts within its special competence. In the case at bar, we find no reason to disturb the factual findings of the NTC which formed the basis for awarding the provisional authority to Bayantel. As found by the NTC, Bayantel has been granted several provisional and permanent authorities before to operate various telecommunications services.51 Indeed, it was established that Bayantel was the first company to comply with its obligation to install local exchange lines pursuant to E.O. 109 and R.A. 7925. In recognition of the same, the provisional authority awarded in favor of Bayantel to operate Local Exchange Services in Quezon City, Malabon, Valenzuela and the entire Bicol region was made permanent and a CPCN for the said service was granted in its favor. Prima facie evidence was likewise found showing Bayantel's legal, financial and technical capacity to undertake the proposed cellular mobile telephone service. Likewise, the May 3, 2000 Order did not violate NTC Memorandum Circular No. 9-14-90 dated September 4, 1990, contrary to the ruling of the Court of Appeals. The memorandum circular sets forth the procedure for the issuance of provisional authority thus: EFFECTIVE THIS DATE, and as part of the Commission's drive to streamline and fast track action on applications/petitions for CPCN other forms of authorizations, the Commission shall be evaluating applications/petitions for immediate issuance of provisional authorizations, pending hearing and final authorization of an application on its merit. For this purpose, it is hereby directed that all applicants/petitioners seeking for provisional authorizations, shall submit immediately to the Commission, either together with their application or in a Motion all their legal, technical, financial, economic documentations in support of their prayer for provisional authorizations for evaluation. On the basis of their

23 completeness and their having complied with requirements, the Commission shall be issuing provisional authorizations. Clearly, a provisional authority may be issued even pending hearing and final determination of an application on its merits. Finally, this Court finds that the Manifestations of Extelcom alleging forum shopping on the part of the NTC and Bayantel are not impressed with merit. The divisions of the Supreme Court are not to be considered as separate and distinct courts. The Supreme Court remains a unit notwithstanding that it works in divisions. Although it may have three divisions, it is but a single court. Actions considered in any of these divisions and decisions rendered therein are, in effect, by the same Tribunal. The divisions of this Court are not to be considered as separate and distinct courts but as divisions of one and the same court.52 Moreover, the rules on forum shopping should not be literally interpreted. We have stated thus: It is scarcely necessary to add that Circular No. 28-91 must be so interpreted and applied as to achieve the purposes projected by the Supreme Court when it promulgated that circular. Circular No. 28-91 was designed to serve as an instrument to promote and facilitate the orderly administration of justice and should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objection or the goal of all rules of procedure which is to achieve substantial justice as expeditiously as possible.53 Even assuming that separate actions have been filed by two different parties involving essentially the same subject matter, no forum shopping was committed as the parties did not resort to multiple judicial remedies. The Court, therefore, directed the consolidation of the two cases because they involve essentially the same issues. It would also prevent the absurd situation wherein two different divisions of the same court would render altogether different rulings in the cases at bar. We rule, likewise, that the NTC has legal standing to file and initiate legal action in cases where it is clear that its inaction would result in an impairment of its ability to execute and perform its functions. Similarly, we have previously held in Civil Service Commission v. Dacoycoy54 that the Civil Service Commission, as an aggrieved party, may appeal the decision of the Court of Appeals to this Court. As correctly stated by the NTC, the rule invoked by Extelcom is Rule 65 of the Rules of Civil Procedure, which provides that public respondents shall not appear in or file an answer or comment to the petition or any pleading therein.55 The instant petition, on the other hand, was filed under Rule 45 where no similar proscription exists. WHEREFORE, in view of the foregoing, the consolidated petitions are GRANTED. The Court of Appeals' Decision dated September 13, 2000 and Resolution dated February 9, 2001 are REVERSED and SET ASIDE. The permanent injunction issued by the Court of Appeals is LIFTED. The Orders of the NTC dated February 1, 2000 and May 3, 2000 are REINSTATED. No pronouncement as to costs. SO ORDERED. Davide, Jr., C.J., Puno, Kapunan, and Pardo, JJ., concur.

24 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-11390 March 26, 1918

EL BANCO ESPAOL-FILIPINO, plaintiff-appellant, vs. VICENTE PALANCA, administrator of the estate of Engracio Palanca Tanquinyeng, defendant-appellant. Aitken and DeSelms for appellant. Hartigan and Welch for appellee. STREET, J.: This action was instituted upon March 31, 1908, by "El Banco Espanol-Filipino" to foreclose a mortgage upon various parcels of real property situated in the city of Manila. The mortgage in question is dated June 16, 1906, and was executed by the original defendant herein, Engracio Palanca Tanquinyeng y Limquingco, as security for a debt owing by him to the bank. Upon March 31, 1906, the debt amounted to P218,294.10 and was drawing interest at the rate of 8 per centum per annum, payable at the end of each quarter. It appears that the parties to this mortgage at that time estimated the value of the property in question at P292,558, which was about P75,000 in excess of the indebtedness. After the execution of this instrument by the mortgagor, he returned to China which appears to have been his native country; and he there died, upon January 29, 1810, without again returning to the Philippine Islands. As the defendant was a nonresident at the time of the institution of the present action, it was necessary for the plaintiff in the foreclosure proceeding to give notice to the defendant by publication pursuant to section 399 of the Code of Civil Procedure. An order for publication was accordingly obtained from the court, and publication was made in due form in a newspaper of the city of Manila. At the same time that the order of the court should deposit in the post office in a stamped envelope a copy of the summons and complaint directed to the defendant at his last place of residence, to wit, the city of Amoy, in the Empire of China. This order was made pursuant to the following provision contained in section 399 of the Code of Civil Procedure: In case of publication, where the residence of a nonresident or absent defendant is known, the judge must direct a copy of the summons and complaint to be forthwith deposited by the clerk in the post-office, postage prepaid, directed to the person to be served, at his place of residence Whether the clerk complied with this order does not affirmatively appear. There is, however, among the papers pertaining to this case, an affidavit, dated April 4, 1908, signed by Bernardo Chan y Garcia, an employee of the attorneys of the bank, showing that upon that date he had deposited in the Manila post-office a registered letter, addressed to Engracio Palanca Tanquinyeng, at Manila, containing copies of the complaint, the plaintiff's affidavit, the summons, and the order of the court directing publication as aforesaid. It appears from the postmaster's receipt that Bernardo probably used an envelope obtained from the clerk's office, as the receipt purports to show that the letter emanated from the office. The cause proceeded in usual course in the Court of First Instance; and the defendant not having appeared, judgment was, upon July 2, 1908, taken against him by default. Upon July 3, 1908, a decision was rendered in favor of the plaintiff. In this decision it was recited that publication had been properly made in a periodical, but nothing was said about this notice having been given mail. The court, upon this occasion, found that the indebtedness of the defendant amounted to P249,355. 32, with interest from March 31, 1908. Accordingly it was ordered that the defendant should, on or before July 6, 1908, deliver said amount to the clerk of the court to be applied to the satisfaction of the judgment, and it was declared that in case of the failure of the defendant to satisfy the judgment within such period, the

25 mortgage property located in the city of Manila should be exposed to public sale. The payment contemplated in said order was never made; and upon July 8, 1908, the court ordered the sale of the property. The sale took place upon July 30, 1908, and the property was bought in by the bank for the sum of P110,200. Upon August 7, 1908, this sale was confirmed by the court. About seven years after the confirmation of this sale, or to the precise, upon June 25, 1915, a motion was made in this cause by Vicente Palanca, as administrator of the estate of the original defendant, Engracio Palanca Tanquinyeng y Limquingco, wherein the applicant requested the court to set aside the order of default of July 2, 1908, and the judgment rendered upon July 3, 1908, and to vacate all the proceedings subsequent thereto. The basis of this application, as set forth in the motion itself, was that the order of default and the judgment rendered thereon were void because the court had never acquired jurisdiction over the defendant or over the subject of the action. At the hearing in the court below the application to vacate the judgment was denied, and from this action of the court Vicente Planca, as administrator of the estate of the original defendant, has appealed. No other feature of the case is here under consideration than such as related to the action of the court upon said motion. The case presents several questions of importance, which will be discussed in what appears to be the sequence of most convenient development. In the first part of this opinion we shall, for the purpose of argument, assume that the clerk of the Court of First Instance did not obey the order of the court in the matter of mailing the papers which he was directed to send to the defendant in Amoy; and in this connection we shall consider, first, whether the court acquired the necessary jurisdiction to enable it to proceed with the foreclosure of the mortgage and, secondly, whether those proceedings were conducted in such manner as to constitute due process of law. The word "jurisdiction," as applied to the faculty of exercising judicial power, is used in several different, though related, senses since it may have reference (1) to the authority of the court to entertain a particular kind of action or to administer a particular kind of relief, or it may refer to the power of the court over the parties, or (2) over the property which is the subject to the litigation. The sovereign authority which organizes a court determines the nature and extent of its powers in general and thus fixes its competency or jurisdiction with reference to the actions which it may entertain and the relief it may grant. Jurisdiction over the person is acquired by the voluntary appearance of a party in court and his submission to its authority, or it is acquired by the coercive power of legal process exerted over the person. Jurisdiction over the property which is the subject of the litigation may result either from a seizure of the property under legal process, whereby it is brought into the actual custody of the law, or it may result from the institution of legal proceedings wherein, under special provisions of law, the power of the court over the property is recognized and made effective. In the latter case the property, though at all times within the potential power of the court, may never be taken into actual custody at all. An illustration of the jurisdiction acquired by actual seizure is found in attachment proceedings, where the property is seized at the beginning of the action, or some subsequent stage of its progress, and held to abide the final event of the litigation. An illustration of what we term potential jurisdiction over the res, is found in the proceeding to register the title of land under our system for the registration of land. Here the court, without taking actual physical control over the property assumes, at the instance of some person claiming to be owner, to exercise a jurisdiction in rem over the property and to adjudicate the title in favor of the petitioner against all the world. In the terminology of American law the action to foreclose a mortgage is said to be a proceeding quasi in rem, by which is expressed the idea that while it is not strictly speaking an action in rem yet it partakes of that nature and is substantially such. The expression "action in rem" is, in its narrow application, used only with reference to certain proceedings in courts of admiralty wherein the property alone is treated as responsible for the claim or obligation upon which the proceedings are based. The action quasi rem differs from the true action in rem in the circumstance that in the former an individual is named as

26 defendant, and the purpose of the proceeding is to subject his interest therein to the obligation or lien burdening the property. All proceedings having for their sole object the sale or other disposition of the property of the defendant, whether by attachment, foreclosure, or other form of remedy, are in a general way thus designated. The judgment entered in these proceedings is conclusive only between the parties. In speaking of the proceeding to foreclose a mortgage the author of a well known treaties, has said: Though nominally against person, such suits are to vindicate liens; they proceed upon seizure; they treat property as primarily indebted; and, with the qualification above-mentioned, they are substantially property actions. In the civil law, they are styled hypothecary actions, and their sole object is the enforcement of the lien against the res; in the common law, they would be different in chancery did not treat the conditional conveyance as a mere hypothecation, and the creditor's right ass an equitable lien; so, in both, the suit is real action so far as it is against property, and seeks the judicial recognition of a property debt, and an order for the sale of the res. (Waples, Proceedings In Rem. sec. 607.) It is true that in proceedings of this character, if the defendant for whom publication is made appears, the action becomes as to him a personal action and is conducted as such. This, however, does not affect the proposition that where the defendant fails to appear the action is quasi in rem; and it should therefore be considered with reference to the principles governing actions in rem. There is an instructive analogy between the foreclosure proceeding and an action of attachment, concerning which the Supreme Court of the United States has used the following language: If the defendant appears, the cause becomes mainly a suit in personam, with the added incident, that the property attached remains liable, under the control of the court, to answer to any demand which may be established against the defendant by the final judgment of the court. But, if there is no appearance of the defendant, and no service of process on him, the case becomes, in its essential nature, a proceeding in rem, the only effect of which is to subject the property attached to the payment of the defendant which the court may find to be due to the plaintiff. (Cooper vs. Reynolds, 10 Wall., 308.) In an ordinary attachment proceeding, if the defendant is not personally served, the preliminary seizure is to, be considered necessary in order to confer jurisdiction upon the court. In this case the lien on the property is acquired by the seizure; and the purpose of the proceedings is to subject the property to that lien. If a lien already exists, whether created by mortgage, contract, or statute, the preliminary seizure is not necessary; and the court proceeds to enforce such lien in the manner provided by law precisely as though the property had been seized upon attachment. (Roller vs. Holly, 176 U. S., 398, 405; 44 L. ed., 520.) It results that the mere circumstance that in an attachment the property may be seized at the inception of the proceedings, while in the foreclosure suit it is not taken into legal custody until the time comes for the sale, does not materially affect the fundamental principle involved in both cases, which is that the court is here exercising a jurisdiction over the property in a proceeding directed essentially in rem. Passing now to a consideration of the jurisdiction of the Court of First Instance in a mortgage foreclosure, it is evident that the court derives its authority to entertain the action primarily from the statutes organizing the court. The jurisdiction of the court, in this most general sense, over the cause of action is obvious and requires no comment. Jurisdiction over the person of the defendant, if acquired at all in such an action, is obtained by the voluntary submission of the defendant or by the personal service of process upon him within the territory where the process is valid. If, however, the defendant is a nonresident and, remaining beyond the range of the personal process of the court, refuses to come in voluntarily, the court never acquires jurisdiction over the person at all. Here the property itself is in fact the sole thing which is impleaded and is the responsible object which is the subject of the exercise of judicial power. It follows that the jurisdiction of the court in such case is based exclusively on the power which, under the law, it possesses over the property; and any discussion relative to the jurisdiction of the court over the person of the defendant is entirely apart from the case. The jurisdiction of the court over the property, considered as the exclusive object of such action, is evidently based upon the

27 following conditions and considerations, namely: (1) that the property is located within the district; (2) that the purpose of the litigation is to subject the property by sale to an obligation fixed upon it by the mortgage; and (3) that the court at a proper stage of the proceedings takes the property into custody, if necessary, and expose it to sale for the purpose of satisfying the mortgage debt. An obvious corollary is that no other relief can be granted in this proceeding than such as can be enforced against the property. We may then, from what has been stated, formulated the following proposition relative to the foreclosure proceeding against the property of a nonresident mortgagor who fails to come in and submit himself personally to the jurisdiction of the court: (I) That the jurisdiction of the court is derived from the power which it possesses over the property; (II) that jurisdiction over the person is not acquired and is nonessential; (III) that the relief granted by the court must be limited to such as can be enforced against the property itself. It is important that the bearing of these propositions be clearly apprehended, for there are many expressions in the American reports from which it might be inferred that the court acquires personal jurisdiction over the person of the defendant by publication and notice; but such is not the case. In truth the proposition that jurisdiction over the person of a nonresident cannot be acquired by publication and notice was never clearly understood even in the American courts until after the decision had been rendered by the Supreme Court of the United States in the leading case of Pennoyer vs. Neff (95 U. S. 714; 24 L. ed., 565). In the light of that decision, and of other decisions which have subsequently been rendered in that and other courts, the proposition that jurisdiction over the person cannot be thus acquired by publication and notice is no longer open to question; and it is now fully established that a personal judgment upon constructive or substituted service against a nonresident who does not appear is wholly invalid. This doctrine applies to all kinds of constructive or substituted process, including service by publication and personal service outside of the jurisdiction in which the judgment is rendered; and the only exception seems to be found in the case where the nonresident defendant has expressly or impliedly consented to the mode of service. (Note to Raher vs. Raher, 35 L. R. A. [N. S. ], 292; see also 50 L .R. A., 585; 35 L. R. A. [N. S.], 312 The idea upon which the decision in Pennoyer vs. Neff (supra) proceeds is that the process from the tribunals of one State cannot run into other States or countries and that due process of law requires that the defendant shall be brought under the power of the court by service of process within the State, or by his voluntary appearance, in order to authorize the court to pass upon the question of his personal liability. The doctrine established by the Supreme Court of the United States on this point, being based upon the constitutional conception of due process of law, is binding upon the courts of the Philippine Islands. Involved in this decision is the principle that in proceedings in rem or quasi in rem against a nonresident who is not served personally within the state, and who does not appear, the relief must be confined to the res, and the court cannot lawfully render a personal judgment against him. (Dewey vs. Des Moines, 173 U. S., 193; 43 L. ed., 665; Heidritter vs. Elizabeth Oil Cloth Co., 112 U. S., 294; 28 L. ed., 729.) Therefore in an action to foreclose a mortgage against a nonresident, upon whom service has been effected exclusively by publication, no personal judgment for the deficiency can be entered. (Latta vs. Tutton, 122 Cal., 279; Blumberg vs. Birch, 99 Cal., 416.) It is suggested in the brief of the appellant that the judgment entered in the court below offends against the principle just stated and that this judgment is void because the court in fact entered a personal judgment against the absent debtor for the full amount of the indebtedness secured by the mortgage. We do not so interpret the judgment. In a foreclosure proceeding against a nonresident owner it is necessary for the court, as in all cases of foreclosure, to ascertain the amount due, as prescribed in section 256 of the Code of Civil Procedure, and to make an order requiring the defendant to pay the money into court. This step is a necessary precursor of the order of sale. In the present case the judgment which was entered contains the following words: Because it is declared that the said defendant Engracio Palanca Tanquinyeng y Limquingco, is indebted in the amount of P249,355.32, plus the interest, to the 'Banco Espanol-Filipino' . . . therefore said appellant is ordered to deliver the above amount etc., etc.

28 This is not the language of a personal judgment. Instead it is clearly intended merely as a compliance with the requirement that the amount due shall be ascertained and that the evidence of this it may be observed that according to the Code of Civil Procedure a personal judgment against the debtor for the deficiency is not to be rendered until after the property has been sold and the proceeds applied to the mortgage debt. (sec. 260). The conclusion upon this phase of the case is that whatever may be the effect in other respects of the failure of the clerk of the Court of First Instance to mail the proper papers to the defendant in Amoy, China, such irregularity could in no wise impair or defeat the jurisdiction of the court, for in our opinion that jurisdiction rest upon a basis much more secure than would be supplied by any form of notice that could be given to a resident of a foreign country. Before leaving this branch of the case, we wish to observe that we are fully aware that many reported cases can be cited in which it is assumed that the question of the sufficiency of publication or notice in a case of this kind is a question affecting the jurisdiction of the court, and the court is sometimes said to acquire jurisdiction by virtue of the publication. This phraseology was undoubtedly originally adopted by the court because of the analogy between service by the publication and personal service of process upon the defendant; and, as has already been suggested, prior to the decision of Pennoyer vs. Neff (supra) the difference between the legal effects of the two forms of service was obscure. It is accordingly not surprising that the modes of expression which had already been molded into legal tradition before that case was decided have been brought down to the present day. But it is clear that the legal principle here involved is not effected by the peculiar language in which the courts have expounded their ideas. We now proceed to a discussion of the question whether the supposed irregularity in the proceedings was of such gravity as to amount to a denial of that "due process of law" which was secured by the Act of Congress in force in these Islands at the time this mortgage was foreclosed. (Act of July 1, 1902, sec. 5.) In dealing with questions involving the application of the constitutional provisions relating to due process of law the Supreme Court of the United States has refrained from attempting to define with precision the meaning of that expression, the reason being that the idea expressed therein is applicable under so many diverse conditions as to make any attempt ay precise definition hazardous and unprofitable. As applied to a judicial proceeding, however, it may be laid down with certainty that the requirement of due process is satisfied if the following conditions are present, namely; (1) There must be a court or tribunal clothed with judicial power to hear and determine the matter before it; (2) jurisdiction must be lawfully acquired over the person of the defendant or over the property which is the subject of the proceeding; (3) the defendant must be given an opportunity to be heard; and (4) judgment must be rendered upon lawful hearing. Passing at once to the requisite that the defendant shall have an opportunity to be heard, we observe that in a foreclosure case some notification of the proceedings to the nonresident owner, prescribing the time within which appearance must be made, is everywhere recognized as essential. To answer this necessity the statutes generally provide for publication, and usually in addition thereto, for the mailing of notice to the defendant, if his residence is known. Though commonly called constructive, or substituted service of process in any true sense. It is merely a means provided by law whereby the owner may be admonished that his property is the subject of judicial proceedings and that it is incumbent upon him to take such steps as he sees fit to protect it. In speaking of notice of this character a distinguish master of constitutional law has used the following language: . . . if the owners are named in the proceedings, and personal notice is provided for, it is rather from tenderness to their interests, and in order to make sure that the opportunity for a hearing shall not be lost to them, than from any necessity that the case shall assume that form. (Cooley on Taxation [2d. ed.], 527, quoted in Leigh vs. Green, 193 U. S., 79, 80.) It will be observed that this mode of notification does not involve any absolute assurance that the absent owner shall thereby receive actual notice. The periodical containing the publication may never in fact come to his hands, and the chances that he should discover the notice may often be very slight. Even where notice is sent by mail the probability of his receiving it, though much increased, is dependent upon the correctness of the address to which it is forwarded as well as upon the regularity

29 and security of the mail service. It will be noted, furthermore, that the provision of our law relative to the mailing of notice does not absolutely require the mailing of notice unconditionally and in every event, but only in the case where the defendant's residence is known. In the light of all these facts, it is evident that actual notice to the defendant in cases of this kind is not, under the law, to be considered absolutely necessary. The idea upon which the law proceeds in recognizing the efficacy of a means of notification which may fall short of actual notice is apparently this: Property is always assumed to be in the possession of its owner, in person or by agent; and he may be safely held, under certain conditions, to be affected with knowledge that proceedings have been instituted for its condemnation and sale. It is the duty of the owner of real estate, who is a nonresident, to take measures that in some way he shall be represented when his property is called into requisition, and if he fails to do this, and fails to get notice by the ordinary publications which have usually been required in such cases, it is his misfortune, and he must abide the consequences. (6 R. C. L., sec. 445 [p. 450]). It has been well said by an American court: If property of a nonresident cannot be reached by legal process upon the constructive notice, then our statutes were passed in vain, and are mere empty legislative declarations, without either force, or meaning; for if the person is not within the jurisdiction of the court, no personal judgment can be rendered, and if the judgment cannot operate upon the property, then no effective judgment at all can be rendered, so that the result would be that the courts would be powerless to assist a citizen against a nonresident. Such a result would be a deplorable one. (Quarl vs. Abbett, 102 Ind., 233; 52 Am. Rep., 662, 667.) It is, of course universally recognized that the statutory provisions relative to publication or other form of notice against a nonresident owner should be complied with; and in respect to the publication of notice in the newspaper it may be stated that strict compliance with the requirements of the law has been held to be essential. In Guaranty Trust etc. Co. vs. Green Cove etc., Railroad Co. (139 U. S., 137, 138), it was held that where newspaper publication was made for 19 weeks, when the statute required 20, the publication was insufficient. With respect to the provisions of our own statute, relative to the sending of notice by mail, the requirement is that the judge shall direct that the notice be deposited in the mail by the clerk of the court, and it is not in terms declared that the notice must be deposited in the mail. We consider this to be of some significance; and it seems to us that, having due regard to the principles upon which the giving of such notice is required, the absent owner of the mortgaged property must, so far as the due process of law is concerned, take the risk incident to the possible failure of the clerk to perform his duty, somewhat as he takes the risk that the mail clerk or the mail carrier might possibly lose or destroy the parcel or envelope containing the notice before it should reach its destination and be delivered to him. This idea seems to be strengthened by the consideration that placing upon the clerk the duty of sending notice by mail, the performance of that act is put effectually beyond the control of the plaintiff in the litigation. At any rate it is obvious that so much of section 399 of the Code of Civil Procedure as relates to the sending of notice by mail was complied with when the court made the order. The question as to what may be the consequences of the failure of the record to show the proof of compliance with that requirement will be discussed by us further on. The observations which have just been made lead to the conclusion that the failure of the clerk to mail the notice, if in fact he did so fail in his duty, is not such an irregularity, as amounts to a denial of due process of law; and hence in our opinion that irregularity, if proved, would not avoid the judgment in this case. Notice was given by publication in a newspaper and this is the only form of notice which the law unconditionally requires. This in our opinion is all that was absolutely necessary to sustain the proceedings. It will be observed that in considering the effect of this irregularity, it makes a difference whether it be viewed as a question involving jurisdiction or as a question involving due process of law. In the matter of jurisdiction there can be no distinction between the much and the little. The court either has jurisdiction

30 or it has not; and if the requirement as to the mailing of notice should be considered as a step antecedent to the acquiring of jurisdiction, there could be no escape from the conclusion that the failure to take that step was fatal to the validity of the judgment. In the application of the idea of due process of law, on the other hand, it is clearly unnecessary to be so rigorous. The jurisdiction being once established, all that due process of law thereafter requires is an opportunity for the defendant to be heard; and as publication was duly made in the newspaper, it would seem highly unreasonable to hold that failure to mail the notice was fatal. We think that in applying the requirement of due process of law, it is permissible to reflect upon the purposes of the provision which is supposed to have been violated and the principle underlying the exercise of judicial power in these proceedings. Judge in the light of these conceptions, we think that the provision of Act of Congress declaring that no person shall be deprived of his property without due process of law has not been infringed. In the progress of this discussion we have stated the two conclusions; (1) that the failure of the clerk to send the notice to the defendant by mail did not destroy the jurisdiction of the court and (2) that such irregularity did not infringe the requirement of due process of law. As a consequence of these conclusions the irregularity in question is in some measure shorn of its potency. It is still necessary, however, to consider its effect considered as a simple irregularity of procedure; and it would be idle to pretend that even in this aspect the irregularity is not grave enough. From this point of view, however, it is obvious that any motion to vacate the judgment on the ground of the irregularity in question must fail unless it shows that the defendant was prejudiced by that irregularity. The least, therefore, that can be required of the proponent of such a motion is to show that he had a good defense against the action to foreclose the mortgage. Nothing of the kind is, however, shown either in the motion or in the affidavit which accompanies the motion. An application to open or vacate a judgment because of an irregularity or defect in the proceedings is usually required to be supported by an affidavit showing the grounds on which the relief is sought, and in addition to this showing also a meritorious defense to the action. It is held that a general statement that a party has a good defense to the action is insufficient. The necessary facts must be averred. Of course if a judgment is void upon its face a showing of the existence of a meritorious defense is not necessary. (10 R. C. L., 718.) The lapse of time is also a circumstance deeply affecting this aspect of the case. In this connection we quote the following passage from the encyclopedic treatise now in course of publication: Where, however, the judgment is not void on its face, and may therefore be enforced if permitted to stand on the record, courts in many instances refuse to exercise their quasi equitable powers to vacate a judgement after the lapse of the term ay which it was entered, except in clear cases, to promote the ends of justice, and where it appears that the party making the application is himself without fault and has acted in good faith and with ordinary diligence. Laches on the part of the applicant, if unexplained, is deemed sufficient ground for refusing the relief to which he might otherwise be entitled. Something is due to the finality of judgments, and acquiescence or unnecessary delay is fatal to motions of this character, since courts are always reluctant to interfere with judgments, and especially where they have been executed or satisfied. The moving party has the burden of showing diligence, and unless it is shown affirmatively the court will not ordinarily exercise its discretion in his favor. (15 R. C. L., 694, 695.) It is stated in the affidavit that the defendant, Engracio Palanca Tanquinyeng y Limquingco, died January 29, 1910. The mortgage under which the property was sold was executed far back in 1906; and the proceedings in the foreclosure were closed by the order of court confirming the sale dated August 7, 1908. It passes the rational bounds of human credulity to suppose that a man who had placed a mortgage upon property worth nearly P300,000 and had then gone away from the scene of his life activities to end his days in the city of Amoy, China, should have long remained in ignorance of the fact that the mortgage had been foreclosed and the property sold, even supposing that he had no knowledge of those proceedings while they were being conducted. It is more in keeping with the ordinary course of things that he should have acquired information as to what was transpiring in his affairs at Manila; and upon the basis of this rational assumption we are authorized, in the absence of

31 proof to the contrary, to presume that he did have, or soon acquired, information as to the sale of his property. The Code of Civil Procedure, indeed, expressly declares that there is a presumption that things have happened according to the ordinary habits of life (sec. 334 [26]); and we cannot conceive of a situation more appropriate than this for applying the presumption thus defined by the lawgiver. In support of this presumption, as applied to the present case, it is permissible to consider the probability that the defendant may have received actual notice of these proceedings from the unofficial notice addressed to him in Manila which was mailed by an employee of the bank's attorneys. Adopting almost the exact words used by the Supreme Court of the United States in Grannis vs. Ordeans (234 U. S., 385; 58 L. ed., 1363), we may say that in view of the well-known skill of postal officials and employees in making proper delivery of letters defectively addressed, we think the presumption is clear and strong that this notice reached the defendant, there being no proof that it was ever returned by the postal officials as undelivered. And if it was delivered in Manila, instead of being forwarded to Amoy, China, there is a probability that the recipient was a person sufficiently interested in his affairs to send it or communicate its contents to him. Of course if the jurisdiction of the court or the sufficiency of the process of law depended upon the mailing of the notice by the clerk, the reflections in which we are now indulging would be idle and frivolous; but the considerations mentioned are introduced in order to show the propriety of applying to this situation the legal presumption to which allusion has been made. Upon that presumption, supported by the circumstances of this case, ,we do not hesitate to found the conclusion that the defendant voluntarily abandoned all thought of saving his property from the obligation which he had placed upon it; that knowledge of the proceedings should be imputed to him; and that he acquiesced in the consequences of those proceedings after they had been accomplished. Under these circumstances it is clear that the merit of this motion is, as we have already stated, adversely affected in a high degree by the delay in asking for relief. Nor is it an adequate reply to say that the proponent of this motion is an administrator who only qualified a few months before this motion was made. No disability on the part of the defendant himself existed from the time when the foreclosure was effected until his death; and we believe that the delay in the appointment of the administrator and institution of this action is a circumstance which is imputable to the parties in interest whoever they may have been. Of course if the minor heirs had instituted an action in their own right to recover the property, it would have been different. It is, however, argued that the defendant has suffered prejudice by reason of the fact that the bank became the purchaser of the property at the foreclosure sale for a price greatly below that which had been agreed upon in the mortgage as the upset price of the property. In this connection, it appears that in article nine of the mortgage which was the subject of this foreclosure, as amended by the notarial document of July 19, 1906, the parties to this mortgage made a stipulation to the effect that the value therein placed upon the mortgaged properties should serve as a basis of sale in case the debt should remain unpaid and the bank should proceed to a foreclosure. The upset price stated in that stipulation for all the parcels involved in this foreclosure was P286,000. It is said in behalf of the appellant that when the bank bought in the property for the sum of P110,200 it violated that stipulation. It has been held by this court that a clause in a mortgage providing for a tipo, or upset price, does not prevent a foreclosure, nor affect the validity of a sale made in the foreclosure proceedings. (Yangco vs. Cruz Herrera and Wy Piaco, 11 Phil. Rep., 402; Banco-Espaol Filipino vs. Donaldson, Sim and Co., 5 Phil. Rep., 418.) In both the cases here cited the property was purchased at the foreclosure sale, not by the creditor or mortgagee, but by a third party. Whether the same rule should be applied in a case where the mortgagee himself becomes the purchaser has apparently not been decided by this court in any reported decision, and this question need not here be considered, since it is evident that if any liability was incurred by the bank by purchasing for a price below that fixed in the stipulation, its liability was a personal liability derived from the contract of mortgage; and as we have already demonstrated such a liability could not be the subject of adjudication in an action where the court had no jurisdiction over the person of the defendant. If the plaintiff bank became liable to account for the difference between the upset price and the price at which in bought in the property, that liability remains unaffected by the disposition which the court made of this case; and the fact that the bank may have violated such an obligation can in no wise affect the validity of the judgment entered in the Court of First Instance.

32 In connection with the entire failure of the motion to show either a meritorious defense to the action or that the defendant had suffered any prejudice of which the law can take notice, we may be permitted to add that in our opinion a motion of this kind, which proposes to unsettle judicial proceedings long ago closed, can not be considered with favor, unless based upon grounds which appeal to the conscience of the court. Public policy requires that judicial proceedings be upheld. The maximum here applicable is non quieta movere. As was once said by Judge Brewer, afterwards a member of the Supreme Court of the United States: Public policy requires that judicial proceedings be upheld, and that titles obtained in those proceedings be safe from the ruthless hand of collateral attack. If technical defects are adjudged potent to destroy such titles, a judicial sale will never realize that value of the property, for no prudent man will risk his money in bidding for and buying that title which he has reason to fear may years thereafter be swept away through some occult and not readily discoverable defect. (Martin vs. Pond, 30 Fed., 15.) In the case where that language was used an attempt was made to annul certain foreclosure proceedings on the ground that the affidavit upon which the order of publication was based erroneously stated that the State of Kansas, when he was in fact residing in another State. It was held that this mistake did not affect the validity of the proceedings. In the preceding discussion we have assumed that the clerk failed to send the notice by post as required by the order of the court. We now proceed to consider whether this is a proper assumption; and the proposition which we propose to establish is that there is a legal presumption that the clerk performed his duty as the ministerial officer of the court, which presumption is not overcome by any other facts appearing in the cause. In subsection 14 of section 334 of the Code of Civil Procedure it is declared that there is a presumption "that official duty has been regularly performed;" and in subsection 18 it is declared that there is a presumption "that the ordinary course of business has been followed." These presumptions are of course in no sense novelties, as they express ideas which have always been recognized. Omnia presumuntur rite et solemniter esse acta donec probetur in contrarium. There is therefore clearly a legal presumption that the clerk performed his duty about mailing this notice; and we think that strong considerations of policy require that this presumption should be allowed to operate with full force under the circumstances of this case. A party to an action has no control over the clerk of the court; and has no right to meddle unduly with the business of the clerk in the performance of his duties. Having no control over this officer, the litigant must depend upon the court to see that the duties imposed on the clerk are performed. Other considerations no less potent contribute to strengthen the conclusion just stated. There is no principle of law better settled than that after jurisdiction has once been required, every act of a court of general jurisdiction shall be presumed to have been rightly done. This rule is applied to every judgment or decree rendered in the various stages of the proceedings from their initiation to their completion (Voorhees vs. United States Bank, 10 Pet., 314; 35 U. S., 449); and if the record is silent with respect to any fact which must have been established before the court could have rightly acted, it will be presumed that such fact was properly brought to its knowledge. (The Lessee of Grignon vs. Astor, 2 How., 319; 11 L. ed., 283.) In making the order of sale [of the real state of a decedent] the court are presumed to have adjudged every question necessary to justify such order or decree, viz: The death of the owners; that the petitioners were his administrators; that the personal estate was insufficient to pay the debts of the deceased; that the private acts of Assembly, as to the manner of sale, were within the constitutional power of the Legislature, and that all the provisions of the law as to notices which are directory to the administrators have been complied with. . . . The court is not bound to enter upon the record the evidence on which any fact was decided. (Florentine vs. Barton, 2 Wall., 210; 17 L. ed., 785.) Especially does all this apply after long lapse of time. Applegate vs. Lexington and Carter County Mining Co. (117 U. S., 255) contains an instructive discussion in a case analogous to that which is now before us. It there appeared that in order to foreclose a

33 mortgage in the State of Kentucky against a nonresident debtor it was necessary that publication should be made in a newspaper for a specified period of time, also be posted at the front door of the court house and be published on some Sunday, immediately after divine service, in such church as the court should direct. In a certain action judgment had been entered against a nonresident, after publication in pursuance of these provisions. Many years later the validity of the proceedings was called in question in another action. It was proved from the files of an ancient periodical that publication had been made in its columns as required by law; but no proof was offered to show the publication of the order at the church, or the posting of it at the front door of the court-house. It was insisted by one of the parties that the judgment of the court was void for lack of jurisdiction. But the Supreme Court of the United States said: The court which made the decree . . . was a court of general jurisdiction. Therefore every presumption not inconsistent with the record is to be indulged in favor of its jurisdiction. . . . It is to be presumed that the court before making its decree took care of to see that its order for constructive service, on which its right to make the decree depended, had been obeyed. It is true that in this case the former judgment was the subject of collateral , or indirect attack, while in the case at bar the motion to vacate the judgment is direct proceeding for relief against it. The same general presumption, however, is indulged in favor of the judgment of a court of general jurisdiction, whether it is the subject of direct or indirect attack the only difference being that in case of indirect attack the judgment is conclusively presumed to be valid unless the record affirmatively shows it to be void, while in case of direct attack the presumption in favor of its validity may in certain cases be overcome by proof extrinsic to the record. The presumption that the clerk performed his duty and that the court made its decree with the knowledge that the requirements of law had been complied with appear to be amply sufficient to support the conclusion that the notice was sent by the clerk as required by the order. It is true that there ought to be found among the papers on file in this cause an affidavit, as required by section 400 of the Code of Civil Procedure, showing that the order was in fact so sent by the clerk; and no such affidavit appears. The record is therefore silent where it ought to speak. But the very purpose of the law in recognizing these presumptions is to enable the court to sustain a prior judgment in the face of such an omission. If we were to hold that the judgment in this case is void because the proper affidavit is not present in the file of papers which we call the record, the result would be that in the future every title in the Islands resting upon a judgment like that now before us would depend, for its continued security, upon the presence of such affidavit among the papers and would be liable at any moment to be destroyed by the disappearance of that piece of paper. We think that no court, with a proper regard for the security of judicial proceedings and for the interests which have by law been confided to the courts, would incline to favor such a conclusion. In our opinion the proper course in a case of this kind is to hold that the legal presumption that the clerk performed his duty still maintains notwithstanding the absence from the record of the proper proof of that fact. In this connection it is important to bear in mind that under the practice prevailing in the Philippine Islands the word "record" is used in a loose and broad sense, as indicating the collective mass of papers which contain the history of all the successive steps taken in a case and which are finally deposited in the archives of the clerk's office as a memorial of the litigation. It is a matter of general information that no judgment roll, or book of final record, is commonly kept in our courts for the purpose of recording the pleadings and principal proceedings in actions which have been terminated; and in particular, no such record is kept in the Court of First Instance of the city of Manila. There is, indeed, a section of the Code of Civil Procedure which directs that such a book of final record shall be kept; but this provision has, as a matter of common knowledge, been generally ignored. The result is that in the present case we do not have the assistance of the recitals of such a record to enable us to pass upon the validity of this judgment and as already stated the question must be determined by examining the papers contained in the entire file. But it is insisted by counsel for this motion that the affidavit of Bernardo Chan y Garcia showing that upon April 4, 1908, he sent a notification through the mail addressed to the defendant at Manila, Philippine Islands, should be accepted as affirmative proof that the clerk of the court failed in his duty and that, instead of himself sending the requisite notice through the mail, he relied upon Bernardo to

34 send it for him. We do not think that this is by any means a necessary inference. Of course if it had affirmatively appeared that the clerk himself had attempted to comply with this order and had directed the notification to Manila when he should have directed it to Amoy, this would be conclusive that he had failed to comply with the exact terms of the order; but such is not this case. That the clerk of the attorneys for the plaintiff erroneously sent a notification to the defendant at a mistaken address affords in our opinion very slight basis for supposing that the clerk may not have sent notice to the right address. There is undoubtedly good authority to support the position that when the record states the evidence or makes an averment with reference to a jurisdictional fact, it will not be presumed that there was other or different evidence respecting the fact, or that the fact was otherwise than stated. If, to give an illustration, it appears from the return of the officer that the summons was served at a particular place or in a particular manner, it will not be presumed that service was also made at another place or in a different manner; or if it appears that service was made upon a person other than the defendant, it will not be presumed, in the silence of the record, that it was made upon the defendant also (Galpin vs. Page, 18 Wall., 350, 366; Settlemier vs. Sullivan, 97 U. S., 444, 449). While we believe that these propositions are entirely correct as applied to the case where the person making the return is the officer who is by law required to make the return, we do not think that it is properly applicable where, as in the present case, the affidavit was made by a person who, so far as the provisions of law are concerned, was a mere intermeddler. The last question of importance which we propose to consider is whether a motion in the cause is admissible as a proceeding to obtain relief in such a case as this. If the motion prevails the judgment of July 2, 1908, and all subsequent proceedings will be set aside, and the litigation will be renewed, proceeding again from the date mentioned as if the progress of the action had not been interrupted. The proponent of the motion does not ask the favor of being permitted to interpose a defense. His purpose is merely to annul the effective judgment of the court, to the end that the litigation may again resume its regular course. There is only one section of the Code of Civil Procedure which expressly recognizes the authority of a Court of First Instance to set aside a final judgment and permit a renewal of the litigation in the same cause. This is as follows: SEC. 113. Upon such terms as may be just the court may relieve a party or legal representative from the judgment, order, or other proceeding taken against him through his mistake, inadvertence, surprise, or excusable neglect; Provided, That application thereof be made within a reasonable time, but in no case exceeding six months after such judgment, order, or proceeding was taken. An additional remedy by petition to the Supreme Court is supplied by section 513 of the same Code. The first paragraph of this section, in so far as pertinent to this discussion, provides as follows: When a judgment is rendered by a Court of First Instance upon default, and a party thereto is unjustly deprived of a hearing by fraud, accident, mistake or excusable negligence, and the Court of First Instance which rendered the judgment has finally adjourned so that no adequate remedy exists in that court, the party so deprived of a hearing may present his petition to the Supreme Court within sixty days after he first learns of the rendition of such judgment, and not thereafter, setting forth the facts and praying to have judgment set aside. . . . It is evident that the proceeding contemplated in this section is intended to supplement the remedy provided by section 113; and we believe the conclusion irresistible that there is no other means recognized by law whereby a defeated party can, by a proceeding in the same cause, procure a judgment to be set aside, with a view to the renewal of the litigation. The Code of Civil Procedure purports to be a complete system of practice in civil causes, and it contains provisions describing with much fullness the various steps to be taken in the conduct of such proceedings. To this end it defines with precision the method of beginning, conducting, and concluding the civil action of whatever species; and by section 795 of the same Code it is declared that the

35 procedure in all civil action shall be in accordance with the provisions of this Code. We are therefore of the opinion that the remedies prescribed in sections 113 and 513 are exclusive of all others, so far as relates to the opening and continuation of a litigation which has been once concluded. The motion in the present case does not conform to the requirements of either of these provisions; and the consequence is that in our opinion the action of the Court of First Instance in dismissing the motion was proper. If the question were admittedly one relating merely to an irregularity of procedure, we cannot suppose that this proceeding would have taken the form of a motion in the cause, since it is clear that, if based on such an error, the came to late for relief in the Court of First Instance. But as we have already seen, the motion attacks the judgment of the court as void for want of jurisdiction over the defendant. The idea underlying the motion therefore is that inasmuch as the judgment is a nullity it can be attacked in any way and at any time. If the judgment were in fact void upon its face, that is, if it were shown to be a nullity by virtue of its own recitals, there might possibly be something in this. Where a judgment or judicial order is void in this sense it may be said to be a lawless thing, which can be treated as an outlaw and slain at sight, or ignored wherever and whenever it exhibits its head. But the judgment in question is not void in any such sense. It is entirely regular in form, and the alleged defect is one which is not apparent upon its face. It follows that even if the judgment could be shown to be void for want of jurisdiction, or for lack of due process of law, the party aggrieved thereby is bound to resort to some appropriate proceeding to obtain relief. Under accepted principles of law and practice, long recognized in American courts, a proper remedy in such case, after the time for appeal or review has passed, is for the aggrieved party to bring an action to enjoin the judgment, if not already carried into effect; or if the property has already been disposed of he may institute suit to recover it. In every situation of this character an appropriate remedy is at hand; and if property has been taken without due process, the law concedes due process to recover it. We accordingly old that, assuming the judgment to have been void as alleged by the proponent of this motion, the proper remedy was by an original proceeding and not by motion in the cause. As we have already seen our Code of Civil Procedure defines the conditions under which relief against a judgment may be productive of conclusion for this court to recognize such a proceeding as proper under conditions different from those defined by law. Upon the point of procedure here involved, we refer to the case of People vs. Harrison (84 Cal., 607) wherein it was held that a motion will not lie to vacate a judgment after the lapse of the time limited by statute if the judgment is not void on its face; and in all cases, after the lapse of the time limited by statute if the judgment is not void on its face; and all cases, after the lapse of such time, when an attempt is made to vacate the judgment by a proceeding in court for that purpose an action regularly brought is preferable, and should be required. It will be noted taken verbatim from the California Code (sec. 473). The conclusions stated in this opinion indicate that the judgment appealed from is without error, and the same is accordingly affirmed, with costs. So ordered. Arellano, C.J., Torres, Carson, and Avancea, JJ., concur.

36 Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 121777 January 24, 2001

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. CAROL M. DELA PIEDRA, accused-appellant. KAPUNAN, J.: Accused-appellant Carol M. dela Piedra questions her conviction for illegal recruitment in large scale and assails, as well, the constitutionality of the law defining and penalizing said crime. The Court affirms the constitutionality of the law and the conviction of the accused, but reduces the penalty imposed upon her. The accused was charged before the Regional Trial Court of Zamboanga City in an information alleging: That on or about January 30, 1994, in the City of Zamboanga, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, without having previously obtained from the Philippine Overseas Employment Administration, a license or authority to engage in recruitment and overseas placement of workers, did then and there, wilfully, unlawfully and feloniously, offer and promise for a fee employment abroad particularly in Singapore thus causing Maria Lourdes Modesto [y] Gadrino, Nancy Araneta y Aliwanag and Jennelyn Baez y Timbol, all qualified to apply, in fact said Maria Lourdes Modesto had already advanced the amount of P2,000.00 to the accused for and in consideration of the promised employment which did not materialized [sic] thus causing damage and prejudice to the latter in the said sum; furthermore, the acts complained of herein tantamount [sic] to economic sabotage in that the same were committed in large scale.1 Arraigned on June 20, 1994, the accused pleaded not guilty2 to these charges. At the trial, the prosecution presented five (5) witnesses, namely, Erlie Ramos, SPO2 Erwin Manalopilar, Eileen Fermindoza, Nancy Araneta and Lourdes Modesto. The succeeding narration is gathered from their testimonies: On January 30, 1994, at exactly 10:00 in the morning, Erlie Ramos, Attorney II of the Philippine Overseas Employment Agency (POEA), received a telephone call from an unidentified woman inquiring about the legitimacy of the recruitment conducted by a certain Mrs. Carol Figueroa. Ramos, whose duties include the surveillance of suspected illegal recruiters, immediately contacted a friend, a certain Mayeth Bellotindos, so they could both go to No. 26-D, Tetuan Highway, Sta. Cruz, Zamboanga City, where the recruitment was reportedly being undertaken. Upon arriving at the reported area at around 4:00 p.m., Bellotindos entered the house and pretended to be an applicant. Ramos remained outside and stood on the pavement, from where he was able to see around six (6) persons in the house's sala. Ramos even heard a woman, identified as Carol Fegueroa, talk about the possible employment she has to provide in Singapore and the documents that the applicants have to comply with. Fifteen (15) minutes later, Bellotindos came out with a bio-data form in hand. On February 1, 1994, Ramos conferred with a certain Capt. Mendoza of the Criminal Investigation Service (CIS) to organize the arrest of the alleged illegal recruiter. Also present were other members of the CIS, including Col. Rodolfo Almonte, Regional Director of the PNP-CIS for Region IX, Eileen Fermindoza, and a certain SPO3 Santos. The group planned to entrap the illegal recruiter the next day by having Fermindoza pose as an applicant.3

37 On February 2, 1994, at around 8:00 p.m., Col. Almonte directed the case to SPO2 Erwin Manalopilar, a member of the Philippine National Police who was assigned as an investigator of the CIS, to conduct a surveillance of the area to confirm the report of illegal recruitment. Accordingly, he, along with Eileen Fermindoza, immediately proceeded to Tetuan Highway. The two did not enter the house where the recruitment was supposedly being conducted, but Fermindoza interviewed two people who informed them that some people do go inside the house. Upon returning to their office at around 8:30 a.m., the two reported to Capt. Mendoza who organized a team to conduct the raid. The raiding team, which included Capt. Mendoza, SPO2 Manalopilar, Fermindoza and a certain Oscar Bucol, quickly set off and arrived at the reported scene at 9:30 that morning. There they met up with Erlie Ramos of the POEA. Fermindoza then proceeded to enter the house while the rest of the team posted themselves outside to secure the area. Fermindoza was instructed to come out after she was given a bio-data form, which will serve as the team's cue to enter the house.4 Fermindoza introduced herself as a job applicant to a man and a woman, apparently the owners of the house, and went inside. There, she saw another woman, later identified as Jasmine, coming out of the bathroom. The man to whom Fermindoza earlier introduced herself told Jasmine that Fermindoza was applying for a position. Jasmine, who was then only wearing a towel, told her that she would just get dressed. Jasmine then came back and asked Fermindoza what position she was applying for. Fermindoza replied that she was applying to be a babysitter or any other work so long as she could go abroad. Jasmine then gave her an application form. A few minutes later, a certain Carol arrived. Jasmine informed Carol that Fermindoza was an applicant. Fermindoza asked Carol what the requirements were and whether she (Fermindoza) was qualified. Carol told Fermindoza that if she had a passport, she could fill up the application papers. Fermindoza replied that she had no passport yet. Carol said she need not worry since Jasmine will prepare the passport for her. While filling up the application form, three women who appeared to be friends of Jasmine arrived to follow up the result of their applications and to give their advance payment. Jasmine got their papers and put them on top of a small table. Fermindoza then proceeded to the door and signaled to the raiding party by raising her hand. Capt. Mendoza asked the owners of the house, a married couple, for permission to enter the same. The owners granted permission after the raiding party introduced themselves as members of the CIS. Inside the house, the raiding party saw some supposed applicants. Application forms, already filled up, were in the hands of one Mrs. Carol Figueroa. The CIS asked Figueroa if she had a permit to recruit. Figueroa retorted that she was not engaged in recruitment. Capt. Mendoza nevertheless proceeded to arrest Figueroa. He took the application forms she was holding as the raiding party seized the other papers5 on the table.6 The CIS team then brought Figueroa, a certain Jasmine Alejandro, and the three women suspected to be applicants, to the office for investigation.7 In the course of their investigation, the CIS discovered that Carol Figueroa had many aliases, among them, Carol Llena and Carol dela Piedra. The accused was not able to present any authority to recruit when asked by the investigators.8 A check by Ramos with the POEA revealed that the acused was not licensed or authorized to conduct recruitment.9 A certification10 dated February 2, 1994 stating thus was executed by Renegold M. Macarulay, Officer-in-Charge of the POEA. The CIS likewise interviewed the supposed applicants, Lourdes Modesto, Nancy Araneta and Jennelyn Baez, all registered nurses working at the Cabato Medical Hospital, who executed their respective written statements.11 At the trial, Nancy Araneta, 23, recounted that she was at Jasmine Alejandro's house in the afternoon of January 30, 1994. Araneta had learned from Sandra Aquino, also a nurse at the Cabato Medical Hospital, that a woman was there to recruit job applicants for Singapore. Araneta and her friends, Jennelyn Baez and Sandra Aquino, arrived at Jasmine's house at around 4:30 p.m. Jasmine welcomed them and told them to sit down. They listened to the "recruiter" who was then

38 talking to a number of people. The recruiter said that she was "recruiting" nurses for Singapore. Araneta and her friends then filled up bio-data forms and were required to submit pictures and a transcript of records. They were also told to pay P2,000, and "the rest will be salary deduction." Araneta submitted her bio-data form to Carol that same afternoon, but did not give any money because she was "not yet sure." On the day of the raid on February 2, 1994, Araneta was again at the Alejandro residence to submit her transcript of records and her picture. She arrived at the house 30 minutes before the raid but did not witness the arrest since she was at the porch when it happened.12 Maria Lourdes Modesto, 26, was also in Jasmine Alejandro's house on January 30, 1994. A friend of Jasmine had informed her that there was someone recruiting in Jasmine's house. Upon arriving at the Alejandro residence, Lourdes was welcomed by Jasmine.1wphi1.nt Lourdes recalled that Carol Figueroa was already briefing some people when she arrived. Carol Figueroa asked if they would like a "good opportunity" since a hospital was hiring nurses. She gave a breakdown of the fees involved: P30,000 for the visa and the round trip ticket, and P5,000 as placement fee and for the processing of the papers. The initial payment was P2,000, while P30,000 will be by salary deduction. Lourdes filled up the application form and submitted it to Jasmine. After the interview, she gave the initial payment of P2,000 to Jasmine, who assured Lourdes that she was authorized to receive the money. On February 2, 1994, however, Lourdes went back to the house to get back the money. Jasmine gave back the money to Lourdes after the raid.13 Denial comprised the accused's defense. Carol dela Piedra, 37, is a housewife and a resident of Cebu City. Her husband is a businessman from Cebu, the manager of the Region 7 Branch of the Grollier International Encyclopedia. They own an apartment in Cebu City, providing lodging to students. The accused claimed that she goes to Singapore to visit her relatives. She first traveled to Singapore on August 21, 1993 as a tourist, and came back to the Philippines on October 20 of the same year. Thereafter, she returned to Singapore on December 10, 1993. On December 21, 1993, while in Singapore, the accused was invited to a Christmas party sponsored by the Zamboanga City Club Association. On that occasion, she met a certain Laleen Malicay, who sought her help. A midwife, Malicay had been working in Singapore for six (6) years. Her employer is a certain Mr. Tan, a close friend of Carol. According to the accused, Malicay sent P15,000 home for her father who was then seriously ill. Malicay was not sure, however, whether her father received the money so she requested the accused to verify from her relatives receipt thereof. She informed the accused that she had a cousin by the name of Jasmine Alejandro. Malicay gave the accused Jasmine's telephone number, address and a sketch of how to get there. The accused returned to the country on January 21, 1994. From Cebu City, the accused flew to Zamboanga City on January 23, 1994 to give some presents to her friends. On January 30, 1994, the accused called up Jasmine Alejandro, Laleen Malicay's cousin, to inform her that she would be going to her house. At around noon that day, the accused, accompanied by her friend Hilda Falcasantos, arrived at the house where she found Jasmine entertaining some friends. Jasmine came down with two of her friends whom she introduced as her classmates. Jasmine told them that the accused was a friend of Laleen Malicay. The accused relayed to Jasmine Malicay's message regarding the money the latter had sent. Jasmine assured her that they received the money, and asked Carol to tell Malicay to send more money for medicine for Malicay's mother. Jasmine also told her that she would send something for Malicay when the accused goes back to Singapore. The accused replied that she just needed to confirm her flight back

39 to Cebu City, and will return to Jasmine's house. After the meeting with Jasmine, the accused went shopping with Hilda Falcasantos. The accused was in the house for only fifteen (15) minutes. On February 2, 1994, the accused went to the Philippine Airlines office at 7:30 in the morning to confirm her 5:30 p.m. flight to Cebu City. She then proceeded to Jasmine's residence, arriving there at past 8 a.m. Inside the house, she met a woman who asked her, "Are you Carol from Singapore?" The accused, in turn, asked the woman if she could do anything for her. The woman inquired from Carol if she was recruiting. Carol replied in the negative, explaining that she was there just to say goodbye to Jasmine. The woman further asked Carol what the requirements were if she (the woman) were to go to Singapore. Carol replied that she would need a passport. Two (2) minutes later, three (3) girls entered the house looking for Jasmine. The woman Carol was talking with then stood up and went out. A minute after, three (3) members of the CIS and a POEA official arrived. A big man identified himself as a member of the CIS and informed her that they received a call that she was recruiting. They told her she had just interviewed a woman from the CIS. She denied this, and said that she came only to say goodbye to the occupants of the house, and to get whatever Jasmine would be sending for Laleen Malicay. She even showed them her ticket for Cebu City. Erlie Ramos then went up to Jasmine's room and returned with some papers. The accused said that those were the papers that Laleen Malicay requested Jasmine to give to her (the accused). The accused surmised that because Laleen Malicay wanted to go home but could not find a replacement, one of the applicants in the forms was to be her (Malicay's) substitute. Ramos told the accused to explain in their office. The accused denied in court that she went to Jasmine's residence to engage in recruitment. She claimed she came to Zamboanga City to visit her friends, to whom she could confide since she and her husband were having some problems. She denied she knew Nancy Araneta or that she brought information sheets for job placement. She also denied instructing Jasmine to collect P2,000 from alleged applicants as processing fee.14 The accused presented two witnesses to corroborate her defense. The first, Jasmine Alejandro, 23, testified that she met the accused for the first time only on January 30, 1994 when the latter visited them to deliver Laleen Malicay's message regarding the money she sent. Carol, who was accompanied by a certain Hilda Falcasantos, stayed in their house for 10 to 15 minutes only. Carol came back to the house a few days later on February 2 at around 8:00 in the morning to "get the envelope for the candidacy of her daughter." Jasmine did not elaborate. Jasmine denied that she knew Nancy Araneta or Lourdes Modesto. She denied that the accused conducted recruitment. She claimed she did not see Carol distribute bio-data or application forms to job applicants. She disclaimed any knowledge regarding the P2,000 application fee.15 The other defense witness, Ernesto Morales, a policeman, merely testified that the accused stayed in their house in No. 270 Tugbungan, Zamboanga City, for four (4) days before her arrest, although she would sometimes go downtown alone. He said he did not notice that she conducted any recruitment.16 On May 5, 1995, the trial court rendered a decision convicting the accused, thus: WHEREFORE, in view of all the foregoing consideration[s][,] this Court finds the accused Carol dela Piedra alias Carol Llena and Carol Figueroa guilty beyond reasonable doubt of Illegal Recruitment committed in a large scale and hereby sentences her to suffer the penalty of LIFE IMPRISONMENT and to pay a fine of P100,000.00, and also to pay the costs. Being a detention prisoner, the said accused is entitled to the full time of the period of her detention during the pendency of this case under the condition set forth in Article 29 of the Revised Penal Code.

40 SO ORDERED.17 The accused, in this appeal, ascribes to the trial court the following errors: I WITH DUE RESPECT, THE LOWER COURT ERRED IN NOT FINDING SEC. 13 (B) OF P.D. 442[,] AS AMENDED[,] OTHERWISE KNOWN AS [THE] ILLEGAL RECRUITMENT LAW UNCONSTITUTIONAL. II WITH DUE RESPECT, THE LOWER COURT ERRED IN NOT HOLDING THAT THE APPREHENDING TEAM COMPOSED OF POEA AND CIS REPRESENTATIVES ENTERED INTO [sic] THE RESIDENCE OF JASMIN[E] ALEJANDRO WITHOUT ANY SEARCH WARRANT IN VIOLATION OF ARTICLE III, SECTION 2 OF THE PHILIPPINE CONSTITUTION, AND ANY EVIDENCE OBTAINED IN VIOLATION THEREOF, SHALL BE INADMISSIBLE FOR ANY PURPOSE IN ANY PROCEEDING AS PROVIDED UNDER ARTICLE III, SECTION 3, (2) OF THE SAME CONSTITUTION; III WITH DUE RESPECT, THE LOWER COURT ERRED IN IGNORING THAT WHEN SPO2 [sic] EILE[E]N FERMINDOZA ENTERED THE RESIDENCE OF JASMIN[E] ALEJANDRO, THERE WAS NO CRIME COMMITTED WHATSOEVER, HENCE THE ARREST OF THE ACCUSED-APPELLANT WAS ILLEGAL; [IV] WITH DUE RESPECT, THE LOWER COURT ERRED IN NOT DISCOVERING THAT SPO2 [sic] EILE[E]N FERMINDOZA WAS NOT ILLEGALLY RECRUITED BY THE ACCUSED-APPELLANT, HENCE, ACCUSEDAPPELLANT SHOULD BE ACQUITTED; V WITH DUE RESPECT, THE LOWER COURT ERRED IN NOT DETECTING THAT NANCY ARANETA WAS NOT ILLEGALLY RECRUITED BY THE ACCUSED-APPELLANT, HENCE, ACCUSED SHOULD BE EXONERATED; VI WITH DUE RESPECT, THE LOWER COURT ERRED IN NOT REALIZING THAT MARIA LOURDES MODESTO WAS NOT ILLEGALLY RECRUITED BY THE ACCUSED-APPELLANT, HENCE, ACCUSEDAPPELLANT SHOULD BE EXCULPATED; VII WITH DUE RESPECT, THE LOWER COURT ERRED IN FINDING THAT THE ACCUSED-APPELLANT WAS CHARGED WITH LARGE SCALE ILLEGAL RECRUITMENT ON JANUARY 30, 1994, THE DATE STATED IN THE INFORMATION AS THE DATE OF THE CRIME, BUT ACCUSED WAS ARRESTED ON FEB. 2, 1994 AND ALL THE EVIDENCES [sic] INDICATED [sic] THAT THE ALLEGED CRIME WERE [sic] COMMITTED ON FEB. 2, 1994, HENCE, THE INFORMATION IS FATALLY DEFECTIVE; VIII WITH DUE RESPECT, THE LOWER COURT ERRED IN NOT FINDING THAT THE ALLEGED CRIME OF ILLEGAL RECRUITMENT WAS COMMITTED NOT ON [sic] LARGE SCALE, HENCE, THE PENALTY SHOULD NOT BE LIFE IMPRISONMENT; IX

41 WITH DUE RESPECT, THE LOWER COURT ERRED IN NOT FINDING THAT THOSE EVIDENCES [sic] SEIZED AT THE HOUSE OF JASMIN[E] ALEJANDRO AND PRESENTED TO THE COURT WERE PLANTED BY A BOGUS ATTORNEY[,] ERLIE S. RAMOS OF THE POEA; X WITH DUE RESPECT, THE LOWER COURT ERRED IN NOT DISCOVERING THAT ACCUSEDAPPELLANT DID NOT RECEIVE ANY PAYMENT EVEN A SINGLE CENTAVO FROM THE ALLEGED VICTIMS WHO DID NOT SUFFER DAMAGE IN ANY MANNER, YET SHE WAS CONVICTED TO SERVE HER ENTIRE LIFE BEHIND PRISON BARS. SUCH PUNISHMENT WAS CRUEL AND UNUSUAL, HENCE, A WANTON VIOLATION OF THE CONSTITUTION.18 In the first assigned error, appellant maintains that the law defining "recruitment and placement" violates due process. Appellant also avers, as part of her sixth assigned error, that she was denied the equal protection of the laws. We shall address the issues jointly. Appellant submits that Article 13 (b) of the Labor Code defining "recruitment and placement" is void for vagueness and, thus, violates the due process clause.19 Due process requires that the terms of a penal statute must be sufficiently explicit to inform those who are subject to it what conduct on their part will render them liable to its penalties.20 A criminal statute that "fails to give a person of ordinary intelligence fair notice that his contemplated conduct is forbidden by the statute," or is so indefinite that "it encourages arbitrary and erratic arrests and convictions," is void for vagueness.21 The constitutional vice in a vague or indefinite statute is the injustice to the accused in placing him on trial for an offense, the nature of which he is given no fair warning.22 We reiterated these principles in People vs. Nazario:23 As a rule, a statute or act may be said to be vague when it lacks comprehensible standards that men "of common intelligence must necessarily guess at its meaning and differ as to its application." It is repugnant to the Constitution in two respects: (1) it violates due process for failure to accord persons, especially the parties targeted by it, fair notice of the conduct to avoid; and (2) it leaves law enforcers unbridled discretion in carrying out its provisions and become an arbitrary flexing of the Government muscle. We added, however, that: x x x the act must be utterly vague on its face, that is to say, it cannot be clarified by either a saving clause or by construction. Thus, in Coates v. City of Cincinnati, the U.S. Supreme Court struck down an ordinance that had made it illegal for "three or more persons to assemble on any sidewalk and there conduct themselves in a manner annoying to persons passing by." Clearly, the ordinance imposed no standard at all "because one may never know in advance what 'annoys some people but does not annoy others.'" Coates highlights what has been referred to as a "perfectly vague" act whose obscurity is evident on its face. It is to be distinguished, however, from legislation couched in imprecise languagebut which nonetheless specifies a standard though defectively phrasedin which case, it may be "saved" by proper construction. Here, the provision in question reads: ART. 13. Definitions.(a) x x x. (b) "Recruitment and placement" refers to any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, and includes referrals, contract services, promising or advertising for employment, locally or abroad, whether for profit or not: Provided,

42 That any person or entity which, in any manner, offers or promises for a fee employment to two or more persons shall be deemed engaged in recruitment and placement. x x x. When undertaken by non-licensees or non-holders of authority, recruitment activities are punishable as follows: ART. 38. Illegal Recruitment. (a) Any recruitment activities, including the prohibited practices enumerated under Article 34 of this Code, to be undertaken by non-licensees or non-holders of authority shall be deemed illegal and punishable under Article 39 of this Code. The Ministry of Labor and Employment or any law enforcement officer may initiate complaints under this Article. (b) Illegal recruitment when committed by a syndicate or in large scale shall be considered an offense involving economic sabotage and shall be penalized in accordance with Article 39 hereof. Illegal recruitment is deemed committed by a syndicate if carried out by a group of three (3) or more persons conspiring and/or confederating with one another in carrying out any unlawful or illegal transaction, enterprise or scheme defined under the first paragraph hereof. Illegal recruitment is deemed committed in large scale if committed against three (3) or more persons individually or as a group. x x x. Art. 39. Penalties. (a) The penalty of life imprisonment and a fine of One Hundred Thousand Pesos (P100,000) shall be imposed if illegal recruitment constitutes economic sabotage as defined herein: (b) Any licensee or holder of authority found violating or causing another to violate any provision of this Title or its implementing rules and regulations, shall upon conviction thereof, suffer the penalty of imprisonment of not less than five years or a fine of not less than P10,000 nor more than P50,000 or both such imprisonment and fine, at the discretion of the court; (c) Any person who is neither a licensee nor a holder of authority under this Title found violating any provision thereof or its implementing rules and regulations shall, upon conviction thereof, suffer the penalty of imprisonment of not less than four years nor more than eight years or a fine of not less than P20,000 nor more than P100,000 or both such imprisonment and fine, at the discretion of the court; x x x. In support of her submission that Article 13 (b) is void for vagueness, appellant invokes People vs. Panis,24 where this Court, to use appellant's term, "criticized" the definition of "recruitment and placement" as follows: It is unfortunate that we can only speculate on the meaning of the questioned provision for lack of records of debates and deliberations that would otherwise have been available if the Labor Code had been enacted as a statute rather than a presidential decree is that they could be, and sometimes were, issued without previous public discussion or consultation, the promulgator heeding only his own counsel or those of his close advisers in their lofty pinnacle of power. The not infrequent results are rejection, intentional or not, of the interest of the greater number and, as in the instant case, certain esoteric provisions that one cannot read against the background facts usually reported in the legislative journals. If the Court in Panis "had to speculate on the meaning of the questioned provision," appellant asks, what more "the ordinary citizen" who does not possess the "necessary [legal] knowledge?"

43 Appellant further argues that the acts that constitute "recruitment and placement" suffer from overbreadth since by merely "referring" a person for employment, a person may be convicted of illegal recruitment. These contentions cannot be sustained. Appellant's reliance on People vs. Panis is misplaced. The issue in Panis was whether, under the proviso of Article 13 (b), the crime of illegal recruitment could be committed only "whenever two or more persons are in any manner promised or offered any employment for a fee." The Court held in the negative, explaining: As we see it, the proviso was intended neither to impose a condition on the basic rule nor to provide an exception thereto but merely to create a presumption. The presumption is that the individual or entity is engaged in recruitment and placement whenever he or it is dealing with two or more persons to whom, in consideration of a fee, an offer or promise of employment is made in the course of the "canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring (of) workers." The number of persons dealt with is not an essential ingredient of the act of recruitment and placement of workers. Any of the acts mentioned in the basic rule in Article 13(b) will constitute recruitment and placement even if only one prospective worker is involved. The proviso merely lays down a rule of evidence that where a fee is collected in consideration of a promise or offer of employment to two or more prospective workers, the individual or entity dealing with them shall be deemed to be engaged in the act of recruitment and placement. The words "shall be deemed" create that presumption. This is not unlike the presumption in article 217 of the Revised Penal Code, for example, regarding the failure of a public officer to produce upon lawful demand funds or property entrusted to his custody. Such failure shall beprima facie evidence that he has put them to personal use; in other words, he shall be deemed to have malversed such funds or property. In the instant case, the word "shall be deemed" should by the same token be given the force of a disputable presumption or of prima facie evidence of engaging in recruitment and placement. It is unfortunate that we can only speculate on the meaning of the questioned provision for lack of records of debates and deliberations that would otherwise have been available if the Labor Code had been enacted as a statute rather than a presidential decree is that they could be, and sometimes were, issued without previous public discussion or consultation, the promulgator heeding only his own counsel or those of his close advisers in their lofty pinnacle of power. The not infrequent results are rejection, intentional or not, of the interest of the greater number and, as in the instant case, certain esoteric provisions that one cannot read against the background facts usually reported in the legislative journals. At any rate, the interpretation here adopted should give more force to the campaign against illegal recruitment and placement, which has victimized many Filipino workers seeking a better life in a foreign land, and investing hard-earned savings or even borrowed funds in pursuit of their dream, only to be awakened to the reality of a cynical deception at the hands of their own countrymen. Evidently, therefore, appellant has taken the penultimate paragraph in the excerpt quoted above out of context. The Court, in Panis, merely bemoaned the lack of records that would help shed light on the meaning of the proviso. The absence of such records notwithstanding, the Court was able to arrive at a reasonable interpretation of the proviso by applying principles in criminal law and drawing from the language and intent of the law itself. Section 13 (b), therefore, is not a "perfectly vague act" whose obscurity is evident on its face. If at all, the proviso therein is merely couched in imprecise language that was salvaged by proper construction. It is not void for vagueness. An act will be declared void and inoperative on the ground of vagueness and uncertainty, only upon a showing that the defect is such that the courts are unable to determine, with any reasonable degree of certainty, what the legislature intended. x x x. In this connection we cannot pretermit reference to the rule that "legislation should not be held invalid on the ground of uncertainty if susceptible of any reasonable construction that will support and give it effect. An Act will not be declared inoperative and ineffectual on the ground that it furnishes no adequate means to secure the purpose for which it is

44 passed, if men of common sense and reason can devise and provide the means, and all the instrumentalities necessary for its execution are within the reach of those intrusted therewith."25 That Section 13 (b) encompasses what appellant apparently considers as customary and harmless acts such as " labor or employment referral" ("referring" an applicant, according to appellant, for employment to a prospective employer) does not render the law overbroad. Evidently, appellant misapprehends concept of overbreadth. A statute may be said to be overbroad where it operates to inhibit the exercise of individual freedoms affirmatively guaranteed by the Constitution, such as the freedom of speech or religion. A generally worded statute, when construed to punish conduct which cannot be constitutionally punished is unconstitutionally vague to the extent that it fails to give adequate warning of the boundary between the constitutionally permissible and the constitutionally impermissible applications of the statute.26 In Blo Umpar Adiong vs. Commission on Elections,27 for instance, we struck down as void for overbreadth provisions prohibiting the posting of election propaganda in any place including private vehicles other than in the common poster areas sanctioned by the COMELEC. We held that the challenged provisions not only deprived the owner of the vehicle the use of his property but also deprived the citizen of his right to free speech and information. The prohibition in Adiong, therefore, was so broad that it covered even constitutionally guaranteed rights and, hence, void for overbreadth. In the present case, however, appellant did not even specify what constitutionally protected freedoms are embraced by the definition of "recruitment and placement" that would render the same constitutionally overbroad. Appellant also invokes the equal protection clause28 in her defense. She points out that although the evidence purportedly shows that Jasmine Alejandro handed out application forms and even received Lourdes Modesto's payment, appellant was the only one criminally charged. Alejandro, on the other hand, remained scot-free. From this, appellant concludes that the prosecution discriminated against her on grounds of regional origins. Appellant is a Cebuana while Alejandro is a Zamboanguea, and the alleged crime took place in Zamboanga City. The argument has no merit. At the outset, it may be stressed that courts are not confined to the language of the statute under challenge in determining whether that statute has any discriminatory effect. A statute nondiscriminatory on its face may be grossly discriminatory in its operation.29 Though the law itself be fair on its face and impartial in appearance, yet, if it is applied and administered by public authority with an evil eye and unequal hand, so as practically to make unjust and illegal discriminations between persons in similar circumstances, material to their rights, the denial of equal justice is still within the prohibition of the Constitution.30 The prosecution of one guilty person while others equally guilty are not prosecuted, however, is not, by itself, a denial of the equal protection of the laws.31 Where the official action purports to be in conformity to the statutory classification, an erroneous or mistaken performance of the statutory duty, although a violation of the statute, is not without more a denial of the equal protection of the laws.32 The unlawful administration by officers of a statute fair on its face, resulting in its unequal application to those who are entitled to be treated alike, is not a denial of equal protection unless there is shown to be present in it an element of intentional or purposeful discrimination. This may appear on the face of the action taken with respect to a particular class or person, or it may only be shown by extrinsic evidence showing a discriminatory design over another not to be inferred from the action itself.But a discriminatory purpose is not presumed, there must be a showing of "clear and intentional discrimination."33 Appellant has failed to show that, in charging appellant in court, that there was a "clear and intentional discrimination" on the part of the prosecuting officials. The discretion of who to prosecute depends on the prosecution's sound assessment whether the evidence before it can justify a reasonable belief that a person has committed an offense.34 The presumption is that the prosecuting officers regularly performed their duties,35 and this presumption can be overcome only by proof to the contrary, not by mere speculation. Indeed, appellant has not

45 presented any evidence to overcome this presumption. The mere allegation that appellant, a Cebuana, was charged with the commission of a crime, while a Zamboanguea, the guilty party in appellant's eyes, was not, is insufficient to support a conclusion that the prosecution officers denied appellant equal protection of the laws. There is also common sense practicality in sustaining appellant's prosecution. While all persons accused of crime are to be treated on a basis of equality before the law, it does not follow that they are to be protected in the commission of crime. It would be unconscionable, for instance, to excuse a defendant guilty of murder because others have murdered with impunity. The remedy for unequal enforcement of the law in such instances does not lie in the exoneration of the guilty at the expense of society x x x. Protection of the law will be extended to all persons equally in the pursuit of their lawful occupations, but no person has the right to demand protection of the law in the commission of a crime.36 Likewise, [i]f the failure of prosecutors to enforce the criminal laws as to some persons should be converted into a defense for others charged with crime, the result would be that the trial of the district attorney for nonfeasance would become an issue in the trial of many persons charged with heinous crimes and the enforcement of law would suffer a complete breakdown.37 We now come to the third, fourth and fifth assigned errors, all of which involve the finding of guilt by the trial court. Illegal recruitment is committed when two elements concur. First, the offender has no valid license or authority required by law to enable one to lawfully engage in recruitment and placement of workers. Second, he or she undertakes either any activity within the meaning of "recruitment and placement" defined under Article 13 (b), or any prohibited practices enumerated under Article 34 of the Labor Code.38 In case of illegal recruitment in large scale, a third element is added: that the accused commits said acts against three or more persons, individually or as a group.39 In this case, the first element is present. The certification of POEA Officer-in-Charge Macarulay states that appellant is not licensed or authorized to engage in recruitment and placement. The second element is also present. Appellant is presumed engaged in recruitment and placement under Article 13 (b) of the Labor Code. Both Nancy Araneta and Lourdes Modesto testified that appellant promised them employment for a fee. Their testimonies corroborate each other on material points: the briefing conducted by appellant, the time and place thereof, the fees involved. Appellant has not shown that these witnesses were incited by any motive to testify falsely against her. The absence of evidence as to an improper motive actuating the principal witnesses of the prosecution strongly tends to sustain that no improper motive existed and that their testimony is worthy of full faith and credence.40 Appellant's denials cannot prevail over the positive declaration of the prosecution witnesses. Affirmative testimony of persons who are eyewitnesses of the fact asserted easily overrides negative testimony.41 That appellant did not receive any payment for the promised or offered employment is of no moment. From the language of the statute, the act of recruitment may be "for profit or not;" it suffices that the accused "promises or offers for a fee employment" to warrant conviction for illegal recruitment. The testimonies of Araneta and Modesto, coming as they do from credible witnesses, meet the standard of proof beyond reasonable doubt that appellant committed recruitment and placement. We therefore do not deem it necessary to delve into the second and third assigned errors assailing the legality of appellant's arrest and the seizure of the application forms. A warrantless arrest, when unlawful, has the effect of invalidating the search incidental thereto and the articles so seized are rendered inadmissible in evidence.42 Here, even if the documents seized were deemed inadmissible, her conviction would stand in view of Araneta and Modesto's testimonies.

46 Appellant attempts to cast doubt on the prosecution's case by claiming in her ninth assigned error that Erlie Ramos of the POEA supposedly "planted" the application forms. She also assails his character, alleging that he passed himself off as a lawyer, although this was denied by Ramos. The claim of "frame-up," like alibi, is a defense that has been invariably viewed by the Court with disfavor for it can easily be concocted but difficult to prove.43 Apart from her self-serving testimony, appellant has not offered any evidence that she was indeed framed by Ramos. She has not even hinted at any motive for Ramos to frame her. Law enforcers are presumed to have performed their duties regularly in the absence of evidence to the contrary.44 Considering that the two elements of lack of license or authority and the undertaking of an activity constituting recruitment and placement are present, appellant, at the very least, is liable for "simple" illegal recruitment. But is she guilty of illegal recruitment in large scale? We find that she is not. A conviction for large scale illegal recruitment must be based on a finding in each case of illegal recruitment of three or more persons whether individually or as a group.45 In this case, only two persons, Araneta and Modesto, were proven to have been recruited by appellant. The third person named in the complaint as having been promised employment for a fee, Jennelyn Baez, was not presented in court to testify. It is true that law does not require that at least three victims testify at the trial; nevertheless, it is necessary that there is sufficient evidence proving that the offense was committed against three or more persons.46 In this case, evidence that appellant likewise promised her employment for a fee is sketchy. The only evidence that tends to prove this fact is the testimony of Nancy Araneta, who said that she and her friends, Baez and Sandra Aquino, came to the briefing and that they (she and her "friends") filled up application forms. The affidavit47 Baez executed jointly with Araneta cannot support Araneta's testimony. The affidavit was neither identified, nor its contents affirmed, by Baez. Insofar as it purports to prove that appellant recruited Baez, therefore, the affidavit is hearsay and inadmissible.48 In any case, hearsay evidence, such as the said affidavit, has little probative value.49 Neither can appellant be convicted for recruiting CIS agent Eileen Fermindoza or even the other persons present in the briefing of January 30, 1994. Appellant is accused of recruiting only the three persons named in the information Araneta, Modesto and Baez. The information does not include Fermindoza or the other persons present in the briefing as among those promised or offered employment for a fee. To convict appellant for the recruitment and placement of persons other than those alleged to have been offered or promised employment for a fee would violate her right to be informed of the nature and cause of the accusation against her.50 In any event, the purpose of the offer of the testimonies of Araneta, Morales and Fermindoza, respectively, was limited as follows: FISCAL BELDUA: Your Honor please, we are offering the oral testimony of the witness, as one of those recruited by the accused, and also to identify some exhibits for the prosecution and as well as to identify the accused.51 xxx FISCAL BELDUA: We are offering the oral testimony of the witness, Your Honor, to testify on the fact about her recruitment by the accused and immediately before the recruitment, as well as to identify some exhibits for the prosecution, and also the accused in this case, Your Honor.52

47 xxx FISCAL BELDUA: This witness is going to testify that at around that date Your Honor, she was connected with the CIS, that she was instructed together with a companion to conduct a surveillance on the place where the illegal recruitment was supposed to be going on, that she acted as an applicant, Your Honor, to ascertain the truthfulness of the illegal recruitment going on, to identify the accused, as well as to identify some exhibits for the prosecution.53 xxx Courts may consider a piece of evidence only for the purpose for which it was offered,54 and the purpose of the offer of their testimonies did not include the proving of the purported recruitment of other supposed applicants by appellant. Appellant claims in her seventh assigned error that the information is fatally defective since it charges her with committing illegal recruitment in large scale on January 30, 1994 while the prosecution evidence supposedly indicates that she committed the crime on February 2, 1994. We find that the evidence for the prosecution regarding the date of the commission of the crime does not vary from that charged in the information. Both Nancy Araneta and Lourdes Modesto testified that on January 30, 1994, while in the Alejandro residence, appellant offered them employment for a fee. Thus, while the arrest was effected only on February 2, 1994, the crime had already been committed three (3) days earlier on January 30, 1994. The eighth and tenth assigned errors, respectively, pertain to the penalty of life imprisonment imposed by the trial court as well as the constitutionality of the law prescribing the same, appellant arguing that it is unconstitutional for being unduly harsh.55 Section 19 (1), Article III of the Constitution states: "Excessive fines shall not be imposed, nor cruel, degrading or inhuman punishment inflicted." The penalty of life imprisonment imposed upon appellant must be reduced. Because the prosecution was able to prove that appellant committed recruitment and placement against two persons only, she cannot be convicted of illegal recruitment in large scale, which requires that recruitment be committed against three or more persons. Appellant can only be convicted of two counts of "simple" illegal recruitment, one for that committed against Nancy Araneta, and another count for that committed against Lourdes Modesto. Appellant is sentenced, for each count, to suffer the penalty of four (4) to six (6) years of imprisonment and to pay a fine of P30,000.00. This renders immaterial the tenth assigned error, which assumes that the proper imposable penalty upon appellant is life imprisonment. WHEREFORE, the decision of the regional trial court is MODIFIED. Appellant is hereby declared guilty of illegal recruitment on two (2) counts and is sentenced, for each count, to suffer the penalty of four (4) to six (6) years of imprisonment and to pay a fine of P30,000.00.1wphi1.nt SO ORDERED. Davide, Jr., C.J., (Chairman), Puno, Pardo, and Ynares-Santiago, JJ., concur.

48 Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 110379 November 28, 1997 HON. ARMAND FABELLA, in his capacity as SECRETARY OF THE DEPARTMENT OF EDUCATION, CULTURE AND SPORTS; John Doe (not his real name), in his capacity as REGIONAL DIRECTOR, DECSNCR; DR. BIENVENIDO ICASIANO, in his capacity as the SUPERINTENDENT OF THE QUEZON CITY SCHOOLS DIVISION; ALMA BELLA O. BAUTISTA, AURORA C. VALENZUELA and TERESITA V. DIMAGMALIW, petitioners, vs. THE COURT OF APPEALS, ROSARITO A. SEPTIMO, ERLINDA B. DE LEON, CLARISSA T. DIMAANO, WILFREDO N. BACANI, MARINA R. VIVAR, VICTORIA S. UBALDO, JENNIE L. DOGWE, NORMA L. RONGCALES, EDITA C. SEPTIMO, TERESITA E. EVANGELISTA, CATALINA R. FRAGANTE, REBECCA D. BAGDOG, MARILYNNA C. KU, MARRISA M. SAMSON, HENEDINA B. CARILLO, NICASIO C. BRAVO, RUTH F. LACANILAO, MIRASOL C. BALIGOD, FELISA S. VILLACRUEL, MA. VIOLETA ELIZABETH Y. HERNANDEZ, ANTONIO C. OCAMPO, ADRIANO S. VALENCIA and ELEUTERIO S. VARGAS, respondents.

PANGANIBAN, J.: Due process of law requires notice and hearing. Hearing, on the other hand, presupposes a competent and impartial tribunal. The right to be heard and, ultimately, the right to due process of law lose meaning in the absence of an independent, competent and impartial tribunal. Statement of the Case This principium is explained by this Court as it resolves this petition for review on certiorari assailing the May 21, 1993 Decision 1 of the Court of Appeals 2 in CA-G.R.. SP No. 29107 which affirmed the trial court's decision, 3 as follows: WHEREFORE, the decision appealed from is AFFIRMED and the appeal is DISMISSED. The Hon. Armand Fabella is hereby ORDERED substituted as respondent-appellant in place of former Secretary Isidro Cario and henceforth this fact should be reflected in the title of this case. SO ORDERED. 4 The Antecedent Facts The facts, as found by Respondent Court, are as follows: On September 17, 1990, then DECS Secretary Cario issued a return-to-work order to all public school teachers who had participated in walk-outs and strikes on various dates during the period September 26, 1990 to October 18, 1990. The mass action had been staged to demand payment of 13th month differentials, clothing allowances and passage of a debt-cap bill in Congress, among other things. On October 18, 1990, Secretary Cario filed administrative cases against herein petitioner-appellees, who are teachers of the Mandaluyong High School. The charge sheets required petitioner-appellees to explain in writing why they should not be

49 punished for having taken part in the mass action in violation of civil service laws and regulations, to wit: 1. grave misconduct; 2. gross neglect of duty; 3. gross violation of Civil Service Law and rules on reasonable office regulations; 4. refusal to perform official duty; 5. conduct prejudicial to the best interest of the service. 6. absence without leave (AWOL) At the same time, Secretary Cario ordered petitioner-appellee to be placed under preventive suspension. The charges were subsequently amended by John Doe (not his real name)on November 7, 1990 to include the specific dates when petitioner-appellees allegedly took part in the strike. Administrative hearings started on December 20, 1990. Petitioner-appellees' counsel objected to the procedure adopted by the committee and demanded that he be furnished a copy of the guidelines adopted by the committee for the investigation and imposition of penalties. As he received no response from the committee, counsel walked out. Later, however, counsel, was able to obtain a copy of the guidelines. On April 10, 1991, the teachers filed a an injunctive suit (Civil Case No. 60675) with the Regional Trial Court in Quezon City, charging the committee appointed by Secretary Cario with fraud and deceit and praying that it be stopped from further investigating them and from rendering any decision in the administrative case. However, the trial court denied them a restraining order. They then amended their complaint and made it one for certiorari and mandamus. They alleged that the investigating committee was acting with grave abuse of discretion because its guidelines for investigation place the burden of proof on them by requiring them to prove their innocence instead of requiring Secretary Cario and his staff to adduce evidence to prove the charges against the teachers. On May 30, 1991, petitioner-appellee Adriano S. Valencia of the Ramon Magsaysay High School filed a motion to intervene, alleging that he was in the same situation as petitioners since he had likewise been charged and preventively suspended by respondent-appellant Cario for the same grounds as the other petitioner-appellees and made to shoulder the burden of proving his innocence under the committee's guidelines. The trial court granted his motion on June 3, 1991 and allowed him to intervene. On June 11, 1991, the Solicitor General answered the petitioner for certiorari and mandamus in behalf of respondent DECS Secretary. In the main he contended that, in accordance with the doctrine of primary resort, the trial court should not interfere in the administrative proceedings. The Solicitor General also asked the trial court to reconsider its order of June 3, 1991, allowing petitioner-appellee Adriano S. Valencia to intervene in the case.

50 Meanwhile, the DECS investigating committee rendered a decision on August 6, 1991, finding the petitioner-appellees guilty, as charged and ordering their immediate dismissal. On August 15, 1991, the trial court dismissed the petition for certiorari and mandamus for lack of merit. Petitioner-appellees moved for a reconsideration, but their motion was denied on September 11, 1991. The teachers then filed a petition for certiorari with the Supreme Court which, on February 18, 1992, issued a resolution en banc declaring void the trial court's order of dismissal and reinstating petitioner-appellees' action, even as it ordered the latter's reinstatement pending decision of their case. Accordingly, on March 25, 1992, the trial court set the case for hearing. June 8, 1992, it issued a pre-trial order which reads: As prayed for by Solicitor Bernard Hernandez, let this case be set for pre-trial conference on June 17, 1992 at 1:30 p.m., so as to expedite the proceedings hereof. In which case, DECS Secretary Isidro Cario, as the principal respondent, is hereby ordered to PERSONALLY APPEAR before this Court on said date and time, with a warning that should he fail to show up on said date, the Court will declare him as IN DEFAULT. Stated otherwise, for the said Pre-Trial Conference, the Court will not recognize any representative of his. By agreement of the parties, the trial conference was reset on June 26, 1992. However, Secretary Cario failed to appear in court on the date set. It was explained that he had to attend a conference in Maragondon, Cavite. Instead, he was represented by Atty. Reno Capinpin, while the other respondents were represented by Atty. Jocelyn Pili. But the court just the same declared them as in default. The Solicitor General moved for a reconsideration, reiterating that Cario could not personally come on June 26, 1992 because of prior commitment in Cavite. It was pointed out that Cario was represented by Atty. Reno Capinpin, while the other respondents were represented by Atty. Jocelyn Pili, both of the DECS-NCR and that both had special powers of attorney. But the Solicitor General's motion for reconsideration was denied by the trial court. In its order of July 15, 1992, the court stated: The "Motion For Reconsideration" dated July 3, 1992 filed by the respondents thru counsel, is hereby DENIED for lack of merit. It appears too obvious that respondents simply did not want to comply with the lawful orders of the Court. The respondents having lost their standing in Court, the "Manifestation and Motion," dated July 3, 1992 filed by the Office of the Solicitor General is hereby DENIED due course. SO ORDERED. On July 3, 1992, the Solicitor General informed the trial court that Cario had ceased to be DECS Secretary and asked for his substitution. But the court failed to act on his motion. The hearing of the case was thereafter conducted ex parte with only the teachers allowed to present their evidence. On August 10, 1992, the trial court rendered a decision, in which it stated:

51 The Court is in full accord with petitioners' contention that Rep. Act No. 4670 otherwise known as the "Magna Carta for Public School Teachers" is the primary law that governs the conduct of investigation in administrative cases filed against public school teachers, with Pres. Decree No. 807 as its supplemental law. Respondents erred in believing and contending that Rep. Act No. 4670 has already been superseded by the applicable provisions of Pres. Decree No. 807 and Exec. Order No. 292. Under the Rules of Statutory Construction, a special law, Rep. Act. No. 4670 in the case at bar, is not regarded as having been replaced by a general law, Pres. Decree No. 807, unless the intent to repeal or alter the same is manifest. A perusal of Pres. Decree No. 807 reveals no such intention exists, hence, Rep. Act No. 4670 stands. In the event that there is conflict between a special and a general law, the former shall prevail since it evidences the legislator's intent more clearly than that of the general statute and must be taken as an exception to the General Act. The provision of Rep. Act No. 4670 therefore prevails over Pres. Decree No. 807 in the composition and selection of the members of the investigating committee. Consequently, the committee tasked to investigate the charges filed against petitioners was illegally constituted, their composition and appointment being violative of Sec. 9 of Rep. Act No. 4670 hence all acts done by said body possess no legal color whatsoever. Anent petitioners' claim that their dismissal was effected without any formal investigation, the Court, after consideration of the circumstances surrounding the case, finds such claim meritorious. Although it cannot be gain said that respondents have a cause of action against the petitioner, the same is not sufficient reason to detract from the necessity of basic fair play. The manner of dismissal of the teachers is tainted with illegality. It is a dismissal without due process. While there was a semblance of investigation conducted by the respondents their intention to dismiss petitioners was already manifest when it adopted a procedure provided for by law, by shifting the burden of proof to the petitioners, knowing fully well that the teachers would boycott the proceedings thereby giving them cause to render judgment ex-parte. The DISMISSAL therefore of the teachers is not justified, it being arbitrary and violative of the teacher's right to due process. Due process must be observed in dismissing the teachers because it affects not only their position but also their means of livelihood. WHEREFORE, premises considered, the present petition is hereby GRANTED and all the questioned orders/decisions of the respondents are hereby declared NULL and VOID and are hereby SET ASIDE. The reinstatement of the petitioners to their former positions without loss of seniority and promotional rights is hereby ORDERED. The payment, if any, of all the petitioners' back salaries, allowances, bonuses, and other benefits and emoluments which may have accrued to them during the entire period of their preventive suspension and/or dismissal from the service is hereby likewise ORDERED. SO ORDERED. 5 From this adverse decision of the trial court; former DECS Secretary Isidro Cario filed an appeal with the Court of Appeals raising the following grounds: I. The trial court seriously erred in declaring appellants as in default. II. The trial court seriously erred in not ordering the proper substitution of parties.

52 III. The trial court seriously erred in holding that R.A. No. 4670, otherwise known as "Magna Carta for Public School Teachers", should govern the conduct of the investigation conducted. IV. The trial court seriously erred in ruling that the dismissal of the teachers are without due process. 6 As mentioned earlier, the Court of Appeals affirmed the RTC decision, holding in the main that private respondents were denied due process in the administrative proceedings instituted against them. Hence, this petition for review. 7 The Issues Before us, petitioners raise the following issues: I Whether or not Respondent Court of Appeals committed grave abuse of discretion in holding in effect that private respondents were denied due process of law. II Whether or not Respondent Court of Appeals seriously erred and committed grave abuse of discretion in applying strictly the provision of R.A. No. 4670 in the composition of the investigating committee. III Whether or not Respondent Court of Appeals committed grave abuse of discretion in dismissing the appeal and in affirming the trial court's decision. 8 These issues, all closely related, boil down to a single question: whether private respondents were denied due process of law. The Court's Ruling The petition is bereft of merit. We agree with the Court of Appeals that private respondents were denied due process of law. Denial of Due Process At the outset, we must stress that we are tasked only to determine whether or not due process of law was observed in the administrative proceedings against herein private respondents. We note the Solicitor General's extensive disquisition that government employees do not have the right to strike. 9 On this point, the Court, in the case of Bangalisan vs. Court of Appeals, 10 has recently pronounced, through Mr. Justice Florenz D. Regalado: It is the settled rule in this jurisdiction that employees in the public service may not engage in strikes. While the Constitution recognizes the right of government employees to organize, they are prohibited from staging strikes, demonstrations mass leaves, walkouts and other forms of mass action which will result in temporary stoppage or disruption of public services. The right of government employees to organize is limited only to the formation of unions or associations, without including the right to strike. More recently, in Jacinto vs. Court of Appeals, 11 the Court explained the schoolteachers' right to peaceful assembly vis-a-vis their right to mass protest:

53 Moreover, the petitioners here, except Merlinda Jacinto, were not penalized for the exercise of their right to assemble peacefully and to petition the government for a redress of grievances. Rather, the Civil Service Commission found them guilty of conduct prejudicial to the best interest of the service for having absented themselves without proper authority, from their schools during regular school days, in order to participate in the mass protest, their absence ineluctably resulting in the non-holding of classes and in the deprivation of students of education, for which they were responsible. Had petitioners availed themselves of their free time recess, after classes, weekends or holidays to dramatize their grievances and to dialogue with the proper authorities within the bounds of law, no one not the DECS, the CSC or even this Court could have held them liable for the valid exercise of their constitutionally guaranteed rights. As it was, the temporary stoppage of classes resulting from their activity necessarily disrupted public services, the very evil sought to be forestalled by the prohibition against strikes by government workers. Their act by its nature was enjoined by the Civil Service law, rules and regulations, for which they must, therefore, be made answerable. 12 In the present case, however, the issue is not whether the private respondents engaged in any prohibited activity which may warrant the imposition of disciplinary sanctions against them as a result of administrative proceedings. As already observed, the resolution of this case revolves around the question of due process of law, not on the right of government workers to strike. The issue is not whether private respondents may be punished for engaging in a prohibited action but whether, in the course of the investigation of the alleged proscribed activity, their right to due process has been violated. In short, before they can be investigated and meted out any penalty, due process must first be observed. In administrative proceedings, due process has been recognized to include the following: (1) the right to actual or constructive notice of the institution of proceedings which may affect a respondent's legal rights; (2) a real opportunity to be heard personally or with the assistance of counsel, to present witnesses and evidence in one's favor, and to defend one's rights; (3) a tribunal vested with competent jurisdiction and so constituted as to afford a person charged administratively a reasonable guarantee of honesty as well as impartiality; and (4) a finding by said tribunal which is supported by substantial evidence submitted for consideration during the hearing or contained in the records or made known to the parties affected. 13 The legislature enacted a special law, RA 4670 known as the Magna Carta for Public School Teachers, which specifically covers administrative proceedings involving public schoolteachers. Section 9 of said law expressly provides that the committee to hear public schoolteachers' administrative cases should be composed of the school superintendent of the division as chairman, a representative of the local or any existing provincial or national teachers' organization and a supervisor of the division. The pertinent provisions of RA 4670 read: Sec. 8. Safeguards in Disciplinary Procedure. Every teacher shall enjoy equitable safeguards at each stage of any disciplinary procedure and shall have: a: the right to be informed, in writing, of the charges; b. the right to full access to the evidence in the case; c. the right to defend himself and to be defended by a representative of his choice and/or by his organization, adequate time being given to the teacher for the preparation of his defense; and d. the right to appeal to clearly designated authorities. No publicity shall be given to any disciplinary action being taken against a teacher during the pendency of his case.

54 Sec. 9. Administrative Charges. Administrative charges against teacher shall be heard initially by a committee composed of the corresponding School Superintendent of the Division or a duly authorized representative who would at least have the rank of a division supervisor, where the teacher belongs, as chairman, a representative of the local or, in its absence, any existing provincial or national teacher's organization and a supervisor of the Division, the last two to be designated by the Director of Public Schools. The committee shall submit its findings, and recommendations to the Director of Public Schools within thirty days from the termination of the hearings: Provided, however, That where the school superintended is the complainant or an interested party, all the members of the committee shall be appointed by the Secretary of Education. The foregoing provisions implement the Declaration of Policy of the statute; that is, to promote the "terms of employment and career prospects" of schoolteachers. In the present case, the various committees formed by DECS to hear the administrative charges against private respondents did not include "a representative of the local or, in its absence, any existing provincial or national teacher's organization" as required by Section 9 of RA 4670. Accordingly, these committees were deemed to have no competent jurisdiction. Thus, all proceedings undertaken by them were necessarily void. They could not provide any basis for the suspension or dismissal of private respondents. The inclusion of a representative of a teachers' organization in these committees was indispensable to ensure an impartial tribunal. It was this requirement that would have given substance and meaning to the right to be heard. Indeed, in any proceeding, the essence of procedural due process is embodied in the basic requirement of notice and a real opportunity to be heard. 14 Petitioners argue that the DECS complied with Section 9 of RA 4670, because "all the teachers who were members of the various committees are members of either the Quezon City Secondary Teachers Federation or the Quezon City Elementary Teachers Federation" 15 and are deemed to be the representatives of a teachers' organization as required by Section 9 of RA 4670. We disagree. Mere membership of said teachers in their respective teachers' organizations does not ipso factomake them authorized representatives of such organizations as contemplated by Section 9 of RA 4670. Under this section, the teachers' organization possesses the right to indicate its choice of representative to be included by the DECS in the investigating committee. Such right to designate cannot be usurped by the secretary of education or the director of public schools or their underlings. In the instant case, there is no dispute that none of the teachers appointed by the DECS as members of its investigating committee was ever designated or authorized by a teachers' organization as its representative in said committee. Contrary to petitioners' asseverations, 16 RA 4670 is applicable to this case. It has not been expressly repealed by the general law PD 807, which was enacted later, nor has it been shown to be inconsistent with the latter. It is a fundamental rule of statutory construction that "repeals by implication are not favor. An implied repeal will not be allowed unless it is convincingly and unambiguously demonstrated that the two laws are so clearly repugnant and patently inconsistent that they cannot co-exist. This is based on the rationale that the will of the legislature cannot be overturned by the judicial function of construction and interpretation. Courts cannot take the place of Congress in repealing statutes. Their function is to try to harmonize, as much as possible, seeming conflicts in the laws and resolve doubts in favor of their validity and co-existence." 17 Thus, a subsequent general law does not repeal a prior special law, "unless the intent to repeal or alter is manifest, although the terms of the general law are broad enough to include the cases embraced in the special law." 18 The aforementioned Section 9 of RA 4670, therefore, reflects the legislative intent to impose a standard and a separate set of procedural requirements in connection with administrative proceedings involving public schoolteachers. Clearly, private respondents' right to due process of law requires compliance with these requirements laid down by RA 4670. Verba legis non est recedendum. Hence, Respondent Court of Appeals, through Mr. Justice Vicente V. Mendoza who is now a member of this Court, perceptively and correctly stated:

55 Respondent-appellants argue that the Magna Carta has been superseded by the Civil Service Decree (P.D. No. 807) and that pursuant to the latter law the head of a department, like the DECS secretary, or a regional director, like the respondentappellant John Doe (not his real name), can file administrative charges against a subordinate, investigate him and take disciplinary action against him if warranted by his findings. Respondent-appellants cite in support of their argument the following provisions of the Civil Service Decree (P.D. No. 807). Sec. 37. Disciplinary Jurisdiction. xxx xxx xxx b) The heads of departments, agencies and instrumentalities. . . shall have jurisdiction to investigate and decide matters involving disciplinary action against officers and employees under their jurisdiction. . . . Sec. 38. Procedure in Administrative Cases Against Non-Presidential Appointees. a) Administrative Proceedings may be commenced against a subordinate officer or the employee by the head of department or officer of equivalent rank, or head of local government, or chiefs of agencies, or regional directors, or upon sworn, written complaint of any other persons. There is really no repugnance between the Civil Service Decree and the Magna Carta for Public School Teachers. Although the Civil Service Decree gives the head of department or the regional director jurisdiction to investigate and decide disciplinary matters, the fact is that such power is exercised through committees. In cases involving public school teachers, the Magna Carta provides that the committee be constituted as follows: Sec. 9. Administrative Charges. Administrative charges against a teacher shall be heard initially by a committee composed of the corresponding School Superintendent of the Division or a duly authorized representative who would at least have the rank of a division supervisor, where the teacher belongs, as chairman, a representative of the local or, in its absence, any existing provincial or national teacher's organization and a supervisor of the Division, the last two to be designated by the Director of Public Schools. The committee shall submit its findings, and recommendations to the Director of Public Schools within thirty days from the termination of the hearings: Provided, however,that where the school superintendent is the complainant or an interested party, all the members of the committee shall be appointed by the Secretary of Education. Indeed, in the case at bar, neither the DECS [s]ecretary nor the DECS-NCR regional director personally conducted the investigation but entrusted it to a committee composed of a division supervisor, secondly and elementary school teachers, and consultants. But there was no representative of a teachers organization. This is a serious flaw in the composition of the committee because the provision for the representation of a teachers organization is intended by law for the protection of the rights of teachers facing administrative charges. There is thus nothing in the Magna Carta that is in any way inconsistent with the Civil Service Decree insofar as procedures for investigation is concerned. To the contrary, the Civil Service Decree, [S]ec. 38(b) affirms the Magna Carta by providing that the respondent in an administrative case may ask for a "formal investigation," which was

56 what the teachers did in this case by questioning the absence of a representative of a teachers organization in the investigating committee. The administrative committee considered the teachers to have waived their right to a hearing after the latter's counsel walked out of the preliminary hearing. The committee should not have made such a ruling because the walk out was staged in protest against the procedures of the committee and its refusal to give the teachers' counsel a copy of the guidelines. The committee concluded its investigation and ordered the dismissal of the teachers without giving the teachers the right to full access of the evidence against them and the opportunity to defend themselves. Its predisposition to find petitionerappellees guilty of the charges was in fact noted by the Supreme Court when in its resolution in G.R. No. 101943 (Rosario Septimo v. Judge Martin Villarama, Jr.) it stated: The facts and issues in this case are similar to the facts and issues in Hon. Isidro Cario, et al. v. Hon. Carlos C. Ofilada, et al. G.R. No. 100206, August 22, 1961. As in the Cario v. Ofilada case, the officials of the Department of Culture and Education are predisposed to summarily hold the petitioners guilty of the charges against them. In fact, in this case Secretary Cario, without awaiting formal administrative procedures and on the basis of reports and "implied admissions" found the petitioners guilty as charged and dismissed them from the service in separate decisions dated May 16, 1997 and August 6, 1991. The teachers went to court. The Court dismissed the case. 19 Furthermore, this Court sees no valid reason to disregard the factual findings and conclusions of the Court of Appeals. It is not our function "to assess and evaluate all over again the evidence, testimonial and documentary, adduced by the parties particularly where, such as here, the findings of both the trial court and the appellate court coincide." 20 It is as clear as day to us that the Court of Appeals committed to reversible error in affirming the trial court's decision setting aside the questioned orders of petitioners; and ordering the unqualified reinstatement of private respondents and the payment of them of salaries, allowances, bonuses and other benefits that accrued to their benefit during the entire duration of their suspension or dismissal. 21 Because the administrative proceedings involved in this case are void, no delinquency or misconduct may be imputed to private respondents. Moreover, the suspension or dismissal meted on them is baseless. Private respondents should, as a consequence, be reinstated 22 and awarded all monetary benefits that may have accrued to them during the period of their unjustified suspension or dismissal. 23 This Court will never countenance a denial of the fundamental right to due process, which is a cornerstone of our legal system. WHEREFORE, premises considered, the petition is hereby DENIED for its utter failure to show any reversible error on the part of the Court of Appeals. The assailed Decision is thus AFFIRMED. SO ORDERED. Narvasa, C.J., Romero, Melo and Francisco, JJ., concur.

57 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-46496 February 27, 1940

ANG TIBAY, represented by TORIBIO TEODORO, manager and propietor, and NATIONAL WORKERS BROTHERHOOD, petitioners, vs. THE COURT OF INDUSTRIAL RELATIONS and NATIONAL LABOR UNION, INC., respondents. Office of the Solicitor-General Ozaeta and Assistant Attorney Barcelona for the Court of Industrial Relations. Antonio D. Paguia for National Labor Unon. Claro M. Recto for petitioner "Ang Tibay". Jose M. Casal for National Workers' Brotherhood. LAUREL, J.: The Solicitor-General in behalf of the respondent Court of Industrial Relations in the above-entitled case has filed a motion for reconsideration and moves that, for the reasons stated in his motion, we reconsider the following legal conclusions of the majority opinion of this Court: 1. Que un contrato de trabajo, asi individual como colectivo, sin termino fijo de duracion o que no sea para una determinada, termina o bien por voluntad de cualquiera de las partes o cada vez que ilega el plazo fijado para el pago de los salarios segun costumbre en la localidad o cunado se termine la obra; 2. Que los obreros de una empresa fabril, que han celebrado contrato, ya individual ya colectivamente, con ell, sin tiempo fijo, y que se han visto obligados a cesar en sus tarbajos por haberse declarando paro forzoso en la fabrica en la cual tarbajan, dejan de ser empleados u obreros de la misma; 3. Que un patrono o sociedad que ha celebrado un contrato colectivo de trabajo con sus osbreros sin tiempo fijo de duracion y sin ser para una obra determiminada y que se niega a readmitir a dichos obreros que cesaron como consecuencia de un paro forzoso, no es culpable de practica injusta in incurre en la sancion penal del articulo 5 de la Ley No. 213 del Commonwealth, aunque su negativa a readmitir se deba a que dichos obreros pertenecen a un determinado organismo obrero, puesto que tales ya han dejado deser empleados suyos por terminacion del contrato en virtud del paro. The respondent National Labor Union, Inc., on the other hand, prays for the vacation of the judgement rendered by the majority of this Court and the remanding of the case to the Court of Industrial Relations for a new trial, and avers: 1. That Toribio Teodoro's claim that on September 26, 1938, there was shortage of leather soles in ANG TIBAY making it necessary for him to temporarily lay off the members of the National Labor Union Inc., is entirely false and unsupported by the records of the Bureau of Customs and the Books of Accounts of native dealers in leather. 2. That the supposed lack of leather materials claimed by Toribio Teodoro was but a scheme to systematically prevent the forfeiture of this bond despite the breach of his CONTRACT with the Philippine Army.

58 3. That Toribio Teodoro's letter to the Philippine Army dated September 29, 1938, (re supposed delay of leather soles from the States) was but a scheme to systematically prevent the forfeiture of this bond despite the breach of his CONTRACT with the Philippine Army. 4. That the National Worker's Brotherhood of ANG TIBAY is a company or employer union dominated by Toribio Teodoro, the existence and functions of which are illegal. (281 U.S., 548, petitioner's printed memorandum, p. 25.) 5. That in the exercise by the laborers of their rights to collective bargaining, majority rule and elective representation are highly essential and indispensable. (Sections 2 and 5, Commonwealth Act No. 213.) 6. That the century provisions of the Civil Code which had been (the) principal source of dissensions and continuous civil war in Spain cannot and should not be made applicable in interpreting and applying the salutary provisions of a modern labor legislation of American origin where the industrial peace has always been the rule. 7. That the employer Toribio Teodoro was guilty of unfair labor practice for discriminating against the National Labor Union, Inc., and unjustly favoring the National Workers' Brotherhood. 8. That the exhibits hereto attached are so inaccessible to the respondents that even with the exercise of due diligence they could not be expected to have obtained them and offered as evidence in the Court of Industrial Relations. 9. That the attached documents and exhibits are of such far-reaching importance and effect that their admission would necessarily mean the modification and reversal of the judgment rendered herein. The petitioner, Ang Tibay, has filed an opposition both to the motion for reconsideration of the respondent National Labor Union, Inc. In view of the conclusion reached by us and to be herein after stead with reference to the motion for a new trial of the respondent National Labor Union, Inc., we are of the opinion that it is not necessary to pass upon the motion for reconsideration of the Solicitor-General. We shall proceed to dispose of the motion for new trial of the respondent labor union. Before doing this, however, we deem it necessary, in the interest of orderly procedure in cases of this nature, in interest of orderly procedure in cases of this nature, to make several observations regarding the nature of the powers of the Court of Industrial Relations and emphasize certain guiding principles which should be observed in the trial of cases brought before it. We have re-examined the entire record of the proceedings had before the Court of Industrial Relations in this case, and we have found no substantial evidence that the exclusion of the 89 laborers here was due to their union affiliation or activity. The whole transcript taken contains what transpired during the hearing and is more of a record of contradictory and conflicting statements of opposing counsel, with sporadic conclusion drawn to suit their own views. It is evident that these statements and expressions of views of counsel have no evidentiary value. The Court of Industrial Relations is a special court whose functions are specifically stated in the law of its creation (Commonwealth Act No. 103). It is more an administrative than a part of the integrated judicial system of the nation. It is not intended to be a mere receptive organ of the Government. Unlike a court of justice which is essentially passive, acting only when its jurisdiction is invoked and deciding only cases that are presented to it by the parties litigant, the function of the Court of Industrial Relations, as will appear from perusal of its organic law, is more active, affirmative and dynamic. It not only exercises judicial or quasi-judicial functions in the determination of disputes between employers and employees but its functions in the determination of disputes between employers and employees but its functions are far more comprehensive and expensive. It has jurisdiction over the entire Philippines, to consider, investigate, decide, and settle any question, matter controversy or dispute arising between, and/or affecting employers and employees or laborers, and regulate the relations between them, subject to, and in accordance with, the provisions of Commonwealth Act No. 103 (section 1). It shall take cognizance or purposes of prevention, arbitration, decision and settlement, of any industrial or

59 agricultural dispute causing or likely to cause a strike or lockout, arising from differences as regards wages, shares or compensation, hours of labor or conditions of tenancy or employment, between landlords and tenants or farm-laborers, provided that the number of employees, laborers or tenants of farm-laborers involved exceeds thirty, and such industrial or agricultural dispute is submitted to the Court by the Secretary of Labor or by any or both of the parties to the controversy and certified by the Secretary of labor as existing and proper to be by the Secretary of Labor as existing and proper to be dealth with by the Court for the sake of public interest. (Section 4, ibid.) It shall, before hearing the dispute and in the course of such hearing, endeavor to reconcile the parties and induce them to settle the dispute by amicable agreement. (Paragraph 2, section 4, ibid.) When directed by the President of the Philippines, it shall investigate and study all industries established in a designated locality, with a view to determinating the necessity and fairness of fixing and adopting for such industry or locality a minimum wage or share of laborers or tenants, or a maximum "canon" or rental to be paid by the "inquilinos" or tenants or less to landowners. (Section 5, ibid.) In fine, it may appeal to voluntary arbitration in the settlement of industrial disputes; may employ mediation or conciliation for that purpose, or recur to the more effective system of official investigation and compulsory arbitration in order to determine specific controversies between labor and capital industry and in agriculture. There is in reality here a mingling of executive and judicial functions, which is a departure from the rigid doctrine of the separation of governmental powers. In the case of Goseco vs. Court of Industrial Relations et al., G.R. No. 46673, promulgated September 13, 1939, we had occasion to joint out that the Court of Industrial Relations et al., G. R. No. 46673, promulgated September 13, 1939, we had occasion to point out that the Court of Industrial Relations is not narrowly constrained by technical rules of procedure, and the Act requires it to "act according to justice and equity and substantial merits of the case, without regard to technicalities or legal forms and shall not be bound by any technicalities or legal forms and shall not be bound by any technical rules of legal evidence but may inform its mind in such manner as it may deem just and equitable." (Section 20, Commonwealth Act No. 103.) It shall not be restricted to the specific relief claimed or demands made by the parties to the industrial or agricultural dispute, but may include in the award, order or decision any matter or determination which may be deemed necessary or expedient for the purpose of settling the dispute or of preventing further industrial or agricultural disputes. (section 13, ibid.) And in the light of this legislative policy, appeals to this Court have been especially regulated by the rules recently promulgated by the rules recently promulgated by this Court to carry into the effect the avowed legislative purpose. The fact, however, that the Court of Industrial Relations may be said to be free from the rigidity of certain procedural requirements does not mean that it can, in justifiable cases before it, entirely ignore or disregard the fundamental and essential requirements of due process in trials and investigations of an administrative character. There are primary rights which must be respected even in proceedings of this character: (1) The first of these rights is the right to a hearing, which includes the right of the party interested or affected to present his own case and submit evidence in support thereof. In the language of Chief Hughes, in Morgan v. U.S., 304 U.S. 1, 58 S. Ct. 773, 999, 82 Law. ed. 1129, "the liberty and property of the citizen shall be protected by the rudimentary requirements of fair play. (2) Not only must the party be given an opportunity to present his case and to adduce evidence tending to establish the rights which he asserts but the tribunal must consider the evidence presented. (Chief Justice Hughes in Morgan v. U.S. 298 U.S. 468, 56 S. Ct. 906, 80 law. ed. 1288.) In the language of this court inEdwards vs. McCoy, 22 Phil., 598, "the right to adduce evidence, without the corresponding duty on the part of the board to consider it, is vain. Such right is conspicuously futile if the person or persons to whom the evidence is presented can thrust it aside without notice or consideration." (3) "While the duty to deliberate does not impose the obligation to decide right, it does imply a necessity which cannot be disregarded, namely, that of having something to support it is a nullity, a place when directly attached." (Edwards vs. McCoy, supra.) This principle emanates from the more fundamental is contrary to the vesting of unlimited power anywhere. Law is both a grant and a limitation upon power.

60 (4) Not only must there be some evidence to support a finding or conclusion (City of Manila vs. Agustin, G.R. No. 45844, promulgated November 29, 1937, XXXVI O. G. 1335), but the evidence must be "substantial." (Washington, Virginia and Maryland Coach Co. v. national labor Relations Board, 301 U.S. 142, 147, 57 S. Ct. 648, 650, 81 Law. ed. 965.) It means such relevant evidence as a reasonable mind accept as adequate to support a conclusion." (Appalachian Electric Power v. National Labor Relations Board, 4 Cir., 93 F. 2d 985, 989; National Labor Relations Board v. Thompson Products, 6 Cir., 97 F. 2d 13, 15; Ballston-Stillwater Knitting Co. v. National Labor Relations Board, 2 Cir., 98 F. 2d 758, 760.) . . . The statute provides that "the rules of evidence prevailing in courts of law and equity shall not be controlling.' The obvious purpose of this and similar provisions is to free administrative boards from the compulsion of technical rules so that the mere admission of matter which would be deemed incompetent inn judicial proceedings would not invalidate the administrative order. (Interstate Commerce Commission v. Baird, 194 U.S. 25, 44, 24 S. Ct. 563, 568, 48 Law. ed. 860; Interstate Commerce Commission v. Louisville and Nashville R. Co., 227 U.S. 88, 93 33 S. Ct. 185, 187, 57 Law. ed. 431; United States v. Abilene and Southern Ry. Co. S. Ct. 220, 225, 74 Law. ed. 624.) But this assurance of a desirable flexibility in administrative procedure does not go far as to justify orders without a basis in evidence having rational probative force. Mere uncorroborated hearsay or rumor does not constitute substantial evidence. (Consolidated Edison Co. v. National Labor Relations Board, 59 S. Ct. 206, 83 Law. ed. No. 4, Adv. Op., p. 131.)" (5) The decision must be rendered on the evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected. (Interstate Commence Commission vs. L. & N. R. Co., 227 U.S. 88, 33 S. Ct. 185, 57 Law. ed. 431.) Only by confining the administrative tribunal to the evidence disclosed to the parties, can the latter be protected in their right to know and meet the case against them. It should not, however, detract from their duty actively to see that the law is enforced, and for that purpose, to use the authorized legal methods of securing evidence and informing itself of facts material and relevant to the controversy. Boards of inquiry may be appointed for the purpose of investigating and determining the facts in any given case, but their report and decision are only advisory. (Section 9, Commonwealth Act No. 103.) The Court of Industrial Relations may refer any industrial or agricultural dispute or any matter under its consideration or advisement to a local board of inquiry, a provincial fiscal. a justice of the peace or any public official in any part of the Philippines for investigation, report and recommendation, and may delegate to such board or public official such powers and functions as the said Court of Industrial Relations may deem necessary, but such delegation shall not affect the exercise of the Court itself of any of its powers. (Section 10, ibid.) (6) The Court of Industrial Relations or any of its judges, therefore, must act on its or his own independent consideration of the law and facts of the controversy, and not simply accept the views of a subordinate in arriving at a decision. It may be that the volume of work is such that it is literally Relations personally to decide all controversies coming before them. In the United States the difficulty is solved with the enactment of statutory authority authorizing examiners or other subordinates to render final decision, with the right to appeal to board or commission, but in our case there is no such statutory authority. (7) The Court of Industrial Relations should, in all controversial questions, render its decision in such a manner that the parties to the proceeding can know the various issues involved, and the reasons for the decision rendered. The performance of this duty is inseparable from the authority conferred upon it. In the right of the foregoing fundamental principles, it is sufficient to observe here that, except as to the alleged agreement between the Ang Tibay and the National Worker's Brotherhood (appendix A), the record is barren and does not satisfy the thirst for a factual basis upon which to predicate, in a national way, a conclusion of law. This result, however, does not now preclude the concession of a new trial prayed for the by respondent National Labor Union, Inc., it is alleged that "the supposed lack of material claimed by Toribio Teodoro was but a scheme adopted to systematically discharged all the members of the National Labor Union

61 Inc., from work" and this avernment is desired to be proved by the petitioner with the "records of the Bureau of Customs and the Books of Accounts of native dealers in leather"; that "the National Workers Brotherhood Union of Ang Tibay is a company or employer union dominated by Toribio Teodoro, the existence and functions of which are illegal." Petitioner further alleges under oath that the exhibits attached to the petition to prove his substantial avernments" are so inaccessible to the respondents that even within the exercise of due diligence they could not be expected to have obtained them and offered as evidence in the Court of Industrial Relations", and that the documents attached to the petition "are of such far reaching importance and effect that their admission would necessarily mean the modification and reversal of the judgment rendered herein." We have considered the reply of Ang Tibay and its arguments against the petition. By and large, after considerable discussions, we have come to the conclusion that the interest of justice would be better served if the movant is given opportunity to present at the hearing the documents referred to in his motion and such other evidence as may be relevant to the main issue involved. The legislation which created the Court of Industrial Relations and under which it acts is new. The failure to grasp the fundamental issue involved is not entirely attributable to the parties adversely affected by the result. Accordingly, the motion for a new trial should be and the same is hereby granted, and the entire record of this case shall be remanded to the Court of Industrial Relations, with instruction that it reopen the case, receive all such evidence as may be relevant and otherwise proceed in accordance with the requirements set forth hereinabove. So ordered. Avancea, C. J., Villa-Real, Imperial, Diaz, Concepcion and Moran, JJ., concur.

62 Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 173918 April 8, 2008

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF ENERGY (DOE), petitioner, vs. PILIPINAS SHELL PETROLEUM CORPORATION, respondent. DECISION CHICO-NAZARIO, J.: This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision dated 4 August 2006 of the Court of Appeals in C.A. G.R. SP No. 82183.1 The appellate court reversed the Decision2dated 19 August 2003 of the Office of the President in OP NO. Case 96-H-6574 and declared that Ministry of Finance (MOF) Circular No. 1-85 dated 15 April 1985, as amended, is ineffective for failure to comply with Section 3 of Chapter 2, Book 7 of the Administrative Code of 1987,3 which requires the publication and filing in the Office of the National Administration Register (ONAR) of administrative issuances. Thus, surcharges provided under the aforementioned circular cannot be imposed upon respondent Pilipinas Shell Petroleum Corporation. Respondent is a corporation duly organized existing under the laws of the Philippines. It is engaged in the business of refining oil, marketing petroleum, and other related activities.4 The Department of Energy (DOE) is a government agency under the direct control and supervision of the Office of the President. The Department is mandated by Republic Act No. 7638 to prepare, integrate, coordinate, supervise and control all plans, programs, projects and activities of the Government relative to energy exploration, development, utilization, distribution and conservation. On 10 October 1984, the Oil Price Stabilization Fund (OPSF) was created under Presidential Decree No. 1956 for the purpose of minimizing frequent price changes brought about by exchange rate adjustments and/or increase in world market prices of crude oil and imported petroleum products.5 Letter of Instruction No. 1431 dated 15 October 1984 was issued directing the utilization of the OPSF to reimburse oil companies the additional costs of importation of crude oil and petroleum products due to fluctuation in foreign exchange rates to assure adequate and continuous supply of petroleum products at reasonable prices.6 Letter of Instruction No. 1441, issued on 20 November 1984, mandated the Board of Energy (now, the Energy Regulatory Board) to review and reset prices of domestic oil products every two months to reflect the prevailing prices of crude oil and petroleum. The prices were regulated by adjusting the OPSF impost, increasing or decreasing this price component as necessary to maintain the balance between revenues and claims on the OPSF.7 On 27 February 1987, Executive Order No. 137 was enacted to amend P. D. No. 1956. It expanded the sources and utilization of the OPSF in order to maintain stability in the domestic prices of oil products at reasonable levels.8 On 4 December 1991, the Office of Energy Affairs (OEA), now the DOE, informed the respondent that respondents contributions to the OPSF for foreign exchange risk charge for the period December 1989 to March 1991 were insufficient. OEA Audit Task Force noted a total underpayment of P14,414,860.75 by respondent to the OPSF. As a consequence of the underpayment, a surcharge of P11,654,782.31 was imposed upon respondent. The said surcharge was imposed pursuant to MOF Circular No. 1-85, as amended by Department of Finance (DOF) Circular No. 2-94,9 which provides that:

63 2. Remittance of payment to the OPSF as provided for under Section 5 of MOF Order No. 11-85 shall be made not later than 20th of the month following the month of remittance of the foreign exchange payment for the import or the month of payment to the domestic producers in the case of locally produced crude. Payment after the specified date shall be subject to a surcharge of fifteen percent (15%) of the amount, if paid within thirty (30) days from the due date plus two percent (2%) per month if paid after thirty days.10(Emphasis supplied.) On 9 December 1991, the OEA wrote another letter11 to respondent advising the latter of its additional underpayment to the OPSF of the foreign exchange risk fee in the amount of P10,139,526.56 for the period April 1991 to October 1991. In addition, surcharges in the amount of P2,806,656.65 were imposed thereon. In a letter dated 20 January 1992 addressed to the OEA, respondent justified that its calculations for the transactions in question were based on a valid interpretation of MOF Order NO. 11-85 dated 12 April 1985 and MOE Circular No. 85-05-82 dated 16 May 1985.12 On 24 March 1992, respondent paid the OEA in full the principal amount of its underpayment, totalingP24,554,387.31, but not the surcharges.13 In a letter14 dated 15 March 1996, OEA notified the respondent that the latter is required to pay the OPSF a total amount of P18,535,531.40 for surcharges on the late payment of foreign exchange risk charges for the period December 1989 to October 1991. In a letter15 dated 11 July 1996, the DOE reiterated its demand for respondent to settle the surcharges due. Otherwise, the DOE warned that it would proceed against the respondents Irrevocable Standby Letter of Credit to recover its unpaid surcharges. On 19 July 1996, respondent filed a Notice of Appeal before the Office of the President. The Office of the President affirmed the conclusion of the DOE, contained in its letters dated 15 March 1996 and 11 July 1996. While it admitted that the implementation of MOF Circular No. 1-85 is contingent upon its publication and filing with the ONAR, it noted that respondent failed to adduce evidence of lack of compliance with such requirements. The aforementioned Decision reads:16 Given the foregoing, the DOEs implementation of MOF Circular 1-85 by imposing surcharges on Pilipinas Shell is only proper. Like this Office, the DOE is bound to presume the validity of that administrative regulation. WHEREFORE, premises considered, the Decision of the Department of Energy, contained in its letters dated 15 March 1996 and 11 July 1996, is hereby AFFIRMED in toto. Respondent filed a Motion for Reconsideration of the Decision dated 19 August 2003 of the Office of the President, which was denied on 28 November 2003.17 Respondent filed an appeal before the Court of Appeals wherein it presented Certifications dated 9 February 200418 and 11 February 200419 issued by ONAR stating that DOF Circular No. 2-94 and MOF Circular No. 1-85 respectively, have not been filed before said office. The Court of Appeals reversed the Decision of the Office of the President in O.P. CASE No. 96-H-6574 and ruled that MOF Circular 1-85, as amended, was ineffective for failure to comply with the requirement to file with ONAR. It decreed that even if the said circular was issued by then Acting Minister of Finance Alfredo de Roda, Jr. long before the Administrative Code of 1987, Section 3 of Chapter 2, Book 7 thereof specifies that rules already in force on the date of the effectivity of the Administrative Code of 1987 must be filed within three months from the date of effectivity of said Code, otherwise such rules cannot thereafter be the basis of any sanction against any party or persons.20 According to the dispositive of the appellate courts Decision:21 WHEREFORE, the instant petition is hereby GRANTED. The Decision dated August 19, 2003 and the Resolution dated November 28, 2003 of the Office of the President, are hereby REVERSED.

64 ACCORDINGLY, the imposition of surcharges upon petitioner is hereby declared without legal basis. On 25 September 2006, petitioner filed the present Petition for Review on Certiorari, wherein the following issues were raised:22 I THE SURCHARGE IMPOSED BY MINISTRY OF FINANCE (MOF) CIRCULAR No. 1-85 HAS BEEN AFFIRMED BY E.O. NO. 137 HAVING RECEIVED VITALITY FROM A LEGISLATIVE ENACTMENT, MOF CIRCULAR NO. 1-85 CANNOT BE RENDERED INVALID BY THE SUBSEQUENT ENACTMENT OF A LAW REQUIRING REGISTRATION OF THE MOF CIRCULAR WITH THE OFFICE OF THE NATIONAL REGISTER II ASSUMING THAT THE REGISTRATION OF MOF NO. 1-85 IS REQUIRED, RESPONDENT WAIVED ITS OBJECTION ON THE BASIS OF NON-REGISTRATION WHEN IT PAID THE AMOUNT REQUIRED BY PETITIONER. This petition is without merit. As early as 1986, this Court in Taada v. Tuvera23 enunciated that publication is indispensable in order that all statutes, including administrative rules that are intended to enforce or implement existing laws, attain binding force and effect, to wit: We hold therefore that all statutes, including those of local application and private laws, shall be published as a condition for their effectivity, which shall begin fifteen days after publication unless a different effectivity date is fixed by the legislature. Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise of legislative powers whenever the same are validly delegated by the legislature or, at present, directly conferred by the Constitution. Administrative rules and regulations must also be published if their purpose is to enforce or implement existing law pursuant also to a valid delegation. (Emphasis provided.) Thereafter, the Administrative Code of 1987 was enacted, with Section 3 of Chapter 2, Book VII thereof specifically providing that: Filing. (1) Every agency shall file with the University of the Philippines Law Center three (3) certified copies of every rule adopted by it. Rules in force on the date of effectivity of this Code which are not filed within three (3) months from the date shall not thereafter be the basis of any sanction against any party or persons. (2) The records officer of the agency, or his equivalent functionary, shall carry out the requirements of this section under pain of disciplinary action. (3) A permanent register of all rules shall be kept by the issuing agency and shall be open to public inspection. (Emphasis provided.) Under the doctrine of Tanada v. Tuvera,24 the MOF Circular No. 1-85, as amended, is one of those issuances which should be published before it becomes effective since it is intended to enforce Presidential Decree No. 1956. The said circular should also comply with the requirement stated under Section 3 of Chapter 2, Book VII of the Administrative Code of 1987 filing with the ONAR in the University of the Philippines Law Center for rules that are already in force at the time the Administrative Code of 1987 became effective. These requirements of publication and filing were put in place as safeguards against abuses on the part of lawmakers and as guarantees to the constitutional

65 right to due process and to information on matters of public concern and, therefore, require strict compliance. In the present case, the Certifications dated 11 February 200425 and 9 February 200426 issued by ONAR prove that MOF Circular No. 1-85 and its amendatory rule, DOF Circular No. 2-94, have not been filed before said office. Moreover, petitioner was unable to controvert respondents allegation that neither of the aforementioned circulars were published in the Official Gazette or in any newspaper of general circulation. Thus, failure to comply with the requirements of publication and filing of administrative issuances renders MOF Circular No. 1-85, as amended, ineffective. In National Association of Electricity Consumers for Reforms v. Energy Regulatory Board,27 this Court emphasized that both the requirements of publication and filing of administrative issuances intended to enforce existing laws are mandatory for the effectivity of said issuances. In support of its ruling, it specified several instances wherein this Court declared administrative issuances, which failed to observe the proper requirements, to have no force and effect: Nowhere from the above narration does it show that the GRAM Implementing Rules was published in the Official Gazette or in a newspaper of general circulation. Significantly, the effectivity clauses of both the GRAM and ICERA Implementing Rules uniformly provide that they "shall take effect immediately." These clauses made no mention of their publication in either the Official Gazette or in a newspaper of general circulation. Moreover, per the Certification dated January 11, 2006 of the Office of the National Administrative Register (ONAR), the said implementing rules and regulations were not likewise filed with the said office in contravention of the Administrative Code of 1987. Applying the doctrine enunciated in Taada v. Tuvera, the Court has previously declared as having no force and effect the following administrative issuances: (1) Rules and Regulations issued by the Joint Ministry of Health-Ministry of Labor and Employment Accreditation Committee regarding the accreditation of hospitals, medical clinics and laboratories; (2) Letter of Instruction No. 1416 ordering the suspension of payments due and payable by distressed copper mining companies to the national government; (3) Memorandum Circulars issued by the Philippine Overseas Employment Administration regulating the recruitment of domestic helpers to Hong Kong; (4) Administrative Order No. SOCPEC 89-08-01 issued by the Philippine International Trading Corporation regulating applications for importation from the Peoples Republic of China; (5) Corporation Compensation Circular No. 10 issued by the Department of Budget and Management discontinuing the payment of other allowances and fringe benefits to government officials and employees; and (6) POEA Memorandum Circular No. 2 Series of 1983 which provided for the schedule of placement and documentation fees for private employment agencies or authority holders. In all these cited cases, the administrative issuances questioned therein were uniformly struck down as they were not published or filed with the National Administrative Register. On the other hand, in Republic v. Express Telecommunications Co., Inc, the Court declared that the 1993 Revised Rules of the National Telecommunications Commission had not become effective despite the fact that it was filed with the National Administrative Register because the same had not been published at the time. The Court emphasized therein that "publication in the Official Gazette or a newspaper of general circulation is a condition sine qua non before statutes, rules or regulations can take effect." Petitioners argument that respondent waived the requisite registration of MOF Circular No. 1-85, as amended, when it paid in full the principal amount of underpayment totaling P24,544,387.31, is specious. MOF Circular No. 1-85, as amended imposes surcharges, while respondents underpayment is based on MOF Circular No. 11-85 dated 12 April 1985. Petitioner also insists that the registration of MOF Circular No. 1-85, as amended, with the ONAR is no longer necessary since the respondent knew of its existence, despite its non-registration. This argument is seriously flawed and contrary to jurisprudence. Strict compliance with the requirements of publication cannot be annulled by a mere allegation that parties were notified of the existence of the implementing

66 rules concerned. Hence, also inNational Association of Electricity Consumers for Reforms v. Energy Regulatory Board, this Court pronounced: In this case, the GRAM Implementing Rules must be declared ineffective as the same was never published or filed with the National Administrative Register. To show that there was compliance with the publication requirement, respondents MERALCO and the ERC dwell lengthily on the fact that parties, particularly the distribution utilities and consumer groups, were duly notified of the public consultation on the ERCs proposed implementing rules. These parties participated in the said public consultation and even submitted their comments thereon. However, the fact that the parties participated in the public consultation and submitted their respective comments is not compliance with the fundamental rule that the GRAM Implementing Rules, or any administrative rules whose purpose is to enforce or implement existing law, must be published in the Official Gazette or in a newspaper of general circulation. The requirement of publication of implementing rules of statutes is mandatory and may not be dispensed with altogether even if, as in this case, there was public consultation and submission by the parties of their comments.28 (Emphasis provided.) Petitioner further avers that MOF Circular No. 1-85, as amended, gains its vitality from the subsequent enactment of Executive Order No. 137, which reiterates the power of then Minister of Finance to promulgate the necessary rules and regulations to implement the executive order. Such contention is irrelevant in the present case since the power of the Minister of Finance to promulgate rules and regulations is not under dispute. The issue rather in the Petition at bar is the ineffectivity of his administrative issuance for non-compliance with the requisite publication and filing with the ONAR. And while MOF Circular No. 1-85, as amended, may be unimpeachable in substance, the due process requirements of publication and filing cannot be disregarded. Moreover, none of the provisions of Executive Order No. 137 exempts MOF Circular No. 1-85, as amended from the aforementioned requirements. IN VIEW OF THE FOREGOING, the instant Petition is DENIED and the assailed Decision dated 4 August 2006 of the Court of Appeals in C.A. G.R. SP No. 82183 is AFFIRMED. No cost. SO ORDERED. Austria-Martinez, Acting Chairperson, Carpio-Morales*, Tinga*, Reyes, JJ., concur.

67 Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 132248 January 19, 2000

HON. ERLINDA C. PEFIANCO, in her capacity as Secretary of the Department of Education, Culture and Sports, petitioner, vs. MARIA LUISA C. MORAL, respondent. BELLOSILLO, J.: SECRETARY ERLINDA C. PEFIANCO of the Department of Education, Culture and Sports (DECS) seeks to nullify through this petition for review the Decision of the Court of Appeals1 dismissing the certiorari filed by then DECS Secretary Ricardo T. Gloria for lack of merit, as well as its Resolution dated 13 January 1998 denying reconsideration thereof.1wphi1.nt On 26 July 1994 former DECS Secretary Ricardo T. Gloria filed a complaint against respondent Maria Luisa C. Moral, then Chief Librarian, Catalog Division, of the National Library for dishonesty, grave misconduct and conduct prejudicial to the best interest of the service. The complaint charged respondent Moral with the pilferage of some historical documents from the vaults of the Filipiniana and Asian Division (FAD) of the National Library which were under her control and supervision as Division Chief and keeping in her possession, without legal authority and justification, some forty-one (41) items of historical documents which were missing from the FAD vaults of the National Library. The DECS Investigating Committee conducted several hearings on the complaint. Atty. Jose M. Diaz, Special Prosecutor from the Department of Justice, represented the DECS Secretary in the administrative case while respondent was represented by her own private counsel. On 25 September 1996 Secretary Gloria issued a resolution finding respondent "guilty of the administrative offenses of dishonesty, grave misconduct and conduct prejudicial to the best interest of the service, for the commission of pilferage of historical documents of the national library, to the prejudice of the national library in particular, and the country in general." She was ordered dismissed from the government service with prejudice to reinstatement and forfeiture of all her retirement benefits and other remunerations. On 30 September 1996 respondent received a copy of the resolution. Thereafter, or on 1 October 1996, she received another resolution correcting the typographical errors found on the first resolution. Respondent did not appeal the judgment. On 2 October 1996 respondent filed a Petition for the Production of the DECS Investigation Committee Report purportedly to "guide [her] on whatever action would be most appropriate to take under the circumstances."2 Her petition was, however, denied. Unfazed, she filed a Reiteration for DECS Committee Report and DECS Resolution dated September 25, 1996, which Secretary Gloria similarly denied in his Order of 23 October 1996. Respondent moved for reconsideration but the motion was merely "noted" in view of the warning in the 23 October 1996 Order that the denial of the request for the production of the Investigation Committee Report was final.3 As earlier stated, respondent did not appeal the Resolution dated 30 September 1996 dismissing her from the service. Instead, she instituted an action for mandamus and injunction before the regular courts against Secretary Gloria praying that she be furnished a copy of the DECS Investigation Committee Report and that the DECS Secretary be enjoined from enforcing the order of dismissal until she received a copy of the said report.4 Secretary Gloria moved to dismiss the mandamus case principally for lack of cause of action, but the trial court denied his motion. Thus, he elevated the case to the Court of Appeals on certiorari imputing grave

68 abuse of discretion to the trial court. In its assailed Decision of 24 November 1997 the appellate court sustained the trial court and dismissed Secretary Gloria's petition for lack of merit holding that FIRST. Petitioner Gloria acted prematurely, not having filed any motion for reconsideration of the assailed order with the respondent judge before filing the instant petition to this Court. This constitutes a procedural infirmity . . . . SECOND. Even if the aforesaid procedural defect were to be disregarded, the petition at hand, nevertheless, must fail. The denial of the motion to dismiss is an option available to the respondent judge. Such order is interlocutory and thus not appealable. The proper recourse of the aggrieved party is to file an answer and interpose, as defenses, the objection(s) raised by him in said motion to dismiss, then proceed with the trial and, in case of adverse decision, to elevate the entire case on appeal in due course. His motion for reconsideration having been denied by the Court of Appeals on 13 January 1998, Secretary Gloria filed the instant petition for review. Meanwhile, Secretary Gloria was replaced by Secretary Erlinda C. Pefianco who was thereafter substituted in the case for Secretary Gloria. The issues before us are: whether the Court of Appeals erred in dismissing the petition for certiorari for failure of petitioner to file a motion for reconsideration of the order denying the motion to dismiss, and in holding that the trial court did not commit grave abuse of discretion in denying the motion to dismiss. Petitioner contends that there is no need to file a motion for reconsideration as the trial court's order denying the motion to dismiss is a patent nullity, and a motion for reconsideration would practically be a useless ceremony as the trial court virtually decided the case, and that there is no law requiring the DECS to furnish respondent with a copy of the Report of the DECS Investigation Committee so that the petition for mandamus has no leg to stand on hence should have been dismissed for lack of cause of action. Excepting thereto respondent argues that the denial of the motion to dismiss is interlocutory in nature as it did not dispose of the case on the merits, and petitioner still has a residual remedy, i.e., to file an answer, thus her substantive rights have not been violated as she contends; that respondent is clearly entitled to the remedy ofmandamus to protect her rights; and, that petitioner has not shown any law, DECS order or regulation prohibiting the release of the petitioned documents for reasons of confidentiality or national security. We grant the petition. Section 3, Rule 16, of the 1997 Rules of Civil Procedure mandatorily requires that the resolution on a motion to dismiss should clearly and distinctly state the reasons therefor After hearing, the court may dismiss the action or claim, deny the motion or order the amendment of the pleading. The court shall not defer the resolution of the motion for the reason that the ground relied upon is not indubitable. In every case, the resolution shall state clearly and distinctly the reasons therefor (Emphasis supplied). Clearly, the above rule proscribes the common practice of perfunctorily denying motions to dismiss "for lack of merit." Such cavalier disposition often creates difficulty and misunderstanding on the part of the aggrieved party in taking recourse therefrom and likewise on the higher court called upon to resolve the issue, usually on certiorari. The challenged Order of the trial court dated 23 April 1997 falls short of the requirements prescribed in Rule 16. The Order merely discussed the general concept of mandamus and the trial court's jurisdiction over the rulings and actions of administrative agencies without stating the basis why petitioner's motion to dismiss was being denied. We are reproducing hereunder for reference the assailed Order

69 This treats of the Motion to Dismiss filed by respondent Gloria on 14 March 1997 to which petitioner filed their (sic) opposition on April 8, 1997. Respondent premised his motion on the following grounds: (a) Mandamus does not lie to compel respondent DECS Secretary to release the Report of the DECS Investigating Committee because the Petition does not state a cause of action; (b) The DECS Resolution dismissing petitioner is legal and valid, and therefore, the writ of preliminary injunction cannot be granted to enjoin its execution; while petitioner alleged among others that she has no plain, speedy and adequate remedy in the ordinary course of law. Mandamus is employed to compel the performance, when refused, of a ministerial duty, this being its main objective. "Purely ministerial" are acts to be performed in a given state of facts, in a prescribed manner in obedience to the mandate of legal authority without regard to the exercise of his own judgment upon the propriety or impropriety of the act done. While the discretion of a Constitutional Commission cannot be controlled by mandamus . . . . the court can decide whether the duty is discretionary or ministerial . . . . Generally, courts have no supervising power over the proceedings and actions of the administrative departments of the government. This is generally true with respect to acts involving the exercise of judgment or discretion, and finding of fact. Findings of fact by an administrative board or official, following a hearing, are binding upon the courts and will not be disturbed except where the board or official has gone beyond his statutory authority, exercised unconstitutional powers or clearly acted arbitrarily and without regard to his duty or with grave abuse of discretion or as when there is capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction as where the power is exercised in an arbitrary or despotic manner by reason of passion, prejudice or personal hostility amounting to an evasion of positive duty, or to a virtual refusal to perform the duty enjoined, or to act at all in contemplation of law .... WHEREFORE, in regard to the foregoing, the motion to dismiss by herein respondent is hereby denied for lack of merit and is hereby ordered to file its (sic) responsive pleadings within ten (10) days from receipt of this Order. Copy furnished petitioner who is likewise given ten (10) days to submit his (sic) comment or opposition. Indeed, we cannot even discern the bearing or relevance of the discussion therein on mandamus, vis-avis the ground relied upon by petitioner in her motion to dismiss, i.e., lack of cause of action, and the dispositive portion of the order. The order only confused petitioner and left her unable to determine the errors which would be the proper subject of her motion for reconsideration. Judges should take pains in crafting their orders, stating therein clearly and comprehensively the reasons for their issuance, which are necessary for the full understanding of the action taken. Where the court itself has not stated any basis for its order, to be very strict in requiring a prior motion for reconsideration before resort to higher courts on certiorari may be had, would be to expect too much. Since the judge himself was not precise and specific in his order, a certain degree of liberality in exacting from petitioner strict compliance with the rules was justified. Ordinarily, certiorari will not lie unless the lower court, through a motion for reconsideration, has been given an opportunity to correct the imputed errors on its act or order. However, this rule is not absolute and is subject to well-recognized exceptions. Thus, when the act or order of the lower court is a patent nullity for failure to comply with a mandatory provision of the Rules; as in this case, a motion for reconsideration may be dispensed with and the aggrieved party may assail the act or order of the lower court directly on certiorari.5 On the second issue, the nature of the remedy of mandamus has been the subject of discussions in several cases. It is settled that mandamus is employed to compel the performance, when refused, of a ministerial duty, this being its main objective. It does not lie to require anyone to fulfill a discretionary duty. It is essential to the issuance of a writ of mandamus that petitioner should have a clear legal right to the thing demanded and it must be the imperative duty of the respondent to perform the act required. It never issues in doubtful cases. While it may not be necessary that the duty be absolutely

70 expressed, it must nevertheless be clear. The writ will not issue to compel an official to do anything which is not his duty to do or which is his duty not to do, or give to the applicant anything to which he is not entitled by law. The writ neither confers powers nor imposes duties. It is simply a command to exercise a power already possessed and to perform a duty already imposed.6 In her petition for mandamus, respondent miserably failed to demonstrate that she has a clear legal right to the DECS Investigation Committee Report and that it is the ministerial duty of petitioner DECS Secretary to furnish her with a copy thereof. Consequently, she is not entitled to the writ prayed for. Primarily, respondent did not appeal to the Civil Service Commission the DECS resolution dismissing her from the service.7 By her failure to do so, nothing prevented the DECS resolution from becoming final and executory. Obviously, it will serve no useful purpose now to compel petitioner to furnish her with a copy of the investigation report. Moreover, there is no law or rule which imposes a legal duty on petitioner to furnish respondent with a copy of the investigation report. On the contrary, we unequivocally held in Ruiz v. Drilon8 that a respondent in an administrative case is not entitled to be informed of the findings and recommendations of any investigating committee created to inquire into charges filed against him. He is entitled only to the administrative decision based on substantial evidence made of record, and a reasonable opportunity to meet the charges and the evidence presented against her during the hearings of the investigation committee. Respondent no doubt had been accorded these rights. Respondent's assertion that the investigation report would be used "to guide [her] on what action would be appropriate to take under the circumstances,"9 hardly merits consideration. It must be stressed that the disputed investigation report is an internal communication between the DECS Secretary and the Investigation Committee, and it is not generally intended for the perusal of respondent or any other person for that matter, except the DECS Secretary. As correctly ruled by Secretary Gloria in his Order of 2 October 1996 Respondent's (Moral) counsel is reminded that the Report of the DECS Investigating Committee is not an integral part of the Decision itself . . . . [t]he report is an internal communication between the Investigating Committee and the DECS Secretary, and, therefore, confidential until the latter had already read and used the same in making his own determination of the facts and applicable law of the case, to be expressed in the Decision he may make. The Report remains an internal and confidential matter to be used as part although not controlling of the basis for the decision. Only when the party adversely affected by the decision has filed and perfected an appeal to the Civil Service Commission may all the records of the case, including the aforesaid Report be forwarded to the CSC. In the latter appellate tribunal, the respondent's counsel may be allowed to read and/or be given a copy of the Report to enable the appellant to file an intelligent and exhaustive appellant's Brief Memorandum. More importantly, the DECS resolution is complete in itself for purposes of appeal to the Civil Service Commission, that is, it contains sufficient findings of fact and conclusion of law upon which respondent's removal from office was grounded. This resolution, and not the investigation report, should be the basis of any further remedies respondent might wish to pursue, and we cannot see how she would be prejudiced by denying her access to the investigation report. In fine, the trial court's Order of 23 April 1997 denying petitioner's motion to dismiss is not a mere error of judgment as the Court of Appeals held, but a grave abuse of discretion amounting to lack or excess of jurisdiction because, to capsulize, the Order is a patent nullity for failure to comply with the provisions of the rules requiring that a resolution on a motion to dismiss should clearly and distinctly state the reasons therefor; and, respondent is clearly not entitled to the writ of mandamus as she did not appeal the DECS resolution dismissing her from service, and there is no law or rule which imposes a ministerial duty on petitioner to furnish respondent with a copy of the investigation report, hence her petition clearly lacked a cause of action. In such instance, while the trial court's order is merely interlocutory and non-appealable, certiorari is the proper remedy to annul the same since it is rendered with grave abuse of discretion.

71 WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals of 24 November 1997 sustaining the trial court's denial of petitioner's motion to dismiss, as well as its Resolution dated 13 January 1998 denying reconsideration, is REVERSED and SET ASIDE. The petition for mandamus filed by respondent before the court a quo to compel petitioner to furnish her a copy of the DECS Investigation Committee Report is DISMISSED for want of cause of action.1wphi1.nt SO ORDERED. Mendoza, Quisumbing, Buena and De Leon, Jr., JJ., concur.

72 Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

A.M. No. MTJ-93-783 July 29, 1996 OFFICE OF THE COURT ADMINISTRATOR, petitioner, vs. JUDGE FILOMENO PASCUAL, respondent.

HERMOSISIMA, JR., J.:p Intimating as to what the ideals of a good judge should be, Sir Francis Bacon wants judges "to remember that theirjus dicere and not jus dare, to interpret law, and not to make law or give law." They ought to be "more revered than plausible, and more advised than confident. Above all things, INTEGRITY is their portion and proper virtue. 1 The Constitution and the statutes, however, limit the legal qualifications of judges to only three bare essentials citizenship, age and experience. The virtues of probity, honesty, temperance, impartiality and integrity, most often used to measure an aspirant to the bench, lose their meaning in individual perception. While people perceive judges to be above the ordinary run of men, they know that a perfect judge, like a perfect priest, exists only in fantasy. Thus, it does not come as a surprise that the integrity of respondent judge in this administrative case stands challenged for committing acts of extortion or bribery. The following antecedent facts appear on record: Sometime in February, 1993, a certain Ceferino Tigas wrote a letter, addressed to Hon. Reynaldo Suarez of the Office of the Court Administrator of the Supreme Court, charging that irregularities and corruption were being committed by the respondent Presiding Judge of the Municipal Trial Court of Angat, Bulacan. On March 10, 1993, the letter was referred to the National Bureau of Investigation in order that an investigation on the alleged illegal and corrupt practices of the respondent may be conducted. Ordered 2 to conduct a "discreet investigation" by the then NBI Director Epimaco Velasco were: SA Edward Villarta, team leader, SI Reynaldo Olazo, HA Teofilo Galang, SI Florino Javier and SI Jose Icasiano. They proceeded to Angat, Bulacan, in order to look for Ceferino Tigas, the letter writer. Tigas, the NBI team realized was a fictitious character. In view of their failure to find Tigas, they proceeded to the residence of Candido Cruz, an accused in respondent's sala. In his affidavit 3 executed on March 23, 1993 before SA Edward Villarta, Cruz declared that he was the accused in Criminal Case No. 2154, charged with the crime of Frustrated Murder. Respondent judge, after conducting the preliminary investigation of the case, decided that the crime he committed was only physical injuries and so, respondent judge assumed jurisdiction over the case. Cruz believed that he was made to understand by the respondent that, in view of his favorable action, Cruz was to give to respondent the sum of P2,000.00. Respondent judge is believed to be a drunkard and, in all probability, would need money to serve his vice.

73 In view of this statement, the NBI agents assigned to the case caused respondent judge to be entrapped, for which reason, the judge was thought to have been caught en flagrante delicto. NBI agents Villarta and Olazo filed the following report: On 25 March 1993, at about 4:00 in the afternoon, CANDIDO CRUZ met with judge PASCUAL at the Colegio de Sta. Monica, near the Municipal Building of Angat, Bulacan, where Subject is attending the graduation of his daughter. CANDIDO CRUZ told Judge PASCUAL that he already had the P2,000.00 which he (Judge PASCUAL) is asking him. However, Judge PASCUAL did not receive the money because according to him there were plenty of people around. He then instructed CANDIDO CRUZ to see him (Judge PASCUAL) at his office the following day. At about 8:30 in the morning of the following day (26 March 1993), CANDIDO CRUZ proceeded to the office of Judge PASCUAL at the Municipal Trial Court of Angat, Bulacan, and thereat handed to him four (4) pieces of P500.00 bills contained in a white mailing envelope previously marked and glazed with fluorescent powder. In the meantime, the Undersigned stayed outside the court room and after about 15 minutes, CANDIDO CRUZ came out of the room and signaled to the Undersigned that Judge PASCUAL had already received the marked money. The Undersigned immediately entered the room and informed Subject about the entrapment. Subject denied having received anything from CANDIDO CRUZ, but after a thorough search, the marked money was found inserted between the page of a blue book on top of his table. Subject was invited to the Office of the NBI-NCR, Manila wherein he was subjected to ultra violet light examination. After finding Subject's right hand for the presence of fluorescent powder, he was booked, photographed and fingerprinted in accordance with our Standard Operating Procedure (S.O.P.) On even date, the results of our investigation together with the person of Judge FILOMENO PASCUAL was referred to the Inquest Prosecutor of the Office of the Special Prosecutor, Ombudsman, with the recommendation that he be charged and prosecuted for Bribery as defined and penalized under Article 210 of the Revised Penal Code of the Philippines. (Rollo, pp. 47-48.) On May 11, 1994, by resolution of the Third Division of this Court, this case was referred to Executive Judge Natividad G. Dizon for investigation, report and recommendation. 4 In connection with this investigation, respondent filed a Memorandum, dated July 28, 1995, wherein respondent presented his version of the case: Sometime in February 1993, one Ceferino Tigas, a fictitious person according to the NBI, wrote a letter to Court Administrator Ernani Pao of the Supreme Court Administrator Reynaldo L. Suarez endorsed the letter to the NBI Director requesting "discreet" investigation of the Tigas letter. An NBI tandem to Agents Edward Villarta and Reynaldo Olazo proceeded to Angat, Bulacan, to investigate. Said tandem's assignment was merely to conduct discreet investigation supposedly, but it led to incriminatory machinations, planting evidence, unlawful arrest, illegal search and seizure. They contacted Candido Cruz who was mentioned in the letter. They, however, discovered that Ceferino Tigas, the alleged letter writer, was an inexistent person, fictitious as shown by the synopsis report of the NBI agents (Exhibit 8). Having contacted Candido Cruz, the NBI agents persuaded him to participate in what they called "entrapment operation." The NBI agents prepared an affidavit, then a supplementary affidavit and had them signed by Candido Cruz. They also went to the NBI Headquarters and had four (4) P500 bills dusted with fluorescent powder which they used in the "operation" against the accused.

74 In the afternoon of March 25, 1993, the NBI, along with Candido Cruz, proceeded to the municipal building of Angat, Bulacan, where the accused judge was holding office. However, they learned that the accused judge was not in his office but was then attending the graduation rites of his son at the nearby Colegio de Sta. Monica, and so they decided to move their "operation" to the school grounds. The ceremonies had not yet begun. Candido Cruz saw the accused in one corner of the compound and approached him. He tried to give the accused an envelope allegedly containing money, but the judge refused to accept it and angrily drove Candido Cruz away. Rebuffed, the NBI agents decided to reset their "operation" the following day. At around 9:30 in the morning of March 26, 1993, the NBI agents and Candido Cruz arrived at the municipal building of Angat, Bulacan. Cruz, as planned, entered the accused judge's chambers and placed an envelope, allegedly containing marked money, right on his (judge's) desk. He thought it was a pleading for filing and he told Candido Cruz to file it with the office of the clerk of court at the adjacent room. Cruz replied that it was the money the judge was asking for. Upon hearing the reply, the accused suddenly erupted in anger, he grabbed the envelope on the desk and hurled it to Cruz. The envelope fell on the floor, the accused picked it up and inserted it inside the pocket of Cruz's polo shirt and drove him out of the chamber. Just second thereafter, agents Villarta and Olazo entered the door of the chamber which door was open at that time. They introduced themselves and told the accused that the money that Cruz gave him was marked. Accused told them that he did not receive or accept money from Cruz. But they proceeded to search the room, the table, its drawers, and every nook and cranny of his room, including the pockets of the accused's pants. After scouring the place, the agents failed to find the envelope with the marked money. And so, one of the agents called for Candido Cruz who was waiting outside at a waiting shed fronting the municipal building, and asked him were the envelope was, Cruz came back to the room and, together with agent Olazo, approached the cabinet and said "heto pala" Then, the accused's humiliating experience began. Thereafter, despite the strident protestations of the accused, the envelope, which came from the table of the judge, pictures were taken, and the accused was arrested by the NBI agents. 5 On August 11, 1995, Executive Judge Natividad G. Dizon submitted the following report and recommendation: The Investigating Judge respectfully submits her findings based on the evidence at hand. As against the respondent judge's denials, the undersigned submits that the sworn affidavits of complainants and NBI Agents and documentary proofs attached to the records are more convincing and nearer to the truth. They have no motive for fabricating this charge, except to bring justice. Credence should be given to the testimony of the NBI Agents coming as it does from an unpolluted source. These Agents had no reason to testify falsely against the respondent judge. They were just doing their duty. On the other hand, the respondent judge had to protect himself against the testimonial and technical/scientific evidence that he had received the envelope and to reject its implications of such evidence. Furthermore, his defense that he was just instigated to commit a crime is likewise untenable. The principle evolved from the cases appears to be that in a prosecution for an offense against the public welfare, such as accepting bribe, the defense of entrapment cannot be successfully interposed; . . . One may well wonder over the manner the envelope containing the money was proffered to the respondent judge as he narrated his story on how he got mad at Candido Cruz when he proffered the said envelope, how he threw, picked it up and

75 placed in the pocket of the latter and how he drove him away. He even testified that it was just "planted" by the NBI Agents when the latter allegedly placed the envelope inside a directory which was placed on top of a cabinet. . . . Why was he not surprised that somebody barged into his chamber or was he really accustomed with people directly dealing or negotiating at his chamber, as what Cruz did, instead of dealing with his staff. His "angry words" and his actuations, according to his testimony, were not convincing at all to show that he was that fuming mad at Candido Cruz's offer. More so, his claim that NBI Agents connived with Candido Cruz just for their own personal glory was not even persuasive. His excuse of the presence of fluorescent powder on his hand was flimsy and incredible. The act of the respondent shows that he can be influenced by monetary considerations. This act of the respondent of demanding and receiving money from a party-litigant before his court constitutes serious misconduct in office. It is this kind of gross and flaunting misconduct, no matter how nominal the amount involved on the part of those who are charged with the responsibility of administering the law that will surely erode the people's respect for law and lose faith and trust in the courts which are expected to render fair and equal justice to all. Such act go against Canons 2 and 3 of the Code of Judicial Conduct which state: A Judge should avoid impropriety and the appearance of impropriety in all activities and a judge should perform official duties honestly, and with impartiality and diligence. xxx xxx xxx With the above, the Investigating Judge respectfully recommends that appropriate penalty be imposed upon the respondent. We find that the evidence on record does not warrant conviction. We note that the only bases for the Report and Recommendation submitted by Executive Judge Natividad G. Dizon consist of: The Complaint, the Answer, the Memorandum of the respondent, and the transcript of stenographic notes of the hearing of the bribery case of the respondent judge at the Sandiganbayan. The respondent was, therefore, not afforded the right to open trial wherein respondent can confront the witnesses against him and present in his defense. This lapse in due process in unfortunate. The Rules, even in an administrative cases, demand that, if the respondent judge should be disciplined for grave misconduct of any graver offense, the evidence against him should be competent and should be derived from direct knowledge. 6 The Judiciary to which respondent belongs demands no less. Before any of its members could be faulted, it should be only after due investigation and after presentation of competent evidence, especially since the charge is penal in character. 7 The above-quoted Report and Recommendation of the investigating judge had fallen short of the requirements of due process. The evidence aforesaid admits of irreconcilable inconsistencies in the testimonies of principal witness, Candido Cruz, and NBI Agent SI Reynaldo Olazo on several material points. It will be remembered that the charge was intimated by someone who must have had an ax to grind against the respondent judge but who, by reason of cowardice or lack of evidence to put up a righteous case, did not come out in the open and instead wrote an anonymous letter. The letter-writer, naming himself as Ceferino Tigas, did not specify crimes committed or illegal acts perpetrated but charged respondent with anomalies in general terms. Respondent judge could not have been expected to make a valid answer or to otherwise defend himself from vague accusations. While then NBI Director Epimaco Velasco, upon being apprised of the Tigas letter, ordered the NBI investigating team to make a "discreet investigation" of respondent, the NBI team had instead caused an instigation or the entrapment of respondent judge. Not having found letter-writer Tigas and

76 concluding that no such person exists, they sought out an accused before respondent's court who could possibly be respondent judge's virtual victim. Approached by the NBI team was Candido Cruz, a person who had been brought before the Municipal Trial Court of Angat, Bulacan, for preliminary investigation on the charge of Frustrated Murder. Respondent judge gave judgment to the effect that the crime committed by Candido Cruz was that of physical injuries merely. He declared then that he had original jurisdiction to try the case. But, respondent's action in this regard was perpetrated some time before Candido Cruz was "persuaded to participate in what they (the NBI agents) called 'entrapment operation'." The opportune time to bribe the respondent should have been before the acted in reducing Cruz' criminal liability from Frustrated Murder to Physical Injuries. No bribe was asked then. It was unlikely that respondent would ask for it on the date of the entrapment on March 26, 1993, the favorable verdict having been rendered already. It is significant to note that NBI Agent Olazo admitted 8 that, despite the fact that he "scoured" the table of the respondent in search of the envelope, with marked money in it, no envelope was found and so he had to call Candido Cruz who was already outside so that Cruz can locate the envelope. In view of these antecedents, we find reason to favorably consider the allegations of respondent judge in his defense that, at around 9:30 o'clock in the morning of March 26, 1993, Candido Cruz, along with the NBI agents, went to the Municipal Building of Angat, Bulacan. Candido Cruz, alone, went inside respondent judge's chambers, located thereat, and placed before respondent judge an envelope containing marked money. Respondent judge thought that what was placed before him was pleading for filing and so, he told Candido Cruz to file it with the Office of the Clerk of Court, that is, in a room adjacent to his chambers. Candido Cruz to file it with the Office of the Clerk of Court, that is, in a room adjacent to his chambers. Candido Cruz replied that it was the money the judge was asking for. Upon hearing this reply, respondent judge suddenly erupted in anger. He grabbed the envelope on the desk and hurled it at Candido Cruz. The envelope fell on the floor. Respondent judge then picked it up and inserted it inside the pocket of Cruz' polo shirt and drove him out of his chambers, introduced themselves, and told respondent judge that the money that Cruz gave him was marked. Respondent judge told them that he did not receive or accept money from Candido Cruz. After respondent judge said this, the NBI Agents nevertheless proceeded to search the room, examined tables, drawers, and every nook and cranny of respondent' chambers of respondent, the NBI Agents failed to find the envelope containing marked money allegedly given by Candido Cruz to respondent judge. Candido Cruz, who had gone down to the waiting shed, was called for by one of the agents. Candido Cruz was asked as to the whereabouts of the envelope containing money. Candido Cruz went back to the judge's chambers and made the motions of conducting a search. Eventually, he went straight to the top of a cabinet and, in the manner of a magician, produced the envelope with marked money, saying, "heto pala". Thereafter, photographs were taken of respondent judge who was humiliated no end by the fact that the envelope with marked money was placed on top of his desk with respondent judge in front of it. In his testimony before the Sandiganbayan, NBI Agent SI Reynaldo Olazo stated that the marked money used in their entrapment operation actually came from Candido Cruz and not from the NBI, 9 and he was not able to see what actually transpired between Candido Cruz and respondent judge inside the chambers of the judge. He was outside the judge's chambers and entered it only after Candido Cruz gave the signal that the money was already delivered by him to the respondent. 10 Candido Cruz, on the other hand, testified that the marked money used in the alleged entrapment operation was given to him by the NBI 11 and, when he went out of the judge's chambers after giving the money, he signaled to one, Col. Javier, who was then positioned immediately outside the chambers. 12 In view of the foregoing facts, it is easy to conclude that the acts of the NBI agents which triggered the incident that transpired inside respondent judge's chambers constituted instigation and not entrapment as claimed by the prosecution. It is evident that Candido Cruz was induced to act as he did in order to place respondent judge in a compromising situation, a situation which was not brought about by any request of respondent judge. It is surprisingly strange that an accused in a case would simply barge into the judge's chambers without rhyme or reason, place bribe money on top of the judge's desk without so

77 much as explaining what the money was for. Respondent judge's action on Candido Cruz's case which case which favored Cruz was effected long before. We can believe the fact that, under the circumstances, respondent judge did react in anger and threw the envelope at the accused Candido Cruz. The judge must have given back the money to Candido Cruz and literally drove Cruz out of his chambers bringing the money with him. This explains the reason why the NBI Agents notwithstanding a relentless search did not find the money inside the chambers. Four (4) NBI Agents made the search and they were unable to find the envelope with the marked money in it. This fact NBI Agent Olazo in effect admitted because he had to call back Candido Cruz in order to make Cruz divulge as to where the bribe money was placed. When, after all, Candido Cruz produced the money when he went back to judge's chambers, it became obvious that the money when offered to respondent judge was not received by the latter. The foregoing set of facts smacks of unlawful prosecution and planting of evidence amounting to persecution. It is reprehensible to say the least that NBI agents should entrap the respondent judge by illegal means, besmirch his reputation by the planting of evidence against him and make the public the foregoing charges of bribery against him in the face of the unjustified and illegal incriminatory machinations perpetrated by the NBI agents in connivance with Candido Cruz. We, thus, hold respondent Judge Filomeno Pascual blameless of the charge of bribery against him. It should be noted that Candido Cruz insisted that he had participated in the alleged entrapment operation only because of the fact that the NBI agents made him believe that there was an order therefor from the Supreme Court. 13 Considering that he is illiterate and is already more than 70 years of age, it is understandable why he was easily persuaded by the NBI agents to cooperate without need of any threat whatsoever. Inconsistencies in his testimony is likewise attributed to his aforesaid personal circumstances for it does not jibe with practical experience that a person telling the truth will still have to struggle to remember everything that transpired, he having been a participant in the operation. Gross mistake on very important points not easily forgotten are very strong indicia of the falsity of the story given by a witness. 14 We reiterate the ruling in the case of Raquiza v. Castaneda, Jr., 15 that: The ground for the removal of a judicial officer should be established beyond reasonable doubt. Such is the rule where the charges on which the removal is sought is misconduct in office, willful neglect, corruption, incompetency, etc. The general rules in regard to admissibility of evidence in criminal trials apply. Reasonable doubt is the inability to let the judicial mind rest easy upon the certainty of guilt after a thorough investigation of the whole evidence. 16 The principle of reasonable doubt being applicable in the instant case, therefore, we find that the alleged act of bribery committed by respondent has not been sufficiently and convincingly proven to warrant the imposition of any penalty against respondent. WHEREFORE, in view of the foregoing, respondent judge is hereby exonerated and the administrative case against him is DISMISSED. SO ORDERED. Padilla, Bellosillo, Vitug and Kapunan, JJ. concur

78 Republic of the Philippines SUPREME COURT Manila THIRD DIVISION Adm. Matter No. MTJ-00-1241 January 20, 2000 (formerly OCA I.P.I. No. 97-445-MTJ) ATTY. NAPOLEON S. VALENZUELA, complainant, vs. JUDGE REYNALDO B. BELLOSILLO, respondent. PURISIMA, J.: The Affidavit-Complaint dated October 17, 1997 of Attorney Napoleon S. Valenzuela charged respondent Judge Reynaldo Blanco Bellosillo of Branch 34 of the Metropolitan Trial Court of Quezon City with gross violation of the constitutional right of subject accused to assistance by counsel of her own choice, gross misconduct, oppression, partiality and violation of the Code of Judicial Ethics; averring: 2. That on September 4, 1997, I was hired as counsel for the accused in Criminal Case No. 6538286 entitled "People of the Philippines vs. Ms. Meriam V. Colapo" for Violation of B.P. 22 which case is being heard before Quezon City Metropolitan Trial Court Branch 34, presided by Hon. Judge Reynaldo Blanco Bellosillo; 3. That subsequently, I then filed a Manifestation praying for the Honorable Court to allow the accused to post bail; a copy of the Manifestation is hereto attached as "Annex A and A-1" and made as integral parts hereof; 4. That Judge Reynaldo Bellosillo as was his custom, talked to my client before granting bail for her provisional liberty inside his chambers and in my absence; 5. That the next day, September 5, 1997, my client Meriam Colapo informed me that Judge Reynaldo B. Bellosillo had angrily ordered her to remove me as counsel and even suggested one Atty. Puhawan of the PALAO QUEZON CITY as my replacement: . . . 6. That as a consequence thereof, the undersigned had no recourse but to file a Notice of Withdrawal with the conformity of my client Meriam V. Colapo . . .; 7. That although was aghast and flabbergasted with the unfathomable actuation of Judge Bellosillo, I can think of no reason what impelled him with anger to order my client for my replacement; 7. [sic] That the actuation of Judge Reynaldo Blanco Bellosillo is certainly oppressive, arrogant, and a gross misconduct affecting his integrity and efficiency which merits a dismissal from the service; 8. That such despotic act of Judge Bellosillo is likewise indicative of partiality and gross ignorance of the Constitution and the constitutional right of accused Meriam Colapo to choose her own counsel to defend her in court; 9. That such arrogant act of Judge Bellosillo would certainly violate and kill my right to earn and practice law; xxx xxx x x x1

The Answer, dated February 16, 1998, of respondent Judge denied the allegations of the complaint, branded the same without any legal and factual basis; theorizing:

79 1. That when Complainant's Accused Client and Witness, Meriam J. [sic] Colapo, appeared before the undersigned respondent to post Bail she was unassisted by Complainant-Counsel and upon inquiry informed that she is allegedly changing him not having liked the idea of being referred by a Metro-TC Branch 34 Personnel to its PAO Lawyer Joseph B. Sia, who rejected her due to the Prohibitive policy of his office to represent an Accused in BP 22 Cases and instead referred her to the Complainant-Lawyer, Napoleon S. Valenzuela, a former PAO Employee, who allegedly changed [sic] her unreasonably for the preparation of a mere Manifestation To Post Bail; 2. That respondent could not have referred Complainant's Accused Client Witness to tha [sic] PALAO knowing its Prohibitive Policy to also represent Accused in BP 22 Cases as previously made clear by its Chief, Atty. Jose Puhawan; 3. That out of delicadeza and in recognition of Complainant's right to practice the law profession, respondent never talked to him about it; 4. That the Motion to Withdraw filed by Complainant with the Conformity of his Accused Client Witness, Meriam V. Colapo, is a matter strictly just between the two of them, to which respondent was never a privy; 5. That had Complainant been more prudent, he could have just verified from the respondent the veracity of his client's statements which for legal intents and purposes are inadmissible for being hearsay, thus, this unfounded time consuming Complaint could have been avoided; 6. That respondent discharges his functions with all integrity and good faith and without fear or favor knowing that justice must never be distorted as to do so would make even the wise blind and subvert tha [sic] cause of the innocent; xxx xxx x x x2

In the Resolution3 issued on June 16, 1999, this Third Division referred the Complaint to the Executive Judge of the Regional Trial Court of Quezon City, for investigation, report and recommendation. On September 22, 1999, Executive Judge Perlita J. Tria Tirona sent in the following Report and Recommendation to wit: Complainant alleged that on September 4, 1997, he filed a motion praying that his client Meriam V. Colapo accused in a BP 22 case then pending in Metropolitan Trial Court, Branch 34, Quezon City, presided over at that time by respondent, be allowed to post bail for her provisional liberty. Respondent before acting on the Motion allegedly talked to the accused and ordered her to replace her counsel, herein complainant, with Atty. Puhawan from PALAO, Quezon City. Accused Colapo informed him of this incident and told him she was terminating his services pursuant to the instructions of the respondent. In deference to his client's wishes, complainant filed a Notice of Withdrawal of his appearance with his client's (Colapo's) conformity. According to complainant, he could not think of any reason for respondent to order his client to replace him. On cross examination, complainant stated that he worked with the Public Attorney's Office for seven (7) to eight (8) years. He resigned in 1995. Complainant's wife used to be an officemate of respondent at the Public Attorney's Office, in Makati in 1988. Complainant admitted that his client Colapo was referred to him by Atty. Sia, his friend, who is with the Public Attorney's Office (PAO) where he used to work. He is aware of the PAO/PALAO policy not to represent any person charged with BP 22. Complainant likewise admitted that he filed his notice of withdrawal on the basis of what his client Colapo told him. However, he did

80 not confront the respondent about it. He believed his client because she was agitated. According to his client Colapo, respondent recommended Atty. Puhawan and he right away filed his withdrawal as counsel. At first, complainant stated that the affidavit of his client Colapo was prepared by the Notary Public Lino Soriano. Then he stated that he assisted her in the preparation of the same. Complainant further alleged that it was also on September 5, 1997 (when his client's bond was approved) that Colapo informed him that respondent wanted him changed as counsel.1wphi1.nt However, in his Notice of Withdrawal as counsel which he filed in Court, he stated that he was informed by his client Colapo on September 7, 1997, which complainant again claims to be a typographical error. Complainant further admitted that his Notice of Withdrawal was with the conformity of his client Colapo. No other witness was presented by the complainant. Respondent Judge Bellosillo, testified that he does not personally know Miriam [sic] Colapo. He first met her when she appeared before him in his Court for the approval of her bail bond. She was allowed to post bail on the basis of the manifestation filed by her counsel on record, complainant Atty. Napoleon S. Valenzuela. At that time she was notassisted [sic] by her counsel (complainant was absent) but he (respondent) allowed her just the same to post bail because according to him he personally knows Colapo's counsel complainant Atty. \/alenzuela. Respondent further stated that when he inquired from Ms. Colapo where her lawyer was, Ms. Colapo, in a very "disappointing mood" said that she was going to change her counsel because she did not like the idea of paying somebody who could not appear for her at the time she needed him most. Later on he was informed of the notice of withdrawal filed by complainant Napoleon Valenzuela with the conformity of his client Colapo. He did not bother to read the withdrawal anymore because anyway it contained the conformity of his client Colapo. It was only when he received the 1st indorsement of the Court Administrator which contained the complaint and the annexes to the complaint of Atty. Valenzuela that he came to read the notice of withdrawal. Had he read the notice of withdrawal earlier, he could have called them for a conference, and confront both of them, considering that the information given to him (complainant) by Colapo is different from what appeared in the notice of withdrawal as counsel, filed by herein complainant. Respondent likewise stated that in all honesty and good faith, he honored the entry of appearance of the new counsel and dismissed the case against Ms. Colapo on the basis of the Affidavit of Desistance filed by the complaining witness in the case against Colapo. On cross examination, respondent admitted that he talked to accused Colapo before he approved the bail, who was then not assisted by her counsel, to find out if she is the one who appears in the picture attached to the bail bond, and to inform her of her undertaking under the bail, and when he inquired from Colapo where her lawyer was, she answered in a very disappointed manner that she was going to change her counsel because she did not like the idea of paying somebody who could not represent her at the time she needed him most and because of the fact that she was referred to one Atty. Sia of the PAO Office who in turn referred her (Colapo) to complainant who allegedly charged her (complainant) so much for the preparation of the manifestation Respondent likewise denied that he ever referred Ms. Colapo, complainant's client to the PALAO knowing fully well that the PALAO does not represent an accused in a BP 22 case. Besides, according to respondent, it was none of his business whether Colapo would want to change her counsel. He (respondent) stated that he is not aware whether Atty. Gusapos, the lawyer who

81 replaced the complainant, is a PALAO lawyer since he used his private or residential address when he entered his appearance. Prescinding from the foregoing, Judge Tirona concluded: The undersigned finds the evidence adduced by the complainant insufficient to substantiate his charges against respondent Judge Bellosillo. The basis of complainant's complaint is the affidavit of his client Meriam Colapo to the effect that respondent Judge suggested to her (Meriam Colapo) that she should change her counsel (herein complainant), and that respondent recommended Atty. Puhawan of the PALAO. However, Meriam Colapo was not presented by complainant to testify because she is presently in Brunei. While complainant claims that Meriam Colapo is willing to testify, said willingness is not sufficient to lend credence to the present charge since respondent has every right to cross examine said witness. It should likewise be noted that the lawyer who replaced complainant as counsel for Meriam Colapo was not Atty. Puhawan, the lawyer allegedly suggested by respondent but one Atty. Gusapos allegedly of the PALAO, although no evidence was presented by complainant to show that indeed Atty. Gusapos is also with PALAO notwithstanding the fact that he promised to submit a certification from PALAO that Atty. Gusapos is indeed an employee of said office. If Meriam Colapo has to discharge complainant as allegedly suggested by respondent so as not to antagonize said respondent judge, why did they not engage the services of Atty. Puhawan, the lawyer allegedly suggested by respondent to take complainant's place as counsel? On the other hand, respondent in denying the charge, stated that he could not have even suggested Atty. Puhawan of PALAO to take complainant's place as counsel since PALAO lawyers are not allowed to represent an accused in a BP 22 case. Besides, even complainant himself could see no reason why respondent would suggest to Meriam Colapo to change complainant as counsel and instead to engage the services of Atty. Puhawan. Thus, the only evidence of the complainant, which is the Affidavit of his client Meriam Colapo, cannot be the basis of a finding of guilt even in an administrative case. In view of the foregoing, the undersigned respectfully recommends that the charges against respondent Judge Reynaldo B. Bellosillo be dismissed for lack of evidence. All the facts of the case studiedly considered, with a thorough evaluation of the records on hand, the Court finds merit in the findings and recommendations of Executive Judge Tirona, absent any discernible basis for adjudging respondent Judge Bellosillo liable under the premises. Apart from his testimony and affidavit-complaint, complainant did not adduce enough evidence to prove his charges. He did not even present his primary witness, Meriam Colapo, to support the charge that respondent Judge Bellosillo pressured the latter to replace him as defense counsel. The affidavit4 of Meriam Colapo cannot be given credence and is inadmissible without the said affiant placed on the witness stand to give the respondent Judge an opportunity to test the veracity of affiant's allegations.5 An affidavit is hearsay unless the affiant is presented for cross-examination.6 Sans the testimony of witness Meriam Colapo, to corroborate complainant's allegations and submission, the case against the respondent judge cannot prosper. The employment or profession of a person is a property right within the constitutional guaranty of due process of law.7 Respondent judge cannot therefore be adjudged guilty of the charges against him without affording him a chance to confront the said witness, Meriam Colapo; otherwise, his right to due process would be infringed.1wphi1.nt

82 WHEREFORE, for insufficiency of evidence, the Complaint at bar against respondent Judge Reynaldo Blanco Bellosillo is hereby DISMISSED. SO ORDERED. Melo, Vitug, Panganiban and Gonzaga-Reyes, JJ., concur.

83 Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 117565 November 18, 1997 ARSENIO P. LUMIQUED (deceased), Regional Director, DAR CAR, Represented by his Heirs, Francisca A. Lumiqued, May A. Lumiqued, Arlene A. Lumiqued and Richard A. Lumiqued, petitioners, vs. Honorable APOLONIO G. EXEVEA, ERDOLFO V. BALAJADIA and FELIX T. CABADING, ALL Members of Investigating Committee, created by DOJ Order No. 145 on May 30, 1992; HON. FRANKLIN M. DRILON, SECRETARY OF JUSTICE, HON. ANTONIO T. CARPIO, CHIEF Presidential Legal Adviser/Counsel; and HON. LEONARDO A. QUISUMBING, Senior Deputy Executive Secretary of the Office of the President, and JEANNETTE OBAR-ZAMUDIO, Private Respondent, respondents.

ROMERO, J.: Does the due process clause encompass the right to be assisted by counsel during an administrative inquiry? Arsenio P. Lumiqued was the Regional Director of the Department of Agrarian Reform Cordillera Autonomous Region (DAR-CAR) until President Fidel V. Ramos dismissed him from that position pursuant to Administrative Order No. 52 dated May 12, 1993. In view of Lumiqued's death on May 19, 1994, his heirs instituted this petition for certiorari and mandamus, questioning such order. The dismissal was the aftermath of three complaints filed by DAR-CAR Regional Cashier and private respondent Jeannette Obar-Zamudio with the Board of Discipline of the DAR. The first affidavitcomplaint dated November 16, 1989, 1 charged Lumiqued with malversation through falsification of official documents. From May to September 1989, Lumiqued allegedly committed at least 93 counts of falsification by padding gasoline receipts. He even submitted a vulcanizing shop receipt worth P550.00 for gasoline bought from the shop, and another receipt for P660.00 for a single vulcanizing job. With the use of falsified receipts, Lumiqued claimed and was reimbursed the sum of P44,172.46. Private respondent added that Lumiqued seldom made field trips and preferred to stay in the office, making it impossible for him to consume the nearly 120 liters of gasoline he claimed everyday. In her second affidavit-complaint dated November 22, 1989, 2 private respondent accused Lumiqued with violation of Commission on Audit (COA) rules and regulations, alleging that during the months of April, May, July, August, September and October, 1989, he made unliquidated cash advances in the total amount of P116,000.00. Lumiqued purportedly defrauded the government "by deliberately concealing his unliquidated cash advances through the falsification of accounting entries in order not to reflect on 'Cash advances of other officials' under code 8-70-600 of accounting rules." The third affidavit-complaint dated December 15, 1989, 3 charged Lumiqued with oppression and harassment. According to private respondent, her two previous complaints prompted Lumiqued to retaliate by relieving her from her post as Regional Cashier without just cause. The three affidavit-complaints were referred in due course to the Department of Justice (DOJ) for appropriate action. On May 20, 1992, Acting Justice Secretary Eduardo G. Montenegro issued Department Order No. 145 creating a committee to investigate the complaints against Lumiqued. The order appointed Regional State Prosecutor Apolinario Exevea as committee chairman with City Prosecutor Erdolfo Balajadia and Provincial Prosecutor Felix Cabading as members. They were mandated

84 to conduct an investigation within thirty days from receipt of the order, and to submit their report and recommendation within fifteen days from its conclusion. The investigating committee accordingly issued a subpoena directing Lumiqued to submit his counteraffidavit on or before June 17, 1992. Lumiqued, however, filed instead an urgent motion to defer submission of his counter-affidavit pending actual receipt of two of private respondent's complaints. The committee granted the motion and gave him a five-day extension. In his counter-affidavit dated June 23, 1992, 4 Lumiqued alleged, inter alia, that the cases were filed against him to extort money from innocent public servants like him, and were initiated by private respondent in connivance with a certain Benedict Ballug of Tarlac and a certain Benigno Aquino III. He claimed that the apparent weakness of the charge was bolstered by private respondent's execution of an affidavit of desistance. 5 Lumiqued admitted that his average daily gasoline consumption was 108.45 liters. He submitted, however, that such consumption was warranted as it was the aggregate consumption of the five service vehicles issued under his name and intended for the use of the Office of the Regional Director of the DAR. He added that the receipts which were issued beyond his region were made in the course of his travels to Ifugao Province, the DAR Central Office in Diliman, Quezon City, and Laguna, where he attended a seminar. Because these receipts were merely turned over to him by drivers for reimbursement, it was not his obligation but that of auditors and accountants to determine whether they were falsified. He affixed his signature on the receipts only to signify that the same were validly issued by the establishments concerned in order that official transactions of the DAR-CAR could be carried out. Explaining why a vulcanizing shop issued a gasoline receipt, Lumiqued said that he and his companions were cruising along Santa Fe, Nueva Vizcaya on their way to Ifugao when their service vehicle ran out of gas. Since it was almost midnight, they sought the help of the owner of a vulcanizing shop who readily furnished them with the gasoline they needed. The vulcanizing shop issued its own receipt so that they could reimburse the cost of the gasoline. Domingo Lucero, the owner of said vulcanizing shop, corroborated this explanation in an affidavit dated June 25, 1990. 6 With respect to the accusation that he sought reimbursement in the amount of P660.00 for one vulcanizing job, Lumiqued submitted that the amount was actually only P6.60. Any error committed in posting the amount in the books of the Regional Office was not his personal error or accountability. To refute private respondent's allegation that he violated COA rules and regulations in incurring unliquidated cash advances in the amount of P116,000.00, Lumiqued presented a certification 7 of DARCAR Administrative Officer Deogracias F. Almora that he had no outstanding cash advances on record as of December 31, 1989. In disputing the charges of oppression and harassment against him, Lumiqued contended that private respondent was not terminated from the service but was merely relieved of her duties due to her prolonged absences. While admitting that private respondent filed the required applications for leave of absence, Lumiqued claimed that the exigency of the service necessitated disapproval of her application for leave of absence. He allegedly rejected her second application for leave of absence in view of her failure to file the same immediately with the head office or upon her return to work. He also asserted that no medical certificate supported her application for leave of absence. In the same counter-affidavit, Lumiqued also claimed that private respondent was corrupt and dishonest because a COA examination revealed that her cash accountabilities from June 22 to November 23, 1989, were short by P30,406.87. Although private respondent immediately returned the amount on January 18, 1990, the day following the completion of the cash examination, Lumiqued asserted that she should be relieved from her duties and assigned to jobs that would not require handling of cash and money matters. Committee hearings on the complaints were conducted on July 3 and 10, 1992, but Lumiqued was not assisted by counsel. On the second hearing date, he moved for its resetting to July 17, 1992, to enable him to employ the services of counsel. The committee granted the motion, but neither Lumiqued nor his

85 counsel appeared on the date he himself had chosen, so the committee deemed the case submitted for resolution. On August 12, 1992, Lumiqued filed an urgent motion for additional hearing, 8 alleging that he suffered a stroke on July 10, 1992. The motion was forwarded to the Office of the State Prosecutor apparently because the investigation had already been terminated. In an order dated September 7, 1992, 9 State Prosecutor Zoila C. Montero denied the motion, viz: The medical certificate given show(s) that respondent was discharged from the Sacred Heart Hospital on July 17, 1992, the date of the hearing, which date was upon the request of respondent (Lumiqued). The records do not disclose that respondent advised the Investigating committee of his confinement and inability to attend despite his discharge, either by himself or thru counsel. The records likewise do not show that efforts were exerted to notify the Committee of respondent's condition on any reasonable date after July 17, 1992. It is herein noted that as early as June 23, 1992, respondent was already being assisted by counsel. Moreover an evaluation of the counter-affidavit submitted reveal(s) the sufficiency, completeness and thoroughness of the counter-affidavit together with the documentary evidence annexed thereto, such that a judicious determination of the case based on the pleadings submitted is already possible. Moreover, considering that the complaint-affidavit was filed as far back as November 16, 1989 yet, justice can not be delayed much longer. Following the conclusion of the hearings, the investigating committee rendered a report dated July 31, 1992, 10finding Lumiqued liable for all the charges against him. It made the following findings: After a thorough evaluation of the evidences (sic) submitted by the parties, this committee finds the evidence submitted by the complainant sufficient to establish the guilt of the respondent for Gross Dishonesty and Grave Misconduct. That most of the gasoline receipts used by the respondent in claiming for the reimbursement of his gasoline expenses were falsified is clearly established by the 15 Certified Xerox Copies of the duplicate receipts (Annexes G-1 to G-15) and the certifications issued by the different gasoline stations where the respondent purchased gasoline. Annexes "G-1" to "G-15" show that the actual average purchase made by the respondent is about 8.46 liters only at a purchase price of P50.00, in contrast to the receipts used by the respondent which reflects an average of 108.45 liters at a purchase price of P550.00. Here, the greed of the respondent is made manifest by his act of claiming reimbursements of more than 10 times the value of what he actually spends. While only 15 of the gasoline receipts were ascertained to have been falsified, the motive, the pattern and the scheme employed by the respondent in defrauding the government has, nevertheless, been established. That the gasoline receipts have been falsified was not rebutted by the respondent. In fact, he had in effect admitted that he had been claiming for the payment of an average consumption of 108.45 liters/day by justifying that this was being used by the 4 vehicles issued to his office. Besides he also admitted having signed the receipts. Respondent's act in defrauding the government of a considerable sum of money by falsifying receipts constitutes not only Dishonesty of a high degree but also a criminal offense for Malversation through Falsification of Official Documents. This committee likewise finds that the respondent have (sic) unliquidated cash advances in the year 1989 which is in violation of established office and auditing rules. His cash advances totaling to about P116,000.00 were properly documented. The requests for

86 obligation of allotments and the vouchers covering the amounts were all signed by him. The mere certification issued by the Administrative Officer of the DAR-CAR cannot therefore rebut these concrete evidences (sic). On the third complaint, this committee likewise believes that the respondent's act in relieving the complainant of her functions as a Regional Cashier on December 1, 1989 was an act of harassment. It is noted that this was done barely two weeks after the complainant filed charges against her (sic). The recommendation of Jose G. Medina of the Commission on Audit came only on May 11, 1990 or almost six months after the respondent's order relieving the complainant was issued. His act in harassing a subordinate employee in retaliation to a complaint she filed constitute(s) Gross Misconduct on the part of the respondent who is a head of office. The affidavits of Joseph In-uyay and Josefina Guting are of no help to the respondent. In fact, this only show(s) that he is capable of giving bribes if only to have the cases against him dismissed. He could not have given a certain Benigno Aquino III the sum of P10,000.00 for any other purpose. Accordingly, the investigating committee recommended Lumiqued's dismissal or removal from office, without prejudice to the filing of the appropriate criminal charges against him. Acting on the report and recommendation, former Justice Secretary Franklin M. Drilon adopted the same in his Memorandum to President Fidel V. Ramos dated October 22, 1992. He added that the filing of the affidavit of desistance 11 would not prevent the issuance of a resolution on the matter considering that what was at stake was not only "the violation of complainant's (herein private respondent's) personal rights" but also "the competence and fitness of the respondent (Lumiqued) to remain in public office." He opined that, in fact, the evidence on record could call for "a punitive action against the respondent on the initiative of the DAR." On December 17, 1992, Lumiqued filed a motion for reconsideration of "the findings of the Committee" with the DOJ. 12 Undersecretary Ramon S. Esguerra indorsed the motion to the investigating committee. 13 In a letter dated April 1, 1993, the three-member investigating committee informed Undersecretary Esguerra that the committee "had no more authority to act on the same (motion for reconsideration) considering that the matter has already been forwarded to the Office of the President" and that their authority under Department Order No. 145 ceased when they transmitted their report to the DOJ. 14 Concurring with this view, Undersecretary Esguerra informed Lumiqued that the investigating committee could no longer act on his motion for reconsideration. He added that the motion was also prematurely filed because the Office of the President (OP) had yet to act on Secretary Drilon's recommendation. 15 On May 12, 1993, President Fidel V. Ramos himself issued Administrative Order No. 52 (A.O. No. 52), 16 finding Lumiqued administratively liable for dishonesty in the alteration of fifteen gasoline receipts, and dismissing him from the service, with forfeiture of his retirement and other benefits. Thus: That the receipts were merely turned over to him by his drivers and that the auditor and accountant of the DAR-CAR should be the ones to be held liable is untenable. The receipts in question were signed by respondent for the purpose of attesting that those receipts were validly issued by the commercial establishments and were properly disbursed and used in the official business for which it was intended. This Office is not about to shift the blame for all these to the drivers employed by the DAR-CAR as respondent would want us to do. The OP, however, found that the charges of oppression and harassment, as well as that of incurring unliquidated cash advances, were not satisfactorily established.

87 In a "petition for appeal" 17 addressed to President Ramos, Lumiqued prayed that A.O. No. 52 be reconsidered and that he be reinstated to his former position "with all the benefits accorded to him by law and existing rules and regulations." This petition was basically premised on the affidavit dated May 27, 1993, of a certain Dwight L. Lumiqued, a former driver of the DAR-CAR, who confessed to having authored the falsification of gasoline receipts and attested to petitioner Lumiqued's being an "honest man" who had no "premonition" that the receipts he (Dwight) turned over to him were "altered." 18 Treating the "petition for appeal" as a motion for reconsideration of A.O. No. 52, the OP, through Senior Deputy Executive Secretary Leonardo A. Quisumbing, denied the same on August 31, 1993. Undaunted, Lumiqued filed a second motion for reconsideration, alleging, among other things, that he was denied the constitutional right to counsel during the hearing. 19 On May 19, 1994, 20 however, before his motion could be resolved, Lumiqued died. On September 28, 1994, 21 Secretary Quisumbing denied the second motion for reconsideration for lack of merit. Hence, the instant petition for certiorari and mandamus praying for the reversal of the Report and Recommendation of the Investigating Committee, the October 22, 1992, Memorandum of then Justice Secretary Drilon, A.O. No. 52 issued by President Ramos, and the orders of Secretary Quisumbing. In a nutshell, it prays for the "payment of retirement benefits and other benefits accorded to deceased Arsenio Lumiqued by law, payable to his heirs; and the backwages from the period he was dismissed from service up to the time of his death on May 19, 1994." 22 Petitioners fault the investigating committee for its failure to inform Lumiqued of his right to counsel during the hearing. They maintain that his right to counsel could not be waived unless the waiver was in writing and in the presence of counsel. They assert that the committee should have suspended the hearing and granted Lumiqued a reasonable time within which to secure a counsel of his own. If suspension was not possible, the committee should have appointed a counsel de oficio to assist him. These arguments are untenable and misplaced. The right to counsel, which cannot be waived unless the waiver is in writing and in the presence of counsel, is a right afforded a suspect or an accused during custodial investigation. 23 It is not an absolute right and may, thus, be invoked or rejected in a criminal proceeding and, with more reason, in an administrative inquiry. In the case at bar, petitioners invoke the right of an accused in criminal proceedings to have competent and independent counsel of his own choice. Lumiqued, however, was not accused of any crime in the proceedings below. The investigation conducted by the committee created by Department Order No. 145 was for the purpose of determining if he could be held administratively liable under the law for the complaints filed against him. The order issued by Acting Secretary of Justice Montenegro states thus: In the interest of the public service and pursuant to the provisions of existing laws, a Committee to conduct the formal investigation of the administrative complaint for oppression, dishonesty, disgraceful and immoral conduct, being notoriously undesirable and conduct prejudicial to the best interest of the service against Mr. ARSENIO P. LUMIQUED, Regional Director, Department of Agrarian Reform, Cordillera Autonomous Region, is hereby created . . . 24 As such, the hearing conducted by the investigating committee was not part of a criminal prosecution. This was even made more pronounced when, after finding Lumiqued administratively liable, it hinted at the filing of a criminal case for malversation through falsification of public documents in its report and recommendation. Petitioners' misconception on the nature of the investigation 25 conducted against Lumiqued appears to have been engendered by the fact that the DOJ conducted it. While it is true that under the Administrative Code of 1987, the DOJ shall "administer the criminal justice system in accordance with the accepted processes thereof consisting in the investigation of the crimes, prosecution of offenders and administration of the correctional system, 26 conducting criminal investigations is not its sole function. By its power to "perform such other functions as may be provided by law," 27 prosecutors may be called upon to conduct administrative investigations. Accordingly, the investigating committee

88 created by Department Order No. 145 was duty-bound to conduct the administrative investigation in accordance with the rules therefor. 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 a body to furnish the person being investigated with counsel. 28 In an administrative proceeding such as the one that transpired below, a respondent (such as Lumiqued) 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 29 (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 30 (otherwise known as the Administrative Code of 1987). Excerpts from the transcript of stenographic notes of the hearings attended by Lumiqued 31 clearly show that he was confident of his capacity and so opted to represent himself . Thus, the right to counsel is not imperative in administrative investigations because such inquiries are conducted merely to determine whether there are facts that merit disciplinary measures against erring public officers and employees, with the purpose of maintaining the dignity of government service. Furthermore, petitioners' reliance on Resolution No. 94-0521 of the Civil Service Commission on the Uniform Procedure in the Conduct of Administrative Investigation stating that a respondent in an administrative complaint must be "informed of his right to the assistance of a counsel of his choice," 32 is inappropriate. In the first place, this resolution is applicable only to cases brought before the Civil Service Commission. 33 Secondly, said resolution, which is dated January 25, 1994, took effect fifteen days following its publication in a newspaper of general circulation, 34 much later than the July 1992 hearings of the investigating committee created by Department Order No. 145. Thirdly, the same committee was not remiss in the matter of reminding Lumiqued of his right to counsel. Thus, at the July 3, 1992, hearing, Lumiqued was repeatedly appraised of his option to secure the services of counsel: RSP EXEVEA: This is an administrative case against Director Lumiqued. Director Lumiqued is present. The complainant is present, Janet Obar-Zamudio. Complainant has just been furnished with a copy of the counteraffidavit of the respondent. Do you have a counsel, Director? DIR. LUMIQUED: I did not bring anybody, Sir, because when I went to see him, he told me, Sir, that he has already set a hearing, morning and afternoon today. RSP EXEVEA: So, we will proceed with the hearing even without your counsel? You are willing to proceed with the hearing even without your counsel? DIR. LUMIQUED: Yes, I am confident. . . CP BALAJADIA: You are confident that you will be able to represent yourself? DIR. LUMIQUED: That is my concern. 35 (Emphasis supplied)

89 In the course of private respondent's damaging testimony, the investigating committee once again reminded Lumiqued of his need for a counsel. Thus: CP BALAJADIA: Q. (To Director Lumiqued) You really wish to go through with this even without your counsel? DIRECTOR LUMIQUED: A. I think so, Sir. CP BALAJADIA: Let us make it of record that we have been warning you to proceed with the assistance of counsel but you said that you can take care of yourself so we have no other alternative but to proceed. 36 (Emphasis supplied). Thereafter, the following colloquies transpired: CP BALAJADIA: We will suspend in the meantime that we are waiting for the supplemental affidavit you are going to present to us. Do you have any request from the panel of investigators, Director Lumiqued? DIRECTOR LUMIQUED: I was not able to bring a lawyer since the lawyer I requested to assist me and was the one who prepared my counter-affidavit is already engaged for a hearing and according to him he is engaged for the whole month of July. RSP EXEVEA: We cannot wait . . . CP BALAJADIA: Why don't you engage the services of another counsel. The charges against you are quite serious. We are not saying you are guilty already. We are just apprehensive that you will go through this investigation without a counsel. We would like you to be protected legally in the course of this investigation. Why don't you get the services of another counsel. There are plenty here in Baguio . . . DIRECTOR LUMIQUED: I will try to see, Sir . . . CP BALAJADIA: Please select your date now, we are only given one month to finish the investigation, Director Lumiqued. RSP EXEVEA:

90 We will not entertain any postponement. With or without counsel, we will proceed. CP BALAJADIA: Madam Witness, will you please submit the document which we asked for and Director Lumiqued, if you have other witnesses, please bring them but reduce their testimonies in affidavit form so that we can expedite with the proceedings. 37 At the hearing scheduled for July 10, 1992, Lumiqued still did not avail of the services of counsel. Pertinent excerpts from said hearing follow: FISCAL BALAJADIA: I notice also Mr. Chairman that the respondent is not being represented by a counsel. The last time he was asked to invite his lawyer in this investigation. May we know if he has a lawyer to represent him in this investigation? DIR. LUMIQUED: There is none Sir because when I went to my lawyer, he told me that he had set a case also at 9:30 in the other court and he told me if there is a possibility of having this case postponed anytime next week, probably Wednesday so we will have good time (sic) of presenting the affidavit. FISCAL BALAJADIA: Are you moving for a postponement Director? May I throw this to the panel. The charges in this case are quite serious and he should be given a chance to the assistance of a counsel/lawyer. RSP EXEVEA: And is (sic) appearing that the supplemental-affidavit has been furnished him only now and this has several documents attached to it so I think we could grant him one last postponement considering that he has already asked for an extension. DIR. LUMIQUED: Furthermore Sir, I am now being bothered by my heart ailment. 38 The hearing was reset to July 17, 1992, the date when Lumiqued was released from the hospital. Prior to said date, however, Lumiqued did not inform the committee of his confinement. Consequently because the hearing could not push through on said date, and Lumiqued had already submitted his counteraffidavit, the committee decided to wind up the proceedings. This did not mean, however, that Lumiqued was short-changed in his right to due process. Lumiqued, a Regional Director of a major department in the executive branch of the government, graduated from the University of the Philippines (Los Baos) with the degree of Bachelor of Science major in Agriculture, was a recipient of various scholarships and grants, and underwent training seminars both here and abroad. 39 Hence, he could have defended himself if need be, without the help of counsel, if truth were on his side. This, apparently, was the thought he entertained during the hearings he was able to attend. In his statement, "That is my concern," one could detect that it had been uttered testily, if not exasperatedly, because of the doubt or skepticism implicit in the question, "You are confident that you will be able to represent yourself?" despite his having positively asserted earlier,

91 "Yes, I am confident." He was obviously convinced that he could ably represent himself. Beyond repeatedly reminding him that he could avail himself of counsel and as often receiving the reply that he is confident of his ability to defend himself, the investigating committee could not do more. One can lead a horse to water but cannot make him drink. The right to counsel is not indispensable to due process unless required by the Constitution or the law. In Nera v.Auditor General, 40 the Court said: . . . There is nothing in the Constitution that says that a party in a non-criminal proceeding is entitled to be represented by counsel and that, without such representation, he shall not be bound by such proceedings. The assistance of lawyers; while desirable, is not indispensable. The legal profession was not engrafted in the due process clause such that without the participation of its members, the safeguard is deemed ignored or violated. The ordinary citizen is not that helpless that he cannot validly act at all except only with a lawyer at his side. In administrative proceedings, the essence of due process is simply the opportunity to explain one's side. One may be heard, not solely by verbal presentation but also, and perhaps even much more creditably as it is more practicable than oral arguments, through pleadings. 41 An actual hearing is not always an indispensable aspect of due process. 42 As 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.43 Moreover, this constitutional mandate is deemed satisfied if a person is granted an opportunity to seek reconsideration of the action or ruling complained of. 44 Lumiqued's appeal and his subsequent filing of motions for reconsideration cured whatever irregularity attended the proceedings conducted by the committee. 45 The constitutional provision on due process safeguards life, liberty and property. 46 In the early case of Cornejo v.Gabriel and Provincial Board of Rizal 47 the Court held that a public office is not property within the sense of the constitutional guarantee of due process of law for it is a public trust or agency. This jurisprudential pronouncement has been enshrined in the 1987 Constitution under Article XI, Section 1, on accountability of public officers, as follows: Sec. 1. Public office is a public trust. Public officers and employees must at all times be accountable to the people, serve them with utmost responsibility, integrity, loyalty, and efficiency, act with patriotism and justice, and lead modest lives. When the dispute concerns one's constitutional right to security of tenure, however, public office is deemed analogous to property in a limited sense; hence, the right to due process could rightfully be invoked. Nonetheless, the right to security of tenure is not absolute. Of equal weight is the countervailing mandate of the Constitution that all public officers and employees must serve with responsibility, integrity, loyalty and efficiency. 48 In this case, it has been clearly shown that Lumiqued did not live up to this constitutional precept. The committee's findings pinning culpability for the charges of dishonesty and grave misconduct upon Lumiqued were not, as shown above, fraught with procedural mischief. Its conclusions were founded on the evidence presented and evaluated as facts. Well-settled in our jurisdiction is the doctrine that findings of fact of administrative agencies must be respected as long as they are supported by substantial evidence, even if such evidence is not overwhelming or preponderant. 49 The quantum of proof necessary for a finding of guilt in administrative cases is only substantial evidence or such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. 50 Consequently, the adoption by Secretary Drilon and the OP of the committee's recommendation of dismissal may not in any way be deemed tainted with arbitrariness amounting to grave abuse of discretion. Government officials are presumed to perform their functions with regularity. Strong evidence is not necessary to rebut that presumption, 51 which petitioners have not successfully disputed in the instant case.

92 Dishonesty is a grave offense penalized by dismissal under Section 23 of Rule XIV of the Omnibus Rules Implementing Book V of the Administrative Code of 1987. Under Section 9 of the same Rule, the penalty of dismissal carries with it "cancellation of eligibility, forfeiture of leave credits and retirement benefits, and the disqualification for reemployment in the government service." The instant petition, which is aimed primarily at the "payment of retirement benefits and other benefits," plus back wages from the time of Lumiqued's dismissal until his demise, must, therefore, fail. WHEREFORE, the instant petition for certiorari and mandamus is hereby DISMISSED and Administrative Order no. 52 of the Office of the President is AFFIRMED. Costs against petitioners. SO ORDERED. Regalado, Davide, Jr., Bellosillo, Melo, Puno, Vitug Kapunan, Mendoza, Francisco and Panganiban, JJ., concur. Narvasa, C.J., is on leave.

93 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 153675 April 19, 2007

GOVERNMENT OF HONG KONG SPECIAL ADMINISTRATIVE REGION, represented by the Philippine Department of Justice, Petitioner, vs. HON. FELIXBERTO T. OLALIA, JR. and JUAN ANTONIO MUOZ, Respondents. DECISION SANDOVAL-GUTIERREZ, J.: For our resolution is the instant Petition for Certiorari under Rule 65 of the 1997 Rules of Civil Procedure, as amended, seeking to nullify the two Orders of the Regional Trial Court (RTC), Branch 8, Manila (presided by respondent Judge Felixberto T. Olalia, Jr.) issued in Civil Case No. 99-95773. These are: (1) the Order dated December 20, 2001 allowing Juan Antonio Muoz, private respondent, to post bail; and (2) the Order dated April 10, 2002 denying the motion to vacate the said Order of December 20, 2001 filed by the Government of Hong Kong Special Administrative Region, represented by the Philippine Department of Justice (DOJ), petitioner. The petition alleges that both Orders were issued by respondent judge with grave abuse of discretion amounting to lack or excess of jurisdiction as there is no provision in the Constitution granting bail to a potential extraditee. The facts are: On January 30, 1995, the Republic of the Philippines and the then British Crown Colony of Hong Kong signed an "Agreement for the Surrender of Accused and Convicted Persons." It took effect on June 20, 1997. On July 1, 1997, Hong Kong reverted back to the Peoples Republic of China and became the Hong Kong Special Administrative Region. Private respondent Muoz was charged before the Hong Kong Court with three (3) counts of the offense of "accepting an advantage as agent," in violation of Section 9 (1) (a) of the Prevention of Bribery Ordinance, Cap. 201 of Hong Kong. He also faces seven (7) counts of the offense of conspiracy to defraud, penalized by the common law of Hong Kong. On August 23, 1997 and October 25, 1999, warrants of arrest were issued against him. If convicted, he faces a jail term of seven (7) to fourteen (14) years for each charge. On September 13, 1999, the DOJ received from the Hong Kong Department of Justice a request for the provisional arrest of private respondent. The DOJ then forwarded the request to the National Bureau of Investigation (NBI) which, in turn, filed with the RTC of Manila, Branch 19 an application for the provisional arrest of private respondent. On September 23, 1999, the RTC, Branch 19, Manila issued an Order of Arrest against private respondent. That same day, the NBI agents arrested and detained him. On October 14, 1999, private respondent filed with the Court of Appeals a petition for certiorari, prohibition andmandamus with application for preliminary mandatory injunction and/or writ of habeas corpus questioning the validity of the Order of Arrest. On November 9, 1999, the Court of Appeals rendered its Decision declaring the Order of Arrest void.

94 On November 12, 1999, the DOJ filed with this Court a petition for review on certiorari, docketed as G.R. No. 140520, praying that the Decision of the Court of Appeals be reversed. On December 18, 2000, this Court rendered a Decision granting the petition of the DOJ and sustaining the validity of the Order of Arrest against private respondent. The Decision became final and executory on April 10, 2001. Meanwhile, as early as November 22, 1999, petitioner Hong Kong Special Administrative Region filed with the RTC of Manila a petition for the extradition of private respondent, docketed as Civil Case No. 99-95733, raffled off to Branch 10, presided by Judge Ricardo Bernardo, Jr. For his part, private respondent filed, in the same case,- a petition for bail which was opposed by petitioner. After hearing, or on October 8, 2001, Judge Bernardo, Jr. issued an Order denying the petition for bail, holding that there is no Philippine law granting bail in extradition cases and that private respondent is a high "flight risk." On October 22, 2001, Judge Bernardo, Jr. inhibited himself from further hearing Civil Case No. 99-95733. It was then raffled off to Branch 8 presided by respondent judge. On October 30, 2001, private respondent filed a motion for reconsideration of the Order denying his application for bail. This was granted by respondent judge in an Order dated December 20, 2001 allowing private respondent to post bail, thus: In conclusion, this Court will not contribute to accuseds further erosion of civil liberties. The petition for bail is granted subject to the following conditions: 1. Bail is set at Php750,000.00 in cash with the condition that accused hereby undertakes that he will appear and answer the issues raised in these proceedings and will at all times hold himself amenable to orders and processes of this Court, will further appear for judgment. If accused fails in this undertaking, the cash bond will be forfeited in favor of the government; 2. Accused must surrender his valid passport to this Court; 3. The Department of Justice is given immediate notice and discretion of filing its own motion for hold departure order before this Court even in extradition proceeding; and 4. Accused is required to report to the government prosecutors handling this case or if they so desire to the nearest office, at any time and day of the week; and if they further desire, manifest before this Court to require that all the assets of accused, real and personal, be filed with this Court soonest, with the condition that if the accused flees from his undertaking, said assets be forfeited in favor of the government and that the corresponding lien/annotation be noted therein accordingly. SO ORDERED. On December 21, 2001, petitioner filed an urgent motion to vacate the above Order, but it was denied by respondent judge in his Order dated April 10, 2002. Hence, the instant petition. Petitioner alleged that the trial court committed grave abuse of discretion amounting to lack or excess of jurisdiction in admitting private respondent to bail; that there is nothing in the Constitution or statutory law providing that a potential extraditee has a right to bail, the right being limited solely to criminal proceedings. In his comment on the petition, private respondent maintained that the right to bail guaranteed under the Bill of Rights extends to a prospective extraditee; and that extradition is a harsh process resulting in a prolonged deprivation of ones liberty. Section 13, Article III of the Constitution provides that the right to bail shall not be impaired, thus:

95 Sec. 13. All persons, except those charged with offenses punishable by reclusion perpetua when evidence of guilt is strong, shall, before conviction, be bailable by sufficient sureties, or be released on recognizance as may be provided by law. The right to bail shall not be impaired even when the privilege of the writ of habeas corpus is suspended. Excessive bail shall not be required. Jurisprudence on extradition is but in its infancy in this jurisdiction. Nonetheless, this is not the first time that this Court has an occasion to resolve the question of whether a prospective extraditee may be granted bail. In Government of United States of America v. Hon. Guillermo G. Purganan, Presiding Judge, RTC of Manila, Branch 42, and Mark B. Jimenez, a.k.a. Mario Batacan Crespo,1 this Court, speaking through then Associate Justice Artemio V. Panganiban, later Chief Justice, held that the constitutional provision on bail does not apply to extradition proceedings. It is "available only in criminal proceedings," thus: x x x. As suggested by the use of the word "conviction," the constitutional provision on bail quoted above, as well as Section 4, Rule 114 of the Rules of Court, applies only when a person has been arrested and detained for violation of Philippine criminal laws. It does not apply to extradition proceedings because extradition courts do not render judgments of conviction or acquittal. Moreover, the constitutional right to bail "flows from the presumption of innocence in favor of every accused who should not be subjected to the loss of freedom as thereafter he would be entitled to acquittal, unless his guilt be proved beyond reasonable doubt" (De la Camara v. Enage, 41 SCRA 1, 6, September 17, 1971, per Fernando, J., later CJ). It follows that the constitutional provision on bail will not apply to a case like extradition, where the presumption of innocence is not at issue. The provision in the Constitution stating that the "right to bail shall not be impaired even when the privilege of the writ of habeas corpus is suspended" does not detract from the rule that the constitutional right to bail is available only in criminal proceedings. It must be noted that the suspension of the privilege of the writ of habeas corpusfinds application "only to persons judicially charged for rebellion or offenses inherent in or directly connected with invasion" (Sec. 18, Art. VIII, Constitution). Hence, the second sentence in the constitutional provision on bail merely emphasizes the right to bail in criminal proceedings for the aforementioned offenses. It cannot be taken to mean that the right is available even in extradition proceedings that are not criminal in nature. At first glance, the above ruling applies squarely to private respondents case. However, this Court cannot ignore the following trends in international law: (1) the growing importance of the individual person in public international law who, in the 20th century, has gradually attained global recognition; (2) the higher value now being given to human rights in the international sphere; (3) the corresponding duty of countries to observe these universal human rights in fulfilling their treaty obligations; and (4) the duty of this Court to balance the rights of the individual under our fundamental law, on one hand, and the law on extradition, on the other. The modern trend in public international law is the primacy placed on the worth of the individual person and the sanctity of human rights. Slowly, the recognition that the individual person may properly be a subject of international law is now taking root. The vulnerable doctrine that the subjects of international law are limited only to states was dramatically eroded towards the second half of the past century. For one, the Nuremberg and Tokyo trials after World War II resulted in the unprecedented spectacle of individual defendants for acts characterized as violations of the laws of war, crimes against peace, and crimes against humanity. Recently, under the Nuremberg principle, Serbian leaders have been persecuted for war crimes and crimes against humanity committed in the former Yugoslavia. These significant events show that the individual person is now a valid subject of international law. On a more positive note, also after World War II, both international organizations and states gave recognition and importance to human rights. Thus, on December 10, 1948, the United Nations General Assembly adopted the Universal Declaration of Human Rights in which the right to life, liberty and all the other fundamental rights of every person were proclaimed. While not a treaty, the principles contained in the said Declaration are now recognized as customarily binding upon the members of the international community. Thus, in Mejoff v. Director of Prisons,2 this Court, in granting bail to a

96 prospective deportee, held that under the Constitution,3 the principles set forth in that Declaration are part of the law of the land. In 1966, the UN General Assembly also adopted the International Covenant on Civil and Political Rights which the Philippines signed and ratified. Fundamental among the rights enshrined therein are the rights of every person to life, liberty, and due process. The Philippines, along with the other members of the family of nations, committed to uphold the fundamental human rights as well as value the worth and dignity of every person. This commitment is enshrined in Section II, Article II of our Constitution which provides: "The State values the dignity of every human person and guarantees full respect for human rights." The Philippines, therefore, has the responsibility of protecting and promoting the right of every person to liberty and due process, ensuring that those detained or arrested can participate in the proceedings before a court, to enable it to decide without delay on the legality of the detention and order their release if justified. In other words, the Philippine authorities are under obligation to make available to every person under detention such remedies which safeguard their fundamental right to liberty. These remedies include the right to be admitted to bail. While this Court in Purganan limited the exercise of the right to bail to criminal proceedings, however, in light of the various international treaties giving recognition and protection to human rights, particularly the right to life and liberty, a reexamination of this Courts ruling in Purganan is in order. First, we note that the exercise of the States power to deprive an individual of his liberty is not necessarily limited to criminal proceedings. Respondents in administrative proceedings, such as deportation and quarantine,4 have likewise been detained. Second, to limit bail to criminal proceedings would be to close our eyes to our jurisprudential history. Philippine jurisprudence has not limited the exercise of the right to bail to criminal proceedings only. This Court has admitted to bail persons who are not involved in criminal proceedings. In fact, bail has been allowed in this jurisdiction to persons in detention during the pendency of administrative proceedings, taking into cognizance the obligation of the Philippines under international conventions to uphold human rights. The 1909 case of US v. Go-Sioco5 is illustrative. In this case, a Chinese facing deportation for failure to secure the necessary certificate of registration was granted bail pending his appeal. After noting that the prospective deportee had committed no crime, the Court opined that "To refuse him bail is to treat him as a person who has committed the most serious crime known to law;" and that while deportation is not a criminal proceeding, some of the machinery used "is the machinery of criminal law." Thus, the provisions relating to bail was applied to deportation proceedings. In Mejoff v. Director of Prisons6 and Chirskoff v. Commission of Immigration,7 this Court ruled that foreign nationals against whom no formal criminal charges have been filed may be released on bail pending the finality of an order of deportation. As previously stated, the Court in Mejoff relied upon the Universal declaration of Human Rights in sustaining the detainees right to bail. If bail can be granted in deportation cases, we see no justification why it should not also be allowed in extradition cases. Likewise, considering that the Universal Declaration of Human Rights applies to deportation cases, there is no reason why it cannot be invoked in extradition cases. After all, both are administrative proceedings where the innocence or guilt of the person detained is not in issue. Clearly, the right of a prospective extraditee to apply for bail in this jurisdiction must be viewed in the light of the various treaty obligations of the Philippines concerning respect for the promotion and protection of human rights. Under these treaties, the presumption lies in favor of human liberty. Thus, the Philippines should see to it that the right to liberty of every individual is not impaired. Section 2(a) of Presidential Decree (P.D.) No. 1069 (The Philippine Extradition Law) defines "extradition" as "the removal of an accused from the Philippines with the object of placing him at the disposal of foreign authorities to enable the requesting state or government to hold him in connection with any criminal investigation directed against him or the execution of a penalty imposed on him under the penal or criminal law of the requesting state or government."

97 Extradition has thus been characterized as the right of a foreign power, created by treaty, to demand the surrender of one accused or convicted of a crime within its territorial jurisdiction, and the correlative duty of the other state to surrender him to the demanding state.8 It is not a criminal proceeding.9 Even if the potential extraditee is a criminal, an extradition proceeding is not by its nature criminal, for it is not punishment for a crime, even though such punishment may follow extradition.10 It is sui generis, tracing its existence wholly to treaty obligations between different nations.11 It is not a trial to determine the guilt or innocence of the potential extraditee.12 Nor is it a full-blown civil action, but one that is merely administrative in character.13 Its object is to prevent the escape of a person accused or convicted of a crime and to secure his return to the state from which he fled, for the purpose of trial or punishment.14 But while extradition is not a criminal proceeding, it is characterized by the following: (a) it entails a deprivation of liberty on the part of the potential extraditee and (b) the means employed to attain the purpose of extradition is also "the machinery of criminal law." This is shown by Section 6 of P.D. No. 1069 (The Philippine Extradition Law) which mandates the "immediate arrest and temporary detention of the accused" if such "will best serve the interest of justice." We further note that Section 20 allows the requesting state "in case of urgency" to ask for the "provisional arrest of the accused, pending receipt of the request for extradition;" and that release from provisional arrest "shall not prejudice rearrest and extradition of the accused if a request for extradition is received subsequently." Obviously, an extradition proceeding, while ostensibly administrative, bears all earmarks of a criminal process. A potential extraditee may be subjected to arrest, to a prolonged restraint of liberty, and forced to transfer to the demanding state following the proceedings. "Temporary detention" may be a necessary step in the process of extradition, but the length of time of the detention should be reasonable. Records show that private respondent was arrested on September 23, 1999, and remained incarcerated until December 20, 2001, when the trial court ordered his admission to bail. In other words, he had been detained for over two (2) years without having been convicted of any crime. By any standard, such an extended period of detention is a serious deprivation of his fundamental right to liberty. In fact, it was this prolonged deprivation of liberty which prompted the extradition court to grant him bail. While our extradition law does not provide for the grant of bail to an extraditee, however, there is no provision prohibiting him or her from filing a motion for bail, a right to due process under the Constitution. The applicable standard of due process, however, should not be the same as that in criminal proceedings. In the latter, the standard of due process is premised on the presumption of innocence of the accused. As Purganancorrectly points out, it is from this major premise that the ancillary presumption in favor of admitting to bail arises. Bearing in mind the purpose of extradition proceedings, the premise behind the issuance of the arrest warrant and the "temporary detention" is the possibility of flight of the potential extraditee. This is based on the assumption that such extraditee is a fugitive from justice.15 Given the foregoing, the prospective extraditee thus bears the onus probandi of showing that he or she is not a flight risk and should be granted bail. The time-honored principle of pacta sunt servanda demands that the Philippines honor its obligations under the Extradition Treaty it entered into with the Hong Kong Special Administrative Region. Failure to comply with these obligations is a setback in our foreign relations and defeats the purpose of extradition. However, it does not necessarily mean that in keeping with its treaty obligations, the Philippines should diminish a potential extraditees rights to life, liberty, and due process. More so, where these rights are guaranteed, not only by our Constitution, but also by international conventions, to which the Philippines is a party. We should not, therefore, deprive an extraditee of his right to apply for bail, provided that a certain standard for the grant is satisfactorily met. An extradition proceeding being sui generis, the standard of proof required in granting or denying bail can neither be the proof beyond reasonable doubt in criminal cases nor the standard of proof of preponderance of evidence in civil cases. While administrative in character, the standard of substantial evidence used in administrative cases cannot likewise apply given the object of extradition law which is to prevent the prospective extraditee from fleeing our jurisdiction. In his Separate Opinion in Purganan,

98 then Associate Justice, now Chief Justice Reynato S. Puno, proposed that a new standard which he termed "clear and convincing evidence" should be used in granting bail in extradition cases. According to him, this standard should be lower than proof beyond reasonable doubt but higher than preponderance of evidence. The potential extraditee must prove by "clear and convincing evidence" that he is not a flight risk and will abide with all the orders and processes of the extradition court. In this case, there is no showing that private respondent presented evidence to show that he is not a flight risk. Consequently, this case should be remanded to the trial court to determine whether private respondent may be granted bail on the basis of "clear and convincing evidence." WHEREFORE, we DISMISS the petition. This case is REMANDED to the trial court to determine whether private respondent is entitled to bail on the basis of "clear and convincing evidence." If not, the trial court should order the cancellation of his bail bond and his immediate detention; and thereafter, conduct the extradition proceedings with dispatch. SO ORDERED.

99 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-68288 July 11, 1986 DIOSDADO GUZMAN, ULYSSES URBIZTONDO, and ARIEL RAMACULA, petitioners, vs. NATIONAL UNIVERSITY and DOMINGO L. JHOCSON in his capacity as President of National University,respondents. Efren H. Mercado and Haydee Yorac for petitioners. Samson S. Alcantara for respondents.

NARVASA, J.: Petitioners Diosdado Guzman, Ulysses Urbiztondo and Ariel Ramacula, students of respondent National University, have come to this Court to seek relief from what they describe as their school's "continued and persistent refusal to allow them to enrol." In their petition "for extraordinary legal and equitable remedies with prayer for preliminary mandatory injunction" dated August 7, 1984, they allege: 1) that respondent University's avowed reason for its refusal to re-enroll them in their respective courses is "the latter's participation in peaceful mass actions within the premises of the University. 2) that this "attitude of the (University) is simply a continuation of its cavalier if not hostile attitude to the student's exercise of their basic constitutional and human rights already recorded in Rockie C. San Juan vs. National University, S.C. G.R. No. 65443 (1983) and its utter contempt for the principle of due process of law to the prejudice of petitioners;" and 3) that "in effect petitioners are subjected to the extreme penalty of expulsion without cause or if there be any, without being informed of such cause and without being afforded the opportunity to defend themselves. Berina v. Philippine Maritime Institute (117 SCRA 581 [1983]). In the comment filed on September 24, 1986 for respondent University and its President pursuant to this Court's requirement therefor 1 , respondents make the claim: 1) that "petitioners' failure to enroll for the first semester of the school year 1984-1985 is due to their own fault and not because of their allegedexercise of their constitutional and human rights;" 2) that petitioner Urbiztondo, sought to re-enroll only on July 5, 1986 "when the enrollment period was already closed;" 3) that as regards petitioner Guzman, his "academic showing" was "poor", "due to his activities in leading boycotts of classes"; that when his father was notified of this development sometime in August, 1982, the latter had demanded that his son "reform or else we will recall him to the province"; that Guzman was one of the petitioners in G.R. No. 65443 entitled "Rockie San Juan, et al. vs. National University, et al.," at the hearing of which on November 23, 1983 this Court had admonished "the students involved (to) take advantage and make the most of the opportunity given to them to study;" that Guzman "however continued to lead or actively participate in activities within the university premises, conducted without prior permit from school authorities, that disturbed or disrupted classes

100 therein;" that moreover, Guzman "is facing criminal charges for malicious mischief before the Metropolitan Trial Court of Manila (Crim. Case No. 066446) in connection with the destruction of properties of respondent University on September 12, 1983 ", and "is also one of the defendants in Civil Case No. 8320483 of the Regional Trial Court of Manila entitled 'National University, Inc. vs. Rockie San Juan et al.' for damages arising from destruction of university properties 4) that as regards petitioner Ramacula, like Guzman "he continued to lead or actively participate, contrary to the spirit of the Resolution dated November 23, 1983 of this ... Court (in G.R. No. 65443 in which he was also one of the petitioners) and to university rules and regulations, within university premises but without permit from university officials in activities that disturbed or disrupted classes;" and 5) that petitioners have "failures in their records, (and) are not of good scholastic standing. " Respondents close their comment with the following assertions, to wit: 1) By their actuations, petitioners must be deemed to have forfeited their privilege, if any, to seek enrollment in respondent university. The rights of respondent university, as an institution of higher learning, must also be respected. It is also beyond comprehension why petitioners, who continually despise and villify respondent university and its officials and faculty members, should persist in seeking enrollment in an institution that they hate. 2) Under the circumstances, and without regard to legal technicalities, it is not to the best interest of all concerned that petitioners be allowed to enroll in respondent university. 3) In any event, petitioners' enrollment being on the semestral basis, respondents cannot be compelled to enroll them after the end of the semester. On October 2, 1984 this Court issued a resolution reading as follows: ... Acting on the Comment submitted by respondent, the Court Resolved to NOTE the same and to require a REPLY to such Comment. The Court further Resolved to ISSUE a MANDATORY INJUNCTION, enjoining respondent to allow the enrolment of petitioners for the coming semester without prejudice to any disciplinary proceeding to which any or all of them may be subjected with their right to lawful defense recognized and respected. As regards petitioner Diosdado Guzman, even if it be a fact that there is a pending criminal charge against him for malicious mischief, the Court nonetheless is of the opinion that, as above-noted, without prejudice to the continuation of any disciplinary proceeding against him, that he be allowed to resume his studies in the meanwhile. As shown in Annex 2 of the petition itself, Mr. Juan P. Guzman, father of said petitioner, is extending full cooperation with petitioners to assure that whatever protest or grievance petitioner Guzman may have would be ventilated in a lawful and peaceful manner. Petitioners' REPLY inter alia 1) denied that Urbiztondo attempted to enroll only on July 5, 1984 (when enrollment was already closed), it being alleged that "while he did try to enroll that day, he also attempted to do so several times before that date, all to no avail, because respondents ... persistently refused to allow him to do so" respondents' ostensible reason being that Urbiztondo (had) participated in mass actions ... within the school premises," although there were no existing disciplinary charge against petitioner Urbiztondo" at the time; 2) asserted that "neither the text nor the context of the resolution 2 justifies the conclusion that "petitioners' right to exercise their constitutional freedoms" had thereby been restricted or limited; and

101 3) alleged that "the holding of activities (mass action) in the school premises without the permission of the school ... can be explained by the fact that the respondents persistently refused to issue such permit repeatedly sought by the students. " On November 23, 1984, this Court promulgated another resolution, this time reading as follows: ... The Court, after considering the pleadings filed and deliberating on the issues raised in the petition for extraordinary legal and equitable remedies with prayer for preliminary mandatory injunction as well as the respondents' comment on the petition and the reply of counsel for petitioners to the respondents' comment, Resolved to (a) give DUE COURSE to the petition; (b) consider the respondents' comment as ANSWER to the petition; and (c) require the parties to file their respective MEMORANDA within twenty (20) days from notice. ... . Immediately apparent from a reading of respondents' comment and memorandum is the fact that they had never conducted proceedings of any sort to determine whether or not petitioners-students had indeed led or participated "in activities within the university premises, conducted without prior permit from school authorities, that disturbed or disrupted classes therein" 3 or perpetrated acts of "vandalism, coercion and intimidation, slander, noise barrage and other acts showing disdain for and defiance of University authority." 4 Parenthetically, the pendency of a civil case for damages and a criminal case for malicious mischief against petitioner Guzman, cannot, without more, furnish sufficient warrant for his expulsion or debarment from re-enrollment. Also apparent is the omission of respondents to cite this Court to any duly published rule of theirs by which students may be expelled or refused re-enrollment for poor scholastic standing. Under the Education Act of 1982, 5 the petitioners, as students, have the right among others "to freely choose their field of study subject to existing curricula and to continue their course therein up to graduation, except in case of academic deficiency, or violation of disciplinary regulations." 6Petitioners were being denied this right, or being disciplined, without due process, in violation of the admonition in the Manual of Regulations for Private Schools 7 that "(n)o penalty shall be imposed upon any student except for cause as defined in ... (the) Manual and/or in the school rules and regulations as duly promulgated and only after due investigation shall have been conducted." 8 This Court is therefore constrained, as in Berina v. Philippine Maritime Institute, 9 to declare illegal this act of respondents of imposing sanctions on students without due investigation. Educational institutions of course have the power to "adopt and enforce such rules as may be deemed expedient for ... (its) government, ... (this being)" incident to the very object of incorporation, and indispensable to the successful management of the college." 10 The rules may include those governing student discipline. Indeed, the maintenance of "good school discipline" is a duty specifically enjoined on "every private school" by the Manual of Regulations for Private Schools; 11 and in this connection, the Manual further provides that... The school rules governing discipline and the corresponding sanctions therefor must be clearly specified and defined in writing and made known to the students and/or their parents or guardians. Schools shall have the authority and prerogative to promulgate such rules and regulations as they may deem necessary from time to time effective as of the date of their promulgation unless otherwise specified.12 But, to repeat, the imposition of disciplinary sanctions requires observance of procedural due process. And it bears stressing that due process in disciplinary cases involving students does not entail proceedings and hearings similar to those prescribed for actions and proceedings in courts of justice. The proceedings in student discipline cases may be summary; and cross-examination is not, 'contrary to petitioners' view, an essential part thereof. There are withal minimum standards which must be met to satisfy the demands of procedural due process; and these are, that (1) the students must be informed in writing of the nature and cause of any accusation against them; (2) they shag have the right to answer the charges against them, with the assistance of counsel, if desired; (3) they shall be informed of the evidence against them; (4) they shall have the right to adduce evidence in their own behalf; and (5) the

102 evidence must be duly considered by the investigating committee or official designated by the school authorities to hear and decide the case. WHEREFORE, the petition is granted and the respondents are directed to allow the petitioners to reenroll or otherwise continue with their respective courses, without prejudice to any disciplinary proceedings to which any or all of them may be subjected in accordance with the standards herein set forth. SO ORDERED. Teehankee, CJ., Abad Santos, Feria, Yap, Fernan, Melencio-Herrera, Alampay, Gutierrez, Jr., Cruz and Paras, JJ., concur.

103 Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 76353 May 2, 1988 SOPHIA ALCUAZ, MA. CECILIA ALINDAYU BERNADETTE ANG, IRNA ANONAS, MA, REMEDIOS BALTAZAR, CORAZON BUNDOC JOHN CARMONA, ANNA SHIELA DIOSO, RAFAEL ENCARNACION, ET AL., petitioners, vs. PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION, Quezon City Branch (PSBA), DR. JUAN D. LIM, in his capacity as President and Chairman of Board of Trustees of PSBA, ATTY. P. PAULINO, etc., et al.,respondents. Rosalinda L. Santos for petitioners. Balgos & Perez Law Office for respondents. Merly Basco-Olano for Intervenor Union. Camilo Flores for Intervenor

PARAS, J.: This is a petition for review on certiorari and prohibition with motion for preliminary mandatory injunction seeking to nullify the action taken by herein respondent Philippine School of Business Administration, Quezon City Branch, in violation of petitioners' constitutional rights. The factual background of this case is as follows: Petitioners are all bonafide students of the Philippine School of Business Administration, Quezon City, while respondents, are the Philippine School of Business Administration (hereinafter referred to as PSBA) Quezon City Branch, a 'non-stock institution of higher learning organized and existing under the laws of the Philippines, Juan D. Lim, President and Chairman of the Board of PSBA; Benjamin P. Paulino, Vice President for Admission and Registration of PSBA, Q.C.; Ruben Estrella, Officer-in-Charge; and Ramon Agapay, Director of the Office of Student Affairs of PSBA, Q.C. and Romeo Rafer, Chief Security of PSBA, Q.C. As early as March 22, 1986, the students of the respondent school and the respondent PSBA, Q.C. had already agreed on certain matters which would govern their activities within the school (Rollo, p. 75). Among the agreements reached at that time were: On The exercise of student's democratic rights, it has been agreed that protest actions can be conducted any day as long as they meet the following requirements: a) that they be held at the PSBA quadrangle from 12:30 p.m. to 1:00 p.m. only; b) that the protest action be removed to the PSBA parking lot if it will exceed the 1:00 time limit; c) that if the protest move exceeds 1:00 it will be limited only up to 2:30 p.m. d) However, before any action is taken the organizers of the protest action should secure a permit 6 days before, or if on the same day, it still be under the "first-come-

104 first-serve served" basis in the use of facilities, volume of sound system shall be adjusted so as not to disturb classes. It is the firm stand of the administration of PSBA that it will not allow the students to directly participate in the policy-making body of the school, as this is provided by law. However, the administration will be open to suggestions and questions, especially those regarding tuition fee increases and other policies that directly affect us. In spite of the above-stated agreement, petitioners felt the need to hold dialogues. Among others they demanded the negotiation of a new agreement, which demand was turned down by the school, resulting in mass assemblies and barricades of school entrances (Rollo. p. 20; 347-348). "Subsequently dialogues proved futile." Finally, petitioners received uniform letters from respondents dated October 8, 1986 (Rollo, p. 23) giving them 3 days to explain why the school should not take / mete out any administrative sanction on their direct participation and/or conspiring with others in the commission of tumultuous and anarchic acts on Thursday (Oct. 2), Friday (Oct. 3) and Tuesday (Oct. 7).<re||an1w> The aforestated letter was answered by the counsel for the students in a reply letter dated October 22, 1982 Annex "E" (Rollo, P. 26). During the regular enrollment period, petitioners and other students similarly situated were allegedly blacklisted and denied admission for the second semester of school year 1986-1987. On October 28,1986 the President of the Student Council filed a complaint with the Director of the MECS against the PSBA for barring the enrollment of the Student Council Officers and student leaders. (Annex "F" Rollo, p. 30). Simultaneously on the same date, the student council wrote the President, Board of Trustees, requesting for a written statement of the school's decision regarding their enrollment (Rollo, p. 31). Another demand letter was made by Counsel for the students Atty. Alan Romulo Yap, also to the President, Board of Trustees, to enroll his clients within forty-eight (48) hours (Rollo. p. 33). All these notwithstanding, no relief appeared to be forthcoming, hence this petition. In the resolution of November 7,1986, the Second Division of this Court without giving due course to the petition required respondents to comment thereon and set the hearing for preliminary mandatory injunction on November 10, 1986 (Rollo, p. 35). In compliance therewith on November 9, 1986, respondents filed their comment and opposition to the application for the issuance of a writ of preliminary mandatory injunction praying that the petition for the issuance of a writ be denied not only for lack of merit but also for being barred by res judicata (Rollo, p. 67). Meanwhile, a motion for intervention was filed on November 10, 1986, by the Philippine School of Business Administration, Quezon City Faculty Union, (PSBA, QC-FU for brevity) representing the faculty members hereinafter referred to as intervenors, on the ground of commonality of issues and cause of action with that of the petitioners (Rollo, p. 36). At the hearing on the petition for preliminary mandatory injunction, where counsel for all the parties appeared and argued their causes, the Court Resolved to grant the motion for intervention and to require the intervenors to comment on the petition and the petitioners to file a reply thereto (Rollo, p. 66, copy corrected, p. 167). On the same day respondents filed their comment and opposition to the application for the issuance of a writ of preliminary mandatory injunction (Rollo, pp. 67-74). On November 12, 1986, this Court resolved to issue a temporary mandatory order directing the respondents herein (a) to re-enroll the petitioners herein and (b) to re-admit the intervenors to their former positions without prejudice to the investigation to be conducted by the school authorities (Rollo, p. 141). Said Order was issued on November 14, 1986 (Rollo, pp. 142-143). A supplemental comment and opposition to application for a writ of preliminary mandatory injunction dated November 11, 1986 was filed by herein respondents (Rollo, p. 150), while an urgent motion to reiterate prayer for issuance of preliminary mandatory injunction dated November 13, 1986 was filed by herein petitioners (Rollo, pp. 162-163).

105 Instead of complying with tile resolution of November 12, 1986 an urgent motion for reconsideration was filed by herein respondents on November 15, 1987 (Rollo, p. 194) praying that this Court reconsider the aforesaid resolution. On November 18, 1986 petitioners and intervenors filed a joint urgent motin to cite respondents in contempt (Rollo, p. 199), while respondents filed a supplemental motion for reconsideration, also on the same date (Rollo, p. 205). In the resolution of November 19,1986, respondents' motion for reconsideration and sumplemental motion for reconsideration were denied for lack of merit, and the denial was dedlared FINAL. The urgent motion of counsel for petitioners and intervanorts to cite respondents in contempt of court was NOTED (Rollo, p. 225). An urgent motion for intervention and answer in intervention was filed by Nelia M. Lat, Annalisa T. Geronimo, Leonora Q. Bueniraje, Maria L. Araas, Eduerijes Llanto, Charita, R. Chong, Marilou Garcia, Amelita R. Sia, Loida O. Ladines, Dominic P. Santos, Noly R. Chong, and Arthur R. Cacdac for themselves and on behalf of other students of the PSBA, Quezon City, who are similarly situated, to allolw them to intervene as respondents dated November 11, 1986 (Rollo, p. 227) which was granted by this Court in a resoulution dated December 3, 1986 (Rollo, p. 240) On November 20, 1986, the respondents filed their compliance with the temporary mandatory order; Issued by this Court pursuant to its resolution dated November 12, 1987 (Rollo, p. 237). On November 29, 1986, respondents filed their comment on the motion for intervention of the PSBA Quezon City Faculty Union (Rollo, p. 252). A consolidated reply to respondents' supplemental comment and opposition to application for a writ of preliminary mandatory injunction, urgent motion for reconsideration and supplemental motion for reconsideration was filed by herein in intervenors on December 2,1986 (Rollo. p. 242). In the resolution of January 21, 1987, the petition was given due course and parties parties were required to file their respective memoranda (Rollo, p. 266). Accordingly, respondents filed their memorandum on February 23, 1987, (Rollo, p. 269) while the intervenor Union filed its memorandum on March 13, 1987 (Rollo, p. 296). Respondents filed their reply memorandum on April 13, 1987 praying that the intervention of the intervening teachers be dismissed (Rollo, p. 328). Respondents filed their manifestation and motion dated April 27, 1987 stating that pursuant to this court's order dated November 12, 1986, the school authorities created a special investigating committee to conduct an investigation, which submitted a report with recommendations (Rollo, p. 335), the report reading as follows: After due deliberation, the Committee hereby submits the following recommendation: STUDENT-RESPONDENTS A. RENATO PALMA, BERNADETTE ANG, ROGELIO TAGANAS are hereby recommended to be EXONERATED of all charges. B. SOPHIA ALCUAZ (up to No. 19) are hereby recommended to be HONORABLY DISMISSED from PSBA Q.C. roll of students without prejudice to reenrollment on a case to case basis if found suitable and justified. FACULTY-RESPONDENTS A. To be EXONERATED of all charges JOSE C. ANTONIO, DONALLY BRINGAS, DANTE CAJUCOM, LEO LOQUELLANO SOLITA A. CRUZ, and N TOLENTINO.

106 B. To be reprimanded with a WARNING that a repetition of similar acts in the future will be dealt with more severely FLORANTE BAGSIC and ATENOGENES BONDOC. C. MR. SEVERINO CORTES, JR. is hereby recommended for non-renewal of his semester to semester appointment. D. MESSRS. ASSER (BONG) TAMAYO and RENE Q. ENCARNACION are hereby recommended for termination of their services as faculty members. Respondents adopted the aforestated recommendations of the Committee and prayed that the case be dismissed for having become moot (Rollo, p. 341). On April 30, a second urgent manifestation and motion was filed by respondent praying that the recommendation of special Committee as implemented by its President be made effective by the discontinuance of the summer enrollment of petitioners Anna Shiela A. Dinoso, Zeny Gudito and Ma. Shalina Pitoy upon the refund to them of all the fees they have paid to the school (Rollo, p. 397). An urgent motion to cite for contempt herein respondents was filed on May 5, 1987 for violating this court's temporary mandatory order on November 12, 1986, by discharging and striking off from the roll of students petitioners Dinoso, Gudito and Pitoy (Rollo, p. 400) while an opposition to urgent motion to cite for contempt was filed by herein respoddents on May 20, 1987 (Rollo, p. 413). On May 20, 1987, Intervenor Union filed their Intervenor's Comment on Respondents' reply memorandum and manifestation and motion with motion to cite respondent in contempt (Rollo, p. 417). On June 8, 1987, petitioners filed their very urgent motion for an order to re-enroll (Rollo, p. 620) followed by an urgent supplemental motion and Reply to opposition dated June 9, 1987 (Rollo, p. 623). Later on, an Opposition to "very urgent motion for order to re-enroll was filed by herein respondents on June 11, 1987 (Rollo, p. 625) while on June 15,1987, herein intervenor Union filed its manifestation and motion with urgent motion reiterating intervenor's motion to cite respondents in contempt (Rollo, p. 629). On June 16,1987 respondents filed their opposition to urgent motion to oppose petitioners' urgent motion dated June 9, 1987 (Rollo, p. 795)'. Petitioners filed their memorandum on June 17, 1987 (Rollo, p. 799). On June 18, 1987, respondents filed their counter-comment and opposition to motion to cite respondents in contempt (Rollo, p. 815). Subsequently, on June 25,1987, respondents filed their Reply Memorandum on the petitioners' memorandum (Rollo, p. 820.). In the resolution of June 29, 1 987 the motion of petitioners to compel respondents to readmit or reenroll herein petitioners was denied except in the case of three (3) student petitioners cleared by the investigating committee and who had been recommended to be readmitted or re-enrolled. This court further stated that the reason for the non-enrollment of the others is that the results of the investigation conducted indicate prima facie the violation by the majority of the petitioners of the rules and regulations of respondent school (Rollo, p. 793). The Court further resolved to require respondent school to show cause why it should not be adjudged in contempt for refusing to reinstate the intervenors-faculty members in the interim. Respondents filed the manifestation on July 3, 1987 informing this Court that they did not refuse to reinstate the intervenors/faculty members; that they were in fact actually reinstated in compliance with the Court's temporary mandatory order (Rollo, p. 829). Hence, the motion for contempt should be dismissed. The pivotal issue of this case is whether or not there has been deprivation of due process for petitioners-students who have been barred from re-enrollment and for intervenors teachers whose services have been terminated as faculty members, on account of their participation in the

107 demonstration or protest charged by respondents as "anarchic" rallies, and a violation of their constitutional rights of expression and assembly. Petitioners allege that they have been deprived of procedural due process which requires that there be due notice and hear hearing and of substantive due process which requires that the person or body to conduct the investigation be competent to act and decide free from bias or prejudice. They claim that barring them from enrollment for the second semester is equivalent to expulsion which cannot be valid and effective without the required MEC's approval (Rollo, pp. 12-13). Furthermore, petitioners point out that the acts of respondents constitute a wanton and deliberate disregard of petitioners' freedom of expression (ibid). In the same manner, intervenors-teachers claim that their constitutional right to due process has been violated when they were summarily dismissed without affording them the opportunity to be heard (Rollo, p. 301). It is beyond dispute that a student once admitted by the school is considered enrolled for one semester. It is provided in Paragraph 137 Manual of Regulations for Private Schools, that when a college student registers in a school, it is understood that he is enrolling for the entire semester. Likewise, it is provided in the Manual, that the "written contracts" required for college teachers are for 'one semester." It is thus evident that after the close of the first semester, the PSBA-QC no longer has any existing contract either with the students or with the intervening teachers. Such being the case, the charge of denial of due process is untenable. It is a time-honored principle that contracts are respected as the law between the contracting parties (Henson vs. Intermediate Appellate Court, et al., G.R. No. 72456, February 19, 1987, citing: Castro vs. Court of Appeals, 99 SCRA 722; Escano vs. Court of Appeals, 1 00 SCRA 197).<re||an1w> The contract having been terminated, there is no more contract to speak of. The school cannot be compelled to enter into another contract with said students and teachers. "The courts, be they the original trial court or the appellate court, have no power to make contracts for the parties." (Henson vs. Intermediate Appellate Court, et al., supra). Under similar circumstances where students have been refused re-enrollment but without allegation of termination of contracts as in the instant case, this Court has stressed, that due process in disciplinary cases involving students does not entail proceedings and hearings similar to those prescribed for actions and proceedings in courts of justice. Such proceedings may be summary and cross-examination is not even an essential part thereof. Accordingly, the minimum standards laid down by the Court to meet the demands of procedural due process are: (1) the students must be informed in writing of the nature and cause of any accusation against them; (2) they shall have the right to answer the charges against them, with the assistance of counsel, if desired: (3) they shall be informed of the evidence against them; (4) they shall have the right to adduce evidence in their own behalf and (5) the evidence must be duly considered by the investigating committee or official designated by the school authorities to hear and decide the case (Guzman vs. National University, 142 SCRA 706-707 [1986]). Tested under said standards, the records show that the proceedings in the case at bar, at the outset satisfied conditions No. 1 and 2, but, without a hearing, conditions No. 3, 4 and 5 had evidently not been completed with. It is not disputed that printed Rules and Regulations of the PSBA-Q.C. are distributed at the beginning of each school year to the students including petitioners. The Rules, among other things, provide: Enrollment in the PSBA is contractual in nature and upon admission to the School, the Student is deemed to have agreed to bind himself to all rules/regulations promulgated by t he Ministry of Education, Culture and Sports. Furthermore, he agrees that he may be required to withdraw from the School at any time for reasons deemed sufficiently serious by the School Administration. As previously stated, in violation of aforesaid Rules and Regulations, sore students staged noisy demonstrations in the premises of the school. For the settlement thereof, an agreement was reached providing among otliers the regulations for the conduct of protest actions. Despite said agreement, it

108 was alleged that petitioners, acting as the core group of a noisy minoritv, committed tumultuous and anarchic acts within the premises of the school, fanned by the cooperation of the intervening teachers, causing disruption of classes to the prejudice of the majority of the students including the intervening ones; which acts now constitute the subject of this controversy (Rollo, p. 217 ). Accordingly, both students and teachers were given three (3) days from receipts of letter to explain in writing why the school should not take / mete out any administrative sanction on them in view of their participation in the commission of tumultuous and anarchic acts on the dates stated. Respondents alleged that none of the students ever filed a reply thereto. The records show however that a letter was sent by Atty. Alan Rollo Yap, in behalf of all PSBA students to the President of the School Mr. Juan D. Lim, explaining why said students are not guilty of the charges filed against them (Rollo, pp- 26-28). Similarly, a faculty member of the PSBA filed as answer in a letter to the same President of the school, where he denied the charges against him (Rollo, p. 52). It therefore becomes readily apparent that while the students and the teachers have been informed in writing of the charges filed against them and they in turn filed their answers thereto, no investigating committee or official was designated by the school authorities to hear and decide the case upon the presentation of evidence of both parties. Presumably, the schools banking on the theory that the contracts have already expired, said procedural steps are no longer necessary. At any rate, this Court obviously to insure that full justice is done both to the students and teachers on the one hand and the school on the other, ordered an investigation to be conducted by the school authorities, in the resolution of November 12, 1986. The investigating committee found among others that: there were concerted mass assemblies conducted on October 2, 3, 7 and 8 at PSBA Quezon City, which were participated in by said students and teachers, and which disrupted classes. The disruption of classes and the barricades in the school entrances constitute violations of existing MECS and PSBA rules and regulations (Rollo, pp. 348-349). It is ironic that many of those who claim that their human rights have been violated are the very ones who emasculate the human rights of the innocent majority. Moreover, petitioners named in the report were found to be academically deficient (Rollo, p. 273) while the intervening teachers apart from participating in acts of illegality against the school were found to have committed various acts of misconduct (Rollo. p. 275). Accordingly, three students were recommended for exoneration from all charges, and some to be honorably dismissed. Of the faculty members eight were recommended to be exonerated of all charges, two to be reprimanded, one for non-renewal of his semester to semester appointment and two to be terminated (Rollo, pp. 359-360). The right of the school to refuse re-enrollment of students for academic delinquency and violation of disciplinary regulations has always been recognized by this Court (Tangonan vs. Paflo, 137 SCRA 246 [1985]; Ateneo de Manila University vs. CA, 145 SCRA 100 [1986]). Thus, the Court has ruled that the school's refusal is sanctioned by law. Sec. 107 of the Manual of Regulations for Private Schools considers academic delinquency and violation of disciplinary regulations vs as valid grounds for refusing reenrollment of students. The opposite view would do violence to the academic freedom enjoyed by the school and enshrined under the Constitution. More specifically, academic freedom is defined by the Court as follows: This institutional academic freedom includes not only the freedom of professionally qualified persons to inquire, discover, publish and teach the truth as they see it in the field of their competence subject to no control or authority except of rational methods by which truths and conclusions are sought and established in their disciplines, but also the right of the school or college to decide for itself, its ms and objectives, and how best to attain them the grant being to institutions of higher learning-free from outside coercion or interference save possibly when the overriding public welfare calls for some restraint. (Tangonan vs. Pao, supra). It is well settled that by reason of their special knowledge and expertise gained from the handling of specific matters falling under their respective jurisdictions, the Court ordinarily accords respect if not

109 finality to factual findings of administrative tribunals, unless the factual findings are not supported by evidence; where the findings are vitiated by fraud, imposition or collusion; where the procedure which led to the factual findings is irregular; when palpable errors are committed; or when a grave abuse of discretion, arbitrariness, or capriciousness is manifest. (Ateneo de Manila University vs. Court of Appeals, 145 SCRA 106 (1986); citing: International Hardwood and Veneer Co. of the Philippines vs. Leonardo, 11 7 SCRA 967; Baguio Country Club Corporation vs. National Labor Relations Commission, 118 SCRA 557; Sichangco vs. Commissioner of Immigration, 94 SCRA 61 and Eusebio vs. Sociedad Agricola de Balarin, 16 SCRA 569). A careful scrutiny of the Report and Recommendation of the Special Investigating Committee shows it does not fall under any of the above exceptions. On the contrary, it is readily apparent that the investigation conducted was fair, open, exhaustive and adequate. Accordingly, there appears to be no cogent reason to disturb the finding of said committee and as manifested by the respondents, the report of said committee has virtually rendered this petition moot and academic. The urgent motion of petitioners and intervenors to cite respondents in contempt of court is likewise untenable. Contempt of court has been defined as a defiance of the authority, justice or dignity of the court; such conduct as tends to bring the authority and administration of the law into disrespect or to interfere with or prejudice parties litigant or their witnesses during litigation. (Hahn vs. Court of Industrial Relations, 136 SCRA 57 [1985]). In the case at bar, there appears to be no defiance of authority by the mere filing by respondents of a motion for reconsideration of the resolution of November 12, 1986. In fact respondent school explained that the intervenors were actually reinstated as such faculty members after the issuance of the temporary mandatory injunction. Thus, in the compliance submitted by said school on November 20, 1 986, it ma manifested that 'without prejudice to the investigation to be conducted by the school authorities, ... and in order that dislocations may not result with respect to the academic activities of the students and the distribution of teaching loads among the teachers, the respondent school has created new classes for the petitioners and the intervening teachers" beginning November 20, 1986. The school manifested that while the investigation was going on, the intervenors-faculty members were teaching and it was only after the investigation, that the recommendations of the Committee were adopted by the school and the latter moved for the dismissal of the case for having become moot and academic. Otherwise stated, respondent school has fully complied with its duties under the temporary mandatory injunction (Rollo, pp. 830- 832). PREMISES CONSIDERED, the petition is hereby DISMISSED, but in the light of compassionate equity, students Who were, in view of the absence of academic deficiencies, scheduled to graduate during the school year when this petition was filed, should be allowed to re-enroll and to graduate in due time. No pronouncement as to costs. SO ORDERED.

110 Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 89317 May 20, 1990 ARIEL NON, REX MAGANA, ALVIN AGURA, NORMANDY OCCIANO, JORGE DAYAON, LOURDES BANARES, BARTOLOME IBASCO, EMMANUEL BARBA, SONNY MORENO, GIOVANI PALMA, JOSELITO VILLALON, LUIS SANTOS, and DANIEL TORRES, petitioners, vs. HON. SANCHO DANES II, in his capacity as the Presiding Judge of 5th Regional Trial Court, Br. 38, Daet, Camarines Norte; and MABINI COLLEGES, INC., represented by its president ROMULO ADEVA and by the chairman of the Board of Trustees, JUSTO LUKBAN, respondents. Antonio A. Ayo Jr. and Soliman M. Santos, Jr., for petitioners Pedro A. Venida Agustin A. Ferrer and Gil F. Echaro for private respondents.

CORTES, J.: Petitioners urge the Court en banc to review and reverse the doctrine laid down in Alcuaz, et al. v. Philippine School of Business Administration, et al., G.R. No. 76353, May 2, 1988, 161 SCRA 7, to the effect that a college student, once admitted by the school, is considered enrolled only for one semester and, hence, may be refused readmission after the semester is over, as the contract between the student and the school is deemed terminated. Petitioners, students in private respondent Mabini Colleges, Inc. in Daet, Camarines Norte, were not allowed to re-enroll by the school for the academic year 1988-1989 for leading or participating in student mass actions against the school in the preceding semester. The subject of the protests is not, however, made clear in the pleadings. Petitioners filed a petition in the court a quo seeking their readmission or re-enrollment to the school, but the trial court dismissed the petition in an order dated August 8, 1988; the dispositive portion of which reads: WHEREFORE, premises considered, and the fact that the ruling in the Alcuaz vs. PSBA is exactly on the point at issue in this case but the authority of the school regarding admission of students, save as a matter of compassionate equity when any of the petitioners would, at the least, qualify for re-enrollment, this petition is hereby DISMISSED. SO ORDERED. [Rollo, p. 12-A.] A motion for reconsideration was filed, but this was denied by the trial court on February 24, 1989 in this wise: Perhaps many will agree with the critical comment of Joaquin G. Bernas S.J., and that really there must be a better way of treating students and teachers than the manner ruled (not suggested) by the Supreme Court, the Termination of Contract at the end of the semester, that is.

111 But applicable rule in the case is that enunciated by the Supreme Court in the case of Sophia Alcuaz, et al. vs. Philippine School of Business Administration, Quezon City Branch (PSBA), et al., G.R. No. 76353, May 2, 1988; that of the termination at the end of the semester, reason for the critical comments of Joaquin G. Bernas and Doods Santos, who both do not agree with the ruling. Petitioners' claim of lack of due process cannot prosper in view of their failure to specifically deny respondent's affirmative defenses that "they were given all the chances to air their grievances on February 9, 10, 16, and 18, 1988, and also on February 22, 1988 during which they were represented by Atty. Jose L. Lapak" and that on February 22, 1988, the date of the resumption of classes at Mabini College, petitioners continued their rally picketing, even though without any renewal permit, physically coercing students not to attend their classes, thereby disrupting the scheduled classes and depriving a great majority of students of their right to be present in their classes. Against this backdrop, it must be noted that the petitioners waived their privilege to be admitted for re-enrollment with respondent college when they adopted, signed, and used its enrollment form for the first semester of school year 1988-89. Said form specifically states that: The Mabini College reserves the right to deny admission of students whose scholarship and attendance are unsatisfactory and to require withdrawal of students whose conduct discredits the institution and/or whose activities unduly disrupts or interfere with the efficient operation of the college. Students, therefore, are required to behave in accord with the Mabini College code of conduct and discipline. In addition, for the same semester, petitioners duly signed pledges which among others uniformly reads: In consideration of my admission to the Mabini College and of my privileges as student of this institution, I hereby pledge/ promise under oath to abide and comply with all the rules and regulations laid down by competent authorities in the College Department or School in which I am enrolled. Specifically: xxx xxx xxx 3. I will respect my Alma Matter the Mabini College, which I represent and see to it that I conduct myself in such a manner that the college wig not be put to a bad light; xxx xxx xxx 9. I will not release false or unauthorized announcement which tend to cause confusion or disrupt the normal appreciation of the college. Moreover, a clear legal right must first be established for a petition for mandamus to prosper (Sec. 3, Rule 65). It being a mere privilege and not a legal right for a student to be enrolled or reenrolled, respondent Mabini College is free to admit or not admit the petitioners for re-enrollment in view of the academic freedom enjoyed by the school in accordance with the Supreme Court rulings in the cases of Garcia vs. Faculty [Admission Committee] (G.R. No. 40779, November 28, 1975) and Tangonon vs.Pano, et al. (L45157, June 27, 1985). WHEREFORE, premises and jurisprudence considered, and for lack of merit, the motion for reconsideration of the order of this Court dated August 8, 1988 is hereby DENIED.

112 SO ORDERED. [Rollo pp. 15-16.] Hence, petitioners filed the instant petition for certiorari with prayer for preliminary mandatory injunction. The case was originally assigned to the Second Division of the Court, which resolved on April 10, 1989 to refer the case to the Court of Appeals for proper determination and disposition. The Court of Appeals ordered respondents to comment on the petition and set the application for issuance of a writ of preliminary mandatory injunction for hearing. After considering the comment and hearing the injunction application, the Court of Appeals resolved on May 22, 1989 to certify the case back to the Supreme Court considering that only pure questions of law were raised. The case was assigned to the Third Division of the Court, which then transferred it to the Court en banc on August 21, 1989 considering that the issues raised are jurisdictional. On September 14, 1989, the Court en bancaccepted the case and required respondents to comment. Respondents filed their comment on November 13, 1989. Petitioners were required to reply. As reply, they filed a pleading entitled "Counter-Comment," to which respondents filed a rejoinder entitled "Reply to Counter-Comment To this petitioners filed a "Rejoinder to Reply." The issues having been joined, the case was deemed submitted. At the heart of the controversy is the doctrine encapsuled in the following excerpt from Alcuaz: It is beyond dispute that a student once admitted by the school is considered enrolled for one semester. It is provided in Paragraph 137 Manual of Regulations for Private Schools, that when a college student registers in a school, it is understood that he is enrolling for the entire semester. Likewise, it is provided in the Manual, that the "written contracts" required for college teachers are for "one semester." It is thus evident that after the close of the first semester, the PSBA-QC no longer has any existing contract either with the students or with the intervening teachers. Such being the case, the charge of denial of due process is untenable. It is a time-honored principle that contracts are respected as the law between the contracting parties (Henson vs. Intermediate Appellate Court, et al., G.R. No. 72456, February 19, 1987, citing: Castro vs. Court of Appeals, 99 SCRA 722; Escano vs. Court of Appeals, 100 SCRA 197). The contract having been terminated, there is no more contract to speak of. The school cannot be compelled to enter into another contract with said students and teachers. "The courts, be they the original trial court or the appellate court, have no power to make contracts for the parties.' (Henson vs. Intermediate Appellate Court, et al., supra). [At 161 SCRA 17-18; Emphasis supplied.] In Alcuaz, the Second Division of the Court dismissed the petition filed by the students, who were barred from re-enrolling after they led mass assemblies and put up barricades, but it added that "in the light of compassionate equity, students who were, in view of the absence of academic deficiencies, scheduled to graduate during the school year when this petition was filed, should be allowed to re-enroll and to graduate in due time." [At 161 SCRA 22.] Mr. Justice Sarmiento dissented from the majority opinion. A motion for reconsideration was filed by the dismissed teachers in Alcuaz. The students did not move for reconsideration. The Court en banc, to which the case had been transferred, denied the motion for reconsideration in a Resolution dated September 29, 1989, but added as an obiter dictum: In conclusion, We wish to reiterate that while We value the right of students to complete their education in the school or university of their choice, and while We fully respect their right to resort to rallies and demonstrations for the redress of their grievances and as part of their freedom of speech and their right to assemble, still such rallies, demonstrations, and assemblies must always be conducted peacefully, and without resort to intimidation, coercion, or violence. Academic freedom in all its forms,

113 demands the full display of discipline. To hold otherwise would be to subvert freedom into degenerate license. The majority's failure to expressly repudiate the "termination of contract" doctrine enunciated in the decision provoked several dissents on that issue. Although seven (7) members of the Court * disagreed with the Second Division's dismissal of the students petition, a definitive ruling on the issue could not have been made because no timely motion for reconsideration was filed by the students. (As stated above, the motion for reconsideration was filed by the dismissed teachers.) Be that as it may, the reassessment of the doctrine laid down in Alcuaz, insofar as it allowed schools to bar the readmission or re-enrollment of students on the ground of termination of contract, shall be made in this case where the issue is squarely raised by petitioners [Petition, p. 4; Rollo, p. 5]. Initially, the case at bar must be put in the proper perspective. This is not a simple case of a school refusing readmission or re-enrollment of returning students. Undisputed is the fact that the refusal to readmit or re-enroll petitioners was decided upon and implemented by school authorities as a reaction to student mass actions directed against the school. Petitioners are students of respondent school who, after leading and participating in student protests, were denied readmission or re-enrollment for the next semester. This is a case that focuses on the right to speech and assembly as exercised by students vis-a-vis the right of school officials to discipline them. Thus, although respondent judge believed himself bound by the ruling in Alcuaz [Order dated August 8, 1988;Rollo, pp. 1212-A], he actually viewed the issue as a conflict between students' rights and the school's power to discipline them, to wit: Students should not be denied their constitutional and statutory right to education, and there is such denial when students are expelled or barred from enrollment for the exercise of their right to free speech and peaceable assembly and/or subjected to disciplinary action without abiding with the requirements of due process. Also, it is understandable for student leaders to let loose extremely critical and, at times, vitriolic language against school authorities during a student rally. But the right of students is no license and not without limit . . . [Order of February 24, 1989; Rollo, p. 13.] 1. The Student Does Not Shed His Constitutionally Protected Rights at the Schoolgate. Central to the democratic tradition which we cherish is the recognition and protection of the rights of free speech and assembly. Thus, our Constitution provides: Sec. 4. No law shall be passed abridging the freedom of speech, of expression, or of the press, or the right of the people peaceably to assemble and petition the government for redress of grievances. [Art. III.] This guarantee is not peculiar to the 1987 Constitution. A similar provision was found in the 1973 Constitution, as amended [Art. VI, sec. 9], the 1935 Constitution, as amended [Art. III, sec. 81, the Philippine Autonomy Act (Jones Law) [Sec. 3, para. 13], and the Philippine Bill of 1902 [Sec. 15, para. 13]. Thus, as early as 1907, the Court inPeople v. Apurado, 7 Phil. 422, upheld the right to speech and assembly to overturn a conviction for sedition. It said: Section 5 of the Act No. 292 is as follows: All persons who rise publicly and tumultuously in order to attain by force or outside of legal methods any of the following objects are guilty of sedition: xxx xxx xxx

114 2. To prevent the Insular Government, or any provincial or municipal government or any public official, from freely exercising its or his duties or the due execution of any judicial or administrative order. But this law must not be interpreted so as to abridge "the freedom of speech" or "the right of the people peaceably to assemble and petition the Government for redress of grievances" guaranteed by the express provisions of section 5 of "the Philippine Bill." xxx xxx xxx It is rather to be expected that more or less disorder will mark the public assembly of the people to protest against grievances whether real or imaginary, because on such occasions feeling is always wrought to a high pitch of excitement, and the greater the grievance and the more intense the feeling, the less perfect, as a rule, will be the disciplinary control of the leaders over their irresponsible followers. But if the prosecution be permitted to seize upon every instance of such disorderly conduct by individual members of a crowd as an excuse to characterize the assembly as a seditious and tumultuous rising against the authorities, then the right to assemble and to petition for redress of grievances would become a delusion and a snare and the attempt to exercise it on the most righteous occasion and in the most peaceable manner would expose all those who took part therein to the severest and most unmerited punishment, if the purposes which they sought to attain did not happen to be pleasing to the prosecuting authorities. If instances of disorderly conduct occur on such occasions, the guilty individuals should be sought out and punished therefor, but the utmost discretion must be exercise in drawing the line between disorderly and seditious conduct and between an essentially peaceable assembly and a tumultuous uprising. [At pp. 424, 426.] That the protection to the cognate rights of speech and assembly guaranteed by the Constitution is similarly available to students is well-settled in our jurisdiction. In the leading case of Malabanan v. Ramento, G.R. No. 62270, May 21, 1984, 129 SCRA 359, the Court, speaking through Mr. Chief Justice Fernando in an en bancdecision, declared: xxx xxx xxx 4. Petitioners invoke their rights to peaceable assembly and free speech. They are entitled to do so. They enjoy like the rest of the citizens the freedom to express their views and communicate their thoughts to those disposed to listen in gatherings such as was held in this case. They do not, to borrow from the opinion of Justice Fortas in Tinker v. Des Moines Community School District, "shed their constitutional rights to freedom of speech or expression at the schoolhouse gate." While therefore, the authority of educational institutions over the conduct of students must be recognized, it cannot go so far as to be violative of constitutional safeguards. [At pp. 367-368.] The facts in Malabanan are only too familiar in the genre of cases involving student mass actions: . . . Petitioners were officers of the Supreme Student Council of respondent [Gregorio Araneta] University. They sought and were granted by the school authorities a permit to hold a meeting from 8:00 A.M. to 12:00 P.M. on August 27, 1982. Pursuant to such permit, along with other students, they held a general assembly at the Veterinary Medicine and Animal Science (VMAS) the place indicated in such permit, not in the basketball court as therein stated but at the respond floor lobby. At such gathering they manifested in vehement and vigorous language their opposition to the proposed merger of the Institute of Animal Science with the Institute of Agriculture. At 10:30 A.M., the same day, they marched toward the Life Science building and continued their rally. It was outside the area covered by their permit. They continued their demonstration, giving utterance to language severely critical of the University authorities and using megaphones in the process. There was, as a result, disturbance of the classes being

115 held. Also, the non-academic employees, within hearing distance, stopped their work because of the noise created. They were asked to explain on the same day why they should not be held liable for holding an illegal assembly. Then on September 9, 1982, they were informed through a memorandum that they were under preventive suspension for their failure to explain the holding of an illegal assembly in front of the Life Science Building. The validity thereof was challenged by petitioners both before the Court of First Instance of Rizal in a petition for mandamuswith damages against private respondents and before the Ministry of Education, Culture, and Sports. On October 20, 1982, respondent Ramento, as Director of the National Capital Region, found petitioners guilty of the charge of having violated par. 146(c) of the Manual for Private Schools more specifically their holding of an illegal assembly which was characterized by the violation of the permit granted resulting in the disturbance of classes and oral defamation. The penalty was suspension for one academic year. . . . [At pp. 363-364.] The Court found the penalty imposed on the students too severe and reduced it to a one-week suspension. The rule laid down in Malabanan was applied with equal force in three other en banc decisions of the Court. In Villar v. Technological Institute of the Philippines, G.R. No. 69198, April 17, 1985, 135 SCRA 706, the Court reiterated that the exercise of the freedom of assembly could not be a basis for barring students from enrolling. It enjoined the school and its officials from acts of surveillance, blacklisting, suspension and refusal to re-enroll. But the Court allowed the non-enrollment of students who clearly incurred marked academic deficiency, with the following caveat: xxx xxx xxx 4. The academic freedom enjoyed by ''institutions of higher learning" includes the right to set academic standards to determine under what circumstances failing grades suffice for the expulsion of students. Once it has done so, however, that standard should be followed meticulously. It cannot be utilized to discriminate against those students who exercise their constitutional rights to peaceable assembly and free speech. If it does so, then there is a legitimate grievance by the students thus prejudiced, their right to the equal protection clause being disregarded. [At p. 711.] In Arreza v. Gregorio Araneta University Foundation, G.R. No. 62297, June 19, 1985, 137 SCRA 94, a case arising from almost the same facts as those in Malabanan, the Court rejected "the infliction of the highly- disproportionate penalty of denial of enrollment and the consequent failure of senior students to graduate, if in the exercise of the cognate rights of free speech and peaceable assembly, improper conduct could be attributed to them. [At p. 98]. In Guzman v. National University, G.R. No. 68288, July 11, 1986, 142 SCRA 699, respondent school was directed to allow the petitioning students to re-enroll or otherwise continue with their respective courses, without prejudice to any disciplinary proceedings that may be conducted in connection with their participation in the protests that led to the stoppage of classes. 2. Permissible Limitations on Student Exercise of Constitutional Rights Within the School. While the highest regard must be afforded the exercise of the rights to free speech and assembly, this should not be taken to mean that school authorities are virtually powerless to discipline students. This was made clear by the Court in Malabanan, when it echoed Tinker v. Des Moines Community School District, 393 US 503, 514: "But conduct by the student, in class or out of it, which for any reason whether it stems from time, place, or type of behavior materially disrupts classwork or involves substantial disorder or invasion of the rights of others is, of course, not immunized by the constitutional guarantee of freedom of speech." Thus, in Malabanan, the Court said:

116 xxx xxx xxx 8. It does not follow, however, that petitioners can be totally absolved for the events that transpired. Admittedly, there was a violation of the terms of the permit. The rally was held at a place other than that specified, in the second floor lobby, rather than the basketball court, of the (VMAS) building of the University. Moreover, it was continued longer than the period allowed. According to the decision of respondent Ramento, the "concerted activity [referring to such assembly went on until 5:30 p.m." Private respondents could thus, take disciplinary action. . . . [ At pp. 370-371]. But, as stated in Guzman, the imposition of disciplinary sanctions requires observance of procedural due process. Thus: . . . There are withal minimum standards which must be met to satisfy the demands of procedural due process; and these are, that (1) the students must be informed in writing of the nature and cause of any accusation against them; (2) they shall have the right to answer the charges against them, with the assistance of counsel, if desired; (3) they shall be informed of the evidence against them; (4) they shall have the right to adduce evidence in their own behalf; and (5) the evidence must be duly considered by the investigating committee or official designated by the school authorities to hear and decide the case. [At pp. 706-707]. Moreover, the penalty imposed must be proportionate to the offense committed. As stated in Malabanan, "[i]f the concept of proportionality between the offense committed and sanction imposed is not followed, an element of arbitrariness intrudes." [At p. 371]. 3. Circumventing Established Doctrine. Malabanan was decided by the Court in 1984. Since then, student mass actions have escalated not only because of political events that unfurled but also because of the constantly raging controversy over increases in tuition fees. But the over-eager hands of some school authorities were not effectively tied down by the ruling inMalabanan. Instead of suspending or expelling student leaders who fell into disfavor with school authorities, a new variation of the same stratagem was adopted by the latter: refusing the students readmission or re-enrollment on grounds not related to, their alleged misconduct of "illegal assembly" in leading or participating in student mass actions directed against the school. Thus, the spate of expulsions or exclusions due to "academic deficiency." 4. The Nature of the Contract Between a School and its Student. The Court, in Alcuaz, anchored its decision on the "termination of contract" theory. But it must be repeatedly emphasized that the contract between the school and the student is not an ordinary contract. It is imbued with public interest, considering the high priority given by the Constitution to education and the grant to the State of supervisory and regulatory powers over all educational institutions [See Art. XIV, secs. 1-2, 4(1)]. Respondent school cannot justify its actions by relying on Paragraph 137 of the Manual of Regulations for Private Schools, which provides that "[w]hen a student registers in a school, it is understood that he is enrolling . . . for the entire semester for collegiate courses," which the Court in Alcuaz construed as authority for schools to refuse enrollment to a student on the ground that his contract, which has a term of one semester, has already expired. The "termination of contract" theory does not even find support in the Manual. Paragraph 137 merely clarifies that a college student enrolls for the entire semester. It serves to protect schools wherein tuition fees are collected and paid on an installment basis, i.e. collection and payment of the downpayment upon enrollment and the balance before examinations. Thus, even if a student does not complete the semester for which he was enrolled, but has stayed on for more than two weeks, he may be required to pay his tuition fees for the whole semester before he is given his credentials for transfer.

117 This is the import of Paragraph 137, subsumed under Section VII on Tuition and Other Fees, which in its totality provides: 137. When a student registers in a school, it is understood that he is enrolling for the entire school year for elementary and secondary courses, and for the entire semester for collegiate courses. A student who transfers or otherwise withdraws, in writing, within two weeks after the beginning of classes and who has already paid the pertinent tuition and other school fees in full or for any length of time longer than one month may be charged ten per cent of the total amount due for the term if he withdraws within the first week of classes, or twenty per cent if within the second week of classes, regardless of whether or not he has actually attended classes. The student may be charged all the school fees in full if he withdraws anytime after the second week of classes. However, if the transfer or withdrawal is due to a justifiable reason, the student shall be charged the pertinent fees only up to and including the last month of attendance. Clearly, in no way may Paragraph 137 be construed to mean that the student shall be enrolled for only one semester, and that after that semester is over his re-enrollment is dependent solely on the sound discretion of the school. On the contrary, the Manual recognizes the right of the student to be enrolled in his course for the entire period he is expected to complete it. Thus, Paragraph 107 states: Every student has the right to enrol in any school, college or university upon meeting its specific requirement and reasonable regulation: Provided, that except in the case of academic delinquency and violation of disciplinary regulation, the student is presumed to be qualified for enrolment for the entire period he is expected to complete his course without prejudice to his right to transfer. This "presumption" has been translated into a right in Batas Pambansa Blg. 232, the "Education Act of 1982." Section 9 of this act provides: Sec. 9. Rights of Students in School. In addition to other rights, and subject to the limitations prescribed by law and regulations, students and pupils in all schools shall enjoy the following rights: xxx xxx xxx 2. The right to freely choose their field of study subject to existing curricula and to continue their course therein up to graduation, except in cases of academic deficiency, or violation of disciplinary regulations. xxx xxx xxx 5. Academic Freedom Not a Ground for Denying Students' Rights. Respondent judge, in his order dated February 24, 1989, stated that "respondent Mabini College is free to admit or not admit the petitioners for re-enrollment in view of the academic freedom enjoyed by the school" [Rollo, p. 16]. To support this conclusion, he cited the cases of Garcia v. The Faculty Admission Committee, Loyola School of Theology, G.R. No. L-40779, November 28, 1975, 68 SCRA 277, and Tangonan v. Pano, G.R. No. L-45157, June 27, 1985, 137 SCRA 245, where the Court emphasized the institutions' discretion on the admission and enrollment of students as a major component of the academic freedom guaranteed to institutions of higher learning. These cases involve different facts and issues. In Garcia, the issue was whether a female lay student has a clear legal right to compel a seminary for the priesthood to admit her for theological studies leading to a degree. InTangonan, the issue was whether a nursing student, who was admitted on probation and who has failed in her nursing subjects, may compel her school to readmit her for enrollment. Moreover, respondent judge loses sight of the Court's unequivocal statement in Villar that the right of an institution of higher learning to set academic standards cannot be utilized to discriminate against

118 students who exercise their constitutional rights to speech and assembly, for otherwise there win be a violation of their right to equal protection [At p. 711] 6. Capitol Medical Center and Licup. In support of the action taken by respondent judge, private respondents cite the recent cases of Capitol Medical Center, Inc. v. Court of Appeals, G.R. No. 82499, October 13, 1989, and Licup v. University of San Carlos, G.R. No. 85839, October 19, 1989, both decided by the First Division of the Court. We find the issues raised and resolved in these two decisions dissimilar from the issues in the present case. In Capitol Medical Center, the Court upheld the decision of the school authorities to close down the school because of problems emanating from a labor dispute between the school and its faculty. The Court ruled that the students had no clear legal right to demand the reopening of the school. On the other hand, in Licup the issue resolved was whether or not the students were afforded procedural due process before disciplinary action was taken against them. Thus, the Court stated: The Court finds no cogent basis for the protestations of petitioners that they were deprived of due process of law and that the investigation conducted was far from impartial and fair. On the contrary, what appear from the record is that the charges against petitioners were adequately established in an appropriate investigation. The imputation of bias and partiality is not supported by the record. . . . Moreover, Licup, far from adopting the "termination of contract" theory in Alcuaz, impliedly rejected it, to wit: While it is true that the students are entitled to the right to pursue their education, the USC as an educational institution is also entitled to pursue its academic freedom and in the process has the concommitant right to see to it that this freedom is not jeopardized. True, an institution of learning has a contractual obligation to afford its students a fair opportunity to complete the course they seek to pursue. However, when a student commits a serious breach of discipline or fails to maintain the required academic standard, he forfeits his contractual right; and the court should not review the discretion of university authorities. (Emphasis supplied.) 7. The Instant Case. To justify the school's action, respondents, in their Comment dated November 12, 1989, quoting from their answer filed in the trial court, allege that of the thirteen (13) petitioners eight (8) have incurred failing grades, to wit: a) Ariel Non has not only failed in four (4) subjects but also failed to cause the submission of Form 137 which is a pre-requisite to his re- enrollment and to his continuing as a student of Mabini; b) Rex Magana not only has failed in one (1) subject but also has incomplete grades in four (4) subjects as well as no grades in two (2) subjects; c) Elvin Agura failed in two (2) subjects and has three (3) incomplete grades; d) Emmanuel Barba has failed in one (1) subject, and has to still take CMT 1 1 to 22. He is already enrolled at Ago Foundation; e) Joselito Villalon has incomplete grades in nine (9) subjects;

119 f) Luis Santos has failed in one (1) subject; g) George Dayaon has failed in four (4) subjects and has to remove the incomplete grade in one (1) subject; h) Daniel Torres has failed in five (5) subjects, has to remove incomplete grades in five (5) more objects and has no grade in one (1) subject. [Rollo, p. 79.] Petitioners have not denied this, but have countered this allegation as follows: xxx xxx xxx (11) Petitioners were and are prepared to show, among others, that: a) Three of the 13 of them were graduating. (Admitted in the Answer.) b) Their academic deficiencies, if any, do not warrant non- readmission. (The Answer indicates only 8 of the 13 as with deficiencies.) c) Their breach of discipline, if any, was not serious. d) The improper conduct attributed to them was during the exercise of the cognate rights of free speech and peaceable assembly, particularly a February 1988 student rally. (The crux of the matter, as shown even in the Answer.) e) There was no due investigation that could serve as basis for disciplinary action. (In effect, admitted in the Answer; even Alcuaz required due process.) f) Respondents admit students with worse deficiencies a clear case of discrimination against petitioners for their role in the student rally. (An equal protection question.) g) Respondent school is their choice institution near their places of residence which they can afford to pay for tertiary education, of which they have already lost one-and-a-half school-years in itself punishment enough. [Rollo, p. 86]. Clearly, the five (5) students who did not incur failing marks, namely, Normandy Occiano, Lourdes Banares, Bartolome Ibasco, Sonny Moreno and Giovani Palma, were refused re-enrollment without just cause and, hence, should be allowed to re-enroll. On the other hand, it does not appear that the petitioners were afforded due process, in the manner expressed inGuzman, before they were refused re-enrollment. In fact, it would appear from the pleadings that the decision to refuse them re-enrollment because of failing grades was a mere afterthought. It is not denied that what incurred the ire of the school authorities was the student mass actions conducted in February 1988 and which were led and/or participated in by petitioners. Certainly, excluding students because of failing grades when the cause for the action taken against them undeniably related to possible breaches of discipline not only is a denial of due process but also constitutes a violation of the basic tenets of fair play. Moreover, of the eight (8) students with failing grades, some have only one or two failures, namely, Rex Magana, Elvin Agura, Emmanuel Barba, and Luis Santos. Certainly, their failures cannot be considered marked academic deficiency within the context of the Court's decision in Villar. Then, as to the students who incurred several failing grades, namely, Ariel Non, Joselito Villalon, George (Jorge) Dayaon, and Daniel Torres, it is not clear from respondents' enumeration whether the failures were incurred in only one semester or through the course of several semesters of study in the school. Neither are the academic standards of respondent school, from which we can gauge whether or not these students are academically deficient, alleged by respondents. Thus, while the prerogative of

120 schools to set academic standards is recognized, we cannot affirm respondent school's action as to petitioners Non, Villalon, Dayaon and Torres because of insufficient information. With regard to petitioner Emmanuel Barba who respondents claim has enrolled in Ago Foundation, such fact alone, if true, will not bar him from seeking readmission in respondent school. However, these should not be taken to mean that no disciplinary action could have been taken against petitioners for breach of discipline if the facts had so warranted. In line with the Court's ruling in Malabanan, petitioners could have been subjected to disciplinary proceedings in connection with the February 1988 mass actions. But the penalty that could have been imposed must be commensurate to the offense committed and, as set forth inGuzman, it must be imposed only after the requirements of procedural due process have been complied with. This is explicit from the Manual of Regulations for Private Schools, which provides in Paragraph 145 that "[n]o penalty shall be imposed upon any student, except for cause as defined in this Manual and/or in the school's rules and regulations duly promulgated and only after due investigation shall have been conducted." But this matter of disciplinary proceedings and the imposition of administrative sanctions have become moot and academic. Petitioners, who have been refused readmission or re-enrollment and who have been effectively excluded from respondent school for four (4) semesters, have already been more than sufficiently penalized for any breach of discipline they might have committed when they led and participated in the mass actions that, according to respondents, resulted in the disruption of classes. To still subject them to disciplinary proceedings would serve no useful purpose and would only further aggravate the strained relations between petitioners and the officials of respondent school which necessarily resulted from the heated legal battle here, in the Court of Appeals and before the trial court. WHEREFORE, the petition is GRANTED. The orders of respondent judge dated August 8, 1988 and February 24, 1989 are hereby ANNULLED. Respondent Mabini College is ORDERED to readmit and to allow the re- enrollment of petitioners, if they are still so minded, without prejudice to its taking the appropriate action as to petitioners Ariel Non, Joselito Villalon, George (Jorge) Dayaon and Daniel Torres, if it is shown by their records (Form 137) that they have failed to satisfy the school's prescribed academic standards. SO ORDERED. Fernan, C.J., Narvasa, Gutierrez, Jr., Cruz, Feliciano, Paras, Gancayco, Bidin, Medialdea and Regalado, JJ., concur. Grio-Aquino, J., is on leave.

121 Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 99327 May 27, 1993 ATENEO DE MANILA UNIVERSITY, FATHER JOAQUIN BERNAS, S. J., DEAN CYNTHIA ROXAS-DEL CASTILLO, JUDGE RUPERTO KAPUNAN, JR., JUSTICE VENICIO ESCOLIN, FISCAL MIGUEL ALBAR, ATTYS. MARCOS HERRAS, FERDINAND CASIS, JOSE CLARO TESORO, RAMON CAGUIOA, and RAMON ERENETA . petitioners, vs. HON. IGNACIO M. CAPULONG, Presiding Judge of the RTC-Makati, Br. 134, ZOSIMO MENDOZA, JR. ERNEST MONTECILLO, ADEL ABAS, JOSEPH LLEDO AMADO SABBAN, DALMACIO LIM JR., MANUEL ESCONA and JUDE FERNANDEZ, respondents. Bengzon, Zarraga, Narciso, Cudala, Pecson, Benson & Jimenes for petitioners. Romulo, Mabanta, Buenaventura, Sayoc & De Los Angeles for petitioner Cynthia Roxas-del Castillo. Fabregas, Calida & Remollo for private respondents.

ROMERO, J.: In 1975, the Court was confronted with a mandamus proceeding to compel the Faculty Admission Committee of the Loyola School of Theology, a religious seminary which has a working arrangement with the Ateneo de Manila University regarding accreditation of common students, to allow petitioner who had taken some courses therein for credit during summer, to continue her studies. 1 Squarely meeting the issue, we dismissed the petition on the ground that students in the position of petitioner possess, not a right, but a privilege, to be admitted to the institution. Not having satisfied the prime and indispensable requisite of a mandamus proceeding since there is no duty, much less a clear duty, on the part of the respondent to admit the petitioner, the petition did not prosper. In support of its decision, the Court invoked academic freedom of institutions of higher learning, as recognized by the Constitution, the concept encompassing the right of a school to choose its students. Eighteen (18) years later, the right of a University to refuse admittance to its students, this time in Ateneo de Manila University proper, is again challenged. Whereas, in the Garcia case referred to in the opening paragraph, the individual concerned was not a regular student, the respondents in the case at bar, having been previously enrolled in the University, seek re-admission. Moreover, in the earlier case, the petitioner was refused admittance, not on such considerations as personality traits and character orientation, or even inability to meet the institution's academic or intellectual standards, but because of her behavior in the classroom. The school pointedly informed her that ". . . it would seem to be in your best interest to work with a Faculty that is more compatible with your orientations." On the other hand, students who are now being refused admission into petitioner University have been found guilty of violating Rule No. 3 of the Ateneo Law School Rules on Discipline which prohibits participation in hazing activities. The case attracted much publicity due to the death of one of the neophytes and serious physical injuries inflicted on another.

122 Herein lies an opportunity for the Court to add another dimension to the concept of academic freedom of institutions of higher learning, this time a case fraught with social and emotional overtones. The facts which gave rise to this case which is far from novel, are as follows: As a requisite to membership, the Aquila Legis, a fraternity organized in the Ateneo Law School, held its initiation rites on February 8, 9 and 10, 1991, for students interested in joining its ranks. As a result of such initiation rites, Leonardo "Lennie" H. Villa, a first year student of petitioner university, died of serious physical injuries at Chinese General Hospital on February 10, 1991. He was not the lone victim, though, for another freshman by the name of Bienvenido Marquez was also hospitalized at the Capitol Medical Center for acute renal failure occasioned by the serious physical injuries inflicted upon him on the same occasion. In a notice dated February 11, 1991, petitioner Dean Cynthia del Castillo created a Joint AdministrationFaculty-Student Investigating Committee 2 which was tasked to investigate and submit a report within 72 hours on the circumstances surrounding the death of Lennie Villa. Said notice also required respondent students to submit their written statements within twenty-four (24) hours from receipt. Although respondent students received a copy of the written notice, they failed to file a reply. In the meantime, they were placed on preventive suspension. 3 Through their respective counsels, they requested copies of the charges and pertinent documents or affidavits. In a notice dated February 14, 1991, the Joint Administration-Faculty-Student Investigating Committee, after receiving the written statements and hearing the testimonies of several witness, found a prima facie case against respondent students for violation of Rule 3 of the Law School Catalogue entitled "Discipline." 4 Respondent students were then required to file their written answers to the formal charge on or before February 18, 1991; otherwise, they would be deemed to have waived their right to present their defenses. On February 20, 1991, petitioner Dean created a Disciplinary Board composed of petitioners Judge Ruperto Kapunan, Justice Venicio Escolin, Atty. Marcos Herras, Fiscal Miguel Albar and Atty. Ferdinand Casis, to hear the charges against respondent students. In a letter dated February 20, 1991, respondent students were informed that they had violated Rule No. 3 of the Rules on Discipline contained in the Law School Catalogue. Said letter also states: "The complaint/charge against you arose from initiations held on February 8-10, 1991. The evidence against you consist of testimonies of students, showing your participation in acts prohibited by the School regulations." Finally, it ordered respondent students to file their written answers to the above charge on or before February 22 1991, otherwise they would be deemed to have waived their defenses. 5 In a motion dated February 21, 1991, respondent students, through counsel, requested that the investigation against them be held in abeyance, pending action on their request for copies of the evidence against them. 6 Respondent students were then directed by the Board to appear before it at a hearing on February 28, 1991 to clarify their answer with regard to the charges filed by the investigating committee for violation of Rule No. 3. However, in a letter to a petitioners dated February 27, 1991, counsel for respondent students moved to postpone the hearing from February 28, 1991 to March 1, 1991. 7 Subsequently, respondent students were directed to appear on March 2, 1991 for clarificatory questions. 8 They were also informed that: a) The proceedings will be summary in nature in accordance with the rules laid down in the case of Guzman vs. National University; 9 b) Petitioners have no right to cross-examine the affiants-neophytes;

123 c) Hazing which is not defined in the School catalogue shall be defined in accordance with the proposed bill of Sen. Jose Lina, Senate Bill No. 3815; d) The Board will take into consideration the degree of participation of the petitioners in the alleged hazing incident in imposing the penalty; e) The Decision of the Board shall be appealable to the President of the University, i. e., Respondent Joaquin Bernas S. J. On March 5, 1991, petitioner Bernas wrote Dean Castillo that, "in cases where the Disciplinary Board is not prepared to impose the penalty of dismissal, I would prefer that the Board leave the decision on the penalty to the Administration so that this case be decided not just on the Law School level but also on the University level." 10 In a resolution dated March 9, 1991, the Board found respondent students guilty of violating Rule No. 3 of the Ateneo Law School Rules on Discipline which prohibits participation in hazing activities. The Board found that respondent students acted as master auxiliaries or "auxies" during the initiation rites of Aquila Legis, and exercised the "auxies privilege," which allows them to participate in the physical hazing. Although respondent students claim that they were there to assist and attend to the needs of the neophytes, actually they were assigned a definite supportive role to play in the organized activity. Their guilt was heightened by the fact that they made no effort to prevent the infliction of further physical punishment on the neophytes under their care. The Board considered respondent students part and parcel of the integral process of hazing. In conclusion, the Board pronounced respondents guilty of hazing, either by active participation or through acquiescence. However, in view of the lack of unanimity among the members of the Board on the penalty of dismissal, the Board left the imposition of the penalty to the University Administration. 11 Petitioner Dean del Castillo waived her prerogative to review the decision of the Board and left to the President of the University the decision of whether to expel respondents or not. Consequently, in a resolution dated March 10, 1991, petitioner Fr. Joaquin G. Bernas, as President of the Ateneo de Manila University, accepted the factual findings of the Board, thus: "that as Master Auxiliaries they exercised the 'auxie's privilege;' that even assuming they did not lay hands on the neophytes," respondents students are still guilty in accordance with the principle that "where two or more persons act together in the commission of a crime, whether they act through the physical volition of one or of all, proceeding severally or collectively, each individual whose will contributes to the wrongdoing is responsible for the whole." Fr. Bernas, in describing the offense which led to the death of Leonardo Villa, concluded that the "offense of the respondents can be characterized as grave and serious, subversive of the goals of Christian education and contrary to civilized behavior." Accordingly, he imposed the penalty of dismissal on all respondent students. 12 In a resolution dated March 18, 1991 and concurred in by petitioner Fr. Bernas, 13 the Board excluded respondent students Abas and Mendoza from the coverage of the resolution of March 10, 1991, inasmuch as at the time the latter resolution was promulgated, neither had as yet submitted their case to the Board. Said resolution also set the investigation of the two students on March 21, 1991. On March 18, 1991, respondent students filed with the Regional Trial Court of Makati, a petition for certiorari, prohibition and mandamus with prayer for temporary restraining order and preliminary injunction 14 alleging that they were currently enrolled as students for the second semester of school year 1990-91. Unless a temporary restraining order is issued, they would be prevented from taking their examinations. The petition principally centered on the alleged lack of due process in their dismissal. On the same day, Judge Madayag issued a temporary restraining order the enjoining petitioners from dismissing respondent students and stopping the former from conducting hearings relative to the hazing incident. 15 Hearings in connection with the issuance of the temporary restraining order were then held. On April 7, 1991, the temporary restraining order were issued on March 18, 1991 lapsed. Consequently, a day after the expiration of the temporary restraining order, Dean del Castillo created a Special Board composed of

124 Atty.(s) Jose Claro Tesoro, Ramon Caguioa, and Ramon Ereeta to investigate the charges of hazing against respondent students Abas and Mendoza. Respondent students reacted immediately by filing a Supplemental Petition of certiorari, prohibition andmandamus with prayer for a temporary restraining order and preliminary injunction, to include the aforesaid members of the Special Board, as additional respondents to the original petition. 16 Petitioners moved to strike out the Supplement Petition arguing that the creation of the Special Board was totally unrelated to the original petition which alleged lack of due process in the conduct of investigations by the Disciplinary Board against respondent students; that a supplemental petition cannot be admitted without the same being set for hearing and that the supplemental petition for the issuance of a temporary restraining order will, in effect, extend the previous restraining order beyond its mandatory 20-day lifetime. 17 Acting on the urgent motion to admit the supplemental petition with prayer for a temporary restraining order, Judge Amin, as pairing judge of respondents Judge Capulong, granted respondent students' prayer on April 10, 1991. 18 On May 17, 1991, respondent Judge ordered petitioners to reinstate respondent students. Simultaneously, the court ordered petitioners to conduct special examinations in lieu of the final examinations which allegedly the students were not allowed to take, and enjoined them to maintain the status quo with regard to the cases of Adel Abas and Zosimo Mendoza pending final determination of the issue of the instant case. Lastly, it directed respondent students to file a bond in the amount of P50,000.00. 19 On the same date, May 17, 1991, the Special Board investigating petitioners Abas and Mendoza and directed the dropping of their names from its roll of students. 20 The following day or on May 21, 1991, respondent judge issued the writ of preliminary injunction upon posting by respondents of a bond dated May 17, 1991 in the amount of P50,000.00. Hence, this special civil action of certiorari under Rule 65 with prayer for the issuance of a temporary restraining order enjoining the enforcement of the May 17, 1991 order of respondent judge. 21 In the case at bar, we come to grips with two relevant issues on academic freedom, namely: (1) whether a school is within its rights in expelling students from its academic community pursuant to its disciplinary rules and moral standards; and (2) whether or not the penalty imposed by the school administration is proper under the circumstances. We grant the petition and reverse the order of respondent judge ordering readmission of respondent students. Respondent judge committed grave abuse of discretion when he ruled that respondent students had been denied due process in the investigation of the charges against them. It is the threshold argument of respondent students that the decision of petitioner Fr. Joaquin Bernas, S. J., then President of the Ateneo de Manila University, to expel them was arrived at without affording them their right to procedural due process. We are constrained to disagree as we find no indication that such right has been violated. On the contrary, respondent students' rights in a school disciplinary proceeding, as enunciated in the cases of Guzman v. National University, 22 Alcuaz v. PSBA, Q.C. Branch 23 and Non v. Dames II 24 have been meticulously respected by petitioners in the various investigative proceedings held before they were expelled. Corollary to their contention of denials of due process is their argument that it is Ang Tibay case 25 and not theGuzman case which is applicable in the case at bar. Though both cases essentially deal with the requirements of due process, the Guzman case is more apropos to the instant case, since the latter deals specifically with the minimum standards to be satisfied in the imposition of disciplinary sanctions in academic institutions, such as petitioner university herein, thus: (1) the students must be informed in writing of the nature and cause of any accusation against them; (2) that they shall have the right to answer the charges against them with the assistance of counsel, if desired: (3) they shall be informed of the evidence against

125 them (4) they shall have the right to adduce evidence in their own behalf; and (5) the evidence must be duly considered by the investigating committee or official designated by the school authorities to hear and decide the case. 26 It cannot seriously be asserted that the above requirements were not met. When, in view of the death of Leonardo Villa, petitioner Cynthia del Castillo, as Dean of the Ateneo Law School, notified and required respondent students on February 11, 1991 to submit within twenty-four hours their written statement on the incident, 27 the records show that instead of filing a reply, respondent students requested through their counsel, copies of the charges. 28While of the students mentioned in the February 11, 1991 notice duly submitted written statements, the others failed to do so. Thus, the latter were granted an extension of up to February 18, 1991 to file their statements. 29 Indubitably, the nature and cause of the accusation were adequately spelled out in petitioners' notices dated February 14 and 20, 1991. 30 It is to be noted that the February 20, 1991 letter which quoted Rule No. 3 of its Rules of Discipline as contained in the Ateneo Law School Catalogue was addressed individually to respondent students. Petitioners' notices/letters dated February 11, February 14 and 20 clearly show that respondent students were given ample opportunity to adduce evidence in their behalf and to answer the charges leveled against them. The requisite assistance of counsel was met when, from the very start of the investigations before the Joint Administration Faculty-Student Committee, the law firm of Gonzales Batiler and Bilog and Associates put in its appearance and filed pleadings in behalf of respondent students. Respondent students may not use the argument that since they were not accorded the opportunity to see and examine the written statements which became the basis of petitioners' February 14, 1991 order, they were denied procedural due process. 31 Granting that they were denied such opportunity, the same may not be said to detract from the observance of due process, for disciplinary cases involving students need not necessarily include the right to cross examination. An administrative proceeding conducted to investigate students' participation in a hazing activity need not be clothed with the attributes of a judicial proceeding. A closer examination of the March 2, 1991 hearing which characterized the rules on the investigation as being summary in nature and that respondent students have no right to examine affiants-neophytes, reveals that this is but a reiteration of our previous ruling inAlcuaz. 32 Respondent students' contention that the investigating committee failed to consider their evidence is far from the truth because the February 14, 1992 ordered clearly states that it was reached only after receiving the written statements and hearing the testimonies of several witnesses. 33 Similarly, the Disciplinary Board's resolution dated March 10, 1991 was preceded by a hearing on March 2, 1991 wherein respondent students were summoned to answer clarificatory questions. With regard to the charge of hazing, respondent students fault petitioners for not explicitly defining the word "hazing" and allege that there is no proof that they were furnished copies of the 1990-91 Ateneo Law School Catalogue which prohibits hazing. Such flawed sophistry is not worthy of students who aspire to be future members of the Bar. It cannot be overemphasized that the charge filed before the Joint Administration-Faculty-Student Investigating Committee and the Disciplinary Board is not a criminal case requiring proof beyond reasonable doubt but is merely administrative in character. As such, it is not subject to the rigorous requirements of criminal due process, particularly with respect to the specification of the charge involved. As we have had occasion to declare in previous cases a similar nature, due process in disciplinary cases involving students does not entail proceedings and hearings identical to those prescribed for actions and proceedings in courts of justice. 34Accordingly, disciplinary charges against a student need not be drawn with the precision of a criminal information or complaint. Having given prior notice to the students involved that "hazing" which is not defined in the School Catalogue shall be defined in accordance with Senate Bill No. 3815, the proposed bill on the subject of Sen. Jose Lina, petitioners have said what needs to be said. We deem this sufficient for purposes of the investigation under scrutiny. Hazing, as a ground for disciplining a students, to the extent of dismissal or expulsion, finds its raison d' etre in the increasing frequency of injury, even death, inflicted upon the neophytes by their insensate

126 "masters." Assuredly, it passes the test of reasonableness and absence of malice on the part of the school authorities. Far from fostering comradeship and esprit d' corps, it has merely fed upon the cruel and baser instincts of those who aspire to eventual leadership in our country. Respondent students argue that petitioners are not in a position to file the instant petition under Rule 65 considering that they failed to file a motion for reconsideration first before the trial court, thereby by passing the latter and the Court of Appeals. 35 It is accepted legal doctrine that an exception to the doctrine of exhaustion of remedies is when the case involves a question of law, 36 as in this case, where the issue is whether or not respondent students have been afforded procedural due process prior to their dismissal from petitioner university. Lastly, respondent students argue that we erred in issuing a Temporary Restraining Order since petitioners do not stand to suffer irreperable damage in the event that private respondents are allowed to re-enroll. No one can be so myopic as to doubt that the immediate reinstatement of respondent students who have been investigated and found by the Disciplinary Board to have violated petitioner university's disciplinary rules and standards will certainly undermine the authority of the administration of the school. This we would be most loathe to do. More importantly, it will seriously impair petitioner university's academic freedom which has been enshrined in the 1935, 1973 and the present 1987 Constitutions. At this juncture, it would be meet to recall the essential freedoms subsumed by Justice Felix Frankfurter in the term "academic freedom" cited in the case of Sweezy v. New Hampshire, 37 thus: (1) who may teach: (2) what may be taught; (3) how it shall be taught; and (4) who may be admitted to study. Socrates, the "first of the great moralists of Greece," proud to claim the title "gadfly of the State" has deservedly earned for himself a respected place in the annals of history as a martyr to the cause of free intellectual inquiry. To Plato, this great teacher of his was the "best, the most sensible, and the most sensible, and the most just man of his age." In 399 B.C., he willingly quaffed the goblet of hemlock as punishment for alleged "corruption" of the youth of Athens. He describes in his own words how this charge of "corruption," the forerunner of the concept of academic freedom, came about: Young men of the richer classes, who have not much to do, come about me of their own accord: they like to heart the pretenders examined, and they often imitate me, and examine others themselves; there are plenty of person, as they soon discover, who think that they know something, but really know little or nothing; and then those who are examined by them instead of being angry with themselves are angry with me. This confounded Socrates, they say; this villainous misleader of youth. And then if somebody asks them, Why, what evil does he practice or teach? they do not know, and cannot tell; but in order that they may not appear to be at a loss, they repeat the ready-made charges which are used against all philosophers about teaching things up in the clouds and under the earth, and having no gods, and making the worse appear the better cause; for they do not like to confess that their pretense of knowledge has been detected which is the truth; and as they are numerous and ambitious and energetic, and are all in battle array and have persuasive tongues, they have filled your ears with their loud and inveterate calumnies. 38 Since Socrates, numberless individuals of the same heroic mold have similarly defied the stifling strictures of authority, whether State, Church, or various interest groups, to be able to give free rein to their ideas. Particularly odious were the insidious and blatant attempts at thought control during the time of the Inquisition until even the Medieval universities, renowned as intellectual centers in Europe, gradually lost their autonomy. In time, such noble strivings, gathering libertarian encrustations along the way, were gradually crystallized in the cluster of freedoms which awaited the champions and martyrs of the dawning modern age. This was exemplified by the professors of the new German universities in the 16th and 17th centuries such as the Universities of Leiden (1554), Helmstatdt (1574) and Heidelberg (1652). The

127 movement back to freedom of inquiry gained adherents among the exponents of fundamental human rights of the 19th and 20th centuries. "Academic freedom", the term as it evolved to describe the emerging rights related to intellectual liberty, has traditionally been associated with freedom of thought, speech, expression and the press; in other words, with the right of individuals in university communities, such as professors, researchers and administrators, to investigate, pursue, discuss and, in the immortal words of Socrates, "to follow the argument wherever it may lead," free from internal and external interference or pressure. But obviously, its optimum impact is best realized where the freedom is exercised judiciously and does not degenerate into unbridled license. Early cases on this individual aspect of academic freedom have been stressed the need for assuring to such individuals a measure of independence through the guarantees of autonomy and security of tenure. The components of this aspect of academic freedom have been categorized under the areas of: (1) who may teach and (2) how to teach. It is to be realized that this individual aspects of academic freedom could have developed only pari passu with its institutional counterpart. As corporate entities, educational institutions of higher learning are inherently endowed with the right to establish their policies, academic and otherwise, unhampered by external controls or pressure. In the Frankfurter formulation, this is articulated in the areas of: (1) what shall be taught, e.g., the curriculum and (2) who may be admitted to study. In the Philippines, the Acts which are passed with the change of sovereignty from the Spanish to the American government, namely, the Philippine Bill of 1902 and the Philippine Autonomy Act of 1916 made no mention of the rights now subsumed under the catch-all term of "academic freedom." This is most especially true with respect to the institutional aspect of the term. It had to await the drafting of the Philippine Constitutions to be recognized as deserving of legal protection. The breakthrough for the concept itself was found in Section 5 of the 1935 Constitution which stated: "Universities established by the State shall enjoy academic freedom." The only State University at that time, being the University of the Philippines, the Charter was perceived by some as exhibiting rank favoritism for the said institution at the expense of the rest. In attempt to broaden the coverage of the provision, the 1973 Constitution provided in its Section 8(2): "All institutions of higher learning shall enjoy academic freedom." In his interpretation of the provision, former U.P. President Vicente G. Sinco, who was also a delegate to the 1971 Constitutional Convention, declared that it "definitely grants the right of academic freedom to the University as an institution as distinguished from the academic freedom of a university professor." 39 Has the right been carried over the to the present Constitution? In an attempt to give an explicit definition with an expanded coverage, the Commissioners of the Constitutional Commission of the 1986 came up with this formulation: "Academic freedom shall be enjoyed by students, by teachers, and by researchers." After protracted debate and ringing speeches, the final version which was none too different from the way it was couched in the previous two (2) Constitutions, as found in Article XIV, Section 5(2) states: "Academic freedom shall be enjoyed in all institutions of higher learning." In anticipation of the question as to whether and what aspects of academic freedom are included herein, ConCom Commissioner Adolfo S. Azcuna explained: "Since academic freedom is a dynamic concept, we want to expand the frontiers of freedom, especially in education, therefore, we shall leave it to the courts to develop further the parameters of academic freedom." 40 More to the point, Commissioner Jose Luis Martin C. Gascon asked: "When we speak of the sentence 'academic freedom shall be enjoyed in all institutions of higher learning,' do we mean that academic freedom shall be enjoyed by the institution itself?" Azcuna replied: "Not only that, it also includes . . . . " Gascon finished off the broken thought, "the faculty and the students." Azcuna replied: "Yes." Since Garcia v. Loyola School of Theology, 41 we have consistently upheld the salutary proposition that admission to an institution of higher learning is discretionary upon a school, the same being a privilege on the part of the student rather than a right. While under the education Act of 1982, students have a right "to freely choose their field of study, subject to existing curricula and to continue their course

128 therein up to graduation," such right is subject, as all rights are, to the established academic and disciplinary standards laid down by the academic institution. 42 "For private schools have the right to establish reasonable rules and regulations for the admission, discipline and promotion of students. This . . . extends as well to parents . . . as parents are under a social and moral (if not legal) obligation, individually and collectively, to assist and cooperate with the schools." 43 Such rules are "incident to the very object of incorporation and indispensable to the successful management of the college. The rules may include those governing student discipline." 44 Going a step further, the establishment of rules governing university-student relations, particularly those pertaining to student discipline, may be regarded as vital, not merely to the smooth and efficient operation of the institution, but to its very survival. Within memory of the current generation is the eruption of militancy in the academic groves as collectively, the students demanded and plucked for themselves from the ponoply of academic freedom their own rights encapsulized under the rubric of "right to education" forgetting that, in Holfeldian terms, they have a concomitant duty, and that is, their duty to learn under the rules laid down by the school. Considering that respondent students are proud to claim as their own a Christian school that includes Theology as part of its curriculum and assidously strives to turn out individuals of unimpeachable morals and integrity in the mold of the founder of the order of the Society of Jesus, St. Ignatius of Loyola, and their God-fearing forbears, their barbaric and ruthless acts are the more reprehensible. It must be borne in mind that universities are established, not merely to develop the intellect and skills of the studentry, but to inculcate lofty values, ideals and attitudes; nay, the development, or flowering if you will, of the total man. In essence, education must ultimately be religious not in the sense that the founders or charter members of the institution are sectarian or profess a religious ideology. Rather, a religious education, as the renowned philosopher Alfred North Whitehead said, is "an education which inculcates duty and reverence." 45 It appears that the particular brand of religious education offered by the Ateneo de Manila has been lost on the respondent students. Certainly, they do not deserve to claim such a venerable institution as the Ateneo de Manila University as their own a minute longer, for they may foreseeably cast a malevolent influence on the students currently enrolled, as well as those who come after them. Quite applicable to this case is our pronouncement in Yap Chin Fah v. Court of Appeals that: "The maintenance of a morally conducive and orderly educational environment will be seriously imperiled if, under the circumstances of this case, Grace Christian is forced to admit petitioner's children and to reintegrate them to the student body." 46Thus, the decision of petitioner university to expel them is but congruent with the gravity of their misdeeds. That there must be such a congruence between the offense committed and the sanction imposed was stressed inMalabanan v. Ramento. 47 Having carefully reviewed the records and the procedure followed by petitioner university, we see no reason to reverse its decision founded on the following undisputed facts: that on February 8, 9 and 10, 1991, the Aquila Legis Fraternity conducted hazing activities; that respondent students were present at the hazing as auxiliaries, and that as a result of the hazing, Leonardo Villa died from serious physical injuries, while Bienvenido Marquez was hospitalized. In light of the vicious acts of respondent students upon those whom ironically they would claim as "brothers" after the initiation rites, how can we countenance the imposition of such nominal penalties as reprimand or even suspension? We, therefore, affirm petitioners' imposition of the penalty of dismissal upon respondent students. This finds authority and justification in Section 146 of the Manual of Regulations for Private Schools. 48 WHEREFORE, the instant petition is GRANTED; the order of respondent Judge dated May 17, 1991 reinstating respondents students into petitioner university is hereby REVERSED. The resolution of petitioner Joaquin Bernas S. J., then President of Ateneo de Manila University dated March 1991, is

129 REINSTATED and the decision of the Special Board DISMISSING respondent students ADEL ABAS and ZOSIMO MENDOZA dated May 20, 1991 is hereby AFFIRMED. Narvasa, C.J., Feliciano Padilla, Bidin, Regalado, Davide, Jr., Nocon, Bellosillo, Melo and Quiason, JJ., concur. Grio-Aquino, J., is on leave.

130

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 110280 October 12, 1993 UNIVERSITY OF THE PHILIPPINES BOARD OF REGENTS and DR. OLIVIA C. CAOILI in her capacity as Secretary of the Board, petitioners, vs. HON. ELSIE LIGOT-TELAN in her capacity as Presiding Judge of Branch 87, Regional Trial Court of Quezon City and RAMON P. NADAL, respondents. U.P. Office of Legal Services for petitioners. Bonifacio A. Alentajon for private respondent.

ROMERO, J.: In an effort to make the University of the Philippines (U.P.) truly the university of the people, the U.P. administration conceptualized and implemented the socialized scheme of tuition fee payments through the Socialized Tuition Fee and Assistance Program (STFAP), popularly known as the "Iskolar ng Bayan" program. Spawned by the public clamor to overcome what was perceived as the sharpening elitist profile of the U.P studentry, the STFAP aspired to expand the coverage of government educational subsidies so as to include the deserving in the lower rungs of the socio-economic ladder. After broad consultations with the various university constituencies by U.P. President Jose V. Abueva, the U.P. Board of Regents issued on April 28, 1988 a Resolution establishing the STFAP. A year later, it was granted official recognition when the Congress of the Philippines allocated a portion of the National Budget for the implementation of the program. In the interest of democratizing admission to the State University, all students are entitled to apply for STFAP benefits which include reduction in fees, living and book subsidies and student assistantships which give undergraduate students the opportunity to earn P12.00 per hour by working for the University. Applicants are required to accomplish a questionnaire where, among others, they state the amount and source of the annual income of the family, their real and personal properties and special circumstances from which the University may evaluate their financial status and need on the basis of which they are categorized into brackets. At the end the application form, the student applicant, as well as his parent, signs a sworn statement, as follows: Statement of the Student I hereby certify, upon my honor, that all the data and information which I have furnished are accurate and complete. I understand that any willful misinformation and/or withholding of information will automatically disqualify me from receiving any financial assistance or subsidy, and may serve as ground for my expulsion from the University. Furthermore, is such misinformation and/or withholding of information on my part is discovered after I have been awarded tuition scholarship or any form of financial assistance, I will be required to reimburse all financial benefits plus the legal

131 rate of interest prevailing at the time of the reimbursement without prejudice to the filing of charges against me. (Emphasis supplied for emphasis) Moreover, I understand that the University may send a fact-finding team to visit my home/residence to verify the veracity of the information provided in this application and I will give my utmost cooperation in this regard. I also understand that my refusal to cooperate with the fact-finding team may mean suspension of withdrawal of STFAP benefits and privileges. Student's Signature Statement of the Applicant's Parent or Guardian I hereby certify to the truthfulness and completeness of the information which my son/daughter/dependent has furnished in this application together with all the documents attached. I further recognize that in signing this application form, I share with my son/daughter/dependent the responsibility for the truthfulness and completeness of the information supplied herein. (Emphasis supplied for emphasis) Moreover, I understand that the University may send a fact-finding team to visit my home/residence to verify the information provided in this application and I will give my utmost cooperation in this regard. I also understand that my refusal to cooperate with the fact-finding team may mean suspension or withdrawal of STFAP benefits and privileges of my son/daughter/dependent. Parent's/Legal Guardian's/Spouse's Signature 1 From the early stages of its implementation, measures were adopted to safeguard the integrity of the program. One such precautionary measure was the inclusion as one of the punishable acts under Section 2 (a) of the Rules and Regulations on Student Conduct and Discipline of the University the deliberate falsification or suppression/withholding of any material information required in the application form. To further insure the integrity of the program, a random sampling scheme of verification of data indicated in a student's application form is undertaken. Among those who applied for STFAP benefits for School Year 1989-90 was Ramon P. Nadal, a student enrolled in the College of Law. On March 14, 1991, a team composed of Arsenio L. Dona and Jose Carlo Manalo conducted a home investigation at the residence of Nadal at 31 Twinpeaks Drive, Blue Ridge, Quezon City. Ms. Cristeta Packing, Nadal's aunt, was interviewed and the team submitted a home visit report. Consolacion Urbino, Scholarship Affairs Officer II, found discrepancies between the report and Nadal's application form. Forthwith, she and Bella M. Villanueva, head of the Office of Scholarships and Student Services, presented the matter to the Diliman Committee on Scholarships and Financial Assistance. 2 In compliance with the said Committee's directive, Bella Villanueva wrote Nadal informing him that the investigation showed that he had failed to declare, not only the fact that he had been maintaining a 1977 Corolla car which was owned by his brother but also the income of his mother who was supporting his brothers Antonio and Federico. Nadal was likewise informed that the Diliman Committee had reclassified him to Bracket 9 (from Bracket 4), retroactive to June 1989, unless he could submit "proofs to the contrary." Nadal was required "to pay back the equivalent amount of full school fees" with "interest based on current commercial rates." Failure to settle his account would mean the suspension of his registration privileges and the withholding of clearance and transcript of records. He was also warned that his case might be referred to the Student Disciplinary Tribunal for further investigation. 3

132 On July 12, 1991, Nadal issued a certification stating, among other things, that his mother migrated to the United States in 1981 but because her residency status had not yet been legalized, she had not been able to find a "stable, regular, well-paying employment." He also stated that his mother, jointly with his brother Virgilio, was shouldering the expenses of the college education of his two younger brothers. 4 Noting further discrepancies between Nadal's application form and the certification, the U.P. charged Nadal before the Student Disciplinary Tribunal (SDT) on August 23, 1991 with the following: That respondent RAMON P. NADAL (UP Student No. 83-11640), a student of the College of Law, UP System, Diliman, Quezon City, and STFAP (ISKOLAR NG BAYAN) recipient (Bracket 4 for SY 1989-1990; Bracket 5 for SY 1990-1991) in his applications for STFAP (ISKOLAR NG BAYAN) benefits which he filed for schoolyear 1989-1990, and schoolyear 1990-1991, with the Office of Scholarship and Student Services (formerly Scholarship and Financial Assistance Service) voluntarily and willfully withheld and did not declare the following: (a) That he has and maintains a car (Toyota Corolla, Model 1977); and (b) The income of his mother (Natividad Packing Nadal) in the U.S.A., in support of the studies of his brothers Antonio and Federico, which acts of willfully withholding information is tantamount to acts of dishonesty in relation to his studies, in violation of paragraph (a), Section 2, of the Rules and Regulations on Student Conduct and Discipline, as amended. (Approved by the B.O.R. at its 876th meeting on 02 September 1976, amended at the 923rd B.O.R. meeting on 31 January 1980, and further amended at its 1017th B.O.R. meeting on 08 December 1988). 5 On October 27, 1992, after hearing, the SDT 6 rendered a decision in SDT Case No. 91-026 exculpating Nadal of the charge of deliberately withholding in his STFAP application form information that he was maintaining a Toyota Corolla car, but finding him guilty of "wilfully and deliberately withholding information about the income of his mother, who is living abroad, in support of the studies of his brothers Antonio and Federico, 7 which is tantamount to acts of dishonesty in relation to his studies in violation of paragraph [a], Section 2 of the Rules [now covered by paragraph (i), Section 2 of the Rules, as amended 25 June 1992]." As such, the SDT imposed upon Nadal the penalty of expulsion from the University and required him to reimburse all STFAP benefits he had received but if he does not voluntarily make reimbursement, it shall be "effected by the University thru outside legal action." 8 The SDT decision was thereafter automatically elevated to the Executive Committee of U.P. Diliman for review pursuant to Sec. 20 of the U.P. Rules on Student Conduct and Discipline. On November 26, 1992, the Executive Committee, voting 13:4, affirmed the decision of the SDT; whereupon, Nadal appealed to the Board of Regents (BOR). The appeal was included in the agenda of the BOR meeting on January 25, 1993. 9 On January 18, 1993, upon her assumption to the Chairmanship of the Senate Committee on Education, thereby making her automatically a member of the BOR, Senator Leticia Ramos-Shahani wrote the BOR a letter expressing her view that, after a close review of Nadal s case by her legal staff, "it is only fair and just to find Mr. Nadal's appeal meritorious and his arguments worthy of belief. Consequently, he should be allowed to graduate and take the bar examinations this year." 10 At its January 25, 1993 meeting, the BOR affirmed the decision of the SDT but because "the Board was willing to grant a degree of compassion to the appellant in view of the alleged status and predicament of the mother as an immigrant 'TNT' in the United States," the penalty was modified "from Expulsion to One Year- Suspension, effective immediately, plus reimbursement of all benefits received from the STFAP, with legal interest." The BOR also decided against giving Nadal, a certification of good moral character. 11

133 Nadal forthwith filed a motion for reconsideration of the BOR decision, allegedly against the advice of his counsel.12 The motion was placed on the agenda of the February 25, 1993 meeting of the BOR. A day before said date, Senator Shahani wrote the BOR another letter requesting that deliberation on Nadal's case be deferred until such time as she could attend a BOR meeting. On March 15, 1993, the U.P. filed an opposition to Nadal's motion for reconsideration. Thereafter, the BOR held a special meeting to accommodate the request of Regent Shahani with Nadal's case as the sole item on its agenda. Again, Nadal's motion for reconsideration was included in the March 23, 1993 agenda but in view of the absence of Senator Shahani, the decision thereon was deferred. At the special meeting of the BOR on March 28, 1993 at the Board Room of the Manila Polo Club in Forbes Park, Makati, Regent Antonio T. Carpio raised the "material importance" of verifying the truth of Nadal's claim that earlier, he was a beneficiary of a scholarship and financial aid from the Ateneo de Manila University (AdeMU). Learning that the "certification issued by the AdeMU that it had not given Nadal financial aid while he was a student there was made through a telephone call," Regent Carpio declared that there was as yet "no direct evidence in the records to substantiate the charge." According to Carpio, if it should be disclosed that Nadal Falsely stated that he received such financial aid, it would be a clear case of gross and material misrepresentation that would even warrant the penalty of expulsion. Hence, he cast a conditional vote that would depend on the verification of Nadal's claim on the matter. U.P. President and concurrently Regent Jose V. Abueva countered by stating that "a decision should not be anchored solely on one piece of information which he considered irrelevant, and which would ignore the whole pattern of the respondent's dishonesty and deception from 1989 which had been established in the investigation and the reviews." He added that "the respondent's eligibility for his AdeMU high school scholarship and financial assistance from 1979 to 1983 does not in any way establish that he is 'not guilty as charged' before the SDT," since the formal charges against him do not include withholding of information regarding scholarship grants received from other schools. At the said March 28, 1993 special meeting, the Board decided to go into executive session where the following transpired: The Chairman of the Board, together with the President, directed the Secretary to reflect in the minutes of the meeting the following decisions of the Board in executive session, with only the Board members present. A vote was held by secret ballot on whether Ramon P. Nadal was guilty or not guilty as charged of willful withholding of information in relation to his application for Socialized Tuition and Financial Assistance Program (STFAP) benefits which he filed for Schoolyears 1989-1990 and 1990-1991 which is tantamount to act of dishonesty in relation to his studies, in violation of paragraph (a), Section 2 of the Rules and Regulations on Student Conduct and Discipline, as amended. The Chairman gave the following results of the Board action during the Executive Session: four (4) voted guilty; three (3) voted not guilty; and three (3) gave conditional votes, pending verification with Father Raymond Holscher of Ateneo de Manila University of Ramon P. Nadal's statement in his STFAP application that he was granted scholarship while he was in high school. Should Ateneo confirm that Nadal had not received financial assistance, then the conditional votes would be considered as guilty, and if otherwise, then not guilty. The Chairman requested the President to make the verification as soon as possible the next day. In answer to a query, the Chairman clarified that once the information was received from Ateneo, there would be no need for another meeting to validate the decision. The President reiterated his objections to the casting of conditional votes. The Chairman himself did not vote. 13

134 In the morning of March 29, 1993, the AdeMU issued a certification to the effect that Nadal was indeed a recipient of a scholarship grant from 1979 to 1983. That evening, the BOR met again at a special meeting at the Westin Philippine Plaza Hotel. According to Regent Carpio, in executive session, the BOR found Nadal "guilty" as the members voted as follows: six members guilty, three members not guilty, and three members abstained. 14Consequently, the BOR imposed on Nadal the penalties of suspension for one (1) year effective March 29, 1993, non-issuance of any certificate of good moral character during the suspension and/or as long as Nadal has not reimbursed the STFAP benefits he had received with 12% interest per annum from march 30, 1993 and non-issuance of his transcript of records until he has settled his financial obligations with the university. 15 On March 30, 1993, Nadal wrote President Abueva a handwritten letter stating that "after learning of the latest decision" of the BOR, he had been "intensely concentrating on (his) job so that (he) can earn enough to pay for (his) financial obligations to the University." Alleging that he was "now letting nature take its course," Nadal begged President Abueva not to issue any press release regarding the case. 16 However, on April 22, 1993, Nadal filed with the Regional Trial Court of Quezon City a petition for mandamus with preliminary injunction and prayer for a temporary restraining order against President Abueva, the BOR, Oscar M. Alfonso, Cesar A. Buenaventura, Armand V. Fabella and Olivia C. Caoili. The petition prayed: After trial on the merits, judgment be rendered as follows: a. Making the preliminary injunction permanent; b. Ordering respondents 'to uphold and implement their decision rendered on 28 March 1993, exonerating petitioner from all the charges against him, and accordingly dismissing SDT No. 91-026; c. Ordering respondents jointly and severally to pay petitioner litigation expenses of at least P150,000.00. Other just and equitable reliefs are likewise prayed for. 17 The motion for the issuance of a temporary restraining order and the writ of preliminary injunction was immediately set for hearing. At the May 10, 1993 hearing, the lower court declared that the only issue to be resolved was "whether or not the respondents in Civil Case No. 93-15665 violated (Nadal's) right to due process when it rendered a decision finding Nadal guilty of the charges against him" during the March 29, 1993 meeting. After the respondents had presented their first witness, Dr. Olivia C. Caoili, the lower court asked respondents' counsel whether they were amenable to maintaining the status quo. Said counsel replied in the negative, asserting the University's prerogative to discipline students found guilty of violating its rules of discipline. 18 On the same day, the lower court 19 issued the following Order: The parties were heard on their respective positions on the incident (application for preliminary injunction and prayer for temporary restraining order and opposition thereto). For lack of material time set this for continuation on May 17 and 18, 1993 both at 2:30 p.m. In the meantime, in order that the proceedings of this case may not be rendered moot and academic, the respondents herein, namely: Jose V. Abueva, President of the University of the Philippines and Vice-Chairman of the U.P. Board of Regents, Oscar M. Alfonso, Cesar A. Buenaventura and Armand V. Fabella, members of the U.P. Board of Regents, Olivia C. Caoili, the officers, agents, representatives, and all persons acting in their behalf, are hereby temporarily restrained from implementing their decision rendered on March 29, 1993 in Administrative SDT Case No. 91-026 entitled University of the Philippines vs. Ramon P. Nadal, as reflected in the Minutes of the 1062nd meeting

135 of the Board of Regents, U.P. held at the Romblon Room, Westin Phil. Plaza, Manila, until further order from this Court. SO ORDERED. Thereafter, Nadal presented as witnesses Regents Emerenciana Y. Arcellana, Ariel P. Tanangonan, Leticia R. Shahani and Antonio T. Carpio. The University, on the other hand, presented Dr. Olivia Caoili and Nadal himself as a hostile witness. On May 29, 1993, the lower court issued the following Order: The petitioner complains that he was not afforded due process when, after the Board Meeting on SDT Case No. 91-026 on March 28, 1993 that resulted in a decision of "NOT GUILTY" in his favor, the Chairman of the U.P. Board of Regents, without notice to the herein petitioner, called another meeting the following day to deliberate on his (the Chairman's) MOTION FOR RECONSIDERATION, which this time resulted in a decision of "GUILTY." While he main issue of violation of due process raised in the petition pends trial and resolution, the petitioner prays for the issuance of a writ of preliminary injunction prohibiting the respondents from further proceeding with SDT Case No. 21026 and from suspending the petitioner for one year. It is a basic requirement in the issuance of the preliminary injunctive writ that there must be a right to be protected. As the issue in the case at bar is due process in the March 29 Board meeting, there is, indeed, a right to be protected for, in administrative proceedings, a respondent's right to due process exists not only at the early stages but also at the final stage thereof. With the circulation to the members of the Board of Regents, as well as to other UP personnel, of the Minutes of the March 29, 1993 meeting, even after this case had already been filed, the Court is convinced that there now exists a threat to the petitioner (respondent in SDT Case No, 91-026) that the decision of the Board of Regents finally finding him guilty of willfully withholding information material to his application for Socialized Tuition and Financial Assistance Program (STFAP) benefits, will be implemented at any time, especially during the enrollment period, and this implementation would work injustice to the petitioner as it would delay him in finishing his course, and, consequently, in getting a decent and good paying job. The injury thus caused would be irreparable. "Damages are irreparable within the meaning of the rule where there is no standard by which their amount can be measured with reasonable accuracy. Where the damage is susceptible of mathematical computation, it is not irreparable." (Social Security Commission v. Bayona, et al., G.R. No. L-13555, May 30, 1962). IN VIEW OF THE FOREGOING, and so as not to render moot the issues in the instant proceedings, let a writ of preliminary injunction be issued restraining the respondents, their officers, agent(s), representatives, and all persons acting in their behalf, from further proceeding with SDT Case No. 91-026, and from suspending petitioner, upon the latter's filing a bond in the amount of P3,000.00. IT IS SO ORDERED. 20 Dispensing with the filing of a motion for reconsideration, the petitioners filed the instant petition for certiorari and prohibition with prayer for the issuance of an injunction or temporary restraining order, raising the following issues: whether or not Nadal was denied due process in the administrative disciplinary proceedings against him, and, whether or not the respondent judge gravely abused her discretion in issuing the May 29, 1993 writ of preliminary injunction thereby preventing the BOR from implementing the suspension penalty it had imposed on Nadal.

136 Before proceeding with the discussion of the merits of the instant petition, we shall confront a threshold issue raised by private respondent, namely, that Dr. Caoili, not having been authorized by the Board of Regents as a collegial body to file the instant petition, and Dr. Abueva, who verified the petition, not being the "Board of Regents" nor "the University of the Philippines," they are not real parties in interest who should file the same. 21 A real party in interest is one "who stands to be benefited or injured by the judgment or the party entitled to the avails of the suit. 'Interest' within the meaning of the rule means material interest, an interest in issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest."22 Undoubtedly, the U.P. Board of Regents has an interest to protect inasmuch as what is in issue here is its power to impose disciplinary action against a student who violated the Rules and Regulations on Student Conduct and Discipline by withholding information in connection with his application for STFAP benefits, which information, if disclosed, would have sufficed to disqualify him from receiving the financial assistance he sought. Such dishonesty, if left unpunished, would have the effect of subverting a commendable program into which the University officials had devoted much time and expended precious resources, from the conceptualization to the implementation stage, to rationalize the socialized scheme of tuition fee payments in order that more students may benefit from the public funds allocated to the State University. Having specifically named Drs. Abueva and Caoili as respondents in the petition for mandamus that he filed below, Nadal is now estopped from questioning their personality to file the instant petition. 23 Moreover, under Sec. 7 of the U.P. Charter (Act 1870) and Sec. 11 of the University Code "all process" against the BOR shall be served on "the president or secretary thereof'." It is in accordance with these legal provisions that Dr. Caoili is named as a petitioner. Necessarily, Dr. Abueva, the University President and member of the BOR, has to verify the petition. It is not mandatory, however, that each and every member of the BOR be named petitioners. As the Court has time and again held, an action may be entertained, notwithstanding the failure to include an indispensable party where it appears that the naming of the party would be but a formality. 24 No longer novel, as this is not a case of first impression, is the issue on the right of an academic institution to refuse admission to a student arising from the imposition upon him of an administrative disciplinary sanction. In our recent decision in Ateneo de Manila University v. Hon. Ignacio M. Capulong, 25 wherein certain law students were dismissed for hazing resulting in the death of another, we held that the matter of admission of students is within the ambit of academic freedom and therefore, beyond the province of the courts to decide. Certain fundamental principles bear stressing. One of the arguments of Nadal in his petition for mandamus below was that he was denied due process. To clarify, the so-called lack of due process referred only to the March 29, 1993 meeting of the BOR. As stated by respondent's counsel: "What was conceded by undersigned counsel was that Nadal was afforded due process from the start of the administrative proceeding up to the meeting of the Board of Regents on March 28, 1993." 26 With respect to the March 29, 1993 meeting, respondent considers the same as "unquestionably void for lack of due process" inasmuch as he was not sent a notice of said meeting. Counsel cites the ruling in Non v. Dames II 27that imposition of sanctions on students requires "observance of procedural due process," 28 the phrase obviously referring to the sending of notice of the meeting. Attention is drawn to the disparate factual environments obtaining in Non v. Dames II and in the instant case. In the former case, the students were refused admission for having led or participated in student mass actions against the school, thereby posing a collision between constitutionally cherished rights freedom of expression and academic freedom. In the case at bar, Nadal was suspended for having breached the University's disciplinary rules. In the Non case, the Court ruled that the students were not afforded due process for even the refusal to re-enroll them appeared to have been a mere afterthought on part of the school administrators. Here, Nadal does not dispute the fact that his right to due process was held inviolate until the BOR decided to meet on March 29, 1993 with his case as the sole item on the agenda.

137 In any event it is gross error to equate due process in the instant case with the sending of notice of the March 29, 1993 BOR meeting to respondent. University rules do not require the attendance in BOR meetings of individuals whose cases are included as items on the agenda of the Board. This is not exclusive of students whose disciplinary cases have been appealed to the Board of Regents as the final review body. At no time did respondent complain of lack of notice given to him to attend any of the regular and special BOR meetings where his case was up for deliberation. He would make an exception of the March 29, 1993 meeting for it was "supposed to reconsider the decision made on March 28, 1993 exonerating respondent Nadal from all administrative charges against him." 29 Regent Antonio T. Carpio, in his testimony before the lower court on May 25, 1993 admitted that there was no final verdict at the March 28, 1993 meeting in view of the conditional votes resulting from his assertion that he was "not morally convinced that there was sufficient evidence to make a finding of guilty against Nadal because there was no direct evidence that his mother received income from the United States and this income was sent to the Philippines to support the studies of the children." 30 Two regents shared the view of Regent Carpio, with the following result: four voted guilty, three, not guilty, and three cast conditional votes. The BOR agreed that, upon the suggestion of Regent Carpio, they would still verify from the AdeMU about Nadal's alleged scholarship as a student in said institution. Consequently, no definitive decision was arrived at by the BOR on March 28, 1993, Much less was a verdict of exoneration handed down as averred by respondent. Regent Carpio testified, with respect to the March 29, 1993 meeting where all twelve members of the BOR were present, that all of them participated in the voting held to reconsider the previous day's decision. He stated "I remember Regent Arcellana questioning the voting again on the ground that there was already a final decision, but there was a vote taken on whether a motion for reconsideration can be decided by the board, and a majority of the board ruled that the matter can be reconsidered again upon motion of the chairman." 31 At said meeting, six (6) regents voted to find respondent guilty, three (3) voted that he was not guilty and three (3) abstained. As succinctly announced by Regent Carpio, the final decision was that which was rendered on March 29, 1993 as "no other decision was made by the Board with respect to the same issue." 32 Counsel for Nadal charged before the lower court that his client was "not given due process in the March 29 meeting because the ground upon which he was again convicted was not the same as the original charge." 33Obviously, he was referring to the basis of the conditional votes on March 28, i.e., whether or not Nadal was telling the truth when he claimed that he received a scholarship grant from the AdeMU. However, Regent Carpio himself testified that the charge considered was "exactly the same charge" of withholding information on the income of Nadal's mother. 34 It should be stressed that the reason why Regent Carpio requested a verification of Nadal's claim that he was a scholar at the AdeMU was that Regent Carpio was not "morally convinced" yet as to the guilt of Nadal. In other words, he sought additional insights into the character of Nadal through the information that would be obtained from the AdeMU. In this regard, we find such information to be irrelevant and a mere superfluity. In his July, 12, 1991 certification aforementioned, Nadal admitted, although inconsistently, that his mother was a "TNT" who could not find a "stable, regular, well-paying employment" but that she was supporting the education of his brothers with the help of another son. To our mind, this constitutes sufficient admission that Nadal withheld information on the income, however measly and irregular, of his mother. Unlike in criminal cases which require proof beyond reasonable doubt as basis for a judgment, in administrative or quasijudicial proceedings, only substantial evidence is required, that which means more than a mere scintilla or relevant evidence as a reasonable mind might accept as adequate to support a conclusion, even if other minds equally reasonable might conceivably opine otherwise. 35 In light of the foregoing circumstances, we find that Nadal has been sufficiently proven to have violated his undertaking to divulge all information needed when he applied for the benefits of the STFAP. Let it not be forgotten that respondent aspires to join the ranks of the professionals who would uphold truth at all costs so that justice may prevail. The sentinels who stand guard at the portals leading to the hallowed Temples of Justice cannot be overzealous in admitting only those who are intellectually and

138 morally fit. In those who exhibit duplicity in their student days, one spots the shady character who is bound to sow the seeds of chicanery in the practice of his profession. Having reached his senior year, respondent is presumably aware that the bedrock axiom, Canon I, Rule 1.01 of the Code of Professional Responsibility states: "A lawyer shall not engage in unlawful, dishonest, immoral or deceitful conduct." Further on, Canon 7, Rule 7.01 provides: "A lawyer shall be answerable for knowingly making a false statement or suppressing a material fact in connection with his application for admission to the bar." (Emphasis supplied for emphasis) Surely, it is not too early to warn entrants to the noble profession of law that honesty and integrity are requirements no less weighty than hurdling the Bar examinations. This is the reason why a certification of good moral character is one of the documents that must be submitted in applying to take said examination. In fact, a charge of immoral or deceitful conduct on the part of an applicant, when proved, is a ground for disqualifying him. To revert to the instant case, inasmuch as it has been shown sufficiently that respondent has committed an act of dishonesty in withholding vital information in connection with his application for STFAP benefits, all in blatant violation of the Rules and Regulations on Student Conduct and Discipline of petitioner University, the latter's inherent power and authority to impose disciplinary sanction may be invoked and rightfully exercised. As a Bohemian proverb puts it: "A school without discipline is like a mill without water." Insofar as the water turns the mill, so does the school's disciplinary power assure its right to survive and continue operating. In more relevant terms, through its power to impose disciplinary sanctions, an educational institution is able to exercise its academic freedom which is, in the case at bar, the right to suspend and refuse admission to a student who has subverted its authority in the implementation of the critically important STFAP. At the risk of being repetitious, the matter of admission to a University is encompassed by the right of academic freedom. In Garcia v. The Faculty Admission Committee, Loyola School of Theology 36 the Court stated that a school or college which is possessed of the right of academic freedom "decides for itself its aims and objectives and how best to attain them. It is free from outside coercion or interference save possibly when the overriding public welfare calls for some restraint. It has a wide sphere of autonomy certainly extending to the choice of students." Elucidating, in Ateneo de Manila University v. Hon. Ignacio M. Capulong, 37 the Court further expounded: Since Garcia v. Loyola School of Theology, we have consistently upheld the salutary proposition that admission to an institution of higher learning is discretionary upon a school, the same being a privilege on the part of the student rather than a right. While under the Education Act of 1982, students have a right "to freely choose their field of study, subject to existing curricula and to continue their course therein up to graduation," such right is subject, as all rights are, to the established academic and disciplinary standards laid down by the academic institution. For private schools have the right to establish reasonable rules and regulations for the admission, discipline and promotion of students. This right . . . extends as well to parents . . . as parents are under a social and moral (if not legal) obligation, individually and collectively, to assist and cooperate with the schools. Such rules are "incident to the very object of incorporation and indispensable to the successful management of the college. The rules may include those governing student discipline." Going a step further, the establishment of rules governing university-student relations, particularly those pertaining to student discipline, may be regarded as vital, if not merely to the smooth and efficient operation of the institution, but to its very survival. Within memory of the current generation is the eruption of militancy in the academic groves as collectively, the students demanded and plucked for themselves from the

139 panoply of academic freedom their own rights encapsulized under the rubric of "right to education" forgetting that, in Hohfeldian terms, they have a concomitant duty, that is, their duty to learn under the rules laid down by the school. (Emphasis supplied.) On the second issue presented for adjudication, the Court finds that the lower court gravely abused its discretion in issuing the writ of preliminary injunction of May 29, 1993. The issuance of the said writ was based on the lower court's finding that the implementation of the disciplinary sanction of suspension on Nadal "would work injustice to the petitioner as it would delay him in finishing his course, and consequently, in getting a decent and good paying job." Sadly, such a ruling considers only the situation of Nadal without taking into account the circumstances clearly of his own making, which led him into such a predicament. More importantly, it has completely disregarded the overriding issue of academic freedom which provides more than ample justification for the imposition of a disciplinary sanction upon an erring student of an institution of higher learning. From the foregoing arguments, it is clear that the lower court should have restrained itself from assuming jurisdiction over the petition filed by Nadal. Mandamus is never issued in doubtful cases, a showing of a clear and certain right on the part of the petitioner being required. 38 It is of no avail against an official or government agency whose duty requires the exercise of discretion or judgment. 39 Hence, by issuing the writ of preliminary injunction, the lower court dared to tread upon legally forbidden grounds. For, by virtue of the writ, the University's exercise of academic freedom was peremptorily curtailed. Moreover, the door was flung wide open for Nadal to do exactly what the decision of the BOR prohibited him from doing and that is, to violate the suspension order by enrolling for the first semester of 1993-1994. It must have been with consternation that the University officials helplessly watching him complete his academic requirements for taking the Bar. 40 In the event that he be allowed to continue with his studies he would, in effect render moot and academic the disciplinary sanction of suspension legally imposed upon him by the BOR's final decision of March 29, 1993. What is to prevent other aspirants for STFAP scholarships from misleading the University authorities by misrepresenting certain facts or as in instant case, withholding vital information and stating downright falsehoods, in their application forms with impunity? Not only would this undermine the authority of the U.P. to discipline its students who violated the rules and regulations of the institution but, more importantly, subvert the very concept and lofty intent to give financial assistance to poor but deserving students through the STFAP which, incidentally, has not ceased refining and modifying it's operations. WHEREFORE, the instant petition is GRANTED and the lower court is hereby ordered to DISMISS the petition formandamus. SO ORDERED. Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Grio-Aquino, Regalado, Davide, Jr., Nocon, Bellosillo, Melo, Quiason, Puno and Vitug, JJ., concur.

140

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 81798 December 29, 1989 LAO GI alias FILOMENO CHIA, SR., his wife, ONG UE, and his children FILOMENO, JR., MANUEL, ROSITA VICENTA and DOMINGA, all surnamed CHIA, petitioners vs. HONORABLE COURT OF APPEALS AND COMMISSION ON IMMIGRATION AND DEPORTATION, respondents. Dakila F. Castro & Associates for petitioners.

GANCAYCO, J.: On September 3, 1958 the Secretary of Justice rendered Opinion No. 191, series of 1958 finding Filomeno Chia, Jr., alias Sia Pieng Hui to be a Filipino citizen as it appears that his father Filomeno Chia, Sr. is a Filipino citizen born on November 28, 1899 being the legitimate son of Inocencio Chia and Maria Layug of Guagua, Pampanga. However on October 3, 1980 the Minister of Justice rendered Opinion No. 147, series of 1980 cancelling Opinion No. 191, series of 1958 and setting aside the citizenship of Filomeno Chia, Sr. on the ground that it was founded on fraud and misrepresentation. A motion for reconsideration of said Opinion was denied by the Minister of Justice on February 13, 1981. On March 9, 1981 a charge for deportation was filed with the Commission on Immigration and Deportation (CID) against Lao Gi alias Filomeno Chia, Sr., his wife and children. An amended charge was filed with the CID on March 19,1981 alleging that said respondents refused to register as aliens having been required to do so and continued to refuse to register as such. On August 31, 1981 another amended charge was filed alleging that Manuel Chia committed acts of undesirability. On September 4, 1981 said respondents filed a motion to dismiss the amended charges on the ground that the CID has no authority to reopen a matter long settled under Opinion No. 191, series of 1958. The motion to dismiss was opposed by the private prosecutor. The CID special prosecutor also filed an opposition on the ground that the citizenship may be threshed out as the occasion may demand and that due process was accorded to respondents. The respondents filed a reply thereto. The motion to dismiss was denied by the CID and a motion for reconsideration of said denial was also denied in a resolution dated December 10, 1981. Said respondents then filed with this Court on February 11, 1982 a petition for certiorari and prohibition with a prayer for the issuance of a writ of preliminary injunction and restraining order docketed as G.R. No. 59619. After requiring a comment thereon, on April 28, 1982 this court en banc resolved to dismiss the petition for lack of merit. Earlier, Manuel Chia was charged with falsification of public documents in the Court of First Instance (CFI) of Manila in Criminal Case No. 60172 for alleging that he was a Filipino citizen in the execution of a Deed of Absolute Sale of certain real property. He was acquitted by the trial court in an order dated May 5, 1982 on the ground that Opinion No. 191, series of 1958 of the Secretary of Justice may be equated as res judicata and that revocation thereof by Opinion No. 147, series of 1980 cannot be considered just, fair and reasonable.

141 On June 1, 1982 respondents filed a motion for reconsideration of the aforesaid resolution of this Court dismissing the petition but this was denied by another resolution of this Court dated August 17, 1982. A second motion for reconsideration thereof was also denied by this Court on September 16, 1982. On September 23, 1982 the CID set the deportation case against respondents for hearing and Acting Commissioner Victor G. Nituda gave respondents three (3) days to move for reconsideration of the order directing them to register as aliens and to oppose the motion for their arrest. On September 27, 1982 respondents filed said motion for reconsideration and opposition but this was denied by Acting Commissioner Nituda on September 28, 1982. The latter directed respondents to register as aliens within two (2) days from notice thereof. The deportation case was set for hearing on October 5, 1 982 but on the same day respondents filed the petition for certiorari and prohibition with a prayer for injunctive relief in the Court of First Instance of Manila docketed as Civil Case No. 82- 12935 whereby a writ of preliminary injunction was issued. On April 17,1985 a decision was rendered by the trial court dismissing the petition for lack of legal basis and for want of supervisory jurisdiction on the part of the trial court on the particular subject involved. The writ of preliminary injunction previously issued was dissolved. An appeal therefrom was interposed to the Court of Appeals. In due course a decision was rendered on August 19, 1987 dismissing the appeal with costs against petitioners. A motion for reconsideration of the decision filed by petitioners was also denied in a resolution dated January 7, 1988. Hence, the herein petition for certiorari filed by petitioners wherein they seek to set aside the decision of the Court of Appeals and ask that a new one be rendered setting aside the order of the CID dated September 28, 1982 and directing it to proceed with the reception of the evidence in support of the charges against the petitioners. The issues raised in the petition are as follows: 1. The issues raised in G.R. No. 59619 before the Honorable Supreme Court were different from the issues raised in Civil Case No. 82-12935-CV. 2. The minute resolution of the Honorable Supreme Court in G.R. No. 59619 did not make a categorical ruling that petitioner entered and remained in the Philippines by false pretenses. 3. The issue of whether or not petitioners' citizenship was secured by fraud is precisely the subject matter of the proceedings before the Commission on Immigration and Deportation, in which no evidence had been presented yet in support of the charge of fraud in the acquisition of petitioners' citizenship. 4. Petitioners are not subject to immediate deportation. 5. The order for the arrest of petitioners in case of failure to register as aliens was premature since there was no competent determination yet that their citizenship was indeed procured by fraud. 6. The Honorable Court of Appeals overstepped its appellate jurisdiction, when it ruled on matters not covered by the Decision of the lower court. There can be no question that the CID has the authority and jurisdiction to hear and determine the deportation case against petitioners and in the process determine also the question of citizenship raised by the petitioners. Section 37(a) (1) of the Immigration Act provides as follows: SEC. 37. (a) The following aliens shall be arrested upon the warrant of the Commissioner of Immigration or of any other officer designated by him for the purpose and deported upon the warrant of the Commissioner of Immigration after a determination by the Board of Commissioners of the existence of the ground for deportation as charged against the alien: (1) Any alien who enters the Philippines after the effective date of this Act by means of false and misleading statements or without inspection and admission by the

142 immigration authorities at a designated port of entry or at any place other than at a designated port of entry. (As amended by Sec. 13, Rep. Act No. 503.) ... From the foregoing provision it is clear that before any alien may be deported upon a warrant of the Commissioner of Immigration, there should be a prior determination by the Board of Commissioners of the existence of the ground as charged against the alien. In this case it appears that petitioners are charged with having entered the Philippines by means of false and misleading statements or without inspection or admission by the immigration authorities at a designated port of entry. After appropriate charges are filed in the CID the specific grounds of which he should be duly informed of, a hearing should be conducted, and it is only after such a hearing by the CID that the alien may be ordered deported. In such a hearing, Opinion No. 191, Series of 1958 of the Secretary of Justice and Opinion No. 147, Series of 1980 of the Minister of Justice will bear much weight in the determination by the CID of the citizenship of said petitioners. The petitioners question the Order of Acting Commissioner Nituda that they register as aliens as required by the Immigration Act. While it is not disputed that it is also within the power and authority of the Commissioner to require an alien to so register, such a requirement must be predicated on a positive finding that the person who is so required is an alien. In this case where the very citizenship of the petitioners is in issue there should be a previous determination by the CID that they are aliens before the petitioners may be directed and required to register as aliens. The power to deport an alien is an act of the State. It is an act by or under the authority of the sovereign power. 1It is a police measure against undesirable aliens whose presence in the country is found to be injurious to the public good and domestic tranquility of the people. 2 Although a deportation proceeding does not partake of the nature of a criminal action, however, considering that it is a harsh and extraordinary administrative proceeding affecting the freedom and liberty of a person, the constitutional right of such person to due process should not be denied. Thus, the provisions of the Rules of Court of the Philippines particularly on criminal procedure are applicable to deportation proceedings. Under Section 37(c) of the Philippine Immigration Act of 1940 as amended, it is provided: c No alien shall be deported without being informed of the specific grounds for deportation nor without being given a hearing under rules of procedure to be prescribed by the Commissioner of Immigration. Hence, the charge against an alien must specify the acts or omissions complained of which must be stated in ordinary and concise language to enable a person of common understanding to know on what ground he is intended to be deported and enable the CID to pronounce a proper judgment. 3 Before any charge should be filed in the CID a preliminary investigation must be conducted to determine if there is a sufficient cause to charge the respondent for deportation. 4 The issuance of warrants of arrest, arrests without warrant and service of warrants should be in accordance likewise with Rule 113 of the 1985 Rules of Criminal Procedure; 5 search warrants issued by the CID shall be governed by Rule 126 of the 1985 Rules of Criminal Procedure; 6 and so the matter of bail, motion to quash, and trial, 7 among others. Fealty to the prescribed rules of procedure in deportation cases shall insure a speedy, fair and just dispensation of justice. The Court takes note of the fact that a private prosecutor is assisting in the prosecution of the case by the special prosecutor of the CID. The Court sees no reason why a private prosecutor should be allowed to participate in a deportation case. Under the 1985 Rules on Criminal Procedure, particularly Section 16, Rule 110 thereof, an offended party may intervene in a criminal prosecution when there is civil liability arising from the criminal action claimed by said party. In such case he may intervene by counsel.

143 In deportation cases, the Court cannot conceive of any justification for a private party to have any right to intervene. Even if such party can establish any damages due him arising from the deportation charge against the alien, such relief cannot be afforded him in the deportation proceeding. His recourse if at all is in the ordinary courts. Thus the Court rules that the intervention of a private prosecutor should not be allowed in deportation cases. The possibility of oppression, harrassment and persecution cannot be discounted. The deportation of an alien is the sole concern of the State. This is the reason why there are special prosecutors and fiscals tasked to prosecute such cases. WHEREFORE, the petition is hereby GRANTED and the questioned order of the respondent Commission on Immigration and Deportation dated September 28, 1982 is hereby set aside. The respondent Commission on Immigration and Deportation is hereby directed to continue hearing the deportation case against petitioners and thereafter, based on the evidence before it, to resolve the issue of citizenship of petitioners, and if found to be aliens, to determine whether or not the petitioners should be deported and/or otherwise ordered to register as aliens. No costs. SO ORDERED. Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.

144 Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 154745 January 29, 2004

COMMISSIONER ANDREA D. DOMINGO, BUREAU OF IMMIGRATION, Petitioner, vs. HERBERT MARKUS EMIL SCHEER, Respondent. DECISION CALLEJO, SR., J.: This is a petition for review under Rule 45 of the Rules of Court, as amended, of the Decision1 of the Court of Appeals in CA-G.R. SP No. 71094 granting the respondents petition for certiorari and prohibition annulling the order of arrest issued by the petitioner, and permanently enjoining her from deporting the respondent from the Philippines. Through its decision, the CA virtually reversed the Summary Deportation Order2 of the Board of Commissioners (BOC) and its Omnibus Resolution3 denying the respondents Urgent Motion for Reconsideration of said Order, and enjoining the petitioner from deporting the respondent. The facts as culled from the records are as follows: Respondent Herbert Markus Emil Scheer, a native of Ochsenfurt, Germany, was a frequent visitor of the Philippines. On July 18, 1986, his application for permanent resident status was granted.4 The Bureau of Immigration and Deportation (BID) issued in favor of the respondent Alien Certificate of Registration No. B-396907 dated September 16, 19875 and Immigration Certificate of Residence No. 256789 dated February 24, 1988.6 The Commissioner stated that the granting of the petition would redound to the benefit of the Filipino people.7 During his sojourn in the Philippines, the respondent married widowed Edith delos Reyes8 with whom he had two daughters. They had a son, Herbert Scheer, Jr., but he passed away on November 13, 1995.9 They resided in Puerto Princesa City, Palawan, where the respondent established and managed the Bavaria Restaurant. On May 21, 1991, he was appointed Confidential Agent by then NBI Director Alfredo S. Lim.10 In a Letter dated June 29, 1995, Vice Consul Jutta Hippelein informed the Philippine Ambassador to Bonn, Germany, that the respondent had police records and financial liabilities in Germany.11 The Department of Foreign Affairs received from the German Embassy in Manila Note Verbale No. 369/95 dated July 26, 1995, informing it that the respondent was wanted by the German Federal Police; that a warrant of arrest had been issued against him; and that the respondent will be served with an official document requesting him to turn over his German passport to the Embassy which was invalidated on July 2, 1995.12 The Embassy requested the Department of Foreign Affairs to inform the competent Philippine authorities of the matter. The BOC thereafter issued a Summary Deportation Order dated September 27, 1997. The penultimate paragraph of the Order reads: WHEREFORE, the foregoing considered, the Board of Commissioners hereby orders the following: 1. Cancellation of respondents permanent residence visa; 2. Respondents summary deportation and permanent exclusion from the Philippines; and 3. Inclusion of his name on the Bureaus Blacklist. PROVIDED, however that said summary deportation should be held in abeyance in case said alien has a pending final and executory criminal conviction where the imposed penalty is imprisonment, in which

145 case, he has to serve first such imposed penalty, and/or has a pending criminal, civil or administrative action and a Hold Departure Order has been issued or that his presence in said action is indispensable. In such instances, the alien should remain in the custody of the Bureau until his turnover to the proper authorities in case he has to serve imprisonment or in case of pendency of civil or criminal administrative action, he shall remain in the custody of the Bureau until such time that his pending cases shall have been decided, terminated or settled, as the case may be, unless circumstances demand the immediate implementation of this summary deportation. ... SO ORDERED.13 In issuing the said order, the BOC relied on the correspondence from the German Vice Consul on its speculation that it was unlikely that the German Embassy will issue a new passport to the respondent; on the warrant of arrest issued by the District Court of Germany against the respondent for insurance fraud; and on the alleged illegal activities of the respondent in Palawan.14 The BOC concluded that the respondent was not only an undocumented but an undesirable alien as well. When the respondent was apprised of the deportation order, he forthwith aired his side to then BID Commissioner Leandro T. Verceles. The Commissioner allowed the respondent to remain in the Philippines, giving the latter time to secure a clearance and a new passport from the German Embassy.15 Then Presidential Assistant Teodorico K. Imperial wrote a Testimonial dated November 24, 1995, in behalf of the respondent addressed to Commissioner Verceles. Nonetheless, the respondent, through counsel, filed on December 5, 1995 an Urgent Motion for Reconsideration of the Summary Deportation Order of the BOC.16 In his motion, the respondent alleged, inter alia, that: 1. The elementary rules of due process require notice and opportunity to be heard before a person can be lawfully deprived of his right (Ute Paterok vs. Bureau of Customs, 193 SCRA 132). In the instant case, although it is acknowledged that the Honorable Office may conduct summary deportation proceedings, respondent was not given notice and opportunity to be heard before said Summary Deportation Order was issued. Respondents right to procedural due process was therefore violated. Consequently, the Summary Deportation Order is invalid. 2. In issuing, the Summary Deportation Order, this Honorable Office relied on Note Verbal No. 369/95 issued by the Embassy of the Federal Republic of Germany, Manila, notifying the Department of Foreign Affairs and this Honorable Office about the warrant of arrest against respondent for alleged illegal insurance fraud and illegal activities. However, a close scrutiny of said note verbal shows that nowhere therein does it state that respondent was involved in insurance fraud or in any kind of illegal activities in Germany or anywhere else in the world, such as in Palawan. Therefore, the main basis of the Summary Deportation Order is incompetent as evidence against respondent who is, like every Filipino, presumed to be innocent until his guilt is proven beyond reasonable doubt. 3. The power to deport alien is a police power measure necessary against undesirable alien whose presence in the country is injurious to the public good and domestic tranquility of the country (Board of Commissioner Commission on Immigration vs. De la Rosa, 197 SCRA 853). It is respectfully submitted that respondent is not an undesirable alien. He has stayed in the Philippines for more or less than (10) years. He has married a Filipina and has three (3) minor children. He has established his business in Palawan and he has no police record whatsoever. Respondent has considered the Philippines his second home and he has nowhere else to go back to in Germany. Under the circumstances and for humanitarian considerations, respondent is not an undesirable alien whose deportation is warranted. Likewise, the mere fact that his passport was not renewed by the German Embassy does not also automatically justify the deportation of respondent.17 However, the BOC did not resolve the respondents motion. The respondent was neither arrested nor deported.

146 Meanwhile, on February 15, 1996, the District Court of Straubing rendered a Decision dismissing the criminal case against the respondent for physical injuries.18 The German Embassy in Manila, thereafter, issued a temporary passport to the respondent. In a Letter dated March 1, 1996, the respondent informed Commissioner Verceles that his passport had been renewed following the dismissal of the said criminal case. He reiterated his request for the cancellation of the Summary Deportation Order dated September 27, 1995 and the restoration of his permanent resident status.19Subsequently, on March 12, 1996, the German Embassy issued to the respondent a regular passport, to expire on March 11, 2006. The BOC still failed to resolve the respondents Urgent Motion for Reconsideration. Commissioner Verceles did not respond to the respondents March 1, 1996 Letter. The respondent remained in the Philippines and maintained his business in Palawan. On March 20, 1997, the Department of Labor and Employment approved his application for Alien Employment Registration Certificate as manager of the Bavaria Restaurant in Puerto Princesa City. In the meantime, petitioner Immigration Commissioner Andrea T. Domingo assumed office. She wrote the German Embassy and inquired if the respondent was wanted by the German police. On April 12, 2002, the German Embassy replied that the respondent was not so wanted.20 At about midnight on June 6, 2002, Marine operatives and BID agents apprehended the respondent in his residence on orders of the petitioner. He was whisked to the BID Manila Office and there held in custody while awaiting his deportation. Despite entreaties from the respondents wife21 and his employees, the petitioner refused to release the respondent.22 Shocked at the sudden turn of events, the respondent promptly communicated with his lawyer. The latter filed with the BID a motion for bail to secure the respondents temporary liberty. On June 11, 2002, the respondents counsel filed with the Court of Appeals a petition for certiorari, prohibition and mandamus with a prayer for temporary restraining order and writ of preliminary injunction, to enjoin the petitioner from proceeding with the respondents deportation.23 The respondent (petitioner therein) alleged, inter alia, that his arrest and detention were premature, unjust, wrongful, illegal and unconstitutional, effected without sufficient cause and without jurisdiction or with grave abuse of discretion. He asserted that there was no speedy remedy open to him in the ordinary course of law24 and that his Urgent Motion for Reconsideration of the Summary Deportation Order of the BOC had not yet been resolved despite the lapse of more than six years. The respondent averred that he was a fully documented alien, a permanent resident and a law-abiding citizen. He, thus, prayed as follows: PRAYER WHEREFORE, it is most respectfully prayed of this Honorable Court that: 1. Upon the filing of this Petition, this Honorable Court issue a Temporary Restraining Order to enjoin respondent Commissioner from enforcing any order to deport petitioner; 2. After due hearing, a writ of preliminary and mandatory injunction be correspondingly issued to maintain the status quo pending resolution of the Petition on the merits. 3. After hearing, judgment be rendered: a) Directing and mandating respondent Commissioner and the body she heads to resolve the Motion for Reconsideration filed in 1995, in his favor, and nullifying or suspending the implementation of any order, oral or written, she may have issued or issue to deport petitioner; and b) Making the injunction in petitioners favor permanent. Petitioner likewise prays for such other and further relief as may be deemed just and equitable in the premises, such as directing respondent, if Herbert Scheer is deported before the matter is heard on notice, to authorize his return.25

147 The BOC ruled that its September 27, 1995 Order had become final and executory after the lapse of one year, citing our rulings in Sy vs. Vivo,26 and Lou vs. Vivo.27 The BOC also held that it was not competent to reverse the September 27, 1995 Order, citing our ruling in Immigration Commissioner vs. Fernandez.28 It declared that the respondent may seek the waiver of his exclusion via deportation proceedings through the exceptions provided by Commonwealth Act No. 613,29 Section 29 (a)(15), but that his application for the waiver presupposes his prior removal from the Philippines. In a parallel development, the respondent procured a letter from the National Bureau of Investigation (NBI) in Puerto Princesa City certifying that he had no pending criminal record.30 The Puerto Princesa City Philippine National Police (PNP) also issued a certification that the respondent had no pending criminal or derogatory records in the said office.31 Meanwhile, on June 26, 2002, the Court of Appeals issued a status quo order restraining the petitioner from deporting the respondent on a bond of P100,000.00.32 On July 18, 2002, the BOC issued an Omnibus Resolution dated June 14, 2002, pendente lite denying the respondents Urgent Motion for Reconsideration, Motion for Bail/Recognizance, and the Letter dated June 11, 2002. The decretal portion of the resolution reads: Wherefore, in view of the foregoing circumstances, we deny the prayers of the Urgent Motion for Reconsideration of 5 December 1995, the Motion for Bail/Recognizance dated 7 June 2002 and the Letter of 11 June 2002. Further, we hereby order the following: 1. Subject to the submission of appropriate clearances, the summary deportation order the respondent Herbert Scheer, German, under BI Office Memorandum Order No. 34 (series of 1989) and the BOC Summary Deportation Order of 27 September 1995; 2. Permanent exclusion of Herbert Scheer from the Philippines under C.A. No. 613, Section 40 (a)(15). 3. Inclusion of the name of Herbert Scheer in the Immigration Black List; and 4. Forfeiture of the bail bond, if any, of Herbert Scheer under C.A. No. 613, Section 40 (a)(15). ... IT IS SO ORDERED.33 During the hearing of the respondents plea for a writ of preliminary mandatory injunction before the CA on July 22, 2002, the Office of the Solicitor General (OSG) manifested that the State had no opposition to the respondents re-entry and stay in the Philippines, provided that he leave the country first and reapply for admission and residency status with the assurance that he would be re-admitted.34 The respondents counsel manifested to the appellate court that he had just been informed by the OSG of the Omnibus Resolution of the BOC dated June 14, 2002. In her Comment on the Petition, the petitioner (the respondent therein) alleged, inter alia, the following: 1) that the BOC was an indispensable party to the petition; 2) the petitioners failure to implead the BOC warranted the denial of the petition; 3) the allowance by then Immigration Commissioner Leandro Verceles for the petitioner therein to renew his passport and secure clearances, even if proved, was not binding on the BOC; 4) the September 27, 1995 Order of the BOC was already executory when the respondent filed her petition in the CA;

148 5) the German Embassys issuance of a new passport did not legalize the respondents stay in this country, which became illegal on July 2, 1995 when his passport expired; 6) the respondent therein did not act with abuse of discretion in causing the arrest and detention of the respondent based on the BOCs Summary Deportation Order; and 7) the BOC did not act with grave abuse of discretion in issuing its Summary Deportation Order and Omnibus Resolution and such order and resolution were not mooted by the German Embassys issuance of a new passport in favor of the respondent. In view of the Omnibus Resolution of the BOC, the respondent (petitioner therein) in his Memorandum prayed for the nullification of the BOCs Order, as well as its Omnibus Resolution denying his Urgent Motion for Reconsideration considering that with the issuance of a new passport, there was no more basis for his deportation, thus: RELIEF WHEREFORE, it is most respectfully prayed of this Honorable Court that: 1. Upon the filing of this Memorandum, this Honorable Court forthwith direct and authorize the immediate release of petitioner, even on undersigneds recognizance, until further orders from this Honorable Court; 2. The Summary Deportation Order of September 27, 19[9]5, affirmed by respondent allegedly on June 14, 2002 and made known only yesterday, be nullified to the extent that it directs the deportation of petitioner, who has removed the very basis of said Order of not having a valid passport, and that the Resolution of June 14, 2002 be nullified in toto; and, 3. The Temporary Restraining Order of June 26, 2002 be converted into a permanent injunction or writ of prohibition. Petitioner likewise prays for such other and further relief as may be deemed just and equitable in the premises.35 Surprisingly, the respondents counsel received on July 24, 2003 a Letter from the petitioner dated July 16, 2002 stating that, "the BOC was in the course of reviewing the deportation case against Mr. Scheer, and that its findings would be given in due time."36 On August 20, 2002, the Court of Appeals rendered a Decision in favor of the respondent granting his petition for certiorari and prohibition and permanently enjoining the petitioner from deporting the respondent. The decretal portion of the Decision reads: WHEREFORE, premises considered, the petitions for certiorari and prohibition are hereby GRANTED. Accordingly, any order, oral or written, issued by respondent Commissioner Domingo against petitioner, in relation to his deportation, is hereby ANNULLED, and respondent Commissioner Domingo is hereby permanently enjoined/prohibited from deporting petitioner, in so far as this case is concerned. It is likewise ordered that petitioner be released from his confinement/detention in the Bureau of Immigration UNLESS there is/are fresh new grounds/cases that will warrant his continued detention. SO ORDERED.37 The Court of Appeals ruled that the German Embassys subsequent issuance of passport to the respondent before the BOCs issuance of its Omnibus Resolution had mooted the September 27, 1995 Summary Deportation Order, as well as the arrest and detention of the respondent. According to the court, it made no sense to require the respondent to leave the country and thereafter re-apply for admission with the BOC. Furthermore, since the grounds cited by the BOC in its Summary Deportation

149 Order no longer existed, there was no factual and legal basis to disqualify the respondent from staying in the country. On the issue of whether the members of the BOC were indispensable parties, the CA ruled as follows: a) There are quite a number of cases in relevant jurisprudence wherein only the Immigration Commissioner was impleaded to decide whether an alien may stay or be deported, such as in the case of Vivo vs. Arca (19 SCRA 878) and Vivo vs. Cloribel (22 SCRA 159). b) In the case of Caruncho III vs. COMELEC (315 SCRA 693), it was pronounced that: "Ordinarily, the nonjoinder of an indispensable party or the real party interest is not by itself a ground for the dismissal of the petition. The court before which the petition is filed must first require the joinder of such party. It is the noncompliance with said order that would be a ground for the dismissal of the petition." thus, c) respondent may be estopped for not raising such issue earlier.38 Aggrieved, the respondent therein, now the petitioner, through the Office of the Solicitor General, appealed to us for relief. The petitioner contends that the Court of Appeals erred on a question of law in granting the respondents petition in CA-G.R. SP No. 71094.39 In support of his contention, the Solicitor General has submitted the following arguments: I. THE WRIT OF MANDAMUS DOES NOT LIE AGAINST THE COMMISSIONER OF THE BUREAU OF IMMIGRATION TO RESOLVE RESPONDENTS URGENT MOTION FOR RECONSIDERATION OF THE SUMMARY DEPORTATION ORDER, CONSIDERING THAT IT IS THE BOARD OF COMMISSIONERS, AND NOT THE COMMISSIONER ALONE, WHICH HAS AUTHORITY TO MAKE SAID RESOLUTION. II. THE WRIT OF CERTIORARI DOES NOT LIE AGAINST THE COMMISSIONER OF THE BUREAU OF IMMIGRATION, CONSIDERING THAT IT IS THE BOARD OF COMMISSIONERS, AND NOT THE COMMISSIONER ALONE, WHICH ISSUED THE SUMMARY DEPORTATION ORDER AND THE OMNIBUS RESOLUTION. III. THE WRIT OF PROHIBITION DOES NOT LIE AGAINST THE COMMISSIONER OF THE BUREAU OF IMMIGRATION, PROHIBITING THE IMPLEMENTATION OF THE SUMMARY DEPORTATION ORDER AND THE OMNIBUS RESOLUTION, CONSIDERING THAT THE BOARD OF COMMISSIONERS WAS NOT IMPLEADED AS PARTY-RESPONDENT IN THE PETITION IN CA-G.R. SP NO. 71094. IV. ASSUMING BUT WITHOUT ADMITTING THAT THE BOARD OF COMMISSIONERS WAS PROPERLY IMPLEADED AS PARTY-RESPONDENT IN THE PETITION IN CA-G.R. SP NO. 71094, NEVERTHELESS, THE SUMMARY DEPORTATION ORDER AND THE OMNIBUS RESOLUTION WERE NOT ISSUED WITHOUT OR IN EXCESS OF JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF (SIC) EXCESS OF JURISDICTION. V. FURTHER ASSUMING BUT WITHOUT ADMITTING THAT THE BOARD OF COMMISSIONERS WAS PROPERLY IMPLEADED AS PARTY-RESPONDENT IN THE PETITION IN CA-G.R. SP NO. 71094, THE COMMISSIONER OF THE BUREAU OF IMMIGRATION DID NOT ACT WITHOUT OR IN EXCESS OF JURISDICTION OR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN IMPLEMENTING THE SUMMARY DEPORTATION ORDER AND THE OMNIBUS RESOLUTION.40 Elucidating on his first three arguments, the petitioner maintains that the respondents petition for certiorari, prohibition and mandamus before the Court of Appeals should have been dismissed because he failed to implead the real party-in-interest as mandated by Rule 3, Section 7 of the Rules of Court, as amended; in this case, the BOC. According to the Solicitor General, this was a fatal procedural error. The inclusion of the BOC as respondent in the case was necessary in order that its actions could be directly attacked and for the court to acquire jurisdiction over it. The fact that Immigration Commissioner Andrea T. Domingo was impleaded as the sole respondent was not enough, as she is only one of the four

150 Commissioners. Furthermore, the assailed Orders were issued by the Board, and not by the Immigration Commissioner alone. The respondent counters that the petitioner is already estopped from raising this issue. He argues that In quite a number of jurisprudence, only the Immigration Commissioner is impleaded to decide whether an alien may stay here or not. The bottom line is petitioner, head of the Bureau of Immigration, was more than fully heard on its institutional position, a Bureau which speaks with a single voice in this case. She is in estoppel for not raising the issue earlier, either in a timely Comment or during the oral argument41 In Caruncho III v. Comelec, it was held that[O]rdinarily, the nonjoinder of an indispensable party or real party in interest is not by itself a ground for the dismissal of the petition. The court before which the petition is filed must first require the joinder of such party. It is the noncompliance with said order that would be a ground for the dismissal of the petition. But even as the Court of Appeals did not require respondent of such joinder of parties, the respondent, in fact, begged leave, ad cautelam, in its Reply Memorandum dated July 31, 2002 to implead the Board which speaks with a single voice anyway in this case, and therefore, no claim can be made that a valid point of view has not been heard42 Moreover, according to the respondent, the petitioner is clearly the BIDs chosen instrumentality for the relevant purpose. What the respondent ultimately questioned are the acts or orders of the petitioner for the arrest and immediate deportation of the respondent by way of implementing the BOCs Summary Deportation Order. By way of reply, the Office of the Solicitor General asserted that the Summary Deportation Order and Omnibus Resolution were collegial actions of the BOC and not of the petitioner alone. Although its Chairperson, the petitioner, is merely a member thereof, her decisions and actions are still subject to the collective will of the majority.43 The Ruling of the Court The BOC is an Indispensable Party We agree with the petitioners contention that the BOC was an indispensable party to the respondents petition for certiorari, prohibition and mandamus in the Court of Appeals. The respondent was arrested and detained on the basis of the Summary Deportation Order of the BOC. The petitioner caused the arrest of the respondent in obedience to the said Deportation Order. The respondent, in his Memorandum, prayed that the CA annul not only the Summary Deportation Order of the BOC but also the latters Omnibus Resolution, and, thus, order the respondents immediate release. The respondent also prayed that the CA issue a writ of mandamus for the immediate resolution of his Urgent Motion for Reconsideration. The said motion had to be resolved by the BOC as the order sought to be resolved and reconsidered was issued by it and not by the petitioner alone. The powers and duties of the BOC may not be exercised by the individual members of the Commission.44 Section 7, Rule 3 of the Rules of Court, as amended, requires indispensable parties to be joined as plaintiffs or defendants. The joinder of indispensable parties is mandatory. Without the presence of indispensable parties to the suit, the judgment of the court cannot attain real finality.45 Strangers to a case are not bound by the judgment rendered by the court.46 The absence of an indispensable party renders all subsequent actions of the court null and void. Lack of authority to act not only of the absent party but also as to those present.47 The responsibility of impleading all the indispensable parties rests on the petitioner/plaintiff.48

151 However, the non-joinder of indispensable parties is not a ground for the dismissal of an action. Parties may be added by order of the court on motion of the party or on its own initiative at any stage of the action and/or such times as are just.49 If the petitioner/plaintiff refuses to implead an indispensable party despite the order of the court, the latter may dismiss the complaint/petition for the petitioner/plaintiffs failure to comply therefor.50 The remedy is to implead the non-party claimed to be indispensable.51 In this case, the CA did not require the respondent (petitioner therein) to implead the BOC as respondent, but merely relied on the rulings of the Court in Vivo v. Arca,52 and Vivo v. Cloribel.53 The CAs reliance on the said rulings is, however, misplaced. The acts subject of the petition in the two cases were those of the Immigration Commissioner and not those of the BOC; hence, the BOC was not a necessary nor even an indispensable party in the aforecited cases. The Non-joinder of an Indispensable Party is not a Ground for the Dismissal of the Petition The Court may be curing the defect in this case by adding the BOC as party-petitioner. The petition should not be dismissed because the second action would only be a repetition of the first.54 In Salvador, et al., v. Court of Appeals, et al.,55 we held that this Court has full powers, apart from that power and authority which is inherent, to amend the processes, pleadings, proceedings and decisions by substituting as party-plaintiff the real party-in-interest. The Court has the power to avoid delay in the disposition of this case, to order its amendment as to implead the BOC as party-respondent. Indeed, it may no longer be necessary to do so taking into account the unique backdrop in this case, involving as it does an issue of public interest.56 After all, the Office of the Solicitor General has represented the petitioner in the instant proceedings, as well as in the appellate court, and maintained the validity of the deportation order and of the BOCs Omnibus Resolution. It cannot, thus, be claimed by the State that the BOC was not afforded its day in court, simply because only the petitioner, the Chairperson of the BOC,57 was the respondent in the CA, and the petitioner in the instant recourse. In Alonso v. Villamor,58 we had the occasion to state: There is nothing sacred about processes or pleadings, their forms or contents.1wphi1 Their sole purpose is to facilitate the application of justice to the rival claims of contending parties. They were created, not to hinder and delay, but to facilitate and promote, the administration of justice. They do not constitute the thing itself, which courts are always striving to secure to litigants. They are designed as the means best adapted to obtain that thing. In other words, they are a means to an end. When they lose the character of the one and become the other, the administration of justice is at fault and courts are correspondingly remiss in the performance of their obvious duty. The CA had Jurisdiction Over the Petition for Certiorari, Prohibition and Mandamus We do not agree with the petitioners contention that the issue before the CA, as to the power of the President to determine whether an alien may remain or be deported from the Philippines, is beyond the appellate courts competence to delve into and resolve. The contention of the petitioner is based on a wrong premise. The settled rule is that the authority to exclude or expel aliens by a power affecting international relation is vested in the political department of the government, and is to be regulated by treaty or by an act of Congress, and to be executed by the executive authority according to the regulations so established, except in so far as the judicial department has been authorized by treaty or by statute, or is required by the Constitution to intervene.59 The judicial department cannot properly express an opinion upon the wisdom or the justice of the measures executed by Congress in the exercise of the power conferred on it,60 by statute or as required by the Constitution. Congress may, by statute, allow the decision or order of the Immigration Commissioner or the BOC to be reviewed by the President of the Philippines or by the courts, on the grounds and in the manner prescribed by law.

152 Article VIII, Section 1 of the Constitution has vested judicial power in the Supreme Court and the lower courts such as the Court of Appeals, as established by law. Although the courts are without power to directly decide matters over which full discretionary authority has been delegated to the legislative or executive branch of the government and are not empowered to execute absolutely their own judgment from that of Congress or of the President,61 the Court may look into and resolve questions of whether or not such judgment has been made with grave abuse of discretion, when the act of the legislative or executive department violates the law or the Constitution. In Harvy Bridges v. I.F. Wixon,62 the United States Federal Supreme Court reversed an Order of Deportation made by the Attorney General for insufficiency of evidence and for "improper admission of evidence." In Nging v. Nagh,63 the United States Court of Appeals (9th Circuit Court) held that conclusions of administrative offices on the issues of facts are invulnerable in courts unless when they are not rendered by fair-minded men; hence, are arbitrary. In Toon v. Stump,64 the Court ruled that courts may supervise the actions of the administrative offices authorized to deport aliens and reverse their rulings when there is no evidence to sustain them. When acts or omissions of a quasi-judicial agency are involved, a petition for certiorari or prohibition may be filed in the Court of Appeals as provided by law or by the Rules of Court, as amended.65 In this case, the respondent alleges that the petitioner acted arbitrarily, contrary to law and with grave abuse of discretion in causing his arrest and detention at a time when his Urgent Motion for Reconsideration of the BOCs Summary Deportation Order had yet to be resolved. There was no factual or legal basis for his deportation considering that he was a documented alien and a law-abiding citizen; the respondent, thus, prayed for a writ of mandamus to compel the petitioner, the Chairperson of the BOC, to resolve the said motion. The petition before the CA did not involve the act or power of the President of the Philippines to deport or exclude an alien from the country. This being so, the petition necessarily did not call for a substitution of the Presidents discretion on the matter of the deportation of the respondent with that of the judgment of the CA. Irrefragably, the CA had jurisdiction over the petition of the respondent. The BOC Committed a Grave Abuse of Discretion Amounting To Lack or Excess of Jurisdiction In Issuing its Summary Deportation Order and Omnibus Resolution; The Petitioner Committed a Grave Abuse Of Her Discretion Amounting to Lack or Excess of Jurisdiction in Causing the Arrest and Detention Of The Private Respondent On the Solicitor Generals fourth and fifth arguments, we are convinced that the BOC committed a grave abuse of discretion amounting to excess or lack of jurisdiction in issuing its Summary Deportation Order and Omnibus Resolution, and that the petitioner committed grave abuse of discretion amounting to excess or lack of jurisdiction in causing the arrest and detention of the private respondent. The settled rule is that the entry or stay of aliens in the Philippines is merely a privilege and a matter of grace; such privilege is not absolute nor permanent and may be revoked. However, aliens may be expelled or deported from the Philippines only on grounds and in the manner provided for by the Constitution, the Immigration Act of 1940, as amended, and administrative issuances pursuant thereto. In Mejoff v. Director of Prisons,66 we held, thus: Moreover, by its Constitution (Art. II, Sec. 3) the Philippines "adopts the generally accepted principles of international law a part of the law of Nation." And in a resolution entitled "Universal Declaration of Human Rights" and approved by the General Assembly of the United Nations of which the Philippines is a member, at its plenary meeting on December 10, 1948, the right to life and liberty and all other fundamental rights as applied to all human beings were proclaimed. It was there resolved that "All human beings are born free and equal in degree and rights" (Art. 1); that "Everyone is entitled to all the rights and freedom set forth in this Declaration, without distinction of any kind, such as race, color, sex, language, religion, political or other opinion, nationality or social origin, property, birth, or other status" (Art. 2); that "Every one has the right to an effective remedy by the competent national tribunals for acts

153 violating the fundamental rights granted him by the Constitution or by law" (Art. 8); that "No one shall be subjected to arbitrary arrest, detention or exile" (Art. 9); etc. In this case, the BOC ordered the private respondents deportation on September 27, 1995 without even conducting summary deportation proceedings. The BOC merely relied on the June 29, 1995 Letter of the German Vice Consul and of the German Embassys Note Verbale No. 369/95 dated July 26, 1995. It issued the Summary Deportation Order on September 27, 1995 allegedly under paragraph 3 of Office Memorandum Order No. 34 dated August 21, 1989 which reads: 3. If a foreign embassy cancels the passport of the alien or does not reissue a valid passport to him, the alien loses the privilege to remain in the country, under the Immigration Act, Sections 10 and 15 (Schonemann vs. Santiago, et al., G.R. No. 81461, 30 May 1989). The automatic loss of the privilege obviates deportation proceedings. In such instance, the Board of Commissioners may issue summary judgment of deportation which shall be immediately executory. However, as gleaned from the Summary Deportation Order, the respondent was ordered deported not only because his passport had already expired; the BOC speculated that the respondent committed insurance fraud and illegal activities in the Philippines and would not, thus, be issued a new passport. This, in turn, caused the BOC to conclude that the respondent was an undesirable alien. Section 37(c) of Commonwealth Act No. 613, as amended, provides that: No alien shall be deported without being informed of the specific grounds for deportation or without being given a hearing under rules of procedure to be prescribed by the Commissioner of Immigration. Under paragraphs 4 and 5 of Office Memorandum Order No. 34, an alien cannot be deported unless he is given a chance to be heard in a full deportation hearing, with the right to adduce evidence in his behalf, thus: 4. All other cases shall be tried in full deportation hearing, with due observance of the pertinent provisions of Law Instruction No. 39. 5. In all cases, the right of the alien to be informed of the charges against him, to be notified of the time and place of hearing, when necessary, to examine the evidence against him, and to present evidence in his own behalf, where appropriate, shall be observed. The respondent was not afforded any hearing at all. The BOC simply concluded that the respondent committed insurance fraud and illegal activities in Palawan without any evidence. The respondent was not afforded a chance to refute the charges. He cannot, thus, be arrested and deported without due process of law as required by the Bill of Rights of the Constitution. In Lao Gi v. Court of Appeals,67 we held that: Although a deportation proceeding does not partake of the nature of a criminal action, however, considering that it is a harsh and extraordinary administrative proceeding affecting the freedom and liberty of a person, the constitutional right of such person to due process should not be denied. Thus, the provisions of the Rules of Court of the Philippines particularly on criminal procedure are applicable to deportation proceedings. It must be noted that the respondent was a permanent resident before his passport expired on July 2, 1995. In Chew v. Colding,68 the United States Federal Supreme Court ruled: It is well established that if an alien is a lawful permanent resident of the United States and remains physically present there, he is a person within the protection of the Fifth Amendment. He may not be deprived of his life, liberty or property without due process of law. Although it later may be established, as respondents contend, that petitioner can be expelled and deported, yet before his expulsion, he is entitled to notice of the nature of the charge and a hearing at least before an executive or administrative tribunal. Although Congress may prescribe conditions for his expulsion and deportation, not even Congress may expel him without allowing him a fair opportunity to be heard.

154 As Mr. Justice Murphy said in his concurring opinion in Bridges v. Wixon:69 The Bill of Rights belongs to them as well as to all citizens. It protects them as long as they reside within the boundaries of our land. It protects them in the exercise of the great individual rights necessary to a sound political and economic democracy. According to Vattal,70 an alien who is a permanent resident in a country is a member of the new society, at least as a permanent inhabitant, and is a kind of citizen of inferior order from the native citizens; but is, nevertheless, limited and subject to the society, without participating in all its advantages. Sir Robert Philconse called them "de facto," though not de jure citizens of the country of their domicile.71 Such permanent resident72 may be classified as a "denizen," a kind of middle state between alien and a natural-born subject and partakes of both. Paraphrasing Justice Brewer in his dissenting opinion in Fong Yue Ting v. United States,73 when the right to liberty and residence is involved, some other protection than the mere discretion of the petitioner or the BOC is required. We recall the warning of the United States Supreme Court in Boyd v. United States:74 Illegitimate and unconstitutional practices get their first footing in that way, namely, by silent approaches and slight deviations from legal modes of procedure. This can only be obviated by adhering to the rule that constitutional provisions for the security of person and property should be liberally construed. A close and literal construction deprives them of half their efficacy, and leads to a gradual depreciation of the right, as if it consisted more in sound than in substance. It is the duty of the courts to be watchful for the constitutional rights of the citizen, and against any stealthy encroachments thereon. Their motto should be obsta principiis. In sum, the arrest and detention of the respondent and his deportation under the Summary Deportation Order of the BOC for insurance fraud and illegal activities in Palawan violated his constitutional and statutory rights to due process. The Respondents Arrest and Detention was Premature, Unwarranted and Arbitrary We agree that the Immigration Commissioner is mandated to implement a legal and valid Summary Deportation Order within a reasonable time. But in this case, the arrest of the respondent in his house, at near midnight, and his subsequent detention was premature, unwarranted and arbitrary. Like a thunderbolt in the sky, the BID agents and marines arrested the respondent on June 6, 2002, on orders of the petitioner based on the September 27, 1995 Summary Deportation Order. Under the basic rudiments of fair play and due process, the petitioner was required to first resolve the respondents Urgent Motion for Reconsideration of the said Order, which was filed more than six years before or on December 5, 1995. It may be argued that respondents filing of an Urgent Motion for Reconsideration did not ipso facto suspend the efficacy of the BOCs deportation order. However, such an argument cannot be sustained in this case because of the extant and peculiar factual milieu. It bears stressing that more than six years had elapsed, from the time the Summary Deportation Order was issued, until the respondent was finally arrested. Supervening facts and circumstances rendered the respondents arrest and detention unjust, unreasonable, barren of factual and legal basis. The BOC should have set the respondents motion for hearing to afford him a chance to be heard and adduce evidence in support thereon. It was bad enough that the BOC issued its Summary Deportation Order without a hearing; the BOC dealt the respondent a more severe blow when it refused to resolve his motion for reconsideration before causing his arrest on June 6, 2002. As aforestated, the BOC ordered the deportation of the respondent after a summary proceeding without prior notice on the following grounds: (a) the respondents German passport had expired; (b) there was a pending criminal case for physical injuries against him in Germany; (c) the respondent indulged in illegal activities in Palawan; (d) that in all likelihood, the respondents passport will not be renewed by the German Embassy as he was wanted for insurance fraud in Germany; and, (e) he was an

155 undesirable alien. But then, in response to the written query of no less than the petitioner herself, the German Embassy declared that the respondent was not wanted by the German police for any crime, including insurance fraud. This could only mean that the warrant of arrest issued by the German Federal police mentioned in Note Verbale No. 369/95 had been lifted, and that the respondent was not involved in any illegal activities in Germany. The criminal case against the respondent for physical injuries, which does not involve moral turpitude, was dismissed by the German District Court. Furthermore, there was no evidence of insurance fraud against the respondent. The BOC issued its Summary Deportation Order without affording the respondent the right to be heard on his motion and adduce evidence thereon. It merely concluded that the respondent was involved in "illegal activities in Palawan." What made matters worse was that the BOC indulged in sheer speculation, that the German Embassy is unlikely to issue a new passport to the respondent. The deportation of aliens should not be based on mere speculation or a mere product of procrastinations as in this case. As it turned out, the German Embassy re-issued the respondents passport; he was issued a temporary passport, and, thereafter, a regular passport, yet to expire on March 12, 2006. The petitioner cannot feign ignorance of this matter because the respondent himself, six years before he was arrested, informed then Immigration Commissioner Verceles in a Letter dated March 1, 1996. The respondents letter forms part of the records of the BOC. There is no evidence on record that the respondent committed any illegal activities in Palawan. He was even designated as special agent of the NBI, and was, in fact, issued clearances by the PNP and the NBI no less. Despite all the foregoing, the petitioner ordered and caused the arrest and detention of the respondent. What is most nettlesome is the apparent antedating of the BOC Omnibus Resolution. The records show that the petitioner sought to assuage the respondents concern on the belated resolution of his pending urgent motion for reconsideration in a Letter to the latters counsel dated July 18, 2002 in which the petitioner assured the respondent that the BOC will provide him of its action on the said motion: Dear Atty. Sagisag, We respond to your letter of 17 June 2002 by informing you that the case of Mr. Herbert Scheer is being evaluated by the Board of Commissioners (BOC). The BOC will provide you of the results of its collegial action in due time. Very truly yours, (Sgd.) ANDREA D. DOMINGO Commissioner75 However, the Omnibus Resolution of the BOC was dated June 14, 2002, although on its face it was filed with the Records Division of the BID only on July 18, 2002. The foregoing gave reason for the CA to suspect that the Omnibus Resolution of the BOC was antedated.76 The petition of the respondent in the CA must have jolted the petitioner and the BOC from its stupor because it came out with its Omnibus Resolution on July 18, 2002, which was, however, dated as early as June 14, 2002. The respondent had to wait in anxiety for the BOC to quench his quest for justice. The BOCs wanton acts amounted to an abdication of its duty to act and/or resolve cases/incidents with reasonable dispatch. To recall our ruling in Board of Commissioners v. De la Rosa,77 citing Sheor v. Bengson,78 thus: This inaction or oversight on the part of the immigration officials has created an anomalous situation which, for reasons of equity, should be resolved in favor of the minor herein involved. The petitioner and the BOC should have taken to heart the following pronouncement in Commissioner of Immigration v. Fernandez:79 In the face of the disclosure that Teban Caoili had been all along working in the Avenue Electrical Supply Co. (Avesco), located at No. 653 Rizal Avenue, Manila, until his arrest, and the documentary evidence showing that he had been issued a Philippine Passport; had regularly paid his Residence Tax Certificates

156 (A & B), and filed Income Tax Returns, a finding of fact is necessary whether the Commissioner really had intended to notify Teban Caoili of the exclusion proceedings the Board had conducted in his absence. While it may be true that the proceedings is purely administrative in nature, such a circumstance did not excuse the serving of notice. There are cardinal primary rights which must be respected even in proceedings of administrative character, the first of which is the right of the party interested or affected to present his own case and submit evidence in support thereof.80 ... Since the proceedings affected Caoilis status and liberty, notice should have been given. And in the light of the actuations of the new Board of Commissioners, there is a necessity of determining whether the findings of the Board of Special Inquiry and the old Board of Commissioners are correct or not. This calls for an examination of the evidence, and, the law on the matter.81 Apparently, the BOC did not bother to review its own records in resolving the respondents Urgent Motion for Reconsideration. It anchored its Omnibus Resolution only on the following: the membership of the BOC had changed when it issued its September 27, 1995 Summary Deportation Order and under Commonwealth Act No. 613, Section 27(b); the BOC is precluded from reversing a previous order issued by it;82and, the September 27, 1995 Order of the BOC had become final and could no longer be reviewed and reversed by it after the lapse of one year.83 However, the rulings cited by the petitioner are not applicable in the instant case, as the said cases cited involve appeals to the BOC from the decisions of the Board of Special Inquiry (BSI). In Sy v. Vivo84 and Lou v. Vivo,85 we ruled that under Section 27(b) of Commonwealth Act No. 613, as amended, the Decision of the BOC on appeal from the decision of the BSI becomes final and executory after one year: (b) A board of special inquiry shall have authority (1) to determine whether an alien seeking to enter or land in the Philippines shall be allowed to enter or land or shall be excluded, and (2) to make its findings and recommendations in all the cases provided for in section twenty-nine of this Act wherein the Commissioner of Immigration may admit an alien who is otherwise inadmissible. For this purpose, the board or any member thereof, may administer oaths and take evidence and in case of necessity may issue subpoena and/or subpoena duces tecum. The hearing of all cases brought before a board of special inquiry shall be conducted under rules of procedure to be prescribed by the Commissioner of Immigration. The decision of any two members of the board shall prevail and shall be final unless reversed on appeal by the Board of Commissioners as hereafter stated, or in the absence of an appeal, unless reversed by the Board of Commissioners after a review by it, motu propio, of the entire proceedings within one year from the promulgation of the decision. In Commissioner of Immigration v. Fernandez,86 we held that the BOC composed of new members is precluded from reversing, motu proprio, the decision of the BOC on appeal from a BSI decision. But not to be ignored was our ruling that "at any rate, the issue of authority should be made in accordance with the procedure established by law, with a view to protecting the rights of individuals."87 In this case, the Summary Deportation Order was issued by the BOC in the exercise of its authority under Office Memorandum Order No. 34, and not in the exercise of its appellate jurisdiction of BSI decisions. There is no law nor rule which provides that a Summary Deportation Order issued by the BOC in the exercise of its authority becomes final after one year from its issuance,88 or that the aggrieved party is barred from filing a motion for a reconsideration of any order or decision of the BOC. The Rules of Court may be applied in a suppletory manner to deportation proceedings89 and under Rule 37, a motion for reconsideration of a decision or final order may be filed by the aggrieved party. Neither is there any law nor rule providing that the BOC, composed of new members, cannot revise a Summary Deportation Order previously issued by a different body of Commissioners. The BOC that issued the Summary Deportation Order and the BOC which resolved the respondents Urgent Motion for Reconsideration are one and the same government entity, with the same powers and duties regardless of its membership. Similarly, an RTC judge who replaces another judge who presided over a case may review the judgment or order of his predecessor as long as the said judgment or order has not as yet become final or executory. The act subject of review is not the act of the judge but the act of the court.

157 The petitioners contention that it failed to resolve the respondents motion for reconsideration because of the change of administration in the BOC was branded by the CA as flimsy, if not bordering on the absurd: Firstly, it was issued three days (June 14, 2002) after petitioner filed this instant petition on June 11, 2002 or almost seven years from the time the motion for reconsideration was filed; Secondly, respondents counsels excuse that it took such time to resolve it because it was only later that the motion for reconsideration was discovered because of change of administration, is flimsy, if not bordering on the absurd;90 The Issuance of a New and Regular Passport to the Respondent Rendered the Summary Deportation Order Moot and Academic, and the Omnibus Resolution of the BOC Lacking in Legal Basis We agree with the petitioner that a foreign embassys cancellation of the passport it had issued to its citizens, or its refusal to issue a new one in lieu of a passport that has expired, will result in the loss of the aliens privilege to stay in this country and his subsequent deportation therefrom. But even the BOC asserted in its Summary Deportation Order that an embassys issuance of a new passport to any of its citizens may bar the latters deportation, citing the resolution of this Court in Schonemann v. Commissioner Santiago.91 Irrefragably, Commissioner Verceles was mandated to cause the arrest of the respondent preparatory to his deportation from the Philippines. However, there was no fixed period in the Order within which to comply with the same. The Commissioner is not mandated to deport an alien immediately upon receipt of the BOCs deportation order. It is enough that the Commissioner complies with the Order within a "reasonable time," which, in Mejoff v. Director of Prisons,92 we held to connote as follows: The meaning of "reasonable time" depends upon the circumstances, specially the difficulties of obtaining a passport, the availability of transportation, the diplomatic arrangements with the governments concerned and the efforts displayed to send the deportee away; but the Court warned that "under established precedents, too long a detention may justify the issuance of a writ of habeas corpus. In this case, the BOC had yet to act on the respondents Urgent Motion for Reconsideration. The respondent was also given a chance to secure a clearance and a new passport with the German Embassy. After all, the possibility that the German Embassy would renew the respondents passport could not be ruled out. This was exactly what happened: the German Embassy issued a new passport to the respondent on March 12, 1996 after the German District Court dismissed the case for physical injuries. Thus, the respondent was no longer an undocumented alien; nor was he an undesirable one for that matter. The petitioner even admits that there is no longer a legal or factual basis to disqualify the respondent from remaining in the country as a permanent resident. Yet, the OSG insists that he has to be deported first so that the BOCs Summary Deportation Order could be implemented. This contention was rejected by the CA, thus: During the hearing of petitioners prayer for issuance of a writ of preliminary injunction before Us, respondents counsel from the Office of the Solicitor General had the occasion to manifest in open court that the State has no opposition to petitioners stay in the country provided he first leave and re-enter and re-apply for residency if only to comply with the Summary Deportation Order of 1995. That, to Our mind, seems preposterous, if not ridiculous. An individuals human rights and rights to freedom, liberty and self-determination recognize no boundaries in the democratic, free and civilized world. Such rights follow him wherever he may be. If presently, there is no factual or legal impediment to disqualify

158 petitioner in his stay in the country, other than allegedly those relied upon in the Summary Deportation Order of 1995 (as hereinbefore discussed, had ceased to exist), requiring petitioner to leave the country and re-enter and re-apply for residency makes little sense or no sense at all, more so, in the case of petitioner who, for many years past, had lived herein and nurtured a family that is Filipino. Thus, opined, We, therefore, believe and hereby rule, that there is presently every reason to enjoin/prohibit the Bureau of Immigration, respondent Commissioner Domingo in particular, from presently deporting petitioner.93 We agree with the Court of Appeals. The Summary Deportation Order had been rendered moot and academic upon the German Embassys issuance of a new passport to the respondent. The respondent had been in the Philippines as a permanent resident since July 18, 1986, and had married a Filipino citizen, with whom he has two children. He is not a burden to the country nor to the people of Palawan. He put up, and has been managing, the Bavaria Restaurant with about 30 employees. He has no pending criminal case; nor does he have any derogatory record. The respondent was allowed by then Immigration Commissioner Verceles to renew his passport and was given time to secure a clearance from the German Embassy. The respondent was able to do so. The case against him for physical injuries was dismissed by the German District Court. Thus, the inceptual basis for the respondents deportation had ceased to exist. The power to deport is a police matter against undesirable aliens, whose presence in the country is found to be injurious to the public good. We believe that the deportation of the respondent late in the day did not achieve the said purpose. The petitioner admitted that there is no longer a factual and legal basis to disqualify the respondent from staying in the country. He is not an undesirable alien; nor is his presence in the country injurious to public good. He is even an entrepreneur and a productive member of society. Arrest, detention and deportation orders of aliens should not be enforced blindly and indiscriminately, without regard to facts and circumstances that will render the same unjust, unfair or illegal.94 To direct the respondent to leave the country first before allowing him re-entry is downright iniquitous.95 If the respondent does leave the country, he would thereby be accepting the force and effect of the BOCs Summary Deportation Order with its attendant infirmities. He will thereby lose his permanent resident status and admit the efficacy of the cancellation of his permanent resident visa. Moreover, his entry into the country will be subject to such conditions as the petitioner may impose. The deportation of an alien is not intended as a punishment or penalty.1wphi1 But in a real sense, it is. In Bridges v. Wixon,96 Mr. Justice Murphy declared that the impact of deportation upon the life of an alien is often as great if not greater than the imposition of a criminal sentence. In dealing with deportation, there is no justifiable reason for disregarding the democratic and human tenets of our legal system and descending to the practices of despotism. As Justice Brewer opined in Fong Yue Ting v. United States,97 deportation is a punishment because it requires first, an arrest, a deprivation of liberty and second, a removal from home, from family, from business, from property. To be forcibly taken away from home, family, business and property and sent across the ocean to a distant land is punishment; and that oftentimes is most severe and cruel. It would be putting salt on the respondents woes occasioned by the BOCs ineptitude. Considering the peculiar backdrop and the equities in this case, the respondents deportation and the cancellation of his permanent resident visa as a precondition to his reentry into this country is severe and cruel; it is a form of punishment. Our ruling in Vivo v. Cloribel,98 has no application in this case, precisely because the factual milieu here is entirely different. In that case, the Commissioner of Immigration required the respondents to leave the country on or before September 12, 1962, because their stay in the country as approved by the Secretary of Justice had been cancelled. Our ruling in Bing v. Commission on Immigration,99 even buttresses the case for the respondent since we ruled therein that an alien entitled to a permanent stay cannot be deported without being accorded due notice and hearing. IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Decision of the Court of Appeals is AFFIRMED.SO ORDERED

159 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 84818 December 18, 1989 PHILIPPINE COMMUNICATIONS SATELLITE CORPORATION, petitioner, vs. JOSE LUIS A. ALCUAZ, as NTC Commissioner, and NATIONAL TELECOMMUNICATIONS COMMISSION,respondents. Rilloraza, Africa, De Ocampo & Africa for petitioner. Victor de la Serna for respondent Alcuaz.

REGALADO, J.: This case is posed as one of first impression in the sense that it involves the public utility services of the petitioner Philippine Communications Satellite Corporation (PHILCOMSAT, for short) which is the only one rendering such services in the Philippines. The petition before us seeks to annul and set aside an Order 1 issued by respondent Commissioner Jose Luis Alcuaz of the National Telecommunications Commission (hereafter, NTC), dated September 2, 1988, which directs the provisional reduction of the rates which may be charged by petitioner for certain specified lines of its services by fifteen percent (15%) with the reservation to make further reductions later, for being violative of the constitutional prohibition against undue delegation of legislative power and a denial of procedural, as well as substantive, due process of law. The antecedental facts as summarized by petitioner 2 are not in dispute. By virtue of Republic Act No. 5514, PHILCOMSAT was granted "a franchise to establish, construct, maintain and operate in the Philippines, at such places as the grantee may select, station or stations and associated equipment and facilities for international satellite communications." Under this franchise, it was likewise granted the authority to "construct and operate such ground facilities as needed to deliver telecommunications services from the communications satellite system and ground terminal or terminals." Pursuant to said franchise, petitioner puts on record that it undertook the following activities and established the following installations: 1. In 1967, PHILCOMSAT established its provisional earth station in Pinugay, Rizal. 2. In 1968, earth station standard "A" antenna (Pinugay I) was established. Pinugay I provided direct satellite communication links with the Pacific Ocean Region (the United States, Australia, Canada, Hawaii, Guam, Korea, Thailand, China [PROC], New Zealand and Brunei) thru the Pacific Ocean INTELSAT satellite. 3. In 1971, a second earth station standard "A" antenna(Pinugay III) was established. Pinugay II provided links with the Indian Ocean Region (major cities in Europe, Middle East, Africa, and other Asia Pacific countries operating within the region) thru the Indian Ocean INTELSAT satellite. 4. In 1983, a third earth station standard "B" antenna (Pinugay III) was established to temporarily assume the functions of Pinugay I and then Pinugay II while they were being refurbished. Pinugay III now serves as spare or reserved antenna for possible contingencies.

160 5. In 1983, PHILCOMSAT constructed and installed a standard "B" antenna at Clark Air Field, Pampanga as a television receive-only earth station which provides the U.S. Military bases with a 24-hour television service. 6. In 1989, petitioner completed the installation of a third standard "A" earth station (Pinugay IV) to take over the links in Pinugay I due to obsolescence. 3 By designation of the Republic of the Philippines, the petitioner is also the sole signatory for the Philippines in the Agreement and the Operating Agreement relating to the International Telecommunications Satellite Organization (INTELSAT) of 115 member nations, as well as in the Convention and the Operating Agreement of the International Maritime Satellite Organization (INMARSAT) of 53 member nations, which two global commercial telecommunications satellite corporations were collectively established by various states in line with the principles set forth in Resolution 1721 (XVI) of the General Assembly of the United Nations. Since 1968, the petitioner has been leasing its satellite circuits to: 1. Philippine Long Distance Telephone Company; 2. Philippine Global Communications, Inc.; 3. Eastern Telecommunications Phils., Inc.; 4. Globe Mackay Cable and Radio Corp. ITT; and 5. Capitol Wireless, Inc. or their predecessors-in-interest. The satellite services thus provided by petitioner enable said international carriers to serve the public with indispensable communication services, such as overseas telephone, telex, facsimile, telegrams, high speed data, live television in full color, and television standard conversion from European to American or vice versa. Under Section 5 of Republic Act No. 5514, petitioner was exempt from the jurisdiction of the then Public Service Commission, now respondent NTC. However, pursuant to Executive Order No. 196 issued on June 17, 1987, petitioner was placed under the jurisdiction, control and regulation of respondent NTC, including all its facilities and services and the fixing of rates. Implementing said Executive Order No. 196, respondents required petitioner to apply for the requisite certificate of public convenience and necessity covering its facilities and the services it renders, as well as the corresponding authority to charge rates therefor. Consequently, under date of September 9, 1987, petitioner filed with respondent NTC an application 4 for authority to continue operating and maintaining the same facilities it has been continuously operating and maintaining since 1967, to continue providing the international satellite communications services it has likewise been providing since 1967, and to charge the current rates applied for in rendering such services. Pending hearing, it also applied for a provisional authority so that it can continue to operate and maintain the above mentioned facilities, provide the services and charge therefor the aforesaid rates therein applied for. On September 16, 1987, petitioner was granted a provisional authority to continue operating its existing facilities, to render the services it was then offering, and to charge the rates it was then charging. This authority was valid for six (6) months from the date of said order. 5 When said provisional authority expired on March 17, 1988, it was extended for another six (6) months, or up to September 16, 1988. The NTC order now in controversy had further extended the provisional authority of the petitioner for another six (6) months, counted from September 16, 1988, but it directed the petitioner to charge modified reduced rates through a reduction of fifteen percent (15%) on the present authorized rates. Respondent Commissioner ordered said reduction on the following ground:

161 The Commission in its on-going review of present service rates takes note that after an initial evaluation by the Rates Regulation Division of the Common Carriers Authorization Department of the financial statements of applicant, there is merit in a REDUCTION in some of applicant's rates, subject to further reductions, should the Commission finds (sic) in its further evaluation that more reduction should be effected either on the basis of a provisional authorization or in the final consideration of the case. 6 PHILCOMSAT assails the above-quoted order for the following reasons: 1. The enabling act (Executive Order No. 546) of respondent NTC empowering it to fix rates for public service communications does not provide the necessary standards constitutionally required, hence there is an undue delegation of legislative power, particularly the adjudicatory powers of NTC; 2. Assuming arguendo that the rate-fixing power was properly and constitutionally conferred, the same was exercised in an unconstitutional manner, hence it is ultra vires, in that (a) the questioned order violates procedural due process for having been issued without prior notice and hearing; and (b) the rate reduction it imposes is unjust, unreasonable and confiscatory, thus constitutive of a violation of substantive due process. I. Petitioner asseverates that nowhere in the provisions of Executive Order No. 546, providing for the creation of respondent NTC and granting its rate-fixing powers, nor of Executive Order No. 196, placing petitioner under the jurisdiction of respondent NTC, can it be inferred that respondent NTC is guided by any standard in the exercise of its rate-fixing and adjudicatory powers. While petitioner in its petition-inchief raised the issue of undue delegation of legislative power, it subsequently clarified its said submission to mean that the order mandating a reduction of certain rates is undue delegation not of legislative but of quasi-judicial power to respondent NTC, the exercise of which allegedly requires an express conferment by the legislative body. Whichever way it is presented, petitioner is in effect questioning the constitutionality of Executive Orders Nos. 546 and 196 on the ground that the same do not fix a standard for the exercise of the power therein conferred. We hold otherwise. Fundamental is the rule that delegation of legislative power may be sustained only upon the ground that some standard for its exercise is provided and that the legislature in making the delegation has prescribed the manner of the exercise of the delegated power. Therefore, when the administrative agency concerned, respondent NTC in this case, establishes a rate, its act must both be nonconfiscatory and must have been established in the manner prescribed by the legislature; otherwise, in the absence of a fixed standard, the delegation of power becomes unconstitutional. In case of a delegation of rate-fixing power, the only standard which the legislature is required to prescribe for the guidance of the administrative authority is that the rate be reasonable and just. However, it has been held that even in the absence of an express requirement as to reasonableness, this standard may be implied. 7 It becomes important then to ascertain the nature of the power delegated to respondent NTC and the manner required by the statute for the lawful exercise thereof. Pursuant to Executive Orders Nos. 546 and 196, respondent NTC is empowered, among others, to determine and prescribe rates pertinent to the operation of public service communications which necessarily include the power to promulgate rules and regulations in connection therewith. And, under Section 15(g) of Executive Order No. 546, respondent NTC should be guided by the requirements of public safety, public interest and reasonable feasibility of maintaining effective competition of private entities in communications and broadcasting facilities. Likewise, in Section 6(d) thereof, which provides for the creation of the Ministry of Transportation and Communications with control and supervision over respondent NTC, it is specifically provided that the national economic viability of the entire network or components of the communications systems contemplated therein should be maintained at reasonable rates. We need not go into an in-depth analysis of the pertinent provisions of the law in

162 order to conclude that respondent NTC, in the exercise of its rate-fixing power, is limited by the requirements of public safety, public interest, reasonable feasibility and reasonable rates, which conjointly more than satisfy the requirements of a valid delegation of legislative power. II. On another tack, petitioner submits that the questioned order violates procedural due process because it was issued motu proprio, without notice to petitioner and without the benefit of a hearing. Petitioner laments that said order was based merely on an "initial evaluation," which is a unilateral evaluation, but had petitioner been given an opportunity to present its side before the order in question was issued, the confiscatory nature of the rate reduction and the consequent deterioration of the public service could have been shown and demonstrated to respondents. Petitioner argues that the function involved in the rate fixing-power of NTC is adjudicatory and hence quasi-judicial, not quasi- legislative; thus, notice and hearing are necessary and the absence thereof results in a violation of due process. Respondents admit that the application of a policy like the fixing of rates as exercised by administrative bodies is quasi-judicial rather than quasi-legislative: that where the function of the administrative agency is legislative, notice and hearing are not required, but where an order applies to a named person, as in the instant case, the function involved is adjudicatory. 8 Nonetheless, they insist that under the facts obtaining the order in question need not be preceded by a hearing, not because it was issued pursuant to respondent NTC's legislative function but because the assailed order is merely interlocutory, it being an incident in the ongoing proceedings on petitioner's application for a certificate of public convenience; and that petitioner is not the only primary source of data or information since respondent is currently engaged in a continuing review of the rates charged. We find merit in petitioner's contention. In Vigan Electric Light Co., Inc. vs. Public Service Commission, 9 we made a categorical classification as to when the rate-filing power of administrative bodies is quasi-judicial and when it is legislative, thus: Moreover, although the rule-making power and even the power to fix rates- when such rules and/or rates are meant to apply to all enterprises of a given kind throughout the Philippines-may partake of a legislative character, such is not the nature of the order complained of. Indeed, the same applies exclusively to petitioner herein. What is more, it is predicated upon the finding of fact-based upon a report submitted by the General Auditing Office-that petitioner is making a profit of more than 12% of its invested capital, which is denied by petitioner. Obviously, the latter is entitled to cross-examine the maker of said report, and to introduce evidence to disprove the contents thereof and/or explain or complement the same, as well as to refute the conclusion drawn therefrom by the respondent. In other words, in making said finding of fact, respondent performed a function partaking of a quasi-judicial character, the valid exercise of which demands previous notice and hearing. This rule was further explained in the subsequent case of The Central Bank of the Philippines vs. Cloribel, et al. 10to wit: It is also clear from the authorities that where the function of the administrative body is legislative, notice of hearing is not required by due process of law (See Oppenheimer, Administrative Law, 2 Md. L.R. 185, 204, supra, where it is said: 'If the nature of the administrative agency is essentially legislative, the requirements of notice and hearing are not necessary. The validity of a rule of future action which affects a group, if vested rights of liberty or property are not involved, is not determined according to the same rules which apply in the case of the direct application of a policy to a specific individual) ... It is said in 73 C.J.S. Public Administrative Bodies and Procedure, sec. 130, pages 452 and 453: 'Aside from statute, the necessity of notice and hearing in an administrative proceeding depends on the character of the proceeding and the circumstances involved. In so far as generalization is possible in view of the great variety of administrative proceedings, it may be stated as a general rule that notice and hearing are not essential to the validity of administrative action where the administrative body acts in the exercise of executive, administrative, or legislative functions; but where a public

163 administrative body acts in a judicial or quasi-judicial matter, and its acts are particular and immediate rather than general and prospective, the person whose rights or property may be affected by the action is entitled to notice and hearing. 11 The order in question which was issued by respondent Alcuaz no doubt contains all the attributes of a quasi-judicial adjudication. Foremost is the fact that said order pertains exclusively to petitioner and to no other. Further, it is premised on a finding of fact, although patently superficial, that there is merit in a reduction of some of the rates charged- based on an initial evaluation of petitioner's financial statements-without affording petitioner the benefit of an explanation as to what particular aspect or aspects of the financial statements warranted a corresponding rate reduction. No rationalization was offered nor were the attending contingencies, if any, discussed, which prompted respondents to impose as much as a fifteen percent (15%) rate reduction. It is not far-fetched to assume that petitioner could be in a better position to rationalize its rates vis-a-vis the viability of its business requirements. The rates it charges result from an exhaustive and detailed study it conducts of the multi-faceted intricacies attendant to a public service undertaking of such nature and magnitude. We are, therefore, inclined to lend greater credence to petitioner's ratiocination that an immediate reduction in its rates would adversely affect its operations and the quality of its service to the public considering the maintenance requirements, the projects it still has to undertake and the financial outlay involved. Notably, petitioner was not even afforded the opportunity to cross-examine the inspector who issued the report on which respondent NTC based its questioned order. At any rate, there remains the categorical admission made by respondent NTC that the questioned order was issued pursuant to its quasi-judicial functions. It, however, insists that notice and hearing are not necessary since the assailed order is merely incidental to the entire proceedings and, therefore, temporary in nature. This postulate is bereft of merit. While respondents may fix a temporary rate pending final determination of the application of petitioner, such rate-fixing order, temporary though it may be, is not exempt from the statutory procedural requirements of notice and hearing, as well as the requirement of reasonableness. Assuming that such power is vested in NTC, it may not exercise the same in an arbitrary and confiscatory manner. Categorizing such an order as temporary in nature does not perforce entail the applicability of a different rule of statutory procedure than would otherwise be applied to any other order on the same matter unless otherwise provided by the applicable law. In the case at bar, the applicable statutory provision is Section 16(c) of the Public Service Act which provides: Section 16. Proceedings of the Commission, upon notice and hearing the Commission shall have power, upon proper notice and hearing in accordance with the rules and provisions of this Act, subject to the limitations and exceptions mentioned and saving provisions to the contrary: xxx xxx xxx (c) To fix and determine individual or joint rates, ... which shall be imposed, observed and followed thereafter by any public service; ... There is no reason to assume that the aforesaid provision does not apply to respondent NTC, there being no limiting, excepting, or saving provisions to the contrary in Executive Orders Nos. 546 and 196. It is thus clear that with regard to rate-fixing, respondent has no authority to make such order without first giving petitioner a hearing, whether the order be temporary or permanent, and it is immaterial whether the same is made upon a complaint, a summary investigation, or upon the commission's own motion as in the present case. That such a hearing is required is evident in respondents' order of September 16, 1987 in NTC Case No. 87-94 which granted PHILCOMSAT a provisional authority "to continue operating its existing facilities, to render the services it presently offers, and to charge the rates as reduced by them "under the condition that "(s)ubject to hearing and the final consideration of the merit of this application, the Commission may modify, revise or amend the rates ..." 12

164 While it may be true that for purposes of rate-fixing respondents may have other sources of information or data, still, since a hearing is essential, respondent NTC should act solely on the basis of the evidence before it and not on knowledge or information otherwise acquired by it but which is not offered in evidence or, even if so adduced, petitioner was given no opportunity to controvert. Again, the order requires the new reduced rates to be made effective on a specified date. It becomes a final legislative act as to the period during which it has to remain in force pending the final determination of the case. 13An order of respondent NTC prescribing reduced rates, even for a temporary period, could be unjust, unreasonable or even confiscatory, especially if the rates are unreasonably low, since the utility permanently loses its just revenue during the prescribed period. In fact, such order is in effect final insofar as the revenue during the period covered by the order is concerned. Upon a showing, therefore, that the order requiring a reduced rate is confiscatory, and will unduly deprive petitioner of a reasonable return upon its property, a declaration of its nullity becomes inductible, which brings us to the issue on substantive due process. III. Petitioner contends that the rate reduction is confiscatory in that its implementation would virtually result in a cessation of its operations and eventual closure of business. On the other hand, respondents assert that since petitioner is operating its communications satellite facilities through a legislative franchise, as such grantee it has no vested right therein. What it has is merely a privilege or license which may be revoked at will by the State at any time without necessarily violating any vested property right of herein petitioner. While petitioner concedes this thesis of respondent, it counters that the withdrawal of such privilege should nevertheless be neither whimsical nor arbitrary, but it must be fair and reasonable. There is no question that petitioner is a mere grantee of a legislative franchise which is subject to amendment, alteration, or repeal by Congress when the common good so requires. 14 Apparently, therefore, such grant cannot be unilaterally revoked absent a showing that the termination of the operation of said utility is required by the common good. The rule is that the power of the State to regulate the conduct and business of public utilities is limited by the consideration that it is not the owner of the property of the utility, or clothed with the general power of management incident to ownership, since the private right of ownership to such property remains and is not to be destroyed by the regulatory power. The power to regulate is not the power to destroy useful and harmless enterprises, but is the power to protect, foster, promote, preserve, and control with due regard for the interest, first and foremost, of the public, then of the utility and of its patrons. Any regulation, therefore, which operates as an effective confiscation of private property or constitutes an arbitrary or unreasonable infringement of property rights is void, because it is repugnant to the constitutional guaranties of due process and equal protection of the laws. 15 Hence, the inherent power and authority of the State, or its authorized agent, to regulate the rates charged by public utilities should be subject always to the requirement that the rates so fixed shall be reasonable and just. A commission has no power to fix rates which are unreasonable or to regulate them arbitrarily. This basic requirement of reasonableness comprehends such rates which must not be so low as to be confiscatory, or too high as to be oppressive. 16 What is a just and reasonable rate is not a question of formula but of sound business judgment based upon the evidence 17 it is a question of fact calling for the exercise of discretion, good sense, and a fair, enlightened and independent judgment. 18 In determining whether a rate is confiscatory, it is essential also to consider the given situation, requirements and opportunities of the utility. A method often employed in determining reasonableness is the fair return upon the value of the property to the public utility. Competition is also a very important factor in determining the reasonableness of rates since a carrier is allowed to make such rates as are necessary to meet competition. 19 A cursory perusal of the assailed order reveals that the rate reduction is solely and primarily based on the initial evaluation made on the financial statements of petitioner, contrary to respondent NTC's allegation that it has several other sources of information without, however, divulging such sources. Furthermore, it did not as much as make an attempt to elaborate on how it arrived at the prescribed rates. It just perfunctorily declared that based on the financial statements, there is merit for a rate

165 reduction without any elucidation on what implications and conclusions were necessarily inferred by it from said statements. Nor did it deign to explain how the data reflected in the financial statements influenced its decision to impose a rate reduction. On the other hand, petitioner may likely suffer a severe drawback, with the consequent detriment to the public service, should the order of respondent NTC turn out to be unreasonable and improvident. The business in which petitioner is engaged is unique in that its machinery and equipment have always to be taken in relation to the equipment on the other end of the transmission arrangement. Any lack, aging, acquisition, rehabilitation, or refurbishment of machinery and equipment necessarily entails a major adjustment or innovation on the business of petitioner. As pointed out by petitioner, any change in the sending end abroad has to be matched with the corresponding change in the receiving end in the Philippines. Conversely, any in the receiving end abroad has to be matched with the corresponding change in the sending end in the Philippines. An inability on the part of petitioner to meet the variegations demanded be technology could result in a deterioration or total failure of the service of satellite communications. At present, petitioner is engaged in several projects aimed at refurbishing, rehabilitating, and renewing its machinery and equipment in order to keep up with the continuing charges of the times and to maintain its facilities at a competitive level with the technological advances abroad. There projected undertakings were formulated on the premise that rates are maintained at their present or at reasonable levels. Hence, an undue reduction thereof may practically lead to a cessation of its business. While we concede the primacy of the public interest in an adequate and efficient service, the same is not necessarily to be equated with reduced rates. Reasonableness in the rates assumes that the same is fair to both the public utility and the consumer. Consequently, we hold that the challenged order, particularly on the issue of rates provided therein, being violative of the due process clause is void and should be nullified. Respondents should now proceed, as they should heretofore have done, with the hearing and determination of petitioner's pending application for a certificate of public convenience and necessity and in which proceeding the subject of rates involved in the present controversy, as well as other matter involved in said application, be duly adjudicated with reasonable dispatch and with due observance of our pronouncements herein. WHEREFORE, the writ prayed for is GRANTED and the order of respondents, dated September 2, 1988, in NTC Case No. 87-94 is hereby SET ASIDE. The temporary restraining order issued under our resolution of September 13, 1988, as specifically directed against the aforesaid order of respondents on the matter of existing rates on petitioner's present authorized services, is hereby made permanent. SO ORDERED. Fernan, (C.J.), Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Bidin, Sarmiento, Cortes, Grio-Aquino and Medialdea, JJ., concur. Padilla, J., took no part.

166

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-68729 May 29, 1987 RADIO COMMUNICATIONS OF THE PHILIPPINES, INC., petitioner, vs. NATIONAL TELECOMMUNICATIONS COMMISSION and KAYUMANGGI RADIO NETWORK INCORPORATED,respondents.

GUTIERREZ, JR, J.: This petition seeks the reversal of the decision of the National Telecommunications Commission (NTC) which ordered petitioner Radio Communications of the Philippines, Incorporated (RCPI) to desist from operating its radio telephone services in Catarman, Northern Samar; San Jose, Occidental Mindoro; and Sorsogon, Sorsogon. Petitioner has been operating a radio communications system since 1957 under its legislative franchise granted by Republic Act No. 2036 which was enacted on June 23, 1957. In 1968, the petitioner established a radio telegraph service in Sorsogon, Sorsogon. In 1971, another radio telegraph service was put up in San Jose, Mindoro followed by another in Catarman, Samar in 1976. The installation of radio telephone services started in 1971 in San Jose, Mindoro; then in Sorsogon, Sorsogon and Catarman, Samar in 1983. In a decision dated June 24, 1980 in NTC Case No. 80-08, private respondent Kayumanggi Radio Network Incorporated was authorized by the public respondent to operate radio communications systems in Catarman, Samar and in San Jose, Mindoro. On December 14, 1983, the private respondent filed a complaint with the NTC alleging that the petitioner was operating in Catarman, Samar and in San Jose, Mindoro without a certificate of public covenience and necessity. The petitioner, on the other hand, counter-alleged that its telephone services in the places subject of the complaint are covered by the legislative franchise recognized by both the public respondent and its predecessor, the Public Service Commission. In its supplemental reply, the petitioner further stated that it has been in operation in the questioned places long before private respondent Kayumanggi filed its application to operate in the same places. After conducting a hearing, NTC, in its decision dated August 22, 1984 ordered petitioner RCPI to immediately cease or desist from the operation of its radio telephone services in Catarman Northern Samar; San Jose, Occidental Mindoro; and Sorsogon, Sorsogon stating that under Executive Order No. 546, a certificate of public convenience and necessity is mandatory for the operation of communication utilities and services including radio communications. On September 4, 1984, the petitioner filed a motion for reconsideration which was denied in an order dated September 12, 1984. On October 1, 1984, the present petition was filed raising the issue of whether or not petitioner RCPI, a grantee of a legislative franchise to operate a radio company, is required to secure a certificate of public convenience and necessity before it can validly operate its radio stations including radio telephone services in Catarman, Northern Samar; San Jose, Occidental Mindoro; and Sorsogon, Sorsogon.

167 The petitioner's main argument states that the abolition of the Public Service Commission under Presidential Decree No. 1 and the creation of the National Telecommunications Commission under Executive Order No. 546 to replace the defunct Public Service Commission did not affect sections 14 and 15 of the Public Service Law (Commonwealth Act. No. 146, as amended). The provisions of the Public Service Law pertinent to the petitioner's allegation are as follows: Section 13. (a) the Commission shall have jurisdiction, supervision, and control over all public services and their franchises, equipment and other properties, and in the exercise of its authority, it shall have the necessary powers and the aid of public force: ... Section 14. The following are exempted from the provisions of the preceding section: xxx xxx xxx (d) Radio companies except with respect to the fixing of rates; xxx xxx xxx Section 15. With the exception of those enumerated in the preceding section, no public service shall operate in the Philippines without possessing a valid and subsisting certificate from the Public Service Commission, known as "certificate of public convenience," or "certificate of convenience and public necessity," as the case may be, to the effect that the operation of said service and the authorization to do business will promote the public interests in a proper and suitable manner. ... We find no merit in the petitioner's contention. Pursuant to Presidential Decree No. 1 dated September 23,1972, reorganizing the executive branch of the National Government, the Public Service Commission was abolished and its functions were transferred to three specialized regulatory boards, as follows: the Board of Transportation, the Board of Communications and the Board of Power and Waterworks. The functions so transferred were still subject to the limitations provided in sections 14 and 15 of the Public Service Law, as amended. With the enactment of Executive Order No. 546 on July 23, 1979 implementing P.D. No.1, the Board of Communications and the Telecommunications Control Bureau were abolished and their functions were transferred to the National Telecommunications Commission (Sec. 19(d), Executive Order No. 546). Section 15 of said Executive Order spells out the functions of the National Telecommunications Commission as follows: Sec. 15. Functions of the Commission.-The Commission shall exercise the following functions: a. Issue Certificate of Public Convenience for the operation of communications utilities and services, radio communications petitions systems, wire or wireless telephone or telegraph system, radio and television broadcasting system and other similar public utilities; b. Establish, prescribe and regulate areas of operation of particular operators of public service communications; and determine and prescribe charges or rates pertinent to the operation of such public utility facilities and services except in cases where charges or rates are established by international bodies or associations of which the Philippines is a participating member or by bodies recognized by the Philippine Government as the proper arbiter of such charges or rates; c. Grant permits for the use of radio frequencies for wireless telephone and telegraph systems and radio communication systems including amateur radio stations and radio and television broadcasting systems;

168 d. Sub-allocate series of frequencies of bands allocated by the International Telecommunications Union to the specific services; e. Establish and prescribe rules, regulations, standards, specifications in all cases related to the issued Certificate of Public Convenience and administer and enforce the same; f. Coordinate and cooperate with government agencies and other entities concerned with any aspect involving communications with a view to continuously improve the communications service in the country; g. Promulgate such rules and regulations, as public safety and interest may require, to encourage a larger and more effective use of communications, radio and television broadcasting facilities, and to maintain effective competition among private entities in these activities whenever the Commission finds it reasonably feasible; h. Supervise and inspect the operation of radio stations and telecommunications facilities; i. Undertake the examination and licensing of radio operators; j. Undertake, whenever necessary, the registration of radio transmitters and transceivers; and k. Perform such other functions as may be prescribed by law. It is clear from the aforequoted provision that the exemption enjoyed by radio companies from the jurisdiction of the Public Service Commission and the Board of Communications no longer exists because of the changes effected by the Reorganization Law and implementing executive orders. The petitioner's claim that its franchise cannot be affected by Executive Order No. 546 on the ground that it has long been in operation since 1957 cannot be sustained. A franchise started out as a "royal privilege or (a) branch of the King's prerogative, subsisting in the hands of a subject." This definition was given by Finch, adopted by Blackstone, and accepted by every authority since (State v. Twin Village Water Co., 98 Me 214, 56 A 763 (1903)). Today, a franchise, being merely a privilege emanating from the sovereign power of the state and owing its existence to a grant, is subject to regulation by the state itself by virtue of its police power through its administrative agencies. We ruled in Pangasinan transportation Co., Inc. v. Public Service Commission (70 Phil. 221) that: ... statutes enacted for the regulation of public utilities, being a proper exercise by the State of its police power, are applicable not only to those public utilities coming into existence after its passage, but likewise to those already established and in operation ... Executive Order No. 546, being an implementing measure of P.D. No. I insofar as it amends the Public Service Law (CA No. 146, as amended) is applicable to the petitioner who must be bound by its provisions. The petitioner cannot install and operate radio telephone services on the basis of its legislative franchise alone. The position of the petitioner that by the mere grant of its franchise under RA No. 2036 it can operate a radio communications system anywhere within the Philippines is erroneous. Section 1 of said statute reads: Section 1. Subject to the provisions of the Constitution, and to the provisions, not inconsistent herewith, of Act Numbered Three thousand eight hundred and forty-six, entitled.' An Act providing for the regulation of radio stations and radio communications in the Philippine Islands, and for other purposes;' Commonwealth Act Numbered One hundred forty-six, known as the Public Service Act, and their amendments, and other applicable laws, there is hereby granted to the Radio Communications of the Philippines, its successors or assigns, the right and privilege of constructing, installing, establishing

169 and operating in the Philippines, at such places as the said corporation may select and the Secretary of Public Works and Communications may approve, radio stations for the reception and transmission of wireless messages on radiotelegraphy and/or radiotelephone, including both coastal and marine telecommunications, each station to consist of two radio apparatus comprising of a receiving and sending radio apparatus. (Emphasis supplied). Section 4(a) of the same Act further provides that: Sec. 4(a). This franchise shall not take effect nor shall any powers thereunder be exercised by the grantee until the Secretary of Public works and Communications shall have allotted to the grantee the frequencies and wave lengths to be used, and issued to the grantee a license for such case. (Emphasis supplied) Thus, in the words of R.A. No. 2036 itself, approval of the then Secretary of Public Works and Communications was a precondition before the petitioner could put up radio stations in areas where it desires to operate. It has been repeated time and again that where the statutory norm speaks unequivocally, there is nothing for the courts to do except to apply it. The law, leaving no doubt as to the scope of its operation, must be obeyed. (Gonzaga v. Court of Appeals, 51 SCRA 381). The records of the case do not show any grant of authority from the then Secretary of Public Works and Communications before the petitioner installed the questioned radio telephone services in San Jose, Mindoro in 1971. The same is true as regards the radio telephone services opened in Sorsogon, Sorsogon and Catarman, Samar in 1983. No certificate of public convenience and necessity appears to have been secured by the petitioner from the public respondent when such certificate,was required by the applicable public utility regulations (See executive Order No. 546, sec. 15, supra.; Philippine Long Distance Telephone Co. v. City of Davao, 15 SCRA 75; Olongapo Electric Light and Power Corp. v. National Power Corporation, et al., G.R. No. L-24912, promulgated April 9, 1987.) It was well within the powers of the public respondent to authorize the installation by the private respondent network of radio communications systems in Catarman, Samar and San Jose, Mindoro. Under the circumstances of this case, the mere fact that the petitioner possesses a franchise to put up and operate a radio communications system in certain areas is not an insuperable obstacle to the public respondent's issuing the proper certificate to an applicant desiring to extend the same services to those areas. The Constitution mandates that a franchise cannot be exclusive in nature nor can a franchise be granted except that it must be subject to amendment, alteration, or even repeal by the legislature when the common good so requires. (Art. XII, sec. 11 of the 1986 Constitution). There is an express provision in the petitioner's franchise which provides compliance with the above mandate R.A. 2036, sec. 15). In view of the foregoing, we find no reason to disturb the public respondent's findings of fact, and conclusions of law insofar as the private respondent was authorized to operate in Catarman, Samar and San Jose, Mindoro. As a rule, the Commission's findings of fact, if supported by substantial evidence, are conclusive upon this Court. We may modify or ignore them only when it clearly appears that there is no evidence to support reasonably such a conclusion. (Halili v. Daplas, 14 SCRA 14). The petitioner has not shown why the private respondent should be denied the authority to operate its services in Samar and Mindoro. It has not overcome the presumption that when the public respondent disturbed the petitioner's monopoly in certain areas, it was doing so pursuant to public interest and the common good. WHEREFORE, the challenged order of the public respondent dated August 22, 1984 is hereby AFFIRMED. The petition is dismissed for lack of merit.SO ORDERED.

170 Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 143964 July 26, 2004

GLOBE TELECOM, INC., petitioner, vs. THE NATIONAL TELECOMMUNICATIONS COMMISSION, COMMISSIONER JOSEPH A. SANTIAGO, DEPUTY COMMISSIONERS AURELIO M. UMALI and NESTOR DACANAY, and SMART COMMUNICATIONS, INC.respondents.

DECISION

TINGA, J.: Telecommunications services are affected by a high degree of public interest.1 Telephone companies have historically been regulated as common carriers,2 and indeed, the 1936 Public Service Act has classified wire or wireless communications systems as a "public service," along with other common carriers.3 Yet with the advent of rapid technological changes affecting the telecommunications industry, there has been a marked reevaluation of the traditional paradigm governing state regulation over telecommunications. For example, the United States Federal Communications Commission has chosen not to impose strict common regulations on incumbent cellular providers, choosing instead to let go of the reins and rely on market forces to govern pricing and service terms.4 In the Philippines, a similar paradigm shift can be discerned with the passage of the Public Telecommunications Act of 1995 ("PTA"). As noted by one of the law's principal authors, Sen. John Osmea, under prior laws, the government regulated the entry of pricing and operation of all public telecommunications entities. The new law proposed to dismantle gradually the barriers to entry, replace government control on price and income with market instruments, and shift the focus of government's intervention towards ensuring service standards and protection of customers.5 Towards this goal, Article II, Section 8 of the PTA sets forth the regulatory logic, mandating that "a healthy competitive environment shall be fostered, one in which telecommunications carriers are free to make business decisions and to interact with one another in providing telecommunications services, with the end in view of encouraging their financial viability while maintaining affordable rates."6 The statute itself defines the role of the government to "promote a fair, efficient and responsive market to stimulate growth and development of the telecommunications facilities and services."7 The present petition dramatizes to a degree the clash of philosophies between traditional notions of regulation and the au corant trend to deregulation. Appropriately, it involves the most ubiquitous feature of the mobile phone, Short Messaging Service ("SMS")8 or "text messaging," which has been transformed from a mere technological fad into a vital means of communication. And propitiously, the case allows the Court to evaluate the role of the National Telecommunications Commission ("NTC") in this day and age. The NTC is at the forefront of the government response to the avalanche of inventions and innovations in the dynamic telecommunications field. Every regulatory action it undertakes is of keen interest not only to industry analysts and players but to the public at large. The intensive scrutiny is understandable

171 given the high financial stakes involved and the inexorable impact on consumers. And its rulings are traditionally accorded respect even by the courts, owing traditional deference to administrative agencies equipped with special knowledge, experience and capability to hear and determine promptly disputes on technical matters.9 At the same time, judicial review of actions of administrative agencies is essential, as a check on the unique powers vested unto these instrumentalities.10 Review is available to reverse the findings of the specialized administrative agency if the record before the Court clearly precludes the agency's decision from being justified by a fair estimate of the worth of the testimony of witnesses or its informed judgment on matters within its special competence, or both.11 Review may also be warranted to ensure that the NTC or similarly empowered agencies act within the confines of their legal mandate and conform to the demands of due process and equal protection.12 Antecedent Facts Globe and private respondent Smart Communications, Inc. ("Smart") are both grantees of valid and subsisting legislative franchises,13 authorizing them, among others, to operate a Cellular Mobile Telephone System("CMTS"), utilizing the Global System for Mobile Communication ("GSM") technology.14 Among the inherent services supported by the GSM network is the Short Message Services (SMS),15 also known colloquially as "texting," which has attained immense popularity in the Philippines as a mode of electronic communication. On 4 June 1999, Smart filed a Complaint16 with public respondent NTC, praying that NTC order the immediate interconnection of Smart's and Globe's GSM networks, particularly their respective SMS or texting services. TheComplaint arose from the inability of the two leading CMTS providers to effect interconnection. Smart alleged that Globe, with evident bad faith and malice, refused to grant Smart's request for the interconnection of SMS.17 On 7 June 1999, NTC issued a Show Cause Order, informing Globe of the Complaint, specifically the allegations therein that, "among othersdespite formal request made by Smart to Globe for the interconnection of their respective SMS or text messaging services, Globe, with evident bad faith, malice and to the prejudice of Smart and Globe and the public in general, refused to grant Smart's request for the interconnection of their respective SMS or text messaging services, in violation of the mandate of Republic Act 7925, Executive Order No. 39, and their respective implementing rules and regulations."18 Globe filed its Answer with Motion to Dismiss on 7 June 1999, interposing grounds that the Complaint was premature, Smart's failure to comply with the conditions precedent required in Section 6 of NTC Memorandum Circular 9-7-93,19 and its omission of the mandatory Certification of NonForum Shopping.20 Smart responded that it had already submitted the voluminous documents asked by Globe in connection with other interconnection agreements between the two carriers, and that with those voluminous documents the interconnection of the SMS systems could be expedited by merely amending the parties' existing CMTS-to-CMTS interconnection agreements.21 On 19 July 1999, NTC issued the Order now subject of the present petition. In the Order, after noting that both Smart and Globe were "equally blameworthy" for their lack of cooperation in the submission of the documentation required for interconnection and for having "unduly maneuvered the situation into the present impasse,"22 NTC held that since SMS falls squarely within the definition of "value-added service" or "enhanced-service" given in NTC Memorandum Circular No. 8-9-95 (MC No. 8-9-95) the implementation of SMS interconnection is mandatory pursuant to Executive Order (E.O.) No. 59.23 The NTC also declared that both Smart and Globe have been providing SMS without authority from it, in violation of Section 420 (f) of MC No. 8-9-95 which requires PTEs intending to provide value-added services (VAS) to secure prior approval from NTC through an administrative process. Yet, in view of what it noted as the "peculiar circumstances" of the case, NTC refrained from issuing a Show Cause Order with a Cease and Desist Order, and instead directed the parties to secure the requisite authority to provide SMS within thirty (30) days, subject to the payment of fine in the amount of two hundred pesos (P200.00) "from the date of violation and for every day during which such violation continues."24

172 Globe filed with the Court of Appeals a Petition for Certiorari and Prohibition25 to nullify and set aside the Orderand to prohibit NTC from taking any further action in the case. It reiterated its previous arguments that the complaint should have been dismissed for failure to comply with conditions precedent and the non-forum shopping rule. It also claimed that NTC acted without jurisdiction in declaring that it had no authority to render SMS, pointing out that the matter was not raised as an issue before it at all. Finally, Globe alleged that the Order is a patent nullity as it imposed an administrative penalty for an offense for which neither it nor Smart was sufficiently charged nor heard on in violation of their right to due process.26 The Court of Appeals issued a Temporary Restraining Order on 31 August 1999. In its Memorandum, Globe also called the attention of the appellate court to the earlier decision of NTC pertaining to the application of Isla Communications Co., Inc. ("Islacom") to provide SMS, allegedly holding that SMS is a deregulated special feature of the telephone network and therefore does not require the prior approval of NTC.27Globe alleged that its departure from its ruling in the Islacom case constitutes a denial of equal protection of the law. On 22 November 1999, a Decision28 was promulgated by the Former Special Fifth Division of the Court of Appeals29 affirming in toto the NTC Order. Interestingly, on the same day Globe and Smart voluntarily agreed to interconnect their respective SMS systems, and the interconnection was effected at midnight of that day.30 Yet, on 21 December 1999, Globe filed a Motion for Partial Reconsideration,31 seeking to reconsider only the portion of the Decision that upheld NTC's finding that Globe lacked the authority to provide SMS and its imposition of a fine. Both Smart and NTC filed their respective comments, stressing therein that Globe indeed lacked the authority to provide SMS.32 In reply, Globe asserted that the more salient issue was whether NTC complied with its own Rules of Practice and Procedure before making the finding of want of authority and imposing the fine. Globe also reiterated that it has been legally operating its SMS system since 1994 and that SMS being a deregulated special feature of the telephone network it may operate SMS without prior approval of NTC. After the Court of Appeals denied the Motion for Partial Reconsideration,33 Globe elevated the controversy to this Court. Globe contends that the Court of Appeals erred in holding that the NTC has the power under Section 17 of the Public Service Law34 to subject Globe to an administrative sanction and a fine without prior notice and hearing in violation of the due process requirements; that specifically due process was denied Globe because the hearings actually conducted dwelt on different issues; and, the appellate court erred in holding that any possible violation of due process committed by NTC was cured by the fact that NTC refrained from issuing a Show Cause Order with a Cease and Desist Order, directing instead the parties to secure the requisite authority within thirty days. Globe also contends that in treating it differently from other carriers providing SMS the Court of Appeals denied it equal protection of the law. The case was called for oral argument on 22 March 2004. Significantly, Smart has deviated from its original position. It no longer prays that the Court affirm the assailed Decision and Order, and the twin rulings therein that SMS is VAS and that Globe was required to secure prior authority before offering SMS. Instead, Smart now argues that SMS is not VAS and that NTC may not legally require either Smart or Globe to secure prior approval before providing SMS. Smart has also chosen not to make any submission on Globe's claim of due process violations.35 As presented during the oral arguments, the central issues are: (1) whether NTC may legally require Globe to secure NTC approval before it continues providing SMS; (2) whether SMS is a VAS under the PTA, or special feature under NTC MC No. 14-11-97; and (3) whether NTC acted with due process in levying the fine against Globe.36 Another issue is also raised whether Globe should have first filed a motion for reconsideration before the NTC, but this relatively minor question can be resolved in brief. Necessity of Filing Motion for Reconsideration

173 Globe deliberately did not file a motion for reconsideration with the NTC before elevating the matter to the Court of Appeals via a petition for certiorari. Generally, a motion for reconsideration is a prerequisite for the filing of a petition for certiorari.37 In opting not to file the motion for reconsideration, Globe asserted before the Court of Appeals that the case fell within the exceptions to the general rule.38 The appellate court in the questionedDecision cited the purported procedural defect,39 yet chose anyway to rule on the merits as well. Globe's election to elevate the case directly to the Court of Appeals, skipping the standard motion for reconsideration, is not a mortal mistake. According to Globe, the Order is a patent nullity, it being violative of due process; the motion for reconsideration was a useless or idle ceremony; and, the issue raised purely one of law.40Indeed, the circumstances adverted to are among the recognized exceptions to the general rule.41 Besides, the issues presented are of relative importance and novelty42 so much so that it is judicious for the Court to resolve them on the merits instead of hiding behind procedural fineries. The Merits Now, on to the merits of the petition. Deregulation is the mantra in this age of globalization. Globe invokes it in support of its claim that it need not secure prior authority from NTC in order to operate SMS. The claim has to be evaluated carefully. After all, deregulation is not a magic incantation that wards off the spectre of intrusive government with the mere invocation of its name. The principles, guidelines, rules and regulations that govern a deregulated system must be firmly rooted in the law and regulations that institute or implement the deregulation regime.43 The implementation must likewise be fair and evenhanded. Globe hinges its claim of exemption from obtaining prior approval from the NTC on NTC Memorandum Circular No. 14-11-97 ("MC No. 14-11-97"). Globe notes that in a 7 October 1998 ruling on the application of Islacom for the operation of SMS, NTC declared that the applicable circular for SMS is MC No. 14-11-97.44 Under this ruling, it is alleged, NTC effectively denominated SMS as a "special feature" which under MC No. 14-11-97 is a deregulated service that needs no prior authorization from NTC. Globe further contends that NTC's requiring it to secure prior authorization violates the due process and equal protection clauses, since earlier it had exempted the similarly situated Islacom from securing NTC approval prior to its operation of SMS.45 On the other hand, the assailed NTC Decision invokes the NTC Implementing Rules of the PTA (MC No. 89-95) to justify its claim that Globe and Smart need to secure prior authority from the NTC before offering SMS. The statutory basis for the NTC's determination must be thoroughly examined. Our first level of inquiry should be into the PTA. It is the authority behind MC No. 8-9-95. It is also the law that governs all public telecommunications entities ("PTEs") in the Philippines.46 Public Telecommunications Act The PTA has not strictly adopted laissez-faire as its underlying philosophy to promote the telecommunications industry. In fact, the law imposes strictures that restrain within reason how PTEs conduct their business. For example, it requires that any access charge/revenue sharing arrangements between all interconnecting carriers that are entered into have to be submitted for approval to NTC.47 Each "telecommunication category"48established in the PTA is governed by detailed regulations. Also, international carriers and operators of mobile radio services are required to provide local exchange service in unserved or underserved areas.49 At the same time, the general thrust of the PTA is towards modernizing the legal framework for the telecommunications services sector. The transmutation has become necessary due to the rapid changes as well within the telecommunications industry. As noted by Senator Osmea in his sponsorship speech:

174 [D]ramatic developments during the last 15 years in the field of semiconductors have drastically changed the telecommunications sector worldwide as well as in the Philippines. New technologies have fundamentally altered the structure, the economics and the nature of competition in the telecommunications business. Voice telephony is perhaps the most popular face of telecommunications, but it is no longer the only one. There are other faces such as data communications, electronic mail, voice mail, facsimile transmission, video conferencing, mobile radio services like trunked radio, cellular radio, and personal communications services, radio paging, and so on. Because of the mind-boggling developments in semiconductors, the traditional boundaries between computers, telecommunications, and broadcasting are increasingly becoming blurred.50 One of the novel introductions of the PTA is the concept of a "value-added service" ("VAS"). Section 11 of the PTA governs the operations of a "value-added service provider," which the law defines as "an entity which relying on the transmission, switching and local distribution facilities of the local exchange and inter-exchange operators, and overseas carriers, offers enhanced services beyond those ordinarily provided for by such carriers."51 Section 11 recognizes that VAS providers need not secure a franchise, provided that they do not put up their own network.52However, a different rule is laid down for telecommunications entities such as Globe and PLDT. The section unequivocally requires NTC approval for the operation of a value-added service. It reads, viz: Telecommunications entities may provide VAS, subject to the additional requirements that: a) prior approval of the Commission is secured to ensure that such VAS offerings are not cross-subsidized from the proceeds of their utility operations; b) other providers of VAS are not discriminated against in rates nor denied equitable access to their facilities; and c) separate books of accounts are maintained for the VAS. (Emphasis supplied)53

Oddly enough, neither the NTC nor the Court of Appeals cited the above-quoted provision in their respective decisions, which after all, is the statutory premise for the assailed regulatory action. This failure is but a mere indicia of the pattern of ignorance or incompetence that sadly attends the actions assailed in this petition. It is clear that the PTA has left open-ended what services are classified as "value-added," prescribing instead a general standard, set forth as a matter of principle and fundamental policy by the legislature.54 The validity of this standard set by Section 11 is not put into question by the present petition, and there is no need to inquire into its propriety.55 The power to enforce the provisions of the PTA, including the implementation of the standards set therein, is clearly reposed with the NTC.56 It can also be gleaned from Section 11 that the requirement that PTEs secure prior approval before offering VAS is tied to a definite purpose, i.e., "to ensure that such VAS offerings are not crosssubsidized from the proceeds of their utility operations." The reason is related to the fact that PTEs are considered as public services,57 and mandated to perform certain public service functions. Section 11 should be seen in relation to E.O. 109, which mandates that "international gateway operators shall be required to provide local exchange service,"58 for the purpose of ensuring availability of reliable and affordable telecommunications service in both urban and rural areas of the country.59 Under E.O. No. 109, local exchange services are to be cross-subsidized by other telecommunications services within the same company until universal access is achieved.60 Section 10 of the PTA specifically affirms the requirements set by E.O. No. 109. The relevance to VAS is clear: public policy maintains that the offer of VAS by PTEs cannot interfere with the fundamental provision by PTEs of their other public service requirements. More pertinently to the case at bar, the qualification highlights the fact that the legal rationale for regulation of VAS is severely limited. There is an implicit recognition that VAS is not strictly a public service offering in the way that voice-to-voice lines are, for example, but merely supplementary to the basic service. Ultimately, the regulatory attitude of the State towards VAS offerings by PTEs is to treat

175 its provisioning as a "business decision" subject to the discretion of the offeror, so long as such services do not interfere with mandatory public service requirements imposed on PTEs such as those under E.O. No. 109. Thus, non-PTEs are not similarly required to secure prior approval before offering VAS, as they are not burdened by the public service requirements prescribed on PTEs.61 Due regard must be accorded to this attitude, which is in consonance with the general philosophy of deregulation expressed in the PTA. The Pertinent NTC Memorandum Circulars Next, we examine the regulatory framework devised by NTC in dealing with VAS. NTC relied on Section 420(f) of the Implementing Rules of the PTA ("Implementing Rules") as basis for its claim that prior approval must be secured from it before Globe can operate SMS. Section 420 of the Implementing Rules, contained in MC No. 8-9-95, states in full: VALUE ADDED SERVICES (VAS) (a) A non-PTE VAS provider shall not be required to secure a franchise from Congress. (b) A non-PTE VAS provider can utilize its own equipment capable only of routing, storing and forwarding messages in whatever format for the purpose of providing enhanced or augmented telecommunications services. It shall not put up its own network. It shall use the transmission network, toll or local distribution, of the authorized PTES. (c) The provision of VAS shall not in any way affect the cross subsidy to the local exchange network by the international and national toll services and CMTS service. (d) Entities intending to provide value added services only shall submit to the commission application for registration for approval. The application form shall include documents showing, among others, system configuration, mode of operation, method of charging rates, lease agreement with the PTE, etc. (e) The application for registration shall be acted upon by the Commission through an administrative process within thirty (30) days from date of application. (f) PTEs intending to provide value added services are required to secure prior approval by the Commission through an administrative process. (g) VAS providers shall comply strictly with the service performance and other standards prescribed commission. (Emphasis supplied.) Instead of expressly defining what VAS is, the Implementing Rules defines what "enhanced services" are, namely: "a service which adds a feature or value not ordinarily provided by a public telecommunications entity such as format, media conversion, encryption, enhanced security features, computer processing, and the like."62 Given that the PTA defines VAS as "enhanced services," the definition provided in the Implementing Rules may likewise be applied to VAS. Still, the language of the Implementing Rules is unnecessarily confusing. Much trouble would have been spared had the NTC consistently used the term "VAS" as it is used in the PTA. The definition of "enhanced services" in the Implementing Rules, while more distinct than that under the PTA, is still too sweeping. Rather than enumerating what possible features could be classified as VAS or enhanced services, the Implementing Rules instead focuses on the characteristics of these features. The use of the phrase "the like,"63 and its implications of analogy, presumes that a whole myriad of technologies can eventually be subsumed under the definition of "enhanced services." The NTC should not be necessarily faulted for such indistinct formulation since it could not have known in 199564 what possible VAS would be available in the future. The definition laid down in the Implementing Rules may validly serve as a guide for the NTC to determine what emergent offerings would fall under VAS.

176 Still, owing to the general nature of the definition laid down in the Implementing Rules, the expectation arises that the NTC would promulgate further issuances defining whether or not a specific feature newly available in the market is a VAS. Such expectation is especially demanded if the NTC is to penalize PTEs who fail to obtain prior approval in accordance with Section 11 of the PTA. To our knowledge, the NTC has yet to come out with an administrative rule or regulation listing which of the offerings in the market today fall under VAS or "enhanced services." Still, there is MC No. 14-11-97, entitled "Deregulating the Provision of Special Features in the Telephone Network." Globe invokes this circular as it had been previously cited by the NTC as applicable to SMS. On 2 October 1998, Islacom wrote a letter to the NTC, informing the agency that "it will be offering the special feature" of SMS for its CMTS, and citing therein that the notice was being given pursuant to NTC Memorandum Circular No. 14-11-97.65 In response, the NTC acknowledged receipt of the letter "informing" it of Islacom's "offering the special feature" of SMS for its CMTS, and instructed Islacom to "adhere to the provisions of MC No. 14-11-97."66 The clear implication of the letter is that NTC considers the Circular as applicable to SMS. An examination of MC No. 14-11-97 further highlights the state of regulatory confusion befalling the NTC. The relevant portions thereof are reproduced below: SUBJECT: DEREGULATING THE PROVISION OF SPECIAL FEATURES IN THE TELEPHONE NETWORK. For the purpose of exempting specific telecommunications service from rate or tariff regulations if the service has sufficient competition to ensure fair and reasonable rates or tariffs, the Commission hereby deregulates the provision of special features inherent to the Telephone Network. Section 1. For the purpose of this Circular, Special Feature shall refer to a feature inherent to the telephone network which may not be ordinarily provided by a Telephone Service Provider such as call waiting, call forwarding, conference calling, speed dialing, caller ID, malicious call ID, call transfer, charging information, call pick-up, call barring, recorded announcement, no double connect, warm line, wake-up call, hotline, voicemail, and special features offered to customers with PABXs such as direct inward dialing and number hunting, and the like; provided that in the provision of the feature, no law, rule, regulation or international convention on telecommunications is circumvented or violated. The Commission shall periodically update the list of special features in the Telephone Network which, including the charging of rates therefor, shall be deregulated. Section 2. A duly authorized Telephone Service Provider shall inform the Commission in writing of the special features it can offer and the corresponding rates thirty (30) days prior to launch date. xxx Section 4. Authorized Telephone Service Providers shall continue to charge their duly approved rates for special services for 3 months from the effectivity of this circular, after which they may set their own rates. xxx (Emphasis supplied) Just like VAS as defined under the PTA, "special features" are also "not ordinarily provided" by the telephone company. Considering that MC No. 14-11-97 was promulgated after the passage of the PTA, it can be assumed that the authors of the Circular were well aware of the regulatory scheme formed under the PTA. Moreover, MC No. 14-11-97 repeatedly invokes the word "deregulation," and it cannot be denied that the liberalization ethos was introduced by the PTA. Yet, the net effect of MC No. 14-1197 is to add to the haze beclouding the NTC's rationale for regulation. The introduction of a new concept, "special feature," which is not provided for in the PTA just adds to the confusion, especially in

177 light of the similarities between "special features" and VAS. Moreover, there is no requirement that a PTE seeking to offer "special features" must secure prior approval from the NTC. Is SMS a VAS, "enhanced service," or a "special feature"? Apparently, even the NTC is unsure. It had told Islacom that SMS was a "special feature," then subsequently held that it was a "VAS." However, the pertinent laws and regulations had not changed from the time of the Islacom letter up to the day the Order was issued. Only the thinking of NTC did. More significantly, NTC never required ISLACOM to apply for prior approval in order to provide SMS, even after the Order to that effect was promulgated against Globe and Smart. This fact was admitted by NTC during oral arguments.67 NTC's treatment of Islacom, apart from being obviously discriminatory, puts into question whether or not NTC truly believes that SMS is VAS. NTC is unable to point out any subsequent rule or regulation, enacted after it promulgated the adverse order against Globe and Smart, affirming the newly-arrived determination that SMS is VAS. In fact, as Smart admitted during the oral arguments, while it did comply with the NTC Order requiring it to secure prior approval, it was never informed by the NTC of any action on its request.68 While NTC counters that it did issue a Certificate of Registration to Smart, authorizing the latter as a provider of SMS, such Certificate of Registration was issued only on 13 March 2003, or nearly four (4) years after Smart had made its request.69 This inaction indicates a lack of seriousness on the part of the NTC to implement its own rulings. Also, it tends to indicate the lack of belief or confusion on NTC's part as to how SMS should be treated. Given the abstract set of rules the NTC has chosen to implement, this should come as no surprise. Yet no matter how content the NTC may be with its attitude of sloth towards regulation, the effect may prove ruinous to the sector it regulates. Every party subject to administrative regulation deserves an opportunity to know, through reasonable regulations promulgated by the agency, of the objective standards that have to be met. Such rule is integral to due process, as it protects substantive rights. Such rule also promotes harmony within the service or industry subject to regulation. It provides indubitable opportunities to weed out the most frivolous conflicts with minimum hassle, and certain footing in deciding more substantive claims. If this results in a tenfold in administrative rules and regulations, such price is worth paying if it also results in clarity and consistency in the operative rules of the game. The administrative process will best be vindicated by clarity in its exercise.70 In short, the legal basis invoked by NTC in claiming that SMS is VAS has not been duly established. The fault falls squarely on NTC. With the dual classification of SMS as a special feature and a VAS and the varying rules pertinent to each classification, NTC has unnecessarily complicated the regulatory framework to the detriment of the industry and the consumers. But does that translate to a finding that the NTC Order subjecting Globe to prior approval is void? There is a fine line between professional mediocrity and illegality. NTC's byzantine approach to SMS regulation is certainly inefficient. Unfortunately for NTC, its actions have also transgressed due process in many ways, as shown in the ensuing elucidation. Penalized Via a Quasi-Judicial Process, Globe and Smart are Entitled to Corresponding Protections It is essential to understand that the assailed Order was promulgated by NTC in the exercise of its quasijudicial functions. The case arose when Smart had filed the initial complaint against Globe before NTC for interconnection of SMS.71 NTC issued a Show Cause Order requiring Globe to answer Smart's charges. Hearings were conducted, and a decision made on the merits, signed by the three Commissioners of the NTC, sitting as a collegial body.72 The initial controversy may have involved a different subject matter, interconnection, which is no longer contested. It cannot be denied though that the findings and penalty now assailed before us was premised on the same exercise of jurisdiction. Thus, it is not relevant to this case that the process for obtaining prior approval under the PTA and its Implementing Rules is administrative in nature. While this may be so, the assailed NTC's determination and corresponding penalty were rendered in the exercise of

178 quasi-judicial functions. Therefore, all the requirements of due process attendant to the exercise of quasi-judicial power apply to the present case. Among them are the seven cardinal primary rights in justiciable cases before administrative tribunals, as enumerated inAng Tibay v. CIR.73 They are synthesized in a subsequent case, as follows: There are cardinal primary rights which must be respected even in proceedings of this character. The first of these rights is the right to a hearing, which includes the right of the party interested or affected to present his own case and submit evidence in support thereof. Not only must the party be given an opportunity to present his case and to adduce evidence tending to establish the rights which he asserts but the tribunal must consider the evidence presented. While the duty to deliberate does not impose the obligation to decide right, it does imply a necessity which cannot be disregarded, namely, that of having something to support its decision. Not only must there be some evidence to support a finding or conclusion, but the evidence must be substantial. The decision must be rendered on the evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected.74 NTC violated several of these cardinal rights due Globe in the promulgation of the assailed Order. First. The NTC Order is not supported by substantial evidence. Neither does it sufficiently explain the reasons for the decision rendered. Our earlier discussion pertained to the lack of clear legal basis for classifying SMS as VAS, owing to the failure of the NTC to adopt clear rules and regulations to that effect. Muddled as the legal milieu governing SMS already is, NTC's attempt to apply its confusing standards in the case of Globe and Smart is even more disconcerting. The very rationale adopted by the NTC in its Order holding that SMS is VAS is short and shoddy. Astoundingly, the Court of Appeals affirmed the rationale bereft of intelligent inquiry, much less comment. Stated in full, the relevant portion of the NTC Order reads: xxx Getting down [to] the nitty-gritty, Globe's SMS involves the transmission of data over its CMTS which is Globe's basic service. SMS is not ordinarily provided by a CMTS operator like Globe, and since SMS enhances Globe's CMTS, SMS fits in to a nicety [sic] with the definition of "value-added-service" or "enhanced-service" under NTC Memorandum Circular 8-9-95 (Rule 001, Item 15).75 The Court usually accords great respect to the technical findings of administrative agencies in the fields of their expertise, even if they are infelicitously worded. However, the above-quoted "finding" is nothing more than bare assertions, unsupported by substantial evidence.76 The Order reveals that no deep inquiry was made as to the nature of SMS or what its provisioning entails. In fact, the Court is unable to find how exactly does SMS "fits into a nicety" with NTC M.C. No. 8-9-95, which defines "enhanced services" as analogous to "format, media conversion, encryption, enhanced security features, computer processing, and the like."77 The NTC merely notes that SMS involves the "transmission of data over [the] CMTS," a phraseology that evinces no causal relation to the definition in M.C. No. 8-9-95. Neither did the NTC endeavor to explain why the "transmission of data" necessarily classifies SMS as a VAS. In fact, if "the transmission of data over [the] CMTS" is to be reckoned as the determinative characteristic of SMS, it would seem that this is already sufficiently covered by Globe and Smart's respective legislative franchises.78Smart is authorized under its legislative franchise to establish and operate integrated telecommunications/computer/ electronic services for public domestic and international communications,79 while Globe is empowered to establish and operate domestic telecommunications, and stations for transmission and reception of messages by means of electricity, electromagnetic waves or any kind of energy, force, variations or impulses, whether conveyed by wires, radiated through space or transmitted through other media and for the handling of any and all types of telecommunications services.80 The question of the proper legal classification of VAS is uniquely technical, tied as at is to the scientific and technological application of the service or feature. Owing to the dearth of substantive technical findings and data from the NTC on which a judicial review may reasonably be premised, it is not opportunely proper for the Court to make its own technical evaluation of VAS, especially in relation to

179 SMS. Judicial fact-finding of the de novo kind is generally abhorred and the shift of decisional responsibility to the judiciary is not favored as against the substantiated and specialized determination of administrative agencies.81 With greater reason should this be the standard for the exercise of judicial review when the administrative agency concerned has not in the first place come out with a technical finding based on evidence, as in this case. Yet at the same time, this absence of substantial evidence in support of the finding that SMS is VAS already renders reversible that portion of the NTC Order. Moreover, the Order does not explain why the NTC was according the VAS offerings of Globe and Smart a different regulatory treatment from that of Islacom. Indeed, to this day, NTC has not offered any sensible explanation why Islacom was accorded to a less onerous regulatory requirement, nor have they compelled Islacom to suffer the same burdens as Globe and Smart. While stability in the law, particularly in the business field, is desirable, there is no demand that the NTC slavishly follow precedent.82 However, we think it essential, for the sake of clarity and intellectual honesty, that if an administrative agency decides inconsistently with previous action, that it explain thoroughly why a different result is warranted, or if need be, why the previous standards should no longer apply or should be overturned.83 Such explanation is warranted in order to sufficiently establish a decision as having rational basis.84 Any inconsistent decision lacking thorough, ratiocination in support may be struck down as being arbitrary. And any decision with absolutely nothing to support it is a nullity.85 Second. Globe and Smart were denied opportunity to present evidence on the issues relating to the nature of VAS and the prior approval. Another disturbing circumstance attending this petition is that until the promulgation of the assailed Order Globe and Smart were never informed of the fact that their operation of SMS without prior authority was at all an issue for consideration. As a result, neither Globe or Smart was afforded an opportunity to present evidence in their behalf on that point. NTC asserts that since Globe and Smart were required to submit their respective Certificates of Public Convenience and Necessity and franchises, the parties were sufficiently notified that the authority to operate such service was a matter which NTC could look into. This is wrong-headed considering the governing law and regulations. It is clear that before NTC could penalize Globe and Smart for unauthorized provision of SMS, it must first establish that SMS is VAS. Since there was no express rule or regulation on that question, Globe and Smart would be well within reason if they submitted evidence to establish that SMS was not VAS. Unfortunately, no such opportunity arose and no such arguments were raised simply because Globe and Smart were not aware that the question of their authority to provide SMS was an issue at all. Neither could it be said that the requisite of prior authority was indubitable under the existing rules and regulations. Considering the prior treatment towards Islacom, Globe (and Smart, had it chosen to do so) had every right to rely on NTC's disposal of Islacom's initiative and to believe that prior approval was not necessary. Neither was the matter ever raised during the hearings conducted by NTC on Smart's petition. This claim has been repeatedly invoked by Globe. It is borne out by the records or the absence thereof. NTC could have easily rebuffed this claim by pointing to a definitive record. Yet strikingly, NTC has not asserted that the matter of Globe's authority was raised in any pleading or proceeding. In fact, Globe in its Consolidated Reply before this Court challenged NTC to produce the transcripts of the hearings it conducted to prove that the issue of Globe's authority to provide SMS was put in issue. The Court similarly ordered the NTC to produce such transcripts.86 NTC failed to produce any.87 The opportunity to adduce evidence is essential in the administrative process, as decisions must be rendered on the evidence presented, either in the hearing, or at least contained in the record and disclosed to the parties affected.88 The requirement that agencies hold hearings in which parties affected by the agency's action can be represented by counsel may be viewed as an effort to regularize this struggle for advantage within a legislative adversary framework.89 It necessarily follows that if no evidence is procured pertinent to a particular issue, any eventual resolution of that issue on substantive

180 grounds despite the absence of evidence is flawed. Moreover, if the parties did have evidence to counter the ruling but were wrongfully denied the opportunity to offer the evidence, the result would be embarrassing on the adjudicator. Thus, the comical, though expected, result of a definitive order which is totally unsupported by evidence. To this blatant violation of due process, this Court stands athwart. Third. The imposition of fine is void for violation of due process The matter of whether NTC could have imposed the fine on Globe in the assailed Order is necessarily related to due process considerations. Since this question would also call to fore the relevant provisions of the Public Service Act, it deserves its own extensive discussion. Globe claims that the issue of its authority to operate SMS services was never raised as an issue in the Complaintfiled against it by Smart. Nor did NTC ever require Globe to justify its authority to operate SMS services beforethe issuance of the Order imposing the fine. The Court of Appeals, in its assailed decision, upheld the power of NTC to impose a fine and to make a pronouncement on Globe's alleged lack of operational authority without need of hearing, simply by citing the provision of the Public Service Act90 which enumerates the instances when NTC may act motu proprio. That is Section 17, paragraph (a), which reads thus: Sec. 17. Proceedings of [the National Telecommunications Commission] without previous hearing. The Commission shall have power, without previous hearing, subject to established limitations and exceptions and saving provisions to the contrary: (a) To investigate, upon its own initiative, or upon complaint in writing, any matter concerning any public service as regards matters under its jurisdiction; to require any public service to furnish safe, adequate, and proper service as the public interest may require and warrant; to enforce compliance with any standard, rule, regulation, order or other requirement of this Act or of the Commission, and to prohibit or prevent any public service as herein defined from operating without having first secured a certificate of public convenience or public necessity and convenience, as the case may be, and require existing public services to pay the fees provided for in this Act for the issuance of the proper certificate of public convenience or certificate of public necessity and convenience, as the case may be, under the penalty, in the discretion of the Commission, of the revocation and cancellation of any acquired rights. On the other hand, NTC itself, in the Order, cites Section 21 as the basis for its imposition of fine on Globe. The provision states: Sec. 21. Every public service violating or failing to comply with the terms and conditions of any certificate or any orders, decisions or regulations of the Commission shall be subject to a fine of not exceeding two hundred pesos per day for every day during which such default or violation continues; and the Commission is hereby authorized and empowered to impose such fine, after due notice and hearing. [Emphasis supplied.] Sections 17 and 21 of the Public Service Act confer two distinct powers on NTC. Under Section 17, NTC has the power to investigate a PTE compliance with a standard, rule, regulation, order, or other requirement imposed by law or the regulations promulgated by NTC, as well as require compliance if necessary. By the explicit language of the provision, NTC may exercise the power without need of prior hearing. However, Section 17 does not include the power to impose fine in its enumeration. It is Section 21 which adverts to the power to impose fine and in the same breath requires that the power may be exercised only after notice and hearing. Section 21 requires notice and hearing because fine is a sanction, regulatory and even punitive in character. Indeed, the requirement is the essence of due process. Notice and hearing are the bulwark of administrative due process, the right to which is among the primary rights that must be respected even in administrative proceedings.91 The right is guaranteed by the Constitution itself and does not need

181 legislative enactment. The statutory affirmation of the requirement serves merely to enhance the fundamental precept. The right to notice and hearing is essential to due process and its non-observance will, as a rule, invalidate the administrative proceedings.92 In citing Section 21 as the basis of the fine, NTC effectively concedes the necessity of prior notice and hearing. Yet the agency contends that the sanction was justified by arguing that when it took cognizance of Smart's complaint for interconnection, "it may very well look into the issue of whether the parties had the requisite authority to operate such services."93 As a result, both parties were sufficiently notified that this was a matter that NTC could look into in the course of the proceedings. The parties subsequently attended at least five hearings presided by NTC.94 That particular argument of the NTC has been previously disposed of. But it is essential to emphasize the need for a hearing before a fine may be imposed, as it is clearly a punitive measure undertaken by an administrative agency in the exercise of its quasi-judicial functions. Inherently, notice and hearing are indispensable for the valid exercise by an administrative agency of its quasi-judicial functions. As the Court held in Central Bank of the Phil. v. Hon. Cloribel:95 [T]he necessity of notice and hearing in an administrative proceeding depends on the character of the proceeding and the circumstances involved. In so far as generalization is possible in view of the great variety of administrative proceedings, it may be stated as a general rule that notice and hearing are not essential to the validity of administrative action where the administrative body acts in the exercise of executive, administrative, or legislative functions; but where a public administrative body acts in a judicial or quasi-judicial matter, and its acts are particular and immediate rather than general and prospective, the person whose rights or property may be affected by the action is entitled to notice and hearing.96 The requirement of notice and hearing becomes even more imperative if the statute itself demands it, as in the case of Section 21 of the Public Service Act. As earlier stated, the Court is convinced that prior to the promulgation of the assailed Order Globe was never notified that its authority to operate SMS was put in issue. There is an established procedure within NTC that provides for the steps that should be undertaken before an entity such as Globe could be subjected to a disciplinary measure. Section 1, Rule 10 of the NTC Rules of Procedure provides that any action, the object of which is to subject a holder of a certificate of public convenience or authorization, or any person operating without authority from NTC, to any penalty or a disciplinary or other measure shall be commenced by the filing of a complaint. Further, the complaint should state, whenever practicable, the provisions of law or regulation violated, and the acts or omissions complained of as constituting the offense.97 While a complaint was indeed filed against Globe by Smart, the lack of Globe's authority to operate SMS was not raised in the Complaint, solely predicated as it was on Globe's refusal to interconnect with Smart.98 Under the NTC Rules of Procedure, NTC is to serve a Show Cause Order on the respondent to the complaint, containing therein a "statement of the particulars and matters concerning which the Commission is inquiring and the reasons for such actions."99 The Show Cause Order served on Globe in this case gave notice of Smart's charge that Globe, acting in bad faith and contrary to law, refused to allow the interconnection of their respective SMS systems.100 Again, the lack of authority to operate SMS was not adverted to in NTC's Show Cause Order. The records also indicate that the issue of Globe's authority was never raised in the subsequent hearings on Smart's complaint. Quite noticeably, the respondents themselves have never asserted that the matter of Globe's authority was raised in any pleading or proceeding. In fact, Globe in its Consolidated Reply before this Court challenged NTC to produce the transcripts of the hearings it conducted to prove that the issue of Globe's authority to provide SMS was put in issue. It did not produce any transcript. Being an agency of the government, NTC should, at all times, maintain a due regard for the constitutional rights of party litigants.101 In this case, NTC blindsided Globe with a punitive measure for a reason Globe was not made aware of, and in a manner that contravened express provisions of law.

182 Consequently, the fine imposed by NTC on Globe is also invalid. Otherwise put, since the very basis for the fine was invalidly laid, the fine is necessarily void. Conclusion In summary: (i) there is no legal basis under the PTA or the memorandum circulars promulgated by the NTC to denominate SMS as VAS, and any subsequent determination by the NTC on whether SMS is VAS should be made with proper regard for due process and in conformity with the PTA; (ii) the assailed Order violates due process for failure to sufficiently explain the reason for the decision rendered, for being unsupported by substantial evidence, and for imputing violation to, and issuing a corresponding fine on, Globe despite the absence of due notice and hearing which would have afforded Globe the right to present evidence on its behalf. Thus, the Order effectively discriminatory and arbitrary as it is, was issued with grave abuse of discretion and it must be set aside. NTC may not legally require Globe to secure its approval for Globe to continue providing SMS. This does not imply though that NTC lacks authority to regulate SMS or to classify it as VAS. However, the move should be implemented properly, through unequivocal regulations applicable to all entities that are similarly situated, and in an even-handed manner. Concurrently, the Court realizes that the PTA is not intended to constrain the industry within a cumbersome regulatory regime.102 The policy as pre-ordained by legislative fiat renders the traditionally regimented business in an elementary free state to make business decisions, avowing that it is under this atmosphere that the industry would prosper.103 It is disappointing at least if the deregulation thrust of the law is skirted deliberately. But it is ignominious if the spirit is defeated through a crazy quilt of vague, overlapping rules that are implemented haphazardly. By no means should this Decision be interpreted as removing SMS from the ambit of jurisdiction and review by the NTC. The issue before the Court is only the prior approval requirement as imposed on Globe and Smart. The NTC will continue to exercise, by way of its broad grant, jurisdiction over Globe and Smart's SMS offerings, including questions of rates and customer complaints. Yet caution must be had. Much complication could have been avoided had the NTC adopted a proactive position, promulgating the necessary rules and regulations to cope up with the advent of the technologies it superintends. With the persistent advent of new offerings in the telecommunications industry, the NTC's role will become more crucial than at any time before. If NTC's behavior in the present case is but indicative of a malaise pervading this crucial regulatory arm of the State, the Court fears the resultant confusion within the industry and the consuming public. The credibility of an administrative agency entrusted with specialized fields subsists not on judicial doctrine alone, but more so on its intellectual strength, adherence to law, and basic fairness. WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated 22 November 1999, as well as its Resolution dated 29 July 2000, and the assailed Order of the NTC dated 19 July 1999 are hereby SET ASIDE. No cost. SO ORDERED. Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

183 Republic of the Philippines SUPREME COURT Manila EN BANC

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 1985 1 denying herein petitioners' motion to dismiss Civil Case No. Q45139, 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 Court 6 dated 25 July 1985 seeking to enjoin the continued implementation of the questioned MB resolution.

184 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

185 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, 16which 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

186 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 Appeals 20 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

187 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 facieshowing 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.

188 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. Narvasa, C.J., Cruz, Padilla, Bidin, Grio-Aquino, Regalado, Davide, Jr., Romero, Nocon, Campos, Jr. and Quiason, JJ., concur. Feliciano and Melo, JJ., took no part.

189 Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-61689 June 20, 1988 RURAL BANK OF BUHI, INC., and HONORABLE JUDGE CARLOS R. BUENVIAJE, petitioners, vs. HONORABLE COURT OF APPEALS, CENTRAL BANK OF THE PHILIPPINES and CONSOLACION ODRA,respondents. Manuel B. Tomacruz and Rustico Pasilavan for petitioners. I.B. Regalado, Jr. and Pacifica T. Torres for respondents.

PARAS, J.: This is a petition for review on certiorari with preliminary mandatory injunction seeking the reversal of the orders of the Court of Appeals dated March 19, 1982 and March 24, 1982 and its decision * (HATOL) promulgated on June 17,1982 in CA-G.R. No. 13944 entitled "Banko Central ng Pilipinas at Consolacion Odra Laban Kina Rural Bank of Buhi (Camarines Sur), Inc." and praying for a restraining order or a preliminary mandatory injunction to restrain respondents from enforcing aforesaid orders and decision of the respondent Court, and to give due course to the petitioners' complaint in IR-428, pending before Hon. Judge Carlos R. Buenviaje of Branch VII, CFI, Camarines Sur. The decretal portion of the appealed decision reads: DAHIL DITO, ang utos ng pinasasagot sa Hukom noong ika-9 ng Marso, 1982, ay isinasang-tabi. Kapalit nito, isang utos and ipinalabas na nag-uutos sa pinasasagot sa Hukom na itigil ang anumang pagpapatuloy o pagdidinig kaugnay sa usaping IR-428 na pinawawalang saysay din ng Hukumang ito. SIYANG IPINAG-UUTOS. The antecedent facts of the case are as follows: The petitioner Rural Bank of Buhi, Inc. (hereinafter referred to as Buhi) is a juridical entity existing under the laws of the Philippines. Buhi is a rural bank that started its operations only on December 26,1975 (Rollo, p. 86). In 1980, an examination of the books and affairs of Buhi was ordered conducted by the Rural Banks and Savings and Loan Association (DRBSLA), Central Bank of the Philippines, which by law, has charge of the supervision and examination of rural banks and savings and loan associations in the Philippines. However, said petitioner refused to be examined and as a result thereof, financial assistance was suspended. On January 10, 1980, a general examination of the bank's affairs and operations was conducted and there were found by DRBSLA represented by herein respondent, Consolacion V. Odra, Director of DRBSLA, among others, massive irregularities in its operations consisting of loans to unknown and fictitious borrowers, where the sum of P 1,704,782.00 was past due and another sum of P1,130,000.00 was also past due in favor of the Central Bank (Rollo, p. 86). The promissory notes evidencing these loans were rediscounted with the Central Bank for cash. As a result thereof, the bank became insolvent and prejudiced its depositors and creditors.

190 Respondent, Consolacion V. Odra, submitted a report recommending to the Monetary Board of the Central Bank the placing of Buhi under receivership in accordance with Section 29 of Republic Act No. 265, as amended, the designation of the Director, DRBSLA, as receiver thereof. On March 28, 1980, the Monetary Board, finding the report to be true, adopted Resolution No. 583 placing Buhi, petitioner herein, under receivership and designated respondent, Consolacion V. Odra, as Receiver, pursuant to the provisions of Section 29 of Republic Act No. 265 as amended (Rollo, p. 111). In a letter dated April 8, 1980, respondent Consolacion V. Odra, as receiver, implemented and carried out said Monetary Board Resolution No. 583 by authorizing deputies of the receiver to take control, possession and charge of Buhi, its assets and liabilities (Rollo, p. 109). Imelda del Rosario, Manager of herein petitioner Buhi, filed a petition for injunction with Restraining Order dated April 23, 1980, docketed as Special Proceedings IR-428 against respondent Consolacion V. Odra and DRBSLA deputies in the Court of First Instance of Camarines Sur, Branch VII, Iriga City, entitled Rural Bank of Buhi vs. Central Bank, which assailed the action of herein respondent Odra in recommending the receivership over Buhi as a violation of the provisions of Sections 28 and 29 of Republic Act No. 265 as amended, and Section 10 of Republic Act No. 720 (The Rural Banks Act) and as being ultra vires and done with grave abuse of discretion and in excess of jurisdiction (Rollo, p. 120). Respondents filed their motion to dismiss dated May 27, 1980 alleging that the petition did not allege a cause of action and is not sufficient in form and substance and that it was filed in violation of Section 29, Republic Act No. 265 as amended by Presidential Decree No. 1007 (Rollo, p. 36). Petitioners, through their counsel, filed an opposition to the motion to dismiss dated June 17, 1980 averring that the petition alleged a valid cause of action and that respondents have violated the due process clause of the Constitution (Rollo, p. 49). Later, respondents filed a reply to the opposition dated July 1, 1980, claiming that the petition is not proper; that Imelda del Rosario is not the proper representative of the bank; that the petition failed to state a cause of action; and, that the provisions of Section 29 of Republic Act No. 265 had been faithfully observed (Rollo, p. 57). On August 22, 1980, the Central Bank Monetary Board issued a Resolution No. 1514 ordering the liquidation of the Rural Bank of Buhi (Rollo, p. 108). On September 1, 1981, the Office of the Solicitor General, in accordance with Republic Act No. 265, Section 29, filed in the same Court of First Instance of Camarines Sur, Branch VII, a petition for Assistance in the Liquidation of Buhi, which petition was docketed as SP-IR-553, pursuant to the Monetary Board Resolution No. 1514 (Rollo, pp. 89; 264). Meanwhile, respondent Central Bank filed on September 15, 1981, in Civil Case No. IR-428 a Supplemental Motion To Dismiss on the ground that the receivership of Buhi, in view of the issuance of the Monetary Board Resolution No. 1514 had completely become moot and academic (Rollo, p. 68) and the fact that Case SP-IR-553 for the liquidation of Buhi was already pending with the same Court (Rollo, p. 69). On October 16, 1981, petitioners herein filed their amended complaint in Civil Case No. IR-428 alleging that the issuance of Monetary Board Resolution No. 583 was plainly arbitrary and in bad faith under aforequoted Section 29 of Republic Act No. 265 as amended, among others (Rollo, p. 28). On the same day, petitioner herein filed a rejoinder to its opposition to the motion to dismiss (Rollo, p. 145). On March 9,1982, herein petitioner Judge Buenviaje, issued an order denying the respondents' motion to dismiss, supplemental motion to dismiss and granting a temporary restraining order enjoining respondents from further managing and administering the Rural Bank of Buhi and to deliver the possession and control thereof to the petitioner Bank under the same conditions and with the same financial status as when the same was taken over by herein respondents (defendants) on April 16, 1980 and further enjoining petitioner to post a bond in the amount of three hundred thousand pesos (P300,000.00) (Rollo, p. 72).

191 The dispositive portion of said decision reads: WHEREFORE, premises considered, the motion to dismiss and supplemental motion to dismiss, in the light of petitioners' opposition, for want of sufficient merit is denied. Respondents are hereby directed to file their answer within ten (10) days from receipt of a copy of this order. (Rollo, p. 4). On March 11, 1982, petitioner Buhi through counsel, conformably with the above-mentioned order, filed a Motion to Admit Bond in the amount of P300,220.00 (Rollo, pp. 78-80). On March 15,1982, herein petitioner Judge issued the order admitting the bond of P300,220.00 filed by the petitioner, and directing the respondents to surrender the possession of the Rural Bank of Buhi, together with all its equipments, accessories, etc. to the petitioners (Rollo, p. 6). Consequently, on March 16, 1982, herein petitioner Judge issued the writ of execution directing the Acting Provincial Sheriff of Camarines Sur to implement the Court's order of March 9, 1982 (Rollo, p. 268). Complying with the said order of the Court, the Deputy Provincial Sheriff went to the Buhi premises to implement the writ of execution but the vault of the petitioner bank was locked and no inventory was made, as evidenced by the Sheriffs Report (Rollo, pp. 83-84). Thus, the petitioner herein filed with the Court an "Urgent Ex-Parte Motion to Allow Sheriff Calope to Force Open Bank Vault" on the same day (Rollo, p. 268). Accordingly, on March 17, 1982, herein petitioner Judge granted the aforesaid Ex-Parte Motion to Force Open the Bank Vault (Rollo, p. 269). On March 18, 1982, counsel for petitioner filed another "Urgent Ex-Parte Motion to Order Manager of City Trust to Allow Petitioner to Withdraw Rural Bank Deposits" while a separate "Urgent Ex-Parte Motion to Order Manager of Metrobank to Release Deposits of Petitioners" was filed on the same date. The motion was granted by the Court in an order directing the Manager of Metro Bank-Naga City (Rollo, p. 269) to comply as prayed for. In view thereof, herein respondents filed in the Court of Appeals a petition for certiorari and prohibition with preliminary injunction docketed as CA-G.R. No. 13944 against herein petitioners, seeking to set aside the restraining order and reiterating therein that petitioner Buhi's complaint in the lower court be dismissed (Rollo, p. 270). On March 19, 1982, the Court of Appeals issued a Resolution (KAPASIYAHAN) in tagalog, restraining the Hon. Judge Carlos R. Buenviaje, from enforcing his order of March 9,1982 and suspending further proceedings in Sp. Proc. No. IR-428 pending before him while giving the Central Bank counsel, Atty. Ricardo Quintos, authority to carry out personally said orders and directing the "Punong Kawani" of the Court of Appeals to send telegrams to the Office of the President and the Supreme Court (Rollo, p. 168). Herein petitioners did not comply with the Court of Appeals' order of March 19, 1982, but filed instead on March 21, 1982 a motion for reconsideration of said order of the Court of Appeals, claiming that the lower court's order of March 9, 1982 referred only to the denial of therein respondents' motion to dismiss and supplemental motion to dismiss and that the return of Buhi to the petitioners was already an accomplished fact. The motion was denied by the respondent court in a resolution dated June 1, 1982 (Rollo, p. 301). In view of petitioners' refusal to obey the Court of Appeals' Order of March 19, 1982, herein respondents filed with the Court of Appeals a Motion to Cite Petitioners in Contempt, dated April 22, 1982 (Rollo, p. 174). The Court of Appeals issued on May 24, 1982 an order requiring herein petitioner Rural Bank of Buhi, Inc., through its then Acting Manager, Imelda del Rosario and herein petitioner Judge Carlos Buenviaje, as well as Manuel Genova and Rodolfo Sosa, to show cause within ten (10) days from notice why they should not be held in contempt of court and further directing the Ministry of National Defense or its representative to cause the return of possession and management of the Rural Bank to the respondents Central Bank and Consolacion Odra (Rollo, p. 180).

192 On June 9, 1982, petitioners filed their objection to respondents' motion for contempt dated June 5, 1982 claiming that the properties, subject of the order, had already been returned to the herein petitioners who are the lawful owners thereof and that the returning could no longer be undone (Rollo, p. 181). Later, petitioners filed another motion dated June 17, 1982 for the reconsideration of the resolution of June 1, 1982 of the Court of Appeals alleging that the same contravened and departed from the rulings of the Supreme Court that consummated acts or acts already done could no longer be the subject of mandatory injunction and that the respondent Court of Appeals had no jurisdiction to issue the order unless it was in aid of its appellate jurisdiction, claiming that the case (CA-G.R. No. 13944) did not come to it on appeal (Rollo, p. 302). As aforestated, on June 17, 1982, respondent Court of Appeals rendered its decision (HATOL) setting aside the lower court's restraining order dated March 9,1982 and ordering the dismissal of herein petitioners' amended complaint in Civil Case No. IR-428 (Rollo, p. 186). On July 9, 1982, petitioners (respondents in CA-G.R. No. 13944) filed a Motion for Reconsideration of the Decision dated June 17, 1982 insofar as the complaint with the lower court (Civil Case No. IR-428 was ordered dismissed (Rollo, p. 305). On August 23, 1982, the respondent Court of Appeals issued its Resolution denying for lack of merit, herein petitioners' motion for reconsideration of the resolution issued by the respondent Court of Appeals on June 1, 1982 and set on August 31, 1982 the hearing of the motion to cite the respondents in CA-G.R. No. SP-13944 (herein petitioner) for contempt (Rollo, p. 193). At said hearing, counsel for Rural Bank of Buhi agreed and promised in open court to restore and return to the Central Bank the possession and control of the Bank within three (3) days from August 31, 1982. However on September 3,1982, Rosalia Guevara, Manager thereof, vigorously and adamantly refused to surrender the premises unless she received a written order from the Court. In a subsequent hearing of the contempt incident, the Court of Appeals issued its Order dated October 13,1982, but Rosalia Guevara still refused to obey, whereupon she was placed under arrest and the Court of Appeals ordered her to be detained until she decided to obey the Court's Order (Rollo, pp. 273274). Earlier, on September 14, 1982 petitioners had filed this petition even while a motion for reconsideration of the decision of June 17,1982 was still pending consideration in the Court of Appeals. In the resolution of October 20, 1982, the Second Division of this Court without giving due course to the petition required respondents to COMMENT (Rollo, p. 225). Counsel for respondents manifested (Rollo, p. 226) that they could not file the required comment because they were not given a copy of the petition. Meanwhile, they filed an urgent motion dated October 28, 1982 with the Court of Appeals to place the bank through its representatives in possession of the Rural Bank of Buhi (Camarines Sur), Inc. (Rollo, p. 237). On December 9, 1982, petitioners filed a Supplemental Petition with urgent motion for the issuance of a restraining order dated December 2, 1982 praying that the restraining order be issued against respondent court (Rollo, p. 229). In the resolution of December 15,1982, the Court resolved to require petitioners to furnish the respondents with a copy of the petition and to require the respondents to comment on both the original and the supplemental petitions (Rollo, p. 243). In a resolution of February 21, 1983, the Court NOTED Rosalia V. Guevara's letter dated February 4, 1983 (Rollo, p. 252) addressed to Hon. Chief Justice Enrique M. Fernando, requesting that she be allowed to file a petition for the issuance of a writ of habeas corpus (Rollo, p. 256).

193 At the hearing of the said petition on February 23, 1983 where the counsel of both parties appeared, this Court noted the Return of the Writ of Habeas Corpus as well as the release of petitioner Rosalia V. Guevara from detention by the National Bureau of Investigation. After hearing aforesaid counsel and petitioner herself, and it appearing that the latter had resigned since January 18,1983 as Manager of the Rural Bank of Buhi, Inc. and that the Central Bank might avail of more than adequate legal measures to take over the management, possession and control of the said bank (and not through contempt proceedings and detention and confinement of petitioner), with Assistant Solicitor General Andin manifesting that respondents were not insisting on the continued detention of petitioner, the Court Resolved to SET the petitioner at liberty and to consider the contempt incident closed (Rollo, p. 339). On April 11, 1983, respondents filed their comment on the original and supplemental petitions. Meanwhile, the Court of Appeals, acting on respondents' urgent motion filed on October 28, 1982 ordered on April 13, 1983 the return to the petitioners (herein respondents) or their duly authorized representatives of the possession, management and control of subject Rural Bank (Rollo, p. 319), together with its properties. On April 28, 1983, petitioner filed an urgent motion: (1) to give due course to the petition and (2) for immediate issuance of a Restraining Order against the respondent court to prevent it from enforcing its aforesaid resolution dated April 13, 1983 and from further proceeding in AC-G.R. No. 13944-SP (Rollo, p. 315). On May 16, 1983, this Court resolved to deny the petition for lack of merit (Rollo, p. 321). On July 25, 1983, petitioners filed their verified Motion for Reconsideration (Rollo, p. 337) praying that the HATOL dated June 17, 1982 of the Court of Appeals be set aside as null and void and that Special Proceedings No. IR-428 of CFI-Camarines Sur, Iriga City, Branch VII, be ordered remanded to the RTC of Camarines Sur, Iriga City, for further proceedings. A Motion for Early Resolution was filed by herein petitioners on March 12,1984 (Rollo, p. 348). Petitioners raised the following legal issues in their motion for reconsideration: I. UNDER SEC. 29, R.A. 265, AS AMENDED, MAY THE MONETARY BOARD (MB) OF THE CENTRAL BANK (CB) PLACE A RURAL BANK UNDER RECEIVERSHIP WITHOUT PRIOR NOTICE TO SAID RURAL BANK TO ENABLE IT TO BE HEARD ON THE GROUND RELIED UPON FOR SUCH RECEIVERSHIP? II. UNDER THE SAME SECTION OF SAID LAW, WHERE THE MONETARY BOARD (MB) OF THE CENTRAL BANK (CB) HAS PLACED A RURAL BANK UNDER RECEIVERSHIP, IS SUCH ACTION OF THE MONETARY BOARD (MB) SUBJECT TO JUDICIAL REVIEW? IF SO, WHICH COURT MAY EXERCISE SUCH POWER AND WHEN MAY IT EXERCISE THE SAME? III. UNDER THE SAID SECTION OF THE LAW, SUPPOSE A CIVIL CASE IS INSTITUTED SEEKING ANNULMENT OF THE RECEIVERSHIP ON THE GROUND OF ARBITRARINESS AND BAD FAITH ON THE PART OF THE MONETARY BOARD (MB), MAY SUCH CASE BE DISMISSED BY THE IAC (THEN CA) ON THE GROUND OF INSUFFICIENCY OF EVIDENCE EVEN IF THE TRIAL COURT HAS NOT HAD A CHANCE YET TO RECEIVE EVIDENCE AND THE PARTIES HAVE NOT YET PRESENTED EVIDENCE EITHER IN THE TRIAL COURT OR IN SAID APPELLATE COURT? (Rollo, pp. 330-331). I. Petitioner Rural Bank's position is to the effect that due process was not observed by the Monetary Board before said bank was placed under receivership. Said Rural Bank claimed that it was not given the chance to deny and disprove such claim of insolvency and/or any other ground which the Monetary Board used in justification of its action. Relative thereto, the provision of Republic Act No. 265 on the proceedings upon insolvency reads: SEC. 29. Proceedings upon insolvency. Whenever, upon examination by the head of the appropriate supervising and examining department or his examiners or agents into the condition of any banking institution, it shall be disclosed that the condition of the

194 same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of the department head concerned forthwith, in writing, to inform the Monetary Board of the facts, and the Board may, upon finding the statements of the department head to be true, forbid the institution to do business in the Philippines and shall designate an official of the Central Bank, or a person of recognized competence in banking, as receiver to immediately take charge of its assets and liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors, exercising all the powers necessary for these purposes including, but not limited to, bringing suits and foreclosing mortgages in the name of the banking institution. The Monetary Board shall thereupon determine within sixty days whether the institution may be recognized or otherwise placed in such a condition so that it may be permitted to resume business with safety to its depositors and creditors and the general public and shall prescribe the conditions under which such redemption of business shall take place as the time for fulfillment of such conditions. In such case, the expenses and fees in the collection and administration of the assets of the institution shall be determined by the Board and shall be paid to the Central Bank out of the assets of such banking institution. If the Monetary Board shall determine and confirm within the said period that the banking institution is insolvent or cannot resume business with safety to its depositors, creditors and the general public, it shall, if the public interest requires, order its liquidation, indicate the manner of its liquidation and approve a liquidation plan. The Central Bank shall, by the Solicitor General, file a petition in the Court of First Instance reciting the proceedings which have been taken and praying the assistance of the court in the liquidation of the banking institution. The Court shall have jurisdiction in the same proceedings to adjudicate disputed claims against the bank and enforce individual liabilities of the stockholders and do all that is necessary to preserve the assets of the banking institution and to implement the liquidation plan approved by the Monetary Board. The Monetary Board shall designate an official of the Central Bank or a person of recognized competence in banking, as liquidator who shall take over the functions of the receiver previously appointed by the Monetary Board under this Section. The liquidator shall, with all convenient speed, convert the assets of the banking institution to money or sell, assign or otherwise dispose of the same to creditors and other parties for the purpose of paying the debts of such bank and he may, in the name of the banking institution, institute such actions as may be necessary in the appropriate court to collect and recover accounts and assets of the banking institution. The provisions of any law to the contrary notwithstanding the actions of the Monetary Board under this Section and the second paragraph of Section 34 of this Act shall be final and executory, and can be set aside by the court only if there is convincing proof that the action is plainly arbitrary and made in bad faith. No restraining order or injunction shall be issued by the court enjoining the Central Bank from implementing its actions under this Section and the second paragraph of Section 34 of this Act, unless there is convincing proof that the action of the Monetary Board is plainly arbitrary and made in bad faith and the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond executed in favor of the Central Bank, in an amount to be fixed by the court. The restraining order or injunction shall be refused or, if granted, shall be dissolved upon filing by the Central Bank of a bond, which shall be in the form of cash or Central Bank cashier's check, in an amount twice the amount of the bond of the petitioner, or plaintiff conditioned that it will pay the damages which the petitioner or plaintiff may suffer by the refusal or the dissolution of the injunction. The provisions of Rule 58 of the New Rules of Court insofar as they are applicable and not inconsistent with the provisions of this Section shall govern the issuance and dissolution of the restraining order or injunction contemplated in this Section.

195 Insolvency, under this Act, shall be understood to mean the inability of a banking institution to pay its liabilities as they fall due in the usual and ordinary course of business: Provided, however, that this shall not include the inability to pay of an otherwise non-insolvent bank caused by extraordinary demands induced by financial panic commonly evidenced by a run on the banks in the banking community. The appointment of a conservator under Section 28-A of this Act or the appointment of receiver under this Section shall be vested exclusively with the Monetary Board, the provision of any law, general or special, to the contrary not withstanding. It will be observed from the foregoing provision of law, that there is no requirement whether express or implied, that a hearing be first conducted before a banking institution may be placed under receivership. On the contrary, 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 the bank is in a condition of insolvency or so situated that its continuance in business would involve probable loss to its depositors or creditors. Supportive of this theory is the ruling of this Court, which established the authority of the Central Bank under the foregoing circumstances, which reads: As will be noted, whenever it shall appear prima facie that a banking institution is in "a condition of insolvency" or so situated "that its continuance in business would involved probable loss to its depositors or creditors," the Monetary Board has authority: First, to forbid the institution to do business and appoint a receiver therefor; and Second, to determine, within 60 days, whether or not: 1) the institution may be reorganized and rehabilitated to such an extent as to be permitted to resume business with safety to depositors, creditors and the general public; or 2) it is indeed insolvent or cannot resume business with safety to depositors, creditors and the general public, and public interest requires that it be liquidated. In this latter case (i.e., the bank can no longer resume business with safety to depositors, creditors and the public, etc.) its liquidation will be ordered and a liquidator appointed by the Monetary Board. The Central Bank shall thereafter file a petition in the Regional Trial Court praying for the Court's assistance in the liquidation of the bank." ... (Salud vs. Central Bank, 143 SCRA 590 [1986]). Petitioner further argues, that there is also that constitutional guarantee that no property shall be taken without due process of law, so that Section 29, R.A. 265, as amended, could not have intended to disregard and do away with such constitutional requirement when it conferred upon the Monetary Board the power to place Rural Banks under receivership (Rollo, p. 333). The contention is without merit. It has long been established and recognized in this jurisdiction that the closure and liquidation of a bank may be considered as an exercise of police power. Such exercise may, however, be subject to judicial inquiry and could be set aside if found to be capricious, discriminatory, whimsical, arbitrary, unjust or a denial of the due process and equal protection clauses of the Constitution (Central Bank vs. Court of Appeals, 106 SCRA 155 [1981]). The evident implication of the law, therefore, is that the appointment of a receiver may be made by the Monetary Board without notice and hearing but its action is subject to judicial inquiry to insure the protection of the banking institution. Stated otherwise, 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

196 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. In Mendiola vs. Court of Appeals, (106 SCRA 130), the Supreme Court held: The pivotal issue raised by petitioner is whether or not the appointment of a receiver by the Court of First Instance on January 14, 1969 was in order. Respondent Court correctly stated that the appointment of a receiver pendente lite is a matter principally addressed to and resting largely on the sound discretion of the court to which the application is made. This Tribunal has so held in a number of cases. However, receivership being admittedly a harsh remedy, it should be granted with extreme caution. Sound reasons for receivership must appear of record, and there should be a clear showing of a necessity therefor. Before granting the remedy, the court is advised to consider the consequence or effects thereof in order to avoid irreparable injustice or injury to others who are entitled to as much consideration as those seeking it. xxx xxx xxx This is not to say that a hearing is an indispensable requirement for the appointment of a receiver. As petitioner correctly contends in his first assignment of error, courts may appoint receivers without prior presentation of evidence and solely on the basis of the averments of the pleadings. Rule 59 of the Revised Rules of Court allows the appointment of a receiver upon an ex parte application. There is no question that the action of the Monetary Board in this regard may be subject to judicial review. Thus, it has been held that the courts may interfere with the Central Bank's exercise of discretion in determining whether or not a distressed bank shall be supported or liquidated. Discretion has its limits and has never been held to include arbitrariness, discrimination or bad faith (Ramos vs. Central Bank of the Philippines, 41 SCRA 567 [1971]). It has likewise been held that resolutions of the Monetary Board under Section 29 of the Central Bank Act, such as: forbidding bank institutions to do business on account of a "condition of insolvency" or because its continuance in business would involve probable loss to depositors or creditors; or appointing a receiver to take charge of the bank's assets and liabilities, or determining whether the bank may be rehabilitated or should be liquidated and appointing a liquidator for that purpose, are under the law "final and executory" and may be set aside only on one ground, that is "if there is convincing proof that the action is plainly arbitrary and made in bad faith" (Salud vs. Central Bank, supra). There is no dispute that under the above-quoted Section 29 of the Central Bank Act, the Regional Trial Court has jurisdiction to adjudicate the question of whether or not the action of the Monetary Board directing the dissolution of the subject Rural Bank is attended by arbitrariness and bad faith. Such position has been sustained by this Court in Salud vs. Central Bank of the Philippines (supra). In the same case, the Court ruled further that a banking institution's claim that a resolution of the Monetary Board under Section 29 of the Central Bank Act should be set aside as plainly arbitrary and made in bad faith, may be asserted as an affirmative defense (Sections 1 and 4[b], Rule 6, Rules of Court) or a counterclaim (Section 6, Rule 6; Section 2, Rule 72 of the Rules of Court) in the proceedings for assistance in liquidation or as a cause of action in a separate and distinct action where the latter was filed ahead of the petition for assistance in liquidation (ibid; Central Bank vs. Court of Appeals, 106 SCRA 143 [1981]). III. It will be noted that in the issuance of the Order of the Court of First Instance of Camarines Sur, Branch VII, Iriga City, dated March 9, 1982 (Rollo, pp. 72-77), there was no trial on the merits. Based on the pleadings filed, the Court merely acted on the Central Bank's Motion to Dismiss and Supplemental Motion to Dismiss, denying both for lack of sufficient merit. Evidently, the trial court merely acted on an

197 incident and has not as yet inquired, as mandated by Section 29 of the Central Bank Act, into the merits of the claim that the Monetary Board's action is plainly arbitrary and made in bad faith. It has not appreciated certain facts which would render the remedy of liquidation proper and rehabilitation improper, involving as it does an examination of the probative value of the evidence presented by the parties properly belonging to the trial court and not properly cognizable on appeal (Central Bank vs. Court of Appeals, supra, p. 156). Still further, without a hearing held for both parties to substantiate their allegations in their respective pleadings, there is lacking that "convincing proof" prerequisite to justify the temporary restraining order (mandatory injunction) issued by the trial court in its Order of March 9, 1982. PREMISES CONSIDERED, the decision of the Court of Appeals is MODIFIED; We hereby order the remand of this case to the Regional Trial Court for further proceedings, but We LIFT the temporary restraining order issued by the trial court in its Order dated March 9, 1982. SO ORDERED. Yap, C.J., Melencio-Herrera, Padilla and Sarmiento, JJ., concur.

198 Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 112844 June 2, 1995 PHILIPPINE MERCHANT MARINE SCHOOL, INC., represented by JUAN O. NOLASCO III, petitioner, vs. COURT OF APPEALS, THE OFFICE OF THE EXECUTIVE SECRETARY, EDELMIRO AMANTE, RENATO CORONA, and the DEPARTMENT OF EDUCATION, CULTURE AND SPORTS, respondents.

BELLOSILLO, JR., J.: PHILIPPINE MERCHANT MARINE SCHOOL, INC. (PMMSI), was established in Manila in 1950 to train and produce competent marine officers. It offers a two-year course in Marine Engineering (A.M.E.) and a four-year course in Marine Transportation (B.S.M.T.). In 1978 it established a branch in Talon, Las Pias, Metro Manila. But we are here concerned only with the main school in Manila. For several times prior to 1985 respondent Department of Education, Culture and Sports (DECS) disapproved petitioner's requests for renewal permit/recognition. However, on 11 March 1986 the DECS issued petitioner a renewal permit for SY 1985-1986. Later, petitioner applied for a summer permit for 1986 which the DECS favorably indorsed to the Minister of Education in consideration of the graduating students for summer. Thereafter the application was returned to Director Modesta Boquiren of the DECS for evaluation and decision pursuant to the authority delegated to the Regions under Department Order No. 22, series of 1975. Director Boquiren issued petitioner the summer permit for 1986 based on the previously stated humanitarian reason but subject to the condition that petitioner should not enroll students for the first semester of SY 1986-1987 until a permit therefor was granted and that the enrollment list for the summer term be submitted immediately. Sometime in 1986 the DECS received a complaint from Felixberto B. Galvez, president of petitioner's Faculty Association, NAFLU-KMU, concerning the issuance of summer permit to petitioner and of its holding of classes for courses not recognized by the Government. Galvez requested that the matter be looked into as well as the possible revocation of petitioner's authority due to persistent violation of the orders of the DECS. In response, the DECS through Director Boquiren recommended that petitioner's summer permit be revoked and that the school be closed effective SY 1986-1987 on the ground that: (a) petitioner did not have a renewal permit/recognition for SY 1986-1987; (b) several communications were sent to petitioner's head telling him not to operate without permit and to explain within seventy-two (72) hours from receipt of Director Boquiren's letter dated 9 July 1986 why no drastic action should be taken against it but said communication was never answered; and, (c) petitioner did not correct the deficiencies indicated in the renewal permit for 1985-1986. Accordingly, in a 3rd Indorsement dated 23 September 1986 the DECS through then Minister Lourdes R. Quisumbing approved the following courses of action for petitioner: (a) the students in the two courses who were graduating for SY 1986-1987 would be allowed to graduate even without permit for said courses as a special case provided that they completed the requirements for graduation and subject to prior issuance of Special Order; and, (b) the remaining students should be allowed to transfer to other authorized schools. In a letter dated 30 September 1986 Director Boquiren, informed petitioner of the aforementioned courses of action and directed immediate implementation thereof.

199 On 9 April 1987 the DECS Inter-Agency Technical Committee (IATCOM) recommended renewal of permits for the maritime courses offered by petitioner provided that a development plan for the improvement of its buildings classrooms, laboratory rooms, library offices and other rooms be formulated and implemented before the start of school year 1987-1988. Despite lack of permit, petitioner continued to enroll students and offer courses in Marine Engineering and Marine Transportation for SY 1987-1988. This prompted the DECS through Director Hernando Dizon to write petitioner on 4 August 1988 directing it not to operate without permit and inviting its attention to the provisions of the Private School Law 1 as reiterated in the Education Act of 1982 2 which prohibits operation of unauthorized schools/courses. On 28 October 1988 petitioner sent a letter to Director Dizon applying for permit/recognition to conduct classes for the two (2) maritime courses retroactive from summer of 1987 up to SY 1988-1989 and informing him of its transfer to the 5th Floor of the Republic Supermarket Building, corner Rizal Avenue and Soler St., Sta. Cruz, Manila. On the basis of the favorable report of a supervisor of the Bureau of Higher Education who visited the premises of petitioner on 14 November 1988, a director of said Bureau recommended renewal of petitioner's permit. However, in a DECS-PAMI survey conducted by the DECS technical staff in 1988, petitioner scored only 32 points out of a possible 1,026 points for requirements in Nautical Engineering, and only 207 points out of 905 points in Marine Engineering, way below the DECS requirements. Subsequent inspection of petitioner's premises by the Bureau of Higher Education-DECS Technical Panel for Maritime Education (TPME) affirmed the findings of the DECS-PAMI survey. It found petitioner deficient in terms of the minimum requirements as provided in DECS Order No. III, series of 1987, which refers to the policies and standards for Maritime Education Plan. In a memorandum dated 19 January 1989 addressed to DECS Director Nilo Rosas, it set forth the following recommendations: 1. The PMMS administration may be given a last chance to put up at least 60% of the minimum standard equipment for a period of about two months (January-March 1989). 2. The DECS with TPME will conduct a re-inspection sometime the first week of April to monitor the progress of the requirements. 3. No new and old students will be allowed to enroll during summer of 1989 and the subsequent semesters pending issuance of a permit. 4. Therefore, issuance of a school permit for 1987-1988 to 1988-89 shall be held in abeyance pending compliance of at least 60% of the requirements. 5. DECS higher authorities shall decide whether the graduating students for the second semester 1988-89 will be allowed to graduate and a retroactive school permit for the school years 1987-88, 1988-89 can be granted. 3 As recommended, the TPME Secretariat conducted a reinspection of petitioner's premises, then submitted a report dated 18 April 1989 with the following new recommendations 1. Gradual phasing out of the BSMT Nautical Studies and Associate in Marine Engineering programs. Under this scheme, no new enrollees should be accepted anymore for the 1st year BSMT Nautical Studies and AME starting 1st semester of school year 1989-90. 2. If the school can come up with the DECS minimum standard within the phasing out period, suspension order may be lifted. 3. If the school fails to meet the DECS minimum standard at the end of the phasing out period, closure order will be issued.

200 4. No special permit for the BSMT Nautical Studies and AME courses should be granted as a special case. However, during the phasing out period students may be allowed to graduate under PMMS, Talon, Las Pias, based on these considerations 1. PMMS, Manila, has inadequate training facilities and equipment for BSMT Nautical Studies and AME programs. 2. The school has not acquired its own school site and building. The present school campus is not conducive for training and is found to be very limited in space so that there is difficulty for school development and expansion. 3. On 23 September 1986, the Secretary of Education, Culture and Sports already issued a cease to operate order to the school head of PMMS. The said indorsement letter also provided humanitarian decision (reason?) which granted permit to PMMS as a special case, just to allow BSMT and AME students to graduate and the remaining students were advised to transfer to authorized/recognized schools. 4. Labor dispute occurred in 1987. The conflict between the employees and employer is a manifestation of mismanagement of school. 4 In a letter dated 27 April 1989 Director Rosas informed petitioner of the TPME report and recommendations and invited it for a conference on 2 May 1989 before any major decision and action would be made. On 2 May 1989, the TPME Secretariat submitted another memorandum on its reinspection of petitioner's premises made on 28 April 1989. Based on its findings that no substantial improvement in terms of minimum requirements, equipment and training facilities since the January 1989 inspection was made, it reiterated the recommendations it submitted to the DECS Bureau of Higher Education. For this reason, in the letter dated 25 May 1989 Director Rosas notified petitioner about the aforementioned report and the DECS' decision that: 1. The BSMT Nautical Studies and Associate in Marine Engineering courses be gradually phased out. Such being the case, the school shall no longer be allowed to accept 1st year students and new enrollees starting 1st semester of school year 1989-90. 2. The second year and third year students may be allowed to remain until they graduate. However, the school may opt to transfer these students to PMMS, Talon, Las Pias, due to the following considerations: 1. The school's training equipment and instructional facilities are very far below the standards set by DECS. 2. The school site and building are not owned by the school but only leased with contract of renewal to be made annually. 3. The present location of the school does not warrant for expansion, development and improvement. 4. The present location of the school is not conducive for learning, it being located on the 5th floor of a supermarket in the downtown section of the city. 5. A cease to operate order was issued by Secretary Lourdes R. Quisumbing sometime in 1986, which order was violated by the school. 5

201 In a letter dated 11 July 1989 the DECS through Secretary Quisumbing informed petitioner that it had received reports that petitioner enrolled freshmen for its maritime programs which were ordered phased out effective SY 1989-1990 per letter of Director Rosas dated 25 May 1989; called petitioner's attention to the provision of Sec. 1, Rule 1, Part V, of the Implementing Rules of the Education Act of 1982 which makes it punishable and subject to penalties the operation of a school through the conduct or offering of Educational Programs or Courses of Studies/Training, without prior government authorization and/or in violation of any of the terms and conditions of said permit or recognition; directed that in accordance with the phase-out order, petitioner's Manila campus is allowed to operate only the 2nd, 3rd and 4th years of the authorized maritime programs which shall be gradually phased out; and, required petitioner to comment on the reported unauthorized enrollment. In its letter to the DECS dated 26 July 1989, petitioner moved for reconsideration stating that the finding that it had not complied with the minimum requirements was due to the following: that as early as 21 June 1989 it filed a letter requesting reconsideration of the letter dated 25 May 1989 of Director Rosas; that since there was no reply it believed that the 25 May 1989 order was reconsidered sub-silencio and that petitioner was allowed to enroll 1st year students for SY 1989-1990; and, that it had undertaken improvements in all of its facilities in compliance with DECS requirements. In this regard, it requested another inspection of its premises. Pursuant to petitioner's request, another inspection of the Manila premises was conducted by the TPME-Secretariat on 8 August 1989. However, petitioner only obtained a general rating of 31.17% for Nautical Studies and 28.53% for Marine Engineering. Consequently, the inspection team reiterated its previous recommendation to gradually phase out the maritime programs of petitioner's Manila campus effective SY 1990-1991 and that no new freshman students be accepted beginning SY 1990-1991. Accordingly, in a letter dated 25 September 1989 the DECS through Secretary Quisumbing ordered petitioner to discontinue its Maritime program in the Manila campus effective school year 1990-1991 and suggested that efforts be made towards the development of PMMS, Las Pias, which has a great potential of being a good Maritime School. 6 The phase-out order was reiterated in subsequent letters dated 19 February 1990 and 9 May 1990 of Director Rosas and then DECS Secretary Isidro D. Cario, respectively. Subsequently, petitioner moved to reconsider the phase-out order in its letter of 21 May 1990, which request was denied by the DECS through Undersecretary Benjamin Tayabas in his letter of 1 June 1990. The letter reads With reference to your request to rescind an order to phase-out the maritime courses at PMMS, Manila, please be informed that this Department sees no reason for such action as the conditions obtaining in the school when the phase-out order was issued haven't shown any significant improvement inspite of the fact that the PMMS had been given reasonable period to comply with the minimum standard requirements prescribed by the Department of Education, Culture and Sports. Maritime Education courses are highly specialized and require adequate training facilities and equipment in order to ensure quality. However, the series of visits made by the staff of the BHE, NCR, and members of the Technical Panel on Maritime Education revealed the following findings: (a) On April 9, 1987 the Inter-Agency Technical Committee (IATCOM) recommended the renewal of permits of the maritime courses, provided, that a development plan for the improvement of the buildings, classrooms, laboratory rooms, library offices and other rooms shall be formulated and implemented before the start of SY 1987-1988. (b) In 1988, the DECS-PAMI survey conducted by technical persons, revealed that PMMS, then located at the 5th floor of the Republic Supermarket, obtained a general score of 32 out of 1,026 points for requirements in the Nautical course and 207 out of 905 points for the

202 Marina Engineering course. It is needless to say that these findings are way below the DECS requirements. Above all, the school site was described as not conducive for offering maritime program due to its limited area. Furthermore, the lease on the premises is not a long term lease (2 years), a condition which would deter the school from fully developing the school site. (c) In January of 1989, the findings of the Secretariat for the Technical Panel for Maritime Education (TPME) re-affirmed the findings of the DECS-PAMI Survey. Very few equipment were found for the Maritime courses. You concurred with these findings in a dialogue with the Director of the Bureau of Higher Education Secretariat. You appealed for another chance and requested for re-inspection before the opening of SY 1989-1990. (d) As per agreement, on April 28, 1989 another re-inspection was made and it showed that the school did not show any substantial improvement. Then on May 25, 1989, Secretary Lourdes Quisumbing issued the phaseout order of our maritime programs in Manila campus. However, the Department again allowed PMMS, Manila, to operate the maritime courses for SY 1989-1990 despite the above phase-out order. (e) Another evaluation of your school was conducted by technical people on August 8, 1989, as requested. The findings revealed that your school obtained a general rating of 31.17% for Nautical Studies and 28.53% for Marine Engineering. The PMMS has been provided with the Policies and Standards for Maritime Education and, as revealed by the foregoing facts, the series of inspection and evaluation were (sic) done by technical persons who have expertise in the field of maritime education. Therefore, the requests relative to these are not valid. It is therefore with regrets that this Department cannot rescind its order to phase-out the Maritime courses at PMMS, Manila and the school is admonished not to accept incoming first year students starting school year 1990-1991. So that by school year 1992-1993, the maritime courses at the Manila campus would be fully phased-out. . . . 7 It is suggested that PMMS concentrate its development plans in the Las Pias Campus which has a great potential of being a good maritime school. Not satisfied therewith, petitioner appealed the matter to respondent Office of the President. During the pendency of the appeal the DECS thru Secretary Cario issued a Closure Order dated 27 August 1991 In view of the report which was confirmed by the evaluation team from the National Capital Region DECS Regional Office, that Philippine Merchant Marine School (PMMS), Manila, has been accepting freshman students of the maritime programs despite the phase-out order which was issued last September 28, (sic) 1989 by former Secretary Lourdes R. Quisumbing and further reiterated by the undersigned, dated May 9, 1990, the Department, hereby orders Closure of your maritime programs of your school effective second semester school year 1991-1992, otherwise this Department shall be constrained to institute the appropriate administrative, civil and criminal proceedings against you and the other responsible officers of your school pursuant to Section 68, Batas Pambansa Blg. 232. . . .

203 The transfer of the affected students shall be facilitated by the National Capital Region in accordance with our Memorandum dated August 16, 1991, xerox copy of which is hereto attached for your information. For your guidance and strict compliance. 8 In a Letter dated 24 August 1992 petitioner sought reconsideration of the 27 August 1991 Closure Order and at the same time requested that special orders be issued to its graduates for SY 1991-1992. In letters filed with the Office of the President dated 2 and 3 October 1992 petitioner alleged compliance with DECS requirements. The letters were referred to the DECS for consideration. On 10 November 1992 the Office of the President through respondent Executive Secretary Edelmiro Amante rendered a Resolution dismissing petitioner's appeal. 9 It found no plausible reason to disturb the action of the DECS Secretary in the light of the conspicuous fact that petitioner had repeatedly failed to comply with the phase-out order since 1986. Moreover, the grounds advanced by petitioner have already been passed upon by the DECS. Petitioner moved for reconsideration praying that the case be remanded to the DECS for another ocular inspection and evaluation of its alleged improved facilities. Petitioner anchored its motion on the proposition that since it had made substantial improvements on school equipment and facilities there existed no valid ground to deny them a permit to offer maritime courses. After another circumspect review of the case, the Office of the President found no cogent reason to set aside its previous resolution. It opined that Mere alleged efforts to improve the facilities and equipments (sic) which were long due since 1986, do not warrant the reversal of our previous resolution. It bears stressing as the records may show, that the phase-out order of DECS was based not only on PMMSI's failure to provide adequate equipment and facilities but also on PMMSI's failure to comply with the standard requirements prescribed for a school site. xxx xxx xxx Apart from these, PMMSI's adamant refusal to comply with the orders of the DECS to phase out its unauthorized courses is sufficient ground to uphold the order appealed from. Since 1986, PMMSI has been applying for a permit to offer maritime courses but has been invariably denied for failure to comply with the minimum requirements prescribed by DECS. Notwithstanding these denials, PMMSI continues to offer maritime courses and to admit freshmen students in clear violation of Section 1, Rule 1, of the Education Act of 1982 . . . . xxx xxx xxx PMMSI's refusal to comply with the phase-out order on the ground that the same is not yet final and executory is untenable. While said phase-out may not be final and executory, there was no reason for PMMSI to offer maritime courses without the requisite prior authority of the DECS. PMMSI possessed no valid permit prior to the issuance of the phase-out. There was no authority to speak of. 10 Thus the motion was denied in the Resolution dated 12 January 1993 through respondent Assistant Executive Secretary Renato Corona. 11 Petitioner assailed both resolutions of the Office of the President before respondent Court of Appeals by way ofcertiorari. It alleged that the resolutions failed to meet the constitutional requirement of due process because the basis for affirming the DECS phase-out and closure orders was not sufficiently disclosed. Furthermore, its letters dated 2 and 3 October 1992 which presented incontrovertible proof that it had introduced substantial improvements on its facilities for the past two and a half years while its appeal was pending were not taken into account, thereby gravely abusing its discretion.

204 Respondent Court of Appeals brushed aside the allegations of petitioner since [T]he Office of the President, in the resolution dated November 10, 1992, appears to have restated the report of the respondent DECS, meaning, that it adopted as its own the DECS' report, but that is not a violation of the Constitution and the Rules of Court, in line with Alba Patio De Makati vs. Alba Patio De Makati Employees Association, 128 SCRA 253, 264- 265 . . . Petitioner's latest attempt at improving its facilities does not warrant a reversal of the phase-out order. For, in spite of the claim that it spent on improvements, the basic problem remained as it still occupies the fifth floor of the William Liao building, which is not conducive to learning and has a limited area for expansion and development. 12 On 22 July 1993 the petition was dismissed. 13 On 26 November 1993 the motion for reconsideration was denied.14 Petitioner imputes error on respondent court: (1) in not setting aside the questioned resolutions and orders of public respondents which were rendered without due process of law since (a) petitioner was not afforded the right to fully present its case and submit evidence in support thereof; (b) public respondents did not consider the evidence presented by petitioner; (c) public respondents' decisions have no substantial evidence to support them; (d) public respondents' decisions did not disclose the bases therefor; and, (2) in implementing the closure orders which had not become final and executory. Petitioner asseverates that the DECS denied its right to a hearing on the supposed deficiencies which allegedly justified denial of its request for issuance of a renewal permit. Likewise, the DECS denied petitioner the opportunity to correct such deficiencies. The Office of the President totally ignored supervening events properly brought to its attention in the letters of petitioner dated 2 and 3 October 1992. It issued resolutions strictly on the basis of the DECS' representations which do not amount to substantial evidence. The 10 November 1992 Resolution failed to sufficiently disclose the basis for affirmation of the DECS' phase-out and closure orders. The 12 January 1993 Resolution still refused to take into consideration petitioner's compliance with the DECS' requirements. Petitioner did not violate the Education Act of 1992 because it was authorized to operate by virtue of the provisional authorities issued by the DECS. The DECS orders were not final and executory because petitioner challenged them and appropriately availed itself of the remedies available to it under the law. Before proceeding to resolve the merits of this case, we shall state briefly the concept regarding establishment of schools. The educational operation of schools is subject to prior authorization of the government and is effected by recognition. In the case of government-operated schools, whether local, regional or national, recognition of educational programs and/or operations is deemed granted simultaneously with establishment. In all other cases the rules and regulations governing recognition are prescribed and enforced by the DECS, defining therein who are qualified to apply, providing for a permit system, stating the conditions for the grant of recognition and for its cancellation and withdrawal, and providing for related matters. 15 The requirement on prior government authorization is pursuant to the State policy that educational programs and/or operations shall be of good quality and therefore shall at least satisfy minimum standards with respect to curricula, teaching staff, physical plant and facilities and of administrative or management viability. 16 Set against the records of the case, the assertion of petitioner that it was deprived of its right to a hearing and any opportunity whatsoever to correct the alleged deficiencies readily collapses. The earlier narration of facts clearly demonstrates that before the DECS issued the phase-out and closure orders, petitioner was duly notified, warned and given several opportunities to correct its deficiencies and to comply with pertinent orders and regulations. Petitioner has gone all the way up to the Office of the President to seek a reversal of the phase-out and closure orders. There is thus no reason to complain of lack of opportunity to explain its side as well as to comply with the alleged deficiencies. 17 We agree with the observation of the Office of the Solicitor General that

205 As long as the parties were given opportunity to be heard before judgment was rendered, the demands of due process were sufficiently met (Lindo v. COMELEC, 194 SCRA 25). It should also be noted that petitioner herein repeatedly sought reconsideration of the various orders of respondent DECS and its motions were duly considered by respondent DECS to the extent of allowing and granting its request for reinspection of its premises. In connection therewith, it has been ruled that the opportunity to be heard is the essence of procedural due process and that any defect is cured by the filing of a motion for reconsideration (Medenilla v. Civil Service Commission, 194 SCRA 278). 18 Furthermore, the Office of the President properly ignored (in the sense that it did not find worthy of consideration) the alleged supervening events, i.e., substantial improvements on school equipment and facilities during the pendency of the case before said Office because the improvements should have been undertaken starting 1986. Moreover, the phase-out and closure orders were based not only on petitioner's deficiencies as a maritime institute but also on its continued operation without the requisite authorization from the DECS and acceptance of freshman students in blatant violation of the latter's orders and/or persistent warnings not to do so. Verily, there are sufficient grounds to uphold the phaseout and closure orders of the DECS which were issued conformably with Sec. 28 of the Education Act of 1982 which provides: Sec. 28. . . . . Punishable Violation. . . . Operation of schools and educational programs without authorization, and/or operation thereof in violation of the terms of recognition, are hereby declared punishable violations subject to the penalties provided in this Act. Secs. 68 and 69 of the same Act provide the penalties: Sec. 68. Penalty Clause. Any person upon conviction for an act in violation of Section 28, Chapter 3, Title III, shall be punished with a fine of not less than two thousand pesos (P2,000.00) nor more than ten thousand pesos (P10,000.00) or imprisonment for a maximum period of two (2) years, or both, in the discretion of the court. If the act is committed by a school corporation, the school head together with the person or persons responsible for the offense or violation shall be equally liable. Sec. 69. Administrative Sanction. The Minister (Secretary) of Education, Culture and Sports may prescribe and impose such administrative sanction as he may deem reasonable and appropriate in the implementing rules and regulations promulgated pursuant to this Act for any of the following causes . . . . 5. Unauthorized operation of a school, or course, or any component thereof . . . . The corresponding rules implementing Secs. 68 and 69 read Sec. 1. Punishable Acts and Penalties. The operation of a school, through the conduct or offering of educational programs or courses of studies/training without prior government authorization in the form of permit or recognition as provided for in Rule III, PART III of these Rules, and/or in violation of any of the terms and conditions of the said permit or recognition, have been declared punishable violations of the Act, subject to the penalties provided therein. Any person, therefore, upon conviction for an act constituting any of the foregoing punishable violations, shall be punished with a fine of not less than Two Thousand Pesos (P2,000.00) nor more than Ten Thousand Pesos (P10,000.00), or imprisonment for a maximum period of two (2) years, or both, in the discretion of the Court: Provided, however, that when the act is committed by a school corporation, the school head together with the person or persons responsible for the violation or offense shall be deemed equally liable.

206 Sec. 2. Administrative Sanction. Without prejudice to the interest of students, teachers and employees, and independently of the penalty imposed in Sec. 1 under this Rule, the Minister may withdraw, suspend, revoke or cancel a school's authority to operate as an educational institution or to conduct educational programs or courses of studies/training, for any of the following causes, viz: . . . . e. Unauthorized operation of a school, or program or course of studies or component thereof, or any violation of the prescribed rules governing advertisements or announcements of educational institutions. Substantial evidence has been defined to be such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. 19 A perusal of the questioned resolutions of the Office of the President reveals that they are based on the records of the case which constitute substantial evidence, proving distinctly not only petitioner's consistent failure to meet the DECS' minimum standards for maritime institutes and correct its deficiencies but also its continued operation and offering of maritime courses despite the lack of permit. Contrary to the claim of petitioner, the 10 November 1992 Resolution of the Office of the President sufficiently disclosed the basis for its affirmance of the DECS' phase-out and closure orders: After a careful study, we are constrained to resolve that there exists no sufficient justification to modify, alter or reverse the appealed order. We find no plausible reason to disturb the action of the Secretary of Education, Culture and Sports, more so in light of the conspicuous fact that PMMS has repeatedly failed to comply with the phase out order since 1986. What is more, the grounds advanced by PMMS have already been passed upon, and separately resolved by the office a quo. 20 Petitioner's persistent refusal to comply with the phase-out orders on the ground that the same were not yet final and executory is untenable. As correctly held by the Office of the President . . . . While said phase-out (orders) may not be final and executory, there was no reason for PMMSI to offer maritime courses without, the requisite prior authority of the DECS. PMMSI possessed no valid permit prior to the issuance of the phase-out. There was no authority to speak of. 21 By reason of the special knowledge and expertise of administrative departments over matters falling under their jurisdiction, they 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. In the case at bench, it is not the function of this Court nor any other court for that matter . . . to review the decisions and orders of the Secretary on the issue of whether or not an educational institution meets the norms and standards required for permission to operate and to continue operating as such. On this question, no Court has the power or prerogative to substitute its opinion for that of the Secretary. Indeed, it is obviously not expected that any Court would have the competence to do so. The only authority reposed in the Courts on the matter is the determination of whether or not the Secretary of Education, Culture and Sports has acted within the scope of powers granted him by law and the Constitution. As long as it appears that he has done so, any decision rendered by him should not and will not be subject to review and reversal by any court. Of course, if it should be made to appear to the Court that those powers were in a case exercised so whimsically, capriciously, oppressively, despotically or arbitrarily as to call for peremptory correction or stated otherwise, that the Secretary had acted with grave abuse of discretion, or had unlawfully neglected the performance of an act which the law specifically enjoins as a duty, or excluded another from the use or enjoyment of a right or office to which such other is entitled it becomes the Court's duty to rectify such action through the extraordinary remedies of certiorari, prohibition, or mandamus,

207 whichever may properly apply. Yet even in these extreme instances, where a Court finds that there has been abuse of powers by the Secretary and consequently nullifies and/or forbids such an abuse of power, or commands whatever is needful to keep its exercise within bounds, the Court, absent any compelling reason to do otherwise, should still leave to the Secretary the ultimate determination of the issue of the satisfaction of fulfillment by an educational institution of the standards set down for its legitimate operation, as to which it should not ordinarily substitute its own judgment for that of said office. 22 There being no grave abuse of discretion committed by respondents representing the Office of the President in issuing the Resolutions of 10 November 1992 and 12 January 1993, respondent Court of Appeals did not err in sustaining the resolutions in question. WHEREFORE , the petition is DENIED. The questioned Decision of the Court of Appeals dated 22 July 1993, as well as its Resolution of 26 November 1993, is AFFIRMED. Costs against petitioner. SO ORDERED. Narvasa, C.J., Feliciano, Padilla, Regalado, Davide, Jr., Romero, Melo, Puno, Vitug, Kapunan, Mendoza and Francisco, JJ., concur. Quiason, J., is on leave.

208 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 158693 November 17, 2004

JENNY M. AGABON and VIRGILIO C. AGABON, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME IMPROVEMENTS, INC. and VICENTE ANGELES, respondents.

DECISION

YNARES-SANTIAGO, J.: This petition for review seeks to reverse the decision1 of the Court of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, modifying the decision of National Labor Relations Commission (NLRC) in NLRCNCR Case No. 023442-00. Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and installing ornamental and construction materials. It employed petitioners Virgilio Agabon and Jenny Agabon as gypsum board and cornice installers on January 2, 19922 until February 23, 1999 when they were dismissed for abandonment of work. Petitioners then filed a complaint for illegal dismissal and payment of money claims3 and on December 28, 1999, the Labor Arbiter rendered a decision declaring the dismissals illegal and ordered private respondent to pay the monetary claims. The dispositive portion of the decision states: WHEREFORE, premises considered, We find the termination of the complainants illegal. Accordingly, respondent is hereby ordered to pay them their backwages up to November 29, 1999 in the sum of: 1. Jenny M. Agabon - P56, 231.93 2. Virgilio C. Agabon - 56, 231.93 and, in lieu of reinstatement to pay them their separation pay of one (1) month for every year of service from date of hiring up to November 29, 1999. Respondent is further ordered to pay the complainants their holiday pay and service incentive leave pay for the years 1996, 1997 and 1998 as well as their premium pay for holidays and rest days and Virgilio Agabon's 13th month pay differential amounting to TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or the aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT HUNDRED TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon, as per attached computation of Julieta C. Nicolas, OIC, Research and Computation Unit, NCR. SO ORDERED.4

209 On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had abandoned their work, and were not entitled to backwages and separation pay. The other money claims awarded by the Labor Arbiter were also denied for lack of evidence.5 Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court of Appeals. The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they had abandoned their employment but ordered the payment of money claims. The dispositive portion of the decision reads: WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only insofar as it dismissed petitioner's money claims. Private respondents are ordered to pay petitioners holiday pay for four (4) regular holidays in 1996, 1997, and 1998, as well as their service incentive leave pay for said years, and to pay the balance of petitioner Virgilio Agabon's 13th month pay for 1998 in the amount of P2,150.00. SO ORDERED.6 Hence, this petition for review on the sole issue of whether petitioners were illegally dismissed.7 Petitioners assert that they were dismissed because the private respondent refused to give them assignments unless they agreed to work on a "pakyaw" basis when they reported for duty on February 23, 1999. They did not agree on this arrangement because it would mean losing benefits as Social Security System (SSS) members. Petitioners also claim that private respondent did not comply with the twin requirements of notice and hearing.8 Private respondent, on the other hand, maintained that petitioners were not dismissed but had abandoned their work.9 In fact, private respondent sent two letters to the last known addresses of the petitioners advising them to report for work. Private respondent's manager even talked to petitioner Virgilio Agabon by telephone sometime in June 1999 to tell him about the new assignment at Pacific Plaza Towers involving 40,000 square meters of cornice installation work. However, petitioners did not report for work because they had subcontracted to perform installation work for another company. Petitioners also demanded for an increase in their wage to P280.00 per day. When this was not granted, petitioners stopped reporting for work and filed the illegal dismissal case.10 It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not only respect but even finality if the findings are supported by substantial evidence. This is especially so when such findings were affirmed by the Court of Appeals.11 However, if the factual findings of the NLRC and the Labor Arbiter are conflicting, as in this case, the reviewing court may delve into the records and examine for itself the questioned findings.12 Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners' dismissal was for a just cause. They had abandoned their employment and were already working for another employer. To dismiss an employee, the law requires not only the existence of a just and valid cause but also enjoins the employer to give the employee the opportunity to be heard and to defend himself.13 Article 282 of the Labor Code enumerates the just causes for termination by the employer: (a) serious misconduct or willful disobedience by the employee of the lawful orders of his employer or the latter's representative in connection with the employee's work; (b) gross and habitual neglect by the employee of his duties; (c) fraud or willful breach by the employee of the trust reposed in him by his employer or his duly authorized representative; (d) commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and (e) other causes analogous to the foregoing. Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.14 It is a form of neglect of duty, hence, a just cause for termination of employment by the employer.15 For a

210 valid finding of abandonment, these two factors should be present: (1) the failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee relationship, with the second as the more determinative factor which is manifested by overt acts from which it may be deduced that the employees has no more intention to work. The intent to discontinue the employment must be shown by clear proof that it was deliberate and unjustified.16 In February 1999, petitioners were frequently absent having subcontracted for an installation work for another company. Subcontracting for another company clearly showed the intention to sever the employer-employee relationship with private respondent. This was not the first time they did this. In January 1996, they did not report for work because they were working for another company. Private respondent at that time warned petitioners that they would be dismissed if this happened again. Petitioners disregarded the warning and exhibited a clear intention to sever their employer-employee relationship. The record of an employee is a relevant consideration in determining the penalty that should be meted out to him.17 In Sandoval Shipyard v. Clave,18 we held that an employee who deliberately absented from work without leave or permission from his employer, for the purpose of looking for a job elsewhere, is considered to have abandoned his job. We should apply that rule with more reason here where petitioners were absent because they were already working in another company. The law imposes many obligations on the employer such as providing just compensation to workers, observance of the procedural requirements of notice and hearing in the termination of employment. On the other hand, the law also recognizes the right of the employer to expect from its workers not only good performance, adequate work and diligence, but also good conduct19 and loyalty. The employer may not be compelled to continue to employ such persons whose continuance in the service will patently be inimical to his interests.20 After establishing that the terminations were for a just and valid cause, we now determine if the procedures for dismissal were observed. The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the Omnibus Rules Implementing the Labor Code: Standards of due process: requirements of notice. In all cases of termination of employment, the following standards of due process shall be substantially observed: I. For termination of employment based on just causes as defined in Article 282 of the Code: (a) A written notice served on the employee specifying the ground or grounds for termination, and giving to said employee reasonable opportunity within which to explain his side; (b) A hearing or conference during which the employee concerned, with the assistance of counsel if the employee so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence presented against him; and (c) A written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination. In case of termination, the foregoing notices shall be served on the employee's last known address. Dismissals based on just causes contemplate acts or omissions attributable to the employee while dismissals based on authorized causes involve grounds under the Labor Code which allow the employer to terminate employees. A termination for an authorized cause requires payment of separation pay. When the termination of employment is declared illegal, reinstatement and full backwages are mandated under Article 279. If reinstatement is no longer possible where the dismissal was unjust, separation pay may be granted.

211 Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the employee two written notices and a hearing or opportunity to be heard if requested by the employee before terminating the employment: a notice specifying the grounds for which dismissal is sought a hearing or an opportunity to be heard and after hearing or opportunity to be heard, a notice of the decision to dismiss; and (2) if the dismissal is based on authorized causes under Articles 283 and 284, the employer must give the employee and the Department of Labor and Employment written notices 30 days prior to the effectivity of his separation. From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause under Article 282 of the Labor Code, for an authorized cause under Article 283, or for health reasons under Article 284, and due process was observed; (2) the dismissal is without just or authorized cause but due process was observed; (3) the dismissal is without just or authorized cause and there was no due process; and (4) the dismissal is for just or authorized cause but due process was not observed. In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability. In the second and third situations where the dismissals are illegal, Article 279 mandates that the employee is entitled to reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time the compensation was not paid up to the time of actual reinstatement. In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be cured, it should not invalidate the dismissal. However, the employer should be held liable for non-compliance with the procedural requirements of due process. The present case squarely falls under the fourth situation. The dismissal should be upheld because it was established that the petitioners abandoned their jobs to work for another company. Private respondent, however, did not follow the notice requirements and instead argued that sending notices to the last known addresses would have been useless because they did not reside there anymore. Unfortunately for the private respondent, this is not a valid excuse because the law mandates the twin notice requirements to the employee's last known address.21 Thus, it should be held liable for non-compliance with the procedural requirements of due process. A review and re-examination of the relevant legal principles is appropriate and timely to clarify the various rulings on employment termination in the light of Serrano v. National Labor Relations Commission.22 Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any notice. In the 1989 case of Wenphil Corp. v. National Labor Relations Commission,23 we reversed this long-standing rule and held that the dismissed employee, although not given any notice and hearing, was not entitled to reinstatement and backwages because the dismissal was for grave misconduct and insubordination, a just ground for termination under Article 282. The employee had a violent temper and caused trouble during office hours, defying superiors who tried to pacify him. We concluded that reinstating the employee and awarding backwages "may encourage him to do even worse and will render a mockery of the rules of discipline that employees are required to observe."24 We further held that: Under the circumstances, the dismissal of the private respondent for just cause should be maintained. He has no right to return to his former employment. However, the petitioner must nevertheless be held to account for failure to extend to private respondent his right to an investigation before causing his dismissal. The rule is explicit as above discussed. The dismissal of an employee must be for just or authorized cause and after due process. Petitioner committed an infraction of the second requirement. Thus, it must be imposed a sanction for its failure to give a formal notice and conduct an investigation as required by law before dismissing petitioner from employment. Considering the circumstances of this case petitioner must indemnify the private respondent the amount of P1,000.00. The

212 measure of this award depends on the facts of each case and the gravity of the omission committed by the employer.25 The rule thus evolved: where the employer had a valid reason to dismiss an employee but did not follow the due process requirement, the dismissal may be upheld but the employer will be penalized to pay an indemnity to the employee. This became known as the Wenphil or Belated Due Process Rule. On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held that the violation by the employer of the notice requirement in termination for just or authorized causes was not a denial of due process that will nullify the termination. However, the dismissal is ineffectual and the employer must pay full backwages from the time of termination until it is judicially declared that the dismissal was for a just or authorized cause. The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant number of cases involving dismissals without requisite notices. We concluded that the imposition of penalty by way of damages for violation of the notice requirement was not serving as a deterrent. Hence, we now required payment of full backwages from the time of dismissal until the time the Court finds the dismissal was for a just or authorized cause. Serrano was confronting the practice of employers to "dismiss now and pay later" by imposing full backwages. We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279 of the Labor Code which states: ART. 279. Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. This means that the termination is illegal only if it is not for any of the justified or authorized causes provided by law. Payment of backwages and other benefits, including reinstatement, is justified only if the employee was unjustly dismissed. The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent has prompted us to revisit the doctrine. To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of rights based on moral principles so deeply imbedded in the traditions and feelings of our people as to be deemed fundamental to a civilized society as conceived by our entire history. Due process is that which comports with the deepest notions of what is fair and right and just.26 It is a constitutional restraint on the legislative as well as on the executive and judicial powers of the government provided by the Bill of Rights. Due process under the Labor Code, like Constitutional due process, has two aspects: substantive, i.e., the valid and authorized causes of employment termination under the Labor Code; and procedural, i.e., the manner of dismissal. Procedural due process requirements for dismissal are found in the Implementing Rules of P.D. 442, as amended, otherwise known as the Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as amended by Department Order Nos. 9 and 10.27 Breaches of these due process requirements violate the Labor Code. Therefore statutory due process should be differentiated from failure to comply with constitutional due process. Constitutional due process protects the individual from the government and assures him of his rights in criminal, civil or administrative proceedings; while statutory due process found in the Labor Code and Implementing Rules protects employees from being unjustly terminated without just cause after notice and hearing.

213 In Sebuguero v. National Labor Relations Commission,28 the dismissal was for a just and valid cause but the employee was not accorded due process. The dismissal was upheld by the Court but the employer was sanctioned. The sanction should be in the nature of indemnification or penalty, and depends on the facts of each case and the gravity of the omission committed by the employer. In Nath v. National Labor Relations Commission,29 it was ruled that even if the employee was not given due process, the failure did not operate to eradicate the just causes for dismissal. The dismissal being for just cause,albeit without due process, did not entitle the employee to reinstatement, backwages, damages and attorney's fees. Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National Labor Relations Commission,30 which opinion he reiterated in Serrano, stated: C. Where there is just cause for dismissal but due process has not been properly observed by an employer, it would not be right to order either the reinstatement of the dismissed employee or the payment of backwages to him. In failing, however, to comply with the procedure prescribed by law in terminating the services of the employee, the employer must be deemed to have opted or, in any case, should be made liable, for the payment of separation pay. It might be pointed out that the notice to be given and the hearing to be conducted generally constitute the two-part due process requirement of law to be accorded to the employee by the employer. Nevertheless, peculiar circumstances might obtain in certain situations where to undertake the above steps would be no more than a useless formality and where, accordingly, it would not be imprudent to apply the res ipsa loquitur rule and award, in lieu of separation pay, nominal damages to the employee. x x x.31 After carefully analyzing the consequences of the divergent doctrines in the law on employment termination, we believe that in cases involving dismissals for cause but without observance of the twin requirements of notice and hearing, the better rule is to abandon the Serrano doctrine and to follow Wenphil by holding that the dismissal was for just cause but imposing sanctions on the employer. Such sanctions, however, must be stiffer than that imposed in Wenphil. By doing so, this Court would be able to achieve a fair result by dispensing justice not just to employees, but to employers as well. The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying with statutory due process may have far-reaching consequences. This would encourage frivolous suits, where even the most notorious violators of company policy are rewarded by invoking due process. This also creates absurd situations where there is a just or authorized cause for dismissal but a procedural infirmity invalidates the termination. Let us take for example a case where the employee is caught stealing or threatens the lives of his co-employees or has become a criminal, who has fled and cannot be found, or where serious business losses demand that operations be ceased in less than a month. Invalidating the dismissal would not serve public interest. It could also discourage investments that can generate employment in the local economy. The constitutional policy to provide full protection to labor is not meant to be a sword to oppress employers. The commitment of this Court to the cause of labor does not prevent us from sustaining the employer when it is in the right, as in this case.32 Certainly, an employer should not be compelled to pay employees for work not actually performed and in fact abandoned. The employer should not be compelled to continue employing a person who is admittedly guilty of misfeasance or malfeasance and whose continued employment is patently inimical to the employer. The law protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer.33 It must be stressed that in the present case, the petitioners committed a grave offense, i.e., abandonment, which, if the requirements of due process were complied with, would undoubtedly result in a valid dismissal.

214 An employee who is clearly guilty of conduct violative of Article 282 should not be protected by the Social Justice Clause of the Constitution. Social justice, as the term suggests, should be used only to correct an injustice. As the eminent Justice Jose P. Laurel observed, social justice must be founded on the recognition of the necessity of interdependence among diverse units of a society and of the protection that should be equally and evenly extended to all groups as a combined force in our social and economic life, consistent with the fundamental and paramount objective of the state of promoting the health, comfort, and quiet of all persons, and of bringing about "the greatest good to the greatest number."34 This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano and related cases. Social justice is not based on rigid formulas set in stone. It has to allow for changing times and circumstances. Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labor-management relations and dispense justice with an even hand in every case: We have repeatedly stressed that social justice or any justice for that matter is for the deserving, whether he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case of reasonable doubt, we are to tilt the balance in favor of the poor to whom the Constitution fittingly extends its sympathy and compassion. But never is it justified to give preference to the poor simply because they are poor, or reject the rich simply because they are rich, for justice must always be served for the poor and the rich alike, according to the mandate of the law.35 Justice in every case should only be for the deserving party. It should not be presumed that every case of illegal dismissal would automatically be decided in favor of labor, as management has rights that should be fully respected and enforced by this Court. As interdependent and indispensable partners in nationbuilding, labor and management need each other to foster productivity and economic growth; hence, the need to weigh and balance the rights and welfare of both the employee and employer. Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for the violation of his statutory rights, as ruled in Reta v. National Labor Relations Commission.36 The indemnity to be imposed should be stiffer to discourage the abhorrent practice of "dismiss now, pay later," which we sought to deter in the Serrano ruling. The sanction should be in the nature of indemnification or penalty and should depend on the facts of each case, taking into special consideration the gravity of the due process violation of the employer. Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.37 As enunciated by this Court in Viernes v. National Labor Relations Commissions,38 an employer is liable to pay indemnity in the form of nominal damages to an employee who has been dismissed if, in effecting such dismissal, the employer fails to comply with the requirements of due process. The Court, after considering the circumstances therein, fixed the indemnity at P2,590.50, which was equivalent to the employee's one month salary. This indemnity is intended not to penalize the employer but to vindicate or recognize the employee's right to statutory due process which was violated by the employer.39 The violation of the petitioners' right to statutory due process by the private respondent warrants the payment of indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances.40 Considering the prevailing circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We believe this form of damages would serve to deter employers from future violations of the statutory due process rights of employees. At the very least, it provides a vindication or recognition of this fundamental right granted to the latter under the Labor Code and its Implementing Rules.

215 Private respondent claims that the Court of Appeals erred in holding that it failed to pay petitioners' holiday pay, service incentive leave pay and 13th month pay. We are not persuaded. We affirm the ruling of the appellate court on petitioners' money claims. Private respondent is liable for petitioners' holiday pay, service incentive leave pay and 13th month pay without deductions. As a general rule, one who pleads payment has the burden of proving it. Even where the employee must allege non-payment, the general rule is that the burden rests on the employer to prove payment, rather than on the employee to prove non-payment. The reason for the rule is that the pertinent personnel files, payrolls, records, remittances and other similar documents which will show that overtime, differentials, service incentive leave and other claims of workers have been paid are not in the possession of the worker but in the custody and absolute control of the employer.41 In the case at bar, if private respondent indeed paid petitioners' holiday pay and service incentive leave pay, it could have easily presented documentary proofs of such monetary benefits to disprove the claims of the petitioners. But it did not, except with respect to the 13th month pay wherein it presented cash vouchers showing payments of the benefit in the years disputed.42 Allegations by private respondent that it does not operate during holidays and that it allows its employees 10 days leave with pay, other than being self-serving, do not constitute proof of payment. Consequently, it failed to discharge the onus probandi thereby making it liable for such claims to the petitioners. Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th month pay, we find the same to be unauthorized. The evident intention of Presidential Decree No. 851 is to grant an additional income in the form of the 13th month pay to employees not already receiving the same43 so as "to further protect the level of real wages from the ravages of world-wide inflation."44 Clearly, as additional income, the 13th month pay is included in the definition of wage under Article 97(f) of the Labor Code, to wit: (f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece , or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee" from which an employer is prohibited under Article 11345 of the same Code from making any deductions without the employee's knowledge and consent. In the instant case, private respondent failed to show that the deduction of the SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th month pay was authorized by the latter. The lack of authority to deduct is further bolstered by the fact that petitioner Virgilio Agabon included the same as one of his money claims against private respondent. The Court of Appeals properly reinstated the monetary claims awarded by the Labor Arbiter ordering the private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in the amount of P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of P2,150.00. WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, finding that petitioners' Jenny and Virgilio Agabon abandoned their work, and ordering private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in the amount of P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of P2,150.00 isAFFIRMED with the MODIFICATION that private respondent Riviera Home Improvements, Inc. is furtherORDERED to pay each of the petitioners the amount of P30,000.00 as nominal damages for non-compliance with statutory due process.No costs.SO ORDERED

216

Republic of the Philippines SUPREME COURT EN BANC G.R. No. 151378. March 28, 2005 JAKA FOOD PROCESSING CORPORATION, Petitioners, vs. DARWIN PACOT, ROBERT PAROHINOG, DAVID BISNAR, MARLON DOMINGO, RHOEL LESCANO and JONATHAN CAGABCAB, Respondents. DECISION GARCIA, J.: Assailed and sought to be set aside in this appeal by way of a petition for review on certiorari under rule 45 of the Rules of Court are the following issuances of the Court of Appeals in CA-G.R. SP. No. 59847, to wit: 1. Decision dated 16 November 2001,1 reversing and setting aside an earlier decision of the National Labor Relations Commission (NLRC); and 2. Resolution dated 8 January 2002,2 denying petitioners motion for reconsideration. The material facts may be briefly stated, as follows: Respondents Darwin Pacot, Robert Parohinog, David Bisnar, Marlon Domingo, Rhoel Lescano and Jonathan Cagabcab were earlier hired by petitioner JAKA Foods Processing Corporation (JAKA, for short) until the latter terminated their employment on August 29, 1997 because the corporation was "in dire financial straits". It is not disputed, however, that the termination was effected without JAKA complying with the requirement under Article 283 of the Labor Code regarding the service of a written notice upon the employees and the Department of Labor and Employment at least one (1) month before the intended date of termination. In time, respondents separately filed with the regional Arbitration Branch of the National Labor Relations Commission (NLRC) complaints for illegal dismissal, underpayment of wages and nonpayment of service incentive leave and 13th month pay against JAKA and its HRD Manager, Rosana Castelo. After due proceedings, the Labor Arbiter rendered a decision3 declaring the termination illegal and ordering JAKA and its HRD Manager to reinstate respondents with full backwages, and separation pay if reinstatement is not possible. More specifically the decision dispositively reads: WHEREFORE, judgment is hereby rendered declaring as illegal the termination of complainants and ordering respondents to reinstate them to their positions with full backwages which as of July 30, 1998 have already amounted to P339,768.00. Respondents are also ordered to pay complainants the amount of P2,775.00 representing the unpaid service incentive leave pay of Parohinog, Lescano and Cagabcab an the amount of P19,239.96 as payment for 1997 13th month pay as alluded in the above computation. If complainants could not be reinstated, respondents are ordered to pay them separation pay equivalent to one month salary for very (sic) year of service. SO ORDERED. Therefrom, JAKA went on appeal to the NLRC, which, in a decision dated August 30, 1999,4 affirmed in toto that of the Labor Arbiter.

217 JAKA filed a motion for reconsideration. Acting thereon, the NLRC came out with another decision dated January 28, 2000,5 this time modifying its earlier decision, thus: WHEREFORE, premises considered, the instant motion for reconsideration is hereby GRANTED and the challenged decision of this Commission [dated] 30 August 1999 and the decision of the Labor Arbiter xxx are hereby modified by reversing an setting aside the awards of backwages, service incentive leave pay. Each of the complainants-appellees shall be entitled to a separation pay equivalent to one month. In addition, respondents-appellants is (sic) ordered to pay each of the complainants-appellees the sum of P2,000.00 as indemnification for its failure to observe due process in effecting the retrenchment. SO ORDERED. Their motion for reconsideration having been denied by the NLRC in its resolution of April 28, 2000,6 respondents went to the Court of Appeals via a petition for certiorari, thereat docketed as CAG.R. SP No. 59847. As stated at the outset hereof, the Court of Appeals, in a decision dated November 16, 2000, applying the doctrine laid down by this Court in Serrano vs. NLRC,7 reversed and set aside the NLRCs decision of January 28, 2000, thus: WHEREFORE, the decision dated January 28, 2000 of the National Labor Relations Commission is REVERSEDand SET ASIDE and another one entered ordering respondent JAKA Foods Processing Corporation to pay petitioners separation pay equivalent to one (1) month salary, the proportionate 13th month pay and, in addition, full backwages from the time their employment was terminated on August 29, 1997 up to the time the Decision herein becomes final. SO ORDERED. This time, JAKA moved for a reconsideration but its motion was denied by the appellate court in its resolution of January 8, 2002. Hence, JAKAs present recourse, submitting, for our consideration, the following issues: "I. WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AWARDED FULL BACKWAGES TO RESPONDENTS. II. WHETHER OR NOT THE ASSAILED DECISION CORRECTLY AWARDED SEPARATION PAY TO RESPONDENTS". As we see it, there is only one question that requires resolution, i.e. what are the legal implications of a situation where an employee is dismissed for cause but such dismissal was effected without the employers compliance with the notice requirement under the Labor Code. This, certainly, is not a case of first impression. In the very recent case of Agabon vs. NLRC,8 we had the opportunity to resolve a similar question. Therein, we found that the employees committed a grave offense, i.e.,abandonment, which is a form of a neglect of duty which, in turn, is one of the just causes enumerated under Article 282 of the Labor Code. In said case, we upheld the validity of the dismissal despite non-compliance with the notice requirement of the Labor Code. However, we required the employer to pay the dismissed employees the amount of P30,000.00, representing nominal damages for non-compliance with statutory due process, thus: "Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for the violation of his statutory rights, as ruled in Reta vs. National Labor Relations Commission. The indemnity to be imposed should be stiffer to discourage the abhorrent practice of dismiss now, pay later, which we sought to deter in the Serrano ruling. The sanction should be in the nature of indemnification or penalty and should depend on the facts of each case, taking into special consideration the gravity of the due process violation of the employer.

218 xxx xxx xxx The violation of petitioners right to statutory due process by the private respondent warrants the payment of indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances. Considering the prevailing circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We believe this form of damages would serve to deter employers from future violations of the statutory due process rights of employees. At the very least, it provides a vindication or recognition of this fundamental right granted to the latter under the Labor Code and its Implementing Rules," (Emphasis supplied). The difference between Agabon and the instant case is that in the former, the dismissal was based on a just cause under Article 282 of the Labor Code while in the present case, respondents were dismissed due to retrenchment, which is one of the authorized causes under Article 283 of the same Code. At this point, we note that there are divergent implications of a dismissal for just cause under Article 282, on one hand, and a dismissal for authorized cause under Article 283, on the other. A dismissal for just cause under Article 282 implies that the employee concerned has committed, or is guilty of, some violation against the employer, i.e. the employee has committed some serious misconduct, is guilty of some fraud against the employer, or, as in Agabon, he has neglected his duties. Thus, it can be said that the employee himself initiated the dismissal process. On another breath, a dismissal for an authorized cause under Article 283 does not necessarily imply delinquency or culpability on the part of the employee. Instead, the dismissal process is initiated by the employers exercise of his management prerogative, i.e. when the employer opts to install labor saving devices, when he decides to cease business operations or when, as in this case, he undertakes to implement a retrenchment program. The clear-cut distinction between a dismissal for just cause under Article 282 and a dismissal for authorized cause under Article 283 is further reinforced by the fact that in the first, payment of separation pay, as a rule, is not required, while in the second, the law requires payment of separation pay.9 For these reasons, there ought to be a difference in treatment when the ground for dismissal is one of the just causes under Article 282, and when based on one of the authorized causes under Article 283. Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but the employer failed to comply with the notice requirement, the sanction to be imposed upon him should be tempered because the dismissal process was, in effect, initiated by an act imputable to the employee; and (2) if the dismissal is based on an authorized cause under Article 283 but the employer failed to comply with the notice requirement, the sanction should be stiffer because the dismissal process was initiated by the employers exercise of his management prerogative. The records before us reveal that, indeed, JAKA was suffering from serious business losses at the time it terminated respondents employment. As aptly found by the NLRC: "A careful study of the evidence presented by the respondent-appellant corporation shows that the audited Financial Statement of the corporation for the periods 1996, 1997 and 1998 were submitted by the respondent-appellant corporation, The Statement of Income and Deficit found in the Audited Financial Statement of the respondent-appellant corporation clearly shows the following in 1996, the deficit of the respondent-appellant corporation was P188,218,419.00 or 94.11% of the stockholders [sic] equity which amounts to P200,000,000.00. In 1997 when the retrenchment program of respondentappellant corporation was undertaken, the deficit ballooned to P247,222,569.00 or 123.61% of the stockholders equity, thus a capital deficiency or impairment of equity ensued. In 1998, the deficit grew to P355,794,897.00 or 177% of the stockholders equity. From 1996 to 1997, the deficit grew by more that (sic) 31% while in 1998 the deficit grew by more than 47%.

219 The Statement of Income and Deficit of the respondent-appellant corporation to prove its alleged losses was prepared by an independent auditor, SGV & Co. It convincingly showed that the respondentappellant corporation was in dire financial straits, which the complainants-appellees failed to dispute. The losses incurred by the respondent-appellant corporation are clearly substantial and sufficiently proven with clear and satisfactory evidence. Losses incurred were adequately shown with respondentappellants audited financial statement. Having established the loss incurred by the respondentappellant corporation, it necessarily necessarily (sic) follows that the ground in support of retrenchment existed at the time the complainants-appellees were terminated. We cannot therefore sustain the findings of the Labor Arbiter that the alleged losses of the respondent-appellant was [sic] not well substantiated by substantial proofs. It is therefore logical for the corporation to implement a retrenchment program to prevent further losses."10 Noteworthy it is, moreover, to state that herein respondents did not assail the foregoing finding of the NLRC which, incidentally, was also affirmed by the Court of Appeals. It is, therefore, established that there was ground for respondents dismissal, i.e., retrenchment, which is one of the authorized causes enumerated under Article 283 of the Labor Code. Likewise, it is established that JAKA failed to comply with the notice requirement under the same Article. Considering the factual circumstances in the instant case and the above ratiocination, we, therefore, deem it proper to fix the indemnity at P50,000.00. We likewise find the Court of Appeals to have been in error when it ordered JAKA to pay respondents separation pay equivalent to one (1) month salary for every year of service. This is because in Reahs Corporation vs. NLRC,11 we made the following declaration: "The rule, therefore, is that in all cases of business closure or cessation of operation or undertaking of the employer, the affected employee is entitled to separation pay. This is consistent with the state policy of treating labor as a primary social economic force, affording full protection to its rights as well as its welfare. The exception is when the closure of business or cessation of operations is due to serious business losses or financial reverses; duly proved, in which case, the right of affected employees to separation pay is lost for obvious reasons. xxx". (Emphasis supplied) WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed decision and resolution of the Court of Appeals respectively dated November 16, 2001 and January 8, 2002 are hereby SET ASIDE and a new one entered upholding the legality of the dismissal but ordering petitioner to pay each of the respondents the amount of P50,000.00, representing nominal damages for non-compliance with statutory due process. SO ORDERED.

220 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-5060 January 26, 1910

THE UNITED STATES, plaintiff-appellee, vs. LUIS TORIBIO, defendant-appellant. Rodriguez & Del Rosario, for appellant. Attorney-General Villamor, for appellee. CARSON, J.: The evidence of record fully sustains the findings of the trial court that the appellant slaughtered or caused to be slaughtered for human consumption, the carabao described in the information, without a permit from the municipal treasure of the municipality wherein it was slaughtered, in violation of the provisions of sections 30 and 33 of Act No. 1147, an Act regulating the registration, branding, and slaughter of large cattle. It appears that in the town of Carmen, in the Province of Bohol, wherein the animal was slaughtered there is no municipal slaughterhouse, and counsel for appellant contends that under such circumstances the provisions of Act No. 1147 do not prohibit nor penalize the slaughter of large cattle without a permit of the municipal treasure. Sections 30, 31, 32, and 33 of the Act are as follows: SEC. 30. No large cattle shall be slaughtered or killed for food at the municipal slaughterhouse except upon permit secured from the municipal treasure. Before issuing the permit for the slaughter of large cattle for human consumption, the municipal treasurer shall require for branded cattle the production of the original certificate of ownership and certificates of transfer showing title in the person applying for the permit, and for unbranded cattle such evidence as may satisfy said treasurer as to the ownership of the animals for which permit to slaughter has been requested. SEC. 31. No permit to slaughter has been carabaos shall be granted by the municipal treasurer unless such animals are unfit for agricultural work or for draft purposes, and in no event shall a permit be given to slaughter for food any animal of any kind which is not fit for human consumption. SEC. 32. The municipal treasurer shall keep a record of all permits for slaughter issued by him, and such record shall show the name and residence of the owner, and the class, sex, age, brands, knots of radiated hair commonly know as remolinos or cowlicks, and other marks of identification of the animal for the slaughter of which permit is issued and the date on which such permit is issued. Names of owners shall be alphabetically arranged in the record, together with date of permit. A copy of the record of permits granted for slaughter shall be forwarded monthly to the provincial treasurer, who shall file and properly index the same under the name of the owner, together with date of permit. SEC. 33. Any person slaughtering or causing to be slaughtered for human consumption or killing for food at the municipal slaughterhouse any large cattle except upon permit duly secured from the municipal treasurer, shall be punished by a fine of not less than ten nor more than five hundred pesos, Philippine currency, or by imprisonment for not less than one month nor more than six months, or by both such fine and imprisonment, in the discretion of the court.

221 It is contended that the proper construction of the language of these provisions limits the prohibition contained in section 30 and the penalty imposed in section 33 to cases (1) of slaughter of large cattle for human consumptionin a municipal slaughter without a permit duly secured from the municipal treasurer, and (2) cases of killing of large cattle for food in a municipal slaughterhouse without a permit duly secured from the municipal treasurer; and it is urged that the municipality of Carmen not being provided with a municipal slaughterhouse, neither the prohibition nor the penalty is applicable to cases of slaughter of large cattle without a permit in that municipality. We are of opinion, however, that the prohibition contained in section 30 refers (1) to the slaughter of large cattle for human consumption, anywhere, without a permit duly secured from the municipal treasurer, and (2) expressly and specifically to the killing for food of large cattle at a municipal slaughterhouse without such permit; and that the penalty provided in section 33 applies generally to the slaughter of large cattle for human consumption, anywhere, without a permit duly secured from the municipal treasurer, and specifically to the killing for food of large cattle at a municipal slaughterhouse without such permit. It may be admitted at once, that the pertinent language of those sections taken by itself and examined apart from the context fairly admits of two constructions: one whereby the phrase "at the municipal slaughterhouse" may be taken as limiting and restricting both the word "slaughtered" and the words "killed for food" in section 30, and the words "slaughtering or causing to be slaughtered for human consumption" and the words "killing for food" in section 33; and the other whereby the phrase "at the municipal slaughterhouse" may be taken as limiting and restricting merely the words "killed for food" and "killing for food" as used in those sections. But upon a reading of the whole Act, and keeping in mind the manifest and expressed purpose and object of its enactment, it is very clear that the latter construction is that which should be adopted. The Act primarily seeks to protect the "large cattle" of the Philippine Islands against theft and to make easy the recovery and return of such cattle to their proper owners when lost, strayed, or stolen. To this end it provides an elaborate and compulsory system for the separate branding and registry of ownership of all such cattle throughout the Islands, whereby owners are enabled readily and easily to establish their title; it prohibits and invalidates all transfers of large cattle unaccompanied by certificates of transfer issued by the proper officer in the municipality where the contract of sale is made; and it provides also for the disposition of thieves or persons unlawfully in possession, so as to protect the rights of the true owners. All this, manifestly, in order to make it difficult for any one but the rightful owner of such cattle to retain them in his possession or to dispose of them to others. But the usefulness of this elaborate and compulsory system of identification, resting as it does on the official registry of the brands and marks on each separate animal throughout the Islands, would be largely impaired, if not totally destroyed, if such animals were requiring proof of ownership and the production of certificates of registry by the person slaughtering or causing them to be slaughtered, and this especially if the animals were slaughtered privately or in a clandestine manner outside of a municipal slaughterhouse. Hence, as it would appear, sections 30 and 33 prohibit and penalize the slaughter for human consumption or killing for food at a municipal slaughterhouse of such animals without a permit issued by the municipal treasurer, and section 32 provides for the keeping of detailed records of all such permits in the office of the municipal and also of the provincial treasurer. If, however, the construction be placed on these sections which is contended for by the appellant, it will readily be seen that all these carefully worked out provisions for the registry and record of the brands and marks of identification of all large cattle in the Islands would prove in large part abortion, since thieves and persons unlawfully in possession of such cattle, and naturally would, evade the provisions of the law by slaughtering them outside of municipal slaughterhouses, and thus enjoy the fruits of their wrongdoing without exposing themselves to the danger of detection incident to the bringing of the animals to the public slaughterhouse, where the brands and other identification marks might be scrutinized and proof of ownership required. Where the language of a statute is fairly susceptible of two or more constructions, that construction should be adopted which will most tend to give effect to the manifest intent of the lawmaker and promote the object for which the statute was enacted, and a construction should be rejected which would tend to render abortive other provisions of the statute and to defeat the object which the

222 legislator sought to attain by its enactment. We are of opinion, therefore, that sections 30 and 33 of the Act prohibit and penalize the slaughtering or causing to be slaughtered for human consumption of large cattle at any place without the permit provided for in section 30. It is not essential that an explanation be found for the express prohibition in these sections of the "killing for food at a municipal slaughterhouse" of such animals, despite the fact that this prohibition is clearly included in the general prohibition of the slaughter of such animals for human consumption anywhere; but it is not improbable that the requirement for the issue of a permit in such cases was expressly and specifically mentioned out of superabundance of precaution, and to avoid all possibility of misunderstanding in the event that some of the municipalities should be disposed to modify or vary the general provisions of the law by the passage of local ordinances or regulations for the control of municipal slaughterhouse. Similar reasoning applied to the specific provisions of section 31 of the Act leads to the same conclusion. One of the secondary purposes of the law, as set out in that section, is to prevent the slaughter for food of carabaos fit for agricultural and draft purposes, and of all animals unfit for human consumption. A construction which would limit the prohibitions and penalties prescribed in the statute to the killing of such animals in municipal slaughterhouses, leaving unprohibited and unpenalized their slaughter outside of such establishments, so manifestly tends to defeat the purpose and object of the legislator, that unless imperatively demanded by the language of the statute it should be rejected; and, as we have already indicated, the language of the statute is clearly susceptible of the construction which we have placed upon it, which tends to make effective the provisions of this as well as all the other sections of the Act. It appears that the defendant did in fact apply for a permit to slaughter his carabao, and that it was denied him on the ground that the animal was not unfit "for agricultural work or for draft purposes." Counsel for appellant contends that the statute, in so far as it undertakes to penalize the slaughter of carabaos for human consumption as food, without first obtaining a permit which can not be procured in the event that the animal is not unfit "for agricultural work or draft purposes," is unconstitutional and in violation of the terms of section 5 of the Philippine Bill (Act of Congress, July 1, 1902), which provides that "no law shall be enacted which shall deprive any person of life, liberty, or property without due process of law." It is not quite clear from the argument of counsel whether his contention is that this provision of the statute constitutes a taking of property for public use in the exercise of the right of eminent domain without providing for the compensation of the owners, or that it is an undue and unauthorized exercise of the police power of the State. But whatever may be the basis of his contention, we are of opinion, appropriating, with necessary modifications understood, the language of that great jurist, Chief Justice Shaw (in the case of Com. vs. Tewksbury, 11 Met., 55, where the question involved was the constitutionality of a statute prohibiting and penalizing the taking or carrying away by any person, including the owner, of any stones, gravel, or sand, from any of the beaches in the town of Chesea,) that the law in question "is not a taking of the property for public use, within the meaning of the constitution, but is a just and legitimate exercise of the power of the legislature to regulate and restrain such particular use of the property as would be inconsistent with or injurious to the rights of the public. All property is acquired and held under the tacit condition that it shall not be so used as to injure the equal rights of others or greatly impair the public rights and interest of the community." It may be conceded that the benificial use and exclusive enjoyment of the property of all carabao owners in these Islands is to a greater or less degree interfered with by the provisions of the statute; and that, without inquiring what quantum of interest thus passes from the owners of such cattle, it is an interest the deprivation of which detracts from their right and authority, and in some degree interferes with their exclusive possession and control of their property, so that if the regulations in question were enacted for purely private purpose, the statute, in so far as these regulations are concerned, would be a violation of the provisions of the Philippine Bill relied on be appellant; but we are satisfied that it is not such a taking, such an interference with the right and title of the owners, as is involved in the exercise by the State of the right of eminent domain, so as to entitle these owners to compensation, and that it is no more than "a just restrain of an injurious private use of the property, which the legislature had authority to impose."

223 In the case of Com. vs. Alger (7 Cush., 53, 84), wherein the doctrine laid down in Com. vs. Tewksbury (supra) was reviewed and affirmed, the same eminent jurist who wrote the former opinion, in distinguishing the exercise of the right of eminent domain from the exercise of the sovereign police powers of the State, said: We think it is settled principle, growing out of the nature of well-ordered civil society, that every holder of property, however absolute and unqualified may be his title, holds it under the implied liability that his use of it may be so regulated that is shall not be injurious to the equal enjoyment of others having an equal right to the enjoyment of their property, nor injurious to the rights of the community. . . . Rights of property, like all other social and conventional rights, are subject to such reasonable limitations in their enjoyment as shall prevent them from being injurious, and to such reasonable restrain and regulations establish by law, as the legislature, under the governing and controlling power vested in them by the constitution, may think necessary and expedient. This is very different from the right of eminent domain, the right of a government to take and appropriate private property to public use, whenever the public exigency requires it; which can be done only on condition of providing a reasonable compensation therefor. The power we allude to is rather the police power, the power vested in the legislature by the constitution, to make, ordain, and establish all manner of wholesome and reasonable laws, statutes, and ordinances, either with penalties or without, not repugnant to the constitution, as they shall judge to be for the good and welfare of the commonwealth, and of the subjects of the same. It is much easier to perceive and realize the existence and sources of this power than to mark its boundaries or prescribe limits to its exercise. Applying these principles, we are opinion that the restrain placed by the law on the slaughter for human consumption of carabaos fit for agricultural work and draft purpose is not an appropriation of property interests to a "public use," and is not, therefore, within the principle of the exercise by the State of the right of eminent domain. It is fact a mere restriction or limitation upon a private use, which the legislature deemed to be determental to the public welfare. And we think that an examination of the general provisions of the statute in relation to the public interest which it seeks to safeguard and the public necessities for which it provides, leaves no room for doubt that the limitations and restraints imposed upon the exercise of rights of ownership by the particular provisions of the statute under consideration were imposed not for private purposes but, strictly, in the promotion of the "general welfare" and "the public interest" in the exercise of the sovereign police power which every State possesses for the general public welfare and which "reaches to every species of property within the commonwealth." For several years prior to the enactment of the statute a virulent contagious or infectious disease had threatened the total extinction of carabaos in these Islands, in many sections sweeping away seventy, eighty, and in some cases as much as ninety and even one hundred per cent of these animals. Agriculture being the principal occupation of the people, and the carabao being the work animal almost exclusively in use in the fields as well as for draft purposes, the ravages of the disease with which they were infected struck an almost vital blow at the material welfare of the country. large areas of productive land lay waste for years, and the production of rice, the staple food of the inhabitants of the Islands, fell off to such an extent that the impoverished people were compelled to spend many millions of pesos in its importation, notwithstanding the fact that with sufficient work animals to cultivate the fields the arable rice lands of the country could easily be made to produce a supply more that sufficient for its own needs. The drain upon the resources of the Islands was such that famine soon began to make itself felt, hope sank in the breast of the people, and in many provinces the energies of the breadwinners seemed to be paralyzed by the apparently hopeless struggle for existence with which they were confronted. To meet these conditions, large sums of money were expended by the Government in relieving the immediate needs of the starving people, three millions of dollars were voted by the Congress of the United States as a relief or famine fund, public works were undertaken to furnish employment in the provinces where the need was most pressing, and every effort made to alleviate the suffering incident

224 to the widespread failure of the crops throughout the Islands, due in large measure to the lack of animals fit for agricultural work and draft purposes. Such measures, however, could only temporarily relieve the situation, because in an agricultural community material progress and permanent prosperity could hardly be hoped for in the absence of the work animals upon which such a community must necessarily rely for the cultivation of the fields and the transportation of the products of the fields to market. Accordingly efforts were made by the Government to increase the supply of these animals by importation, but, as appears from the official reports on this subject, hope for the future depended largely on the conservation of those animals which had been spared from the ravages of the diseased, and their redistribution throughout the Islands where the need for them was greatest. At large expense, the services of experts were employed, with a view to the discovery and applications of preventive and curative remedies, and it is hoped that these measures have proved in some degree successful in protecting the present inadequate supply of large cattle, and that the gradual increase and redistribution of these animals throughout the Archipelago, in response to the operation of the laws of supply and demand, will ultimately results in practically relieving those sections which suffered most by the loss of their work animals. As was to be expected under such conditions, the price of carabaos rapidly increase from the three to five fold or more, and it may fairly be presumed that even if the conservative measures now adopted prove entirely successful, the scant supply will keep the price of these animals at a high figure until the natural increase shall have more nearly equalized the supply to the demand. Coincident with and probably intimately connected with this sudden rise in the price of cattle, the crime of cattle stealing became extremely prevalent throughout the Islands, necessitating the enactment of a special law penalizing with the severest penalties the theft of carabaos and other personal property by roving bands; and it must be assumed from the legislative authority found that the general welfare of the Islands necessitated the enactment of special and somewhat burdensome provisions for the branding and registration of large cattle, and supervision and restriction of their slaughter for food. It will hardly be questioned that the provisions of the statute touching the branding and registration of such cattle, and prohibiting and penalizing the slaughter of diseased cattle for food were enacted in the due and proper exercise of the police power of the State; and we are of opinion that, under all the circumstances, the provision of the statute prohibiting and penalizing the slaughter for human consumption of carabaos fit for work were in like manner enacted in the due and proper exercise of that power, justified by the exigent necessities of existing conditions, and the right of the State to protect itself against the overwhelming disaster incident to the further reduction of the supply of animals fit for agricultural work or draft purposes. It is, we think, a fact of common knowledge in these Islands, and disclosed by the official reports and records of the administrative and legislative departments of the Government, that not merely the material welfare and future prosperity of this agricultural community were threatened by the ravages of the disease which swept away the work animals during the years prior to the enactment of the law under consideration, but that the very life and existence of the inhabitants of these Islands as a civilized people would be more or less imperiled by the continued destruction of large cattle by disease or otherwise. Confronted by such conditions, there can be no doubt of the right of the Legislature to adopt reasonable measures for the preservation of work animals, even to the extent of prohibiting and penalizing what would, under ordinary conditions, be a perfectly legitimate and proper exercise of rights of ownership and control of the private property of the citizen. The police power rests upon necessity and the right of self-protection and if ever the invasion of private property by police regulation can be justified, we think that the reasonable restriction placed upon the use of carabaos by the provision of the law under discussion must be held to be authorized as a reasonable and proper exercise of that power. As stated by Mr. Justice Brown in his opinion in the case of Lawton vs. Steele (152 U.S., 133, 136): The extent and limits of what is known as the police power have been a fruitful subject of discussion in the appellate courts of nearly every State in the Union. It is universally conceded to

225 include everything essential to the public safely, health, and morals, and to justify the destruction or abatement, by summary proceedings, of whatever may be regarded as a public nuisance. Under this power it has been held that the State may order the destruction of a house falling to decay or otherwise endangering the lives of passers-by; the demolition of such as are in the path of a conflagration; the slaughter of diseased cattle; the destruction of decayed or unwholesome food; the prohibition of wooden buildings in cities; the regulation of railways and other means of public conveyance, and of interments in burial grounds; the restriction of objectionable trades to certain localities; the compulsary vaccination of children; the confinement of the insane or those afficted with contagious deceases; the restraint of vagrants, beggars, and habitual drunkards; the suppression of obscene publications and houses of ill fame; and the prohibition of gambling houses and places where intoxicating liquors are sold. Beyond this, however, the State may interfere wherever the public interests demand it, and in this particular a large discretion is necessarily vested in the legislature to determine, not only what the interests of the public require, but what measures are necessary for the protection of such interests. (Barbier vs. Connolly, 113 U. S., 27; Kidd vs. Pearson, 128 U. S., 1.) To justify the State in thus interposing its authority in behalf of the public, it must appear, first, that the interests of the public generally, as distinguished from those of a particular class, require such interference; and, second, that the means are reasonably necessary for the accomplishment of the purpose, and not unduly oppressive upon individuals. The legislature may not, under the guise of protecting the public interests, arbitrarily interfere with private business, or impose unusual and unnecessary restrictions upon lawful occupations. In other words, its determination as to what is a proper exercise of its police powers is not final or conclusive, but is subject to the supervision of the court. From what has been said, we think it is clear that the enactment of the provisions of the statute under consideration was required by "the interests of the public generally, as distinguished from those of a particular class;" and that the prohibition of the slaughter of carabaos for human consumption, so long as these animals are fit for agricultural work or draft purposes was a "reasonably necessary" limitation on private ownership, to protect the community from the loss of the services of such animals by their slaughter by improvident owners, tempted either by greed of momentary gain, or by a desire to enjoy the luxury of animal food, even when by so doing the productive power of the community may be measurably and dangerously affected. Chief Justice Redfield, in Thorpe vs. Rutland & Burlington R. R. Co. (27 Vt., 140), said (p. 149) that by this "general police power of the State, persons and property are subjected to all kinds of restraints and burdens, in order to secure the general comfort, health, and prosperity of the State; of the perfect right in the legislature to do which no question ever was, or, upon acknowledge and general principles, ever can be made, so far as natural persons are concerned." And Cooley in his "Constitutional Limitations" (6th ed., p. 738) says: It would be quite impossible to enumerate all the instances in which the police power is or may be exercised, because the various cases in which the exercise by one individual of his rights may conflict with a similar exercise by others, or may be detrimental to the public order or safety, are infinite in number and in variety. And there are other cases where it becomes necessary for the public authorities to interfere with the control by individuals of their property, and even to destroy it, where the owners themselves have fully observed all their duties to their fellows and to the State, but where, nevertheless, some controlling public necessity demands the interference or destruction. A strong instance of this description is where it becomes necessary to take, use, or destroy the private property of individuals to prevent the spreading of a fire, the ravages of a pestilence, the advance of a hostile army, or any other great public calamity. Here the individual is in no degree in fault, but his interest must yield to that "necessity" which "knows no law." The establishment of limits within the denser portions of cities and villages within which buildings constructed of inflammable materials shall not be erected or repaired may also, in some cases, be equivalent to a destruction of private property; but regulations for this purpose have been sustained notwithstanding this result. Wharf lines may also be established for the general good, even though they prevent the owners of water-fronts from building out on soil which constitutes private property. And, whenever the legislature deem it

226 necessary to the protection of a harbor to forbid the removal of stones, gravel, or sand from the beach, they may establish regulations to that effect under penalties, and make them applicable to the owners of the soil equally with other persons. Such regulations are only "a just restraint of an injurious use of property, which the legislature have authority" to impose. So a particular use of property may sometimes be forbidden, where, by a change of circumstances, and without the fault of the power, that which was once lawful, proper, and unobjectionable has now become a public nuisance, endangering the public health or the public safety. Milldams are sometimes destroyed upon this grounds; and churchyards which prove, in the advance of urban population, to be detrimental to the public health, or in danger of becoming so, are liable to be closed against further use for cemetery purposes. These citations from some of the highest judicial and text-book authorities in the United States clearly indicate the wide scope and extent which has there been given to the doctrine us in our opinion that the provision of the statute in question being a proper exercise of that power is not in violation of the terms of section 5 of the Philippine Bill, which provide that "no law shall be enacted which shall deprive any person of life, liberty, or property without due process of law," a provision which itself is adopted from the Constitution of the United States, and is found in substance in the constitution of most if not all of the States of the Union. The judgment of conviction and the sentence imposed by the trial court should be affirmed with the costs of this instance against the appellant. So ordered. Arellano, C.J., Torres, Johnson, Moreland and Elliott, JJ., concur.

227 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-24153 February 14, 1983 TOMAS VELASCO, LOURDES RAMIREZ, SY PIN, EDMUNDO UNSON, APOLONIA RAMIREZ and LOURDES LOMIBAO, as component members of the STA. CRUZ BARBERSHOP ASSOCIATION, in their own behalf and in representation of the other owners of barbershops in the City of Manila, petitionersappellants, vs. HON. ANTONIO J. VILLEGAS, City Mayor of Manila, HON. HERMINIO A. ASTORGA, Vice-Mayor and Presiding Officer of the Municipal Board in relation to Republic Act 4065, THE MUNICIPAL BOARD OF THE CITY OF MANILA and EDUARDO QUINTOS SR., Chief of Police of the City of Manila, respondentsappellees. Leonardo L. Arguelles for respondent-appellant.

FERNANDO, C.J.: This is an appeal from an order of the lower court dismissing a suit for declaratory relief challenging the constitutionality based on Ordinance No. 4964 of the City of Manila, the contention being that it amounts to a deprivation of property of petitioners-appellants of their means of livelihood without due process of law. The assailed ordinance is worded thus: "It shall be prohibited for any operator of any barber shop to conduct the business of massaging customers or other persons in any adjacent room or rooms of said barber shop, or in any room or rooms within the same building where the barber shop is located as long as the operator of the barber shop and the room where massaging is conducted is the same person." 1As noted in the appealed order, petitioners-appellants admitted that criminal cases for the violation of this ordinance had been previously filed and decided. The lower court, therefore, held that a petition for declaratory relief did not lie, its availability being dependent on there being as yet no case involving such issue having been filed. 2 Even if such were not the case, the attack against the validity cannot succeed. As pointed out in the brief of respondents-appellees, it is a police power measure. The objectives behind its enactment are: "(1) To be able to impose payment of the license fee for engaging in the business of massage clinic under Ordinance No. 3659 as amended by Ordinance 4767, an entirely different measure than the ordinance regulating the business of barbershops and, (2) in order to forestall possible immorality which might grow out of the construction of separate rooms for massage of customers." 3 This Court has been most liberal in sustaining ordinances based on the general welfare clause. As far back as U.S. v. Salaveria, 4 a 1918 decision, this Court through Justice Malcolm made clear the significance and scope of such a clause, which "delegates in statutory form the police power to a municipality. As above stated, this clause has been given wide application by municipal authorities and has in its relation to the particular circumstances of the case been liberally construed by the courts. Such, it is well to really is the progressive view of Philippine jurisprudence." 5 As it was then, so it has continued to be. 6 There is no showing, therefore, of the unconstitutionality of such ordinance. WHEREFORE, the appealed order of the lower court is affirmed. No costs.

228 EN BANC

[G.R. No. 118127. April 12, 2005]

CITY OF MANILA, HON. ALFREDO S. LIM as the Mayor of the City of Manila, HON. JOSELITO L. ATIENZA, in his capacity as Vice-Mayor of the City of Manila and Presiding Officer of the City Council of Manila, HON. ERNESTO A. NIEVA, HON. GONZALO P. GONZALES, HON. AVELINO S. CAILIAN, HON. ROBERTO C. OCAMPO, HON. ALBERTO DOMINGO, HON. HONORIO U. LOPEZ, HON. FRANCISCO G. VARONA, JR., HON. ROMUALDO S. MARANAN, HON. NESTOR C. PONCE, JR., HON. HUMBERTO B. BASCO, HON. FLAVIANO F. CONCEPCION, JR., HON. ROMEO G. RIVERA, HON. MANUEL M. ZARCAL, HON. PEDRO S. DE JESUS, HON. BERNARDITO C. ANG, HON. MANUEL L. QUIN, HON. JHOSEP Y. LOPEZ, HON. CHIKA G. GO, HON. VICTORIANO A. MELENDEZ, HON. ERNESTO V.P. MACEDA, JR., HON. ROLANDO P. NIETO, HON. DANILO V. ROLEDA, HON. GERINO A. TOLENTINO, JR., HON. MA. PAZ E. HERRERA, HON. JOEY D. HIZON, HON. FELIXBERTO D. ESPIRITU, HON. KARLO Q. BUTIONG, HON. ROGELIO P. DELA PAZ, HON. BERNARDO D. RAGAZA, HON. MA. CORAZON R. CABALLES, HON. CASIMIRO C. SISON, HON. BIENVINIDO M. ABANTE, JR., HON. MA. LOURDES M. ISIP, HON. ALEXANDER S. RICAFORT, HON. ERNESTO F. RIVERA, HON. LEONARDO L. ANGAT, and HON. JOCELYN B. DAWIS, in their capacity as councilors of the City of Manila, petitioners, vs. HON. PERFECTO A.S. LAGUIO, JR., as Presiding Judge, RTC, Manila and MALATE TOURIST DEVELOPMENT CORPORATION, respondents. DECISION TINGA, J.: I know only that what is moral is what you feel good after and what is immoral is what you feel bad after. Ernest Hermingway Death in the Afternoon, Ch. 1 It is a moral and political axiom that any dishonorable act, if performed by oneself, is less immoral than if performed by someone else, who would be well-intentioned in his dishonesty. J. Christopher Gerald Bonaparte in Egypt, Ch. I The Courts commitment to the protection of morals is secondary to its fealty to the fundamental law of the land. It is foremost a guardian of the Constitution but not the conscience of individuals. And if it need be, the Court will not hesitate to make the hammer fall, and heavily in the words of Justice Laurel, and uphold the constitutional guarantees when faced with laws that, though not lacking in zeal to promote morality, nevertheless fail to pass the test of constitutionality. The pivotal issue in this Petition[1] under Rule 45 (then Rule 42) of the Revised Rules on Civil Procedure seeking the reversal of the Decision[2] in Civil Case No. 93-66511 of the Regional Trial Court (RTC) of Manila, Branch 18 (lower court),[3] is the validity of Ordinance No. 7783 (the Ordinance) of the City of Manila.[4] The antecedents are as follows: Private respondent Malate Tourist Development Corporation (MTDC) is a corporation engaged in the business of operating hotels, motels, hostels and lodging houses.[5] It built and opened Victoria Court in Malate which was licensed as a motel although duly accredited with the Department of Tourism as a hotel.[6] On 28 June 1993, MTDC filed a Petition for Declaratory Relief with Prayer for a Writ of Preliminary Injunction and/or Temporary Restraining Order[7] (RTC Petition) with the lower court impleading as defendants, herein petitioners City of Manila, Hon. Alfredo S. Lim (Lim), Hon. Joselito L.

229 Atienza, and the members of the City Council of Manila (City Council). MTDC prayed that the Ordinance, insofar as it includes motels and inns as among its prohibited establishments, be declared invalid and unconstitutional.[8] Enacted by the City Council[9] on 9 March 1993 and approved by petitioner City Mayor on 30 March 1993, the said Ordinance is entitled AN ORDINANCE PROHIBITING THE ESTABLISHMENT OR OPERATION OF BUSINESSES PROVIDING CERTAIN FORMS OF AMUSEMENT, ENTERTAINMENT, SERVICES AND FACILITIES IN THE ERMITA-MALATE AREA, PRESCRIBING PENALTIES FOR VIOLATION THEREOF, AND FOR OTHER PURPOSES.[10] The Ordinance is reproduced in full, hereunder: SECTION 1. Any provision of existing laws and ordinances to the contrary notwithstanding, no person, partnership, corporation or entity shall, in the Ermita-Malate area bounded by Teodoro M. Kalaw Sr. Street in the North, Taft Avenue in the East, Vito Cruz Street in the South and Roxas Boulevard in the West, pursuant to P.D. 499 be allowed or authorized to contract and engage in, any business providing certain forms of amusement, entertainment, services and facilities where women are used as tools in entertainment and which tend to disturb the community, annoy the inhabitants, and adversely affect the social and moral welfare of the community, such as but not limited to: 1. Sauna Parlors 2. Massage Parlors 3. Karaoke Bars 4. Beerhouses 5. Night Clubs 6. Day Clubs 7. Super Clubs 8. Discotheques 9. Cabarets 10. Dance Halls 11. Motels 12. Inns SEC. 2 The City Mayor, the City Treasurer or any person acting in behalf of the said officials are prohibited from issuing permits, temporary or otherwise, or from granting licenses and accepting payments for the operation of business enumerated in the preceding section. SEC. 3. Owners and/or operator of establishments engaged in, or devoted to, the businesses enumerated in Section 1 hereof are hereby given three (3) months from the date of approval of this ordinance within which to wind up business operations or to transfer to any place outside of the Ermita-Malate area or convert said businesses to other kinds of business allowable within the area, such as but not limited to: 1. Curio or antique shop 2. Souvenir Shops 3. Handicrafts display centers 4. Art galleries 5. Records and music shops 6. Restaurants 7. Coffee shops 8. Flower shops 9. Music lounge and sing-along restaurants, with well-defined activities for wholesome family entertainment that cater to both local and foreign clientele. 10. Theaters engaged in the exhibition, not only of motion pictures but also of cultural shows, stage and theatrical plays, art exhibitions, concerts and the like. 11. Businesses allowable within the law and medium intensity districts as provided for in the zoning ordinances for Metropolitan Manila, except new warehouse or

230 open-storage depot, dock or yard, motor repair shop, gasoline service station, light industry with any machinery, or funeral establishments. SEC. 4. Any person violating any provisions of this ordinance, shall upon conviction, be punished by imprisonment of one (1) year or fine of FIVE THOUSAND (P5,000.00) PESOS, or both, at the discretion of the Court, PROVIDED, that in case of juridical person, the President, the General Manager, or personin-charge of operation shall be liable thereof; PROVIDED FURTHER, that in case of subsequent violation and conviction, the premises of the erring establishment shall be closed and padlocked permanently. SEC. 5. This ordinance shall take effect upon approval. Enacted by the City Council of Manila at its regular session today, March 9, 1993. Approved by His Honor, the Mayor on March 30, 1993. (Emphasis supplied) In the RTC Petition, MTDC argued that the Ordinance erroneously and improperly included in its enumeration of prohibited establishments, motels and inns such as MTDCs Victoria Court considering that these were not establishments for amusement or entertainment and they were not services or facilities for entertainment, nor did they use women as tools for entertainment, and neither did they disturb the community, annoy the inhabitants or adversely affect the social and moral welfare of the community.[11] MTDC further advanced that the Ordinance was invalid and unconstitutional for the following reasons: (1) The City Council has no power to prohibit the operation of motels as Section 458 (a) 4 (iv)[12] of the Local Government Code of 1991 (the Code) grants to the City Council only the power to regulate the establishment, operation and maintenance of hotels, motels, inns, pension houses, lodging houses and other similar establishments; (2) The Ordinance is void as it is violative of Presidential Decree (P.D.) No. 499[13] which specifically declared portions of the Ermita-Malate area as a commercial zone with certain restrictions; (3) The Ordinance does not constitute a proper exercise of police power as the compulsory closure of the motel business has no reasonable relation to the legitimate municipal interests sought to be protected; (4) The Ordinance constitutes an ex post facto law by punishing the operation of Victoria Court which was a legitimate business prior to its enactment; (5) The Ordinance violates MTDCs constitutional rights in that: (a) it is confiscatory and constitutes an invasion of plaintiffs property rights; (b) the City Council has no power to find as a fact that a particular thing is a nuisance per se nor does it have the power to extrajudicially destroy it; and (6) The Ordinance constitutes a denial of equal protection under the law as no reasonable basis exists for prohibiting the operation of motels and inns, but not pension houses, hotels, lodging houses or other similar establishments, and for prohibiting said business in the Ermita-Malate area but not outside of this area.[14] In their Answer[15] dated 23 July 1993, petitioners City of Manila and Lim maintained that the City Council had the power to prohibit certain forms of entertainment in order to protect the social and moral welfare of the community as provided for in Section 458 (a) 4 (vii) of the Local Government Code,[16] which reads, thus: Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall: .... (4) Regulate activities relative to the use of land, buildings and structures within the city in order to promote the general welfare and for said purpose shall: .... (vii) Regulate the establishment, operation, and maintenance of any entertainment or amusement facilities, including theatrical performances, circuses, billiard pools, public dancing

231 schools, public dance halls, sauna baths, massage parlors, and other places for entertainment or amusement; regulate such other events or activities for amusement or entertainment, particularly those which tend to disturb the community or annoy the inhabitants, or require the suspension or suppression of the same; or, prohibit certain forms of amusement or entertainment in order to protect the social and moral welfare of the community. Citing Kwong Sing v. City of Manila,[17] petitioners insisted that the power of regulation spoken of in the above-quoted provision included the power to control, to govern and to restrain places of exhibition and amusement.[18] Petitioners likewise asserted that the Ordinance was enacted by the City Council of Manila to protect the social and moral welfare of the community in conjunction with its police power as found in Article III, Section 18(kk) of Republic Act No. 409,[19] otherwise known as the Revised Charter of the City of Manila (Revised Charter of Manila)[20] which reads, thus: ARTICLE III THE MUNICIPAL BOARD . . . Section 18. Legislative powers. The Municipal Board shall have the following legislative powers: . . . (kk) To enact all ordinances it may deem necessary and proper for the sanitation and safety, the furtherance of the prosperity, and the promotion of the morality, peace, good order, comfort, convenience, and general welfare of the city and its inhabitants, and such others as may be necessary to carry into effect and discharge the powers and duties conferred by this chapter; and to fix penalties for the violation of ordinances which shall not exceed two hundred pesos fine or six months imprisonment, or both such fine and imprisonment, for a single offense. Further, the petitioners noted, the Ordinance had the presumption of validity; hence, private respondent had the burden to prove its illegality or unconstitutionality.[21] Petitioners also maintained that there was no inconsistency between P.D. 499 and the Ordinance as the latter simply disauthorized certain forms of businesses and allowed the Ermita-Malate area to remain a commercial zone.[22] The Ordinance, the petitioners likewise claimed, cannot be assailed as ex post facto as it was prospective in operation.[23] The Ordinance also did not infringe the equal protection clause and cannot be denounced as class legislation as there existed substantial and real differences between the Ermita-Malate area and other places in the City of Manila.[24] On 28 June 1993, respondent Judge Perfecto A.S. Laguio, Jr. (Judge Laguio) issued an ex-parte temporary restraining order against the enforcement of the Ordinance.[25] And on 16 July 1993, again in an intrepid gesture, he granted the writ of preliminary injunction prayed for by MTDC.[26] After trial, on 25 November 1994, Judge Laguio rendered the assailed Decision, enjoining the petitioners from implementing the Ordinance. The dispositive portion of said Decision reads:[27] WHEREFORE, judgment is hereby rendered declaring Ordinance No. 778[3], Series of 1993, of the City of Manila null and void, and making permanent the writ of preliminary injunction that had been issued by this Court against the defendant. No costs. SO ORDERED.[28] Petitioners filed with the lower court a Notice of Appeal[29] on 12 December 1994, manifesting that they are elevating the case to this Court under then Rule 42 on pure questions of law.[30]

232 On 11 January 1995, petitioners filed the present Petition, alleging that the following errors were committed by the lower court in its ruling: (1) It erred in concluding that the subject ordinance is ultra vires, or otherwise, unfair, unreasonable and oppressive exercise of police power; (2) It erred in holding that the questioned Ordinance contravenes P.D. 499[31] which allows operators of all kinds of commercial establishments, except those specified therein; and (3) It erred in declaring the Ordinance void and unconstitutional.[32] In the Petition and in its Memorandum,[33] petitioners in essence repeat the assertions they made before the lower court. They contend that the assailed Ordinance was enacted in the exercise of the inherent and plenary power of the State and the general welfare clause exercised by local government units provided for in Art. 3, Sec. 18 (kk) of the Revised Charter of Manila and conjunctively, Section 458 (a) 4 (vii) of the Code.[34] They allege that the Ordinance is a valid exercise of police power; it does not contravene P.D. 499; and that it enjoys the presumption of validity.[35] In its Memorandum[36] dated 27 May 1996, private respondent maintains that the Ordinance is ultra vires and that it is void for being repugnant to the general law. It reiterates that the questioned Ordinance is not a valid exercise of police power; that it is violative of due process, confiscatory and amounts to an arbitrary interference with its lawful business; that it is violative of the equal protection clause; and that it confers on petitioner City Mayor or any officer unregulated discretion in the execution of the Ordinance absent rules to guide and control his actions. This is an opportune time to express the Courts deep sentiment and tenderness for the ErmitaMalate area being its home for several decades. A long-time resident, the Court witnessed the areas many turn of events. It relished its glory days and endured its days of infamy. Much as the Court harks back to the resplendent era of the Old Manila and yearns to restore its lost grandeur, it believes that the Ordinance is not the fitting means to that end. The Court is of the opinion, and so holds, that the lower court did not err in declaring the Ordinance, as it did, ultra vires and therefore null and void. The Ordinance is so replete with constitutional infirmities that almost every sentence thereof violates a constitutional provision. The prohibitions and sanctions therein transgress the cardinal rights of persons enshrined by the Constitution. The Court is called upon to shelter these rights from attempts at rendering them worthless. The tests of a valid ordinance are well established. A long line of decisions has held that for an ordinance to be valid, it must not only be within the corporate powers of the local government unit to enact and must be passed according to the procedure prescribed by law, it must also conform to the following substantive requirements: (1) must not contravene the Constitution or any statute; (2) must not be unfair or oppressive; (3) must not be partial or discriminatory; (4) must not prohibit but may regulate trade; (5) must be general and consistent with public policy; and (6) must not be unreasonable.[37] Anent the first criterion, ordinances shall only be valid when they are not contrary to the Constitution and to the laws.[38] The Ordinance must satisfy two requirements: it must pass muster under the test of constitutionality and the test of consistency with the prevailing laws. That ordinances should be constitutional uphold the principle of the supremacy of the Constitution. The requirement that the enactment must not violate existing law gives stress to the precept that local government units are able to legislate only by virtue of their derivative legislative power, a delegation of legislative power from the national legislature. The delegate cannot be superior to the principal or exercise powers higher than those of the latter.[39] This relationship between the national legislature and the local government units has not been enfeebled by the new provisions in the Constitution strengthening the policy of local autonomy. The national legislature is still the principal of the local government units, which cannot defy its will or modify or violate it.[40] The Ordinance was passed by the City Council in the exercise of its police power, an enactment of the City Council acting as agent of Congress. Local government units, as agencies of the State, are endowed with police power in order to effectively accomplish and carry out the declared objects of their creation.[41] This delegated police power is found in Section 16 of the Code, known as the general welfare clause, viz:

233 SECTION 16. General Welfare those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient and effective governance, and those which are essential to the promotion of the general welfare. Within their respective territorial jurisdictions, local government units shall ensure and support, among other things, the preservation and enrichment of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and support the development of appropriate and self-reliant scientific and technological capabilities, improve public morals, enhance economic prosperity and social justice, promote full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants. Local government units exercise police power through their respective legislative bodies; in this case, the sangguniang panlungsod or the city council. The Code empowers the legislative bodies to enact ordinances, approve resolutions and appropriate funds for the general welfare of the province/city/municipality and its inhabitants pursuant to Section 16 of the Code and in the proper exercise of the corporate powers of the province/city/ municipality provided under the Code. [42] The inquiry in this Petition is concerned with the validity of the exercise of such delegated power. The Ordinance contravenes the Constitution The police power of the City Council, however broad and far-reaching, is subordinate to the constitutional limitations thereon; and is subject to the limitation that its exercise must be reasonable and for the public good.[43] In the case at bar, the enactment of the Ordinance was an invalid exercise of delegated power as it is unconstitutional and repugnant to general laws. The relevant constitutional provisions are the following: SEC. 5. The maintenance of peace and order, the protection of life, liberty, and property, and the promotion of the general welfare are essential for the enjoyment by all the people of the blessings of democracy.[44] SEC. 14. The State recognizes the role of women in nation-building, and shall ensure the fundamental equality before the law of women and men.[45] SEC. 1. No person shall be deprived of life, liberty or property without due process of law, nor shall any person be denied the equal protection of laws.[46] Sec. 9. Private property shall not be taken for public use without just compensation.[47] A. The Ordinance infringes the Due Process Clause The constitutional safeguard of due process is embodied in the fiat (N)o person shall be deprived of life, liberty or property without due process of law. . . .[48] There is no controlling and precise definition of due process. It furnishes though a standard to which governmental action should conform in order that deprivation of life, liberty or property, in each appropriate case, be valid. This standard is aptly described as a responsiveness to the supremacy of reason, obedience to the dictates of justice,[49] and as such it is a limitation upon the exercise of the police power.[50] The purpose of the guaranty is to prevent governmental encroachment against the life, liberty and property of individuals; to secure the individual from the arbitrary exercise of the powers of the government, unrestrained by the established principles of private rights and distributive justice; to protect property from confiscation by legislative enactments, from seizure, forfeiture, and destruction without a trial and conviction by the ordinary mode of judicial procedure; and to secure to all persons equal and impartial justice and the benefit of the general law.[51] The guaranty serves as a protection against arbitrary regulation, and private corporations and partnerships are persons within the scope of the guaranty insofar as their property is concerned.[52]

234 This clause has been interpreted as imposing two separate limits on government, usually called procedural due process and substantive due process. Procedural due process, as the phrase implies, refers to the procedures that the government must follow before it deprives a person of life, liberty, or property. Classic procedural due process issues are concerned with what kind of notice and what form of hearing the government must provide when it takes a particular action.[53] Substantive due process, as that phrase connotes, asks whether the government has an adequate reason for taking away a persons life, liberty, or property. In other words, substantive due process looks to whether there is a sufficient justification for the governments action.[54] Case law in the United States (U.S.) tells us that whether there is such a justification depends very much on the level of scrutiny used.[55] For example, if a law is in an area where only rational basis review is applied, substantive due process is met so long as the law is rationally related to a legitimate government purpose. But if it is an area where strict scrutiny is used, such as for protecting fundamental rights, then the government will meet substantive due process only if it can prove that the law is necessary to achieve a compelling government purpose.[56] The police power granted to local government units must always be exercised with utmost observance of the rights of the people to due process and equal protection of the law. Such power cannot be exercised whimsically, arbitrarily or despotically[57] as its exercise is subject to a qualification, limitation or restriction demanded by the respect and regard due to the prescription of the fundamental law, particularly those forming part of the Bill of Rights. Individual rights, it bears emphasis, may be adversely affected only to the extent that may fairly be required by the legitimate demands of public interest or public welfare.[58] Due process requires the intrinsic validity of the law in interfering with the rights of the person to his life, liberty and property.[59] Requisites for the valid exercise of Police Power are not met To successfully invoke the exercise of police power as the rationale for the enactment of the Ordinance, and to free it from the imputation of constitutional infirmity, not only must it appear that the interests of the public generally, as distinguished from those of a particular class, require an interference with private rights, but the means adopted must be reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals.[60] It must be evident that no other alternative for the accomplishment of the purpose less intrusive of private rights can work. A reasonable relation must exist between the purposes of the police measure and the means employed for its accomplishment, for even under the guise of protecting the public interest, personal rights and those pertaining to private property will not be permitted to be arbitrarily invaded.[61] Lacking a concurrence of these two requisites, the police measure shall be struck down as an arbitrary intrusion into private rights[62] The Ordinance was enacted to address and arrest the social ills purportedly spawned by the establishments in the Ermita-Malate area which are allegedly operated under the deceptive veneer of legitimate, licensed and tax-paying nightclubs, bars, karaoke bars, girlie houses, cocktail lounges, hotels and motels. Petitioners insist that even the Court in the case of Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila[63] had already taken judicial notice of the alarming increase in the rate of prostitution, adultery and fornication in Manila traceable in great part to existence of motels, which provide a necessary atmosphere for clandestine entry, presence and exit and thus become the ideal haven for prostitutes and thrill-seekers.[64] The object of the Ordinance was, accordingly, the promotion and protection of the social and moral values of the community. Granting for the sake of argument that the objectives of theOrdinance are within the scope of the City Councils police powers, the means employed for the accomplishment thereof were unreasonable and unduly oppressive. It is undoubtedly one of the fundamental duties of the City of Manila to make all reasonable regulations looking to the promotion of the moral and social values of the community. However, the worthy aim of fostering public morals and the eradication of the communitys social ills can be achieved through means less restrictive of private rights; it can be attained by reasonable restrictions rather than by an absolute prohibition. The closing down and transfer of businesses or their conversion into

235 businesses allowed under the Ordinance have no reasonable relation to the accomplishment of its purposes. Otherwise stated, the prohibition of the enumerated establishments will not per se protect and promote the social and moral welfare of the community; it will not in itself eradicate the alluded social ills of prostitution, adultery, fornication nor will it arrest the spread of sexual disease in Manila. Conceding for the nonce that the Ermita-Malate area teems with houses of ill-repute and establishments of the like which the City Council may lawfully prohibit,[65] it is baseless and insupportable to bring within that classification sauna parlors, massage parlors, karaoke bars, night clubs, day clubs, super clubs, discotheques, cabarets, dance halls, motels and inns. This is not warranted under the accepted definitions of these terms. The enumerated establishments are lawful pursuits which are not per se offensive to the moral welfare of the community. That these are used as arenas to consummate illicit sexual affairs and as venues to further the illegal prostitution is of no moment. We lay stress on the acrid truth that sexual immorality, being a human frailty, may take place in the most innocent of places that it may even take place in the substitute establishments enumerated under Section 3 of the Ordinance. If the flawed logic of theOrdinance were to be followed, in the remote instance that an immoral sexual act transpires in a church cloister or a court chamber, we would behold the spectacle of the City of Manila ordering the closure of the church or court concerned. Every house, building, park, curb, street or even vehicles for that matter will not be exempt from the prohibition. Simply because there are no pure places where there are impure men. Indeed, even the Scripture and the Tradition of Christians churches continually recall the presence and universality of sin in mans history.[66] The problem, it needs to be pointed out, is not the establishment, which by its nature cannot be said to be injurious to the health or comfort of the community and which in itself is amoral, but the deplorable human activity that may occur within its premises. While a motel may be used as a venue for immoral sexual activity, it cannot for that reason alone be punished. It cannot be classified as a house of ill-repute or as a nuisance per se on a mere likelihood or a naked assumption. If that were so and if that were allowed, then the Ermita-Malate area would not only be purged of its supposed social ills, it would be extinguished of its soul as well as every human activity, reprehensible or not, in its every nook and cranny would be laid bare to the estimation of the authorities. The Ordinance seeks to legislate morality but fails to address the core issues of morality. Try as the Ordinance may to shape morality, it should not foster the illusion that it can make a moral man out of it because immorality is not a thing, a building or establishment; it is in the hearts of men. The City Council instead should regulate human conduct that occurs inside the establishments, but not to the detriment of liberty and privacy which are covenants, premiums and blessings of democracy. While petitioners earnestness at curbing clearly objectionable social ills is commendable, they unwittingly punish even the proprietors and operators of wholesome, innocent establishments. In the instant case, there is a clear invasion of personal or property rights, personal in the case of those individuals desirous of owning, operating and patronizing those motels and property in terms of the investments made and the salaries to be paid to those therein employed. If the City of Manila so desires to put an end to prostitution, fornication and other social ills, it can instead impose reasonable regulations such as daily inspections of the establishments for any violation of the conditions of their licenses or permits; it may exercise its authority to suspend or revoke their licenses for these violations;[67] and it may even impose increased license fees. In other words, there are other means to reasonably accomplish the desired end. Means employed are constitutionally infirm The Ordinance disallows the operation of sauna parlors, massage parlors, karaoke bars, beerhouses, night clubs, day clubs, super clubs, discotheques, cabarets, dance halls, motels and inns in the Ermita-Malate area. In Section 3 thereof, owners and/or operators of the enumerated establishments are given three (3) months from the date of approval of the Ordinance within which to wind up business operations or to transfer to any place outside the Ermita-Malate area or convert said businesses to other kinds of business allowable within the area. Further, it states in Section 4 that in cases of subsequent violations of the provisions of the Ordinance, the premises of the erring establishment shall be closed and padlocked permanently.

236 It is readily apparent that the means employed by the Ordinance for the achievement of its purposes, the governmental interference itself, infringes on the constitutional guarantees of a persons fundamental right to liberty and property. Liberty as guaranteed by the Constitution was defined by Justice Malcolm to include the right to exist and the right to be free from arbitrary restraint or servitude. The term cannot be dwarfed into mere freedom from physical restraint of the person of the citizen, but is deemed to embrace the right of man to enjoy the facilities with which he has been endowed by his Creator, subject only to such restraint as are necessary for the common welfare.[68] In accordance with this case, the rights of the citizen to be free to use his faculties in all lawful ways; to live and work where he will; to earn his livelihood by any lawful calling; and to pursue any avocation are all deemed embraced in the concept of liberty.[69] The U.S. Supreme Court in the case of Roth v. Board of Regents,[70] sought to clarify the meaning of liberty. It said: While the Court has not attempted to define with exactness the liberty. . . guaranteed [by the Fifth and Fourteenth Amendments], the term denotes not merely freedom from bodily restraint but also the right of the individual to contract, to engage in any of the common occupations of life, to acquire useful knowledge, to marry, establish a home and bring up children, to worship God according to the dictates of his own conscience, and generally to enjoy those privileges long recognizedas essential to the orderly pursuit of happiness by free men. In a Constitution for a free people, there can be no doubt that the meaning of liberty must be broad indeed. In another case, it also confirmed that liberty protected by the due process clause includes personal decisions relating to marriage, procreation, contraception, family relationships, child rearing, and education. In explaining the respect the Constitution demands for the autonomy of the person in making these choices, the U.S. Supreme Court explained: These matters, involving the most intimate and personal choices a person may make in a lifetime, choices central to personal dignity and autonomy, are central to the liberty protected by the Fourteenth Amendment. At the heart of liberty is the right to define ones own concept of existence, of meaning, of universe, and of the mystery of human life. Beliefs about these matters could not define the attributes of personhood where they formed under compulsion of the State.[71] Persons desirous to own, operate and patronize the enumerated establishments under Section 1 of the Ordinance may seek autonomy for these purposes. Motel patrons who are single and unmarried may invoke this right to autonomy to consummate sexual behavior does not contravene any fundamental state policy as contained in the Constitution.[72] Adults have a right to choose to forge such relationships with others in the confines of their own private lives and still retain their dignity as free persons. The liberty protected by the Constitution allows persons the right to make this choice.[73] Their right to liberty under the due process clause gives them the full right to engage in their conduct without intervention of the government, as long as they do not run afoul of the law. Liberty should be the rule and restraint the exception. Liberty in the constitutional sense not only means freedom from unlawful government restraint; it must include privacy as well, if it is to be a repository of freedom. The right to be let alone is the men.[74] The concept of liberty compels respect for the individual whose claim to privacy and interference demands respect. As the case of Morfe v. Mutuc,[75] borrowing the words of Laski, so very aptly stated: Man is one among many, obstinately refusing reduction to unity. His separateness, his isolation, are indefeasible; indeed, they are so fundamental that they are the basis on which his civic obligations are built. He cannot abandon the consequences of his isolation, which are, broadly speaking, that his experience is private, and the will built out of that experience personal to himself. If he surrenders his will to others, he surrenders himself. If his will is set by the will of others, he ceases to be a master of himself. I cannot believe that a man no longer a master of himself is in any real sense free.

237 Indeed, the right to privacy as a constitutional right was recognized in Morfe, the invasion of which should be justified by a compelling state interest. Morfe accorded recognition to the right to privacy independently of its identification with liberty; in itself it is fully deserving of constitutional protection. Governmental powers should stop short of certain intrusions into the personal life of the citizen.[76] There is a great temptation to have an extended discussion on these civil liberties but the Court chooses to exercise restraint and restrict itself to the issues presented when it should. The previous pronouncements of the Court are not to be interpreted as a license for adults to engage in criminal conduct. The reprehensibility of such conduct is not diminished. The Court only reaffirms and guarantees their right to make this choice. Should they be prosecuted for their illegal conduct, they should suffer the consequences of the choice they have made. That, ultimately, is their choice. Modality employed is unlawful taking In addition, the Ordinance is unreasonable and oppressive as it substantially divests the respondent of the beneficial use of its property.[77] The Ordinance in Section 1 thereof forbids the running of the enumerated businesses in the Ermita-Malate area and in Section 3 instructs its owners/operators to wind up business operations or to transfer outside the area or convert said businesses into allowed businesses. An ordinance which permanently restricts the use of property that it can not be used for any reasonable purpose goes beyond regulation and must be recognized as a taking of the property without just compensation.[78] It is intrusive and violative of the private property rights of individuals. The Constitution expressly provides in Article III, Section 9, that private property shall not be taken for public use without just compensation. The provision is the most important protection of property rights in the Constitution. This is a restriction on the general power of the government to take property. The constitutional provision is about ensuring that the government does not confiscate the property of some to give it to others. In part too, it is about loss spreading. If the government takes away a persons property to benefit society, then society should pay. The principal purpose of the guarantee is to bar the Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.[79] There are two different types of taking that can be identified. A possessory taking occurs when the government confiscates or physically occupies property. A regulatory taking occurs when the governments regulation leaves no reasonable economically viable use of the property.[80] In the landmark case of Pennsylvania Coal v. Mahon,[81] it was held that a taking also could be found if government regulation of the use of property went too far. When regulation reaches a certain magnitude, in most if not in all cases there must be an exercise of eminent domain and compensation to support the act. While property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking.[82] No formula or rule can be devised to answer the questions of what is too far and when regulation becomes a taking. In Mahon, Justice Holmes recognized that it was a question of degree and therefore cannot be disposed of by general propositions. On many other occasions as well, the U.S. Supreme Court has said that the issue of when regulation constitutes a taking is a matter of considering the facts in each case. The Court asks whether justice and fairness require that the economic loss caused by public action must be compensated by the government and thus borne by the public as a whole, or whether the loss should remain concentrated on those few persons subject to the public action.[83] What is crucial in judicial consideration of regulatory takings is that government regulation is a taking if it leaves no reasonable economically viable use of property in a manner that interferes with reasonable expectations for use.[84] A regulation that permanently denies all economically beneficial or productive use of land is, from the owners point of view, equivalent to a taking unless principles of nuisance or property law that existed when the owner acquired the land make the use prohibitable.[85] When the owner of real property has been called upon to sacrifice all economically beneficial uses in the name of the common good, that is, to leave his property economically idle, he has suffered a taking.[86] A regulation which denies all economically beneficial or productive use of land will require compensation under the takings clause. Where a regulation places limitations on land that fall short of eliminating all economically beneficial use, a taking nonetheless may have occurred, depending on a

238 complex of factors including the regulations economic effect on the landowner, the extent to which the regulation interferes with reasonable investment-backed expectations and the character of government action. These inquiries are informed by the purpose of the takings clause which is to prevent the government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.[87] A restriction on use of property may also constitute a taking if not reasonably necessary to the effectuation of a substantial public purpose or if it has an unduly harsh impact on the distinct investment-backed expectations of the owner.[88] The Ordinance gives the owners and operators of the prohibited establishments three (3) months from its approval within which to wind up business operations or to transfer to any place outside of the Ermita-Malate area or convert said businesses to other kinds of business allowable within the area. The directive to wind up business operations amounts to a closure of the establishment, a permanent deprivation of property, and is practically confiscatory. Unless the owner converts his establishment to accommodate an allowed business, the structure which housed the previous business will be left empty and gathering dust. Suppose he transfers it to another area, he will likewise leave the entire establishment idle. Consideration must be given to the substantial amount of money invested to build the edifices which the owner reasonably expects to be returned within a period of time. It is apparent that the Ordinance leaves no reasonable economically viable use of property in a manner that interferes with reasonable expectations for use. to transfer to any place outside of the Ermita-Malate area or to closure in cases of subsequent violations found in Section 4 of the Ordinance is also equivalent to a taking of private property. The second option instructs the owners to abandon their property and build another one outside the Ermita-Malate area. In every sense, it qualifies as a taking without just compensation with an additional burden imposed on the owner to build another establishment solely from his coffers. The proffered solution does not put an end to the problem, it merely relocates it. Not only is this impractical, it is unreasonable, onerous and oppressive. The conversion into allowed enterprises is just as ridiculous. How may the respondent convert a motel into a restaurant or a coffee shop, art gallery or music lounge without essentially destroying its property? This is a taking of private property without due process of law, nay, even without compensation. The penalty of closure likewise constitutes unlawful taking that should be compensated by the government. The burden on the owner to convert or transfer his business, otherwise it will be closed permanently after a subsequent violation should be borne by the public as this end benefits them as a whole. Petitioners cannot take refuge in classifying the measure as a zoning ordinance. A zoning ordinance, although a valid exercise of police power, which limits a wholesome property to a use which can not reasonably be made of it constitutes the taking of such property without just compensation. Private property which is not noxious nor intended for noxious purposes may not, by zoning, be destroyed without compensation. Such principle finds no support in the principles of justice as we know them. The police powers of local government units which have always received broad and liberal interpretation cannot be stretched to cover this particular taking. Distinction should be made between destruction from necessity and eminent domain. It needs restating that the property taken in the exercise of police power is destroyed because it is noxious or intended for a noxious purpose while the property taken under the power of eminent domain is intended for a public use or purpose and is therefore wholesome.[89] If it be of public benefit that a wholesome property remain unused or relegated to a particular purpose, then certainly the public should bear the cost of reasonable compensation for the condemnation of private property for public use.[90] Further, the Ordinance fails to set up any standard to guide or limit the petitioners actions. It in no way controls or guides the discretion vested in them. It provides no definition of the establishments covered by it and it fails to set forth the conditions when the establishments come within its ambit of prohibition. The Ordinance confers upon the mayor arbitrary and unrestricted power to close down establishments. Ordinances such as this, which make possible abuses in its execution, depending upon

239 no conditions or qualifications whatsoever other than the unregulated arbitrary will of the city authorities as the touchstone by which its validity is to be tested, are unreasonable and invalid. The Ordinance should have established a rule by which its impartial enforcement could be secured.[91] Ordinances placing restrictions upon the lawful use of property must, in order to be valid and constitutional, specify the rules and conditions to be observed and conduct to avoid; and must not admit of the exercise, or of an opportunity for the exercise, of unbridled discretion by the law enforcers in carrying out its provisions.[92] Thus, in Coates v. City of Cincinnati,[93] as cited in People v. Nazario,[94] the U.S. Supreme Court struck down an ordinance that had made it illegal for three or more persons to assemble on any sidewalk and there conduct themselves in a manner annoying to persons passing by. The ordinance was nullified as it imposed no standard at all because one may never know in advance what annoys some people but does not annoy others. Similarly, the Ordinance does not specify the standards to ascertain which establishments tend to disturb the community, annoy the inhabitants, and adversely affect the social and moral welfare of the community. The cited case supports the nullification of the Ordinance for lack of comprehensible standards to guide the law enforcers in carrying out its provisions. Petitioners cannot therefore order the closure of the enumerated establishments without infringing the due process clause. These lawful establishments may be regulated, but not prevented from carrying on their business. This is a sweeping exercise of police power that is a result of a lack of imagination on the part of the City Council and which amounts to an interference into personal and private rights which the Court will not countenance. In this regard, we take a resolute stand to uphold the constitutional guarantee of the right to liberty and property. Worthy of note is an example derived from the U.S. of a reasonable regulation which is a far cry from the ill-considered Ordinance enacted by the City Council. In FW/PBS, INC. v. Dallas,[95] the city of Dallas adopted a comprehensive ordinance regulating sexually oriented businesses, which are defined to include adult arcades, bookstores, video stores, cabarets, motels, and theaters as well as escort agencies, nude model studio and sexual encounter centers. Among other things, the ordinance required that such businesses be licensed. A group of motel owners were among the three groups of businesses that filed separate suits challenging the ordinance. The motel owners asserted that the city violated the due process clause by failing to produce adequate support for its supposition that renting room for fewer than ten (10) hours resulted in increased crime and other secondary effects. They likewise argued than the ten (10)-hour limitation on the rental of motel rooms placed an unconstitutional burden on the right to freedom of association. Anent the first contention, the U.S. Supreme Court held that the reasonableness of the legislative judgment combined with a study which the city considered, was adequate to support the citys determination that motels permitting room rentals for fewer than ten (10 ) hours should be included within the licensing scheme. As regards the second point, the Court held that limiting motel room rentals to ten (10) hours will have no discernible effect on personal bonds as those bonds that are formed from the use of a motel room for fewer than ten (10) hours are not those that have played a critical role in the culture and traditions of the nation by cultivating and transmitting shared ideals and beliefs. The ordinance challenged in the above-cited case merely regulated the targeted businesses. It imposed reasonable restrictions; hence, its validity was upheld. The case of Ermita Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila,[96] it needs pointing out, is also different from this case in that what was involved therein was a measure which regulated the mode in which motels may conduct business in order to put an end to practices which could encourage vice and immorality. Necessarily, there was no valid objection on due process or equal protection grounds as the ordinance did not prohibit motels. The Ordinance in this case however is not a regulatory measure but is an exercise of an assumed power to prohibit.[97] The foregoing premises show that the Ordinance is an unwarranted and unlawful curtailment of property and personal rights of citizens. For being unreasonable and an undue restraint of trade, it cannot, even under the guise of exercising police power, be upheld as valid. B. The Ordinance violates Equal Protection Clause

240 Equal protection requires that all persons or things similarly situated should be treated alike, both as to rights conferred and responsibilities imposed. Similar subjects, in other words, should not be treated differently, so as to give undue favor to some and unjustly discriminate against others.[98] The guarantee means that no person or class of persons shall be denied the same protection of laws which is enjoyed by other persons or other classes in like circumstances.[99] The equal protection of the laws is a pledge of the protection of equal laws.[100] It limits governmental discrimination. The equal protection clause extends to artificial persons but only insofar as their property is concerned.[101] The Court has explained the scope of the equal protection clause in this wise: What does it signify? To quote from J.M. Tuason & Co. v. Land Tenure Administration: The ideal situation is for the laws benefits to be available to all, that none be placed outside the sphere of its coverage. Only thus could chance and favor be excluded and the affairs of men governed by that serene and impartial uniformity, which is of the very essence of the idea of law. There is recognition, however, in the opinion that what in fact exists cannot approximate the ideal. Nor is the law susceptible to the reproach that it does not take into account the realities of the situation. The constitutional guarantee then is not to be given a meaning that disregards what is, what does in fact exist. To assure that the general welfare be promoted, which is the end of law, a regulatory measure may cut into the rights to liberty and property. Those adversely affected may under such circumstances invoke the equal protection clause only if they can show that the governmental act assailed, far from being inspired by the attainment of the common weal was prompted by the spirit of hostility, or at the very least, discrimination that finds no support in reason. Classification is thus not ruled out, it being sufficient to quote from the Tuason decision anew that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being different, both in the privileges conferred and the liabilities imposed. Favoritism and undue preference cannot be allowed. For the principle is that equal protection and security shall be given to every person under circumstances which, if not identical, are analogous. If law be looked upon in terms of burden or charges, those that fall within a class should be treated in the same fashion, whatever restrictions cast on some in the group equally binding on the rest.[102] Legislative bodies are allowed to classify the subjects of legislation. If the classification is reasonable, the law may operate only on some and not all of the people without violating the equal protection clause.[103] The classification must, as an indispensable requisite, not be arbitrary. To be valid, it must conform to the following requirements: 1) It must be based on substantial distinctions. 2) It must be germane to the purposes of the law. 3) It must not be limited to existing conditions only. 4) It must apply equally to all members of the class.[104] In the Courts view, there are no substantial distinctions between motels, inns, pension houses, hotels, lodging houses or other similar establishments. By definition, all are commercial establishments providing lodging and usually meals and other services for the public. No reason exists for prohibiting motels and inns but not pension houses, hotels, lodging houses or other similar establishments. The classification in the instant case is invalid as similar subjects are not similarly treated, both as to rights conferred and obligations imposed. It is arbitrary as it does not rest on substantial distinctions bearing a just and fair relation to the purpose of the Ordinance. The Court likewise cannot see the logic for prohibiting the business and operation of motels in the Ermita-Malate area but not outside of this area. A noxious establishment does not become any less noxious if located outside the area. The standard where women are used as tools for entertainment is also discriminatory as Ordinance Both men and women have an equal propensity to engage in prostitution. It is not any less grave a sin when men engage in it. And why would the assumption that there is an ongoing immoral activity apply only when women are employed and be inapposite when men are in harness? This discrimination based on gender violates equal protection as it is not substantially related to important government objectives.[105] Thus, the discrimination is invalid.

241 Failing the test of constitutionality, the Ordinance likewise failed to pass the test of consistency with prevailing laws. C. The Ordinance is repugnant to general laws; it is ultra vires The Ordinance is in contravention of the Code as the latter merely empowers local government units to regulate, and not prohibit, the establishments enumerated in Section 1 thereof. The power of the City Council to regulate by ordinances the establishment, operation, and maintenance of motels, hotels and other similar establishments is found in Section 458 (a) 4 (iv), which provides that: Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall: . . . (4) Regulate activities relative to the use of land, buildings and structures within the city in order to promote the general welfare and for said purpose shall: . . . (iv) Regulate the establishment, operation and maintenance of cafes, restaurants, beerhouses, hotels, motels, inns, pension houses, lodging houses, and other similar establishments, including tourist guides and transports . . . . While its power to regulate the establishment, operation and maintenance of any entertainment or amusement facilities, and to prohibit certain forms of amusement or entertainment is provided under Section 458 (a) 4 (vii) of the Code, which reads as follows: Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall: . . . (4) Regulate activities relative to the use of land, buildings and structures within the city in order to promote the general welfare and for said purpose shall: . . . (vii) Regulate the establishment, operation, and maintenance of any entertainment or amusement facilities, including theatrical performances, circuses, billiard pools, public dancing schools, public dance halls, sauna baths, massage parlors, and other places for entertainment or amusement; regulate such other events or activities for amusement or entertainment, particularly those which tend to disturb the community or annoy the inhabitants, or require the suspension or suppression of the same; or, prohibit certain forms of amusement or entertainment in order to protect the social and moral welfare of the community. Clearly, with respect to cafes, restaurants, beerhouses, hotels, motels, inns, pension houses, lodging houses, and other similar establishments, the only power of the City Council to legislate relative thereto is to regulate them to promote the general welfare. The Code still withholds from cities the power to suppress and prohibit altogether the establishment, operation and maintenance of such establishments. It is well to recall the rulings of the Court in Kwong Sing v. City of Manila[106] that:

242 The word regulate, as used in subsection (l), section 2444 of the Administrative Code, means and includes the power to control, to govern, and to restrain; but regulate should not be construed as synonymous with suppress or prohibit. Consequently, under the power to regulate laundries, the municipal authorities could make proper police regulations as to the mode in which the employment or business shall be exercised.[107] And in People v. Esguerra,[108] wherein the Court nullified an ordinance of the Municipality of Tacloban which prohibited the selling, giving and dispensing of liquor ratiocinating that the municipality is empowered only to regulate the same and not prohibit. The Court therein declared that: (A)s a general rule when a municipal corporation is specifically given authority or power to regulate or to license and regulate the liquor traffic, power to prohibit is impliedly withheld.[109] These doctrines still hold contrary to petitioners assertion[110] that they were modified by the Code vesting upon City Councils prohibitory powers. Similarly, the City Council exercises regulatory powers over public dancing schools, public dance halls, sauna baths, massage parlors, and other places for entertainment or amusement as found in the first clause of Section 458 (a) 4 (vii). Its powers to regulate, suppress and suspend such other events or activities for amusement or entertainment, particularly those which tend to disturb the community or annoy the inhabitants and to prohibit certain forms of amusement or entertainment in order to protect the social and moral welfare of the community are stated in the second and third clauses, respectively of the same Section. The several powers of the City Council as provided in Section 458 (a) 4 (vii) of the Code, it is pertinent to emphasize, are separated by semi-colons (;), the use of which indicates that the clauses in which these powers are set forth are independent of each other albeit closely related to justify being put together in a single enumeration or paragraph.[111] These powers, therefore, should not be confused, commingled or consolidated as to create a conglomerated and unified power of regulation, suppression and prohibition.[112] The Congress unequivocably specified the establishments and forms of amusement or entertainment subject to regulation among which are beerhouses, hotels, motels, inns, pension houses, lodging houses, and other similar establishments (Section 458 (a) 4 (iv)), public dancing schools, public dance halls, sauna baths, massage parlors, and other places for entertainment or amusement (Section 458 (a) 4 (vii)). This enumeration therefore cannot be included as among other events or activities for amusement or entertainment, particularly those which tend to disturb the community or annoy the inhabitants or certain forms of amusement or entertainment which the City Council may suspend, suppress or prohibit. The rule is that the City Council has only such powers as are expressly granted to it and those which are necessarily implied or incidental to the exercise thereof. By reason of its limited powers and the nature thereof, said powers are to be construed strictissimi juris and any doubt or ambiguity arising out of the terms used in granting said powers must be construed against the City Council.[113] Moreover, it is a general rule in statutory construction that the express mention of one person, thing, or consequence is tantamount to an express exclusion of all others.Expressio unius est exclusio alterium. This maxim is based upon the rules of logic and the natural workings of human mind. It is particularly applicable in the construction of such statutes as create new rights or remedies, impose penalties or punishments, or otherwise come under the rule of strict construction.[114] The argument that the City Council is empowered to enact the Ordinance by virtue of the general welfare clause of the Code and of Art. 3, Sec. 18 (kk) of the Revised Charter of Manila is likewise without merit. On the first point, the ruling of the Court in People v. Esguerra,[115] is instructive. It held that: The powers conferred upon a municipal council in the general welfare clause, or section 2238 of the Revised Administrative Code, refers to matters not covered by the other provisions of the same Code, and therefore it can not be applied to intoxicating liquors, for the power to regulate the selling, giving away and dispensing thereof is granted specifically by section 2242 (g) to municipal councils. To hold that, under the general power granted by section 2238, a municipal council may enact the ordinance in question, notwithstanding the provision of section 2242 (g), would be to make the latter superfluous and nugatory, because the power to prohibit, includes the power to regulate, the selling, giving away and dispensing of intoxicating liquors.

243 On the second point, it suffices to say that the Code being a later expression of the legislative will must necessarily prevail and override the earlier law, the Revised Charter of Manila. Legis posteriores priores contrarias abrogant, or later statute repeals prior ones which are repugnant thereto. As between two laws on the same subject matter, which are irreconcilably inconsistent, that which is passed later prevails, since it is the latest expression of legislative will.[116] If there is an inconsistency or repugnance between two statutes, both relating to the same subject matter, which cannot be removed by any fair and reasonable method of interpretation, it is the latest expression of the legislative will which must prevail and override the earlier.[117] Implied repeals are those which take place when a subsequently enacted law contains provisions contrary to those of an existing law but no provisions expressly repealing them. Such repeals have been divided into two general classes: those which occur where an act is so inconsistent or irreconcilable with an existing prior act that only one of the two can remain in force and those which occur when an act covers the whole subject of an earlier act and is intended to be a substitute therefor. The validity of such a repeal is sustained on the ground that the latest expression of the legislative will should prevail.[118] In addition, Section 534(f) of the Code states that All general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly. Thus, submitting to petitioners interpretation that the Revised Charter of Manila empowers the City Council to prohibit motels, that portion of the Charter stating such must be considered repealed by the Code as it is at variance with the latters provisions granting the City Council mere regulatory powers. It is well to point out that petitioners also cannot seek cover under the general welfare clause authorizing the abatement of nuisances without judicial proceedings. That tenet applies to a nuisance per se, or one which affects the immediate safety of persons and property and may be summarily abated under the undefined law of necessity. It can not be said that motels are injurious to the rights of property, health or comfort of the community. It is a legitimate business. If it be a nuisance per accidens it may be so proven in a hearing conducted for that purpose. A motel is not per se a nuisance warranting its summary abatement without judicial intervention.[119] Notably, the City Council was conferred powers to prevent and prohibit certain activities and establishments in another section of the Code which is reproduced as follows: Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall: (1) Approve ordinances and pass resolutions necessary for an efficient and effective city government, and in this connection, shall: . . . (v) Enact ordinances intended to prevent, suppress and impose appropriate penalties for habitual drunkenness in public places, vagrancy, mendicancy, prostitution, establishment and maintenance of houses of ill repute, gambling and other prohibited games of chance, fraudulent devices and ways to obtain money or property, drug addiction, maintenance of drug dens, drug pushing, juvenile delinquency, the printing, distribution or exhibition of obscene or pornographic materials or publications, and such other activities inimical to the welfare and morals of the inhabitants of the city; . . . If it were the intention of Congress to confer upon the City Council the power to prohibit the establishments enumerated in Section 1 of the Ordinance, it would have so declared in uncertain terms by adding them to the list of the matters it may prohibit under the above-quoted Section. The Ordinance now vainly attempts to lump these establishments with houses of ill-repute and expand the City Councils powers in the second and third clauses of Section 458 (a) 4 (vii) of the Code in an effort to overreach its prohibitory powers. It is evident that these establishments may only be regulated in their establishment, operation and maintenance.

244 It is important to distinguish the punishable activities from the establishments themselves. That these establishments are recognized legitimate enterprises can be gleaned from another Section of the Code. Section 131 under the Title on Local Government Taxation expressly mentioned proprietors or operators of massage clinics, sauna, Turkish and Swedish baths, hotels, motels and lodging houses as among the contractors defined in paragraph (h) thereof. The same Section also defined amusement as a pleasurable diversion and entertainment, synonymous to relaxation, avocation, pastime or fun; and amusement places to include theaters, cinemas, concert halls, circuses and other places of amusement where one seeks admission to entertain oneself by seeing or viewing the show or performances. Thus, it can be inferred that the Code considers these establishments as legitimate enterprises and activities. It is well to recall the maxim reddendo singula singulis which means that words in different parts of a statute must be referred to their appropriate connection, giving to each in its place, its proper force and effect, and, if possible, rendering none of them useless or superfluous, even if strict grammatical construction demands otherwise. Likewise, where words under consideration appear in different sections or are widely dispersed throughout an act the same principle applies.[120] Not only does the Ordinance contravene the Code, it likewise runs counter to the provisions of P.D. 499. As correctly argued by MTDC, the statute had already converted the residential Ermita-Malate area into a commercial area. The decree allowed the establishment and operation of all kinds of commercial establishments except warehouse or open storage depot, dump or yard, motor repair shop, gasoline service station, light industry with any machinery or funeral establishment. The rule is that for an ordinance to be valid and to have force and effect, it must not only be within the powers of the council to enact but the same must not be in conflict with or repugnant to the general law.[121] As succinctly illustrated in Solicitor General v. Metropolitan Manila Authority:[122] The requirement that the enactment must not violate existing law explains itself. Local political subdivisions are able to legislate only by virtue of a valid delegation of legislative power from the national legislature (except only that the power to create their own sources of revenue and to levy taxes is conferred by the Constitution itself). They are mere agents vested with what is called the power of subordinate legislation. As delegates of the Congress, the local government units cannot contravene but must obey at all times the will of their principal. In the case before us, the enactment in question, which are merely local in origin cannot prevail against the decree, which has the force and effect of a statute.[123] Petitioners contend that the Ordinance enjoys the presumption of validity. While this may be the rule, it has already been held that although the presumption is always in favor of the validity or reasonableness of the ordinance, such presumption must nevertheless be set aside when the invalidity or unreasonableness appears on the face of the ordinance itself or is established by proper evidence. The exercise of police power by the local government is valid unless it contravenes the fundamental law of the land, or an act of the legislature, or unless it is against public policy or is unreasonable, oppressive, partial, discriminating or in derogation of a common right.[124] Conclusion All considered, the Ordinance invades fundamental personal and property rights and impairs personal privileges. It is constitutionally infirm. The Ordinance contravenes statutes; it is discriminatory and unreasonable in its operation; it is not sufficiently detailed and explicit that abuses may attend the enforcement of its sanctions. And not to be forgotten, the City Council under the Code had no power to enact the Ordinance and is therefore ultra vires, null and void. Concededly, the challenged Ordinance was enacted with the best of motives and shares the concern of the public for the cleansing of the Ermita-Malate area of its social sins. Police power legislation of such character deserves the full endorsement of the judiciary it. But inspite of its virtuous aims, the enactment of the Ordinance has no statutory or constitutional authority to stand on. Local legislative bodies, in this case, the City Council, cannot prohibit the operation of the enumerated establishments under Section 1 thereof or order their transfer or conversion without infringing the constitutional guarantees of due process and equal protection of laws WHEREFORE, the Petition is hereby DENIED and the decision of the Regional Trial Court declaring the Ordinance void is AFFIRMED. Costs against petitioners.SO ORDERED

245 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 122846 January 20, 2009

WHITE LIGHT CORPORATION, TITANIUM CORPORATION and STA. MESA TOURIST & DEVELOPMENT CORPORATION, Petitioners, vs. CITY OF MANILA, represented by DE CASTRO, MAYOR ALFREDO S. LIM, Respondent. DECISION Tinga, J.: With another city ordinance of Manila also principally involving the tourist district as subject, the Court is confronted anew with the incessant clash between government power and individual liberty in tandem with the archetypal tension between law and morality. In City of Manila v. Laguio, Jr.,1 the Court affirmed the nullification of a city ordinance barring the operation of motels and inns, among other establishments, within the Ermita-Malate area. The petition at bar assails a similarly-motivated city ordinance that prohibits those same establishments from offering short-time admission, as well as pro-rated or "wash up" rates for such abbreviated stays. Our earlier decision tested the city ordinance against our sacred constitutional rights to liberty, due process and equal protection of law. The same parameters apply to the present petition. This Petition2 under Rule 45 of the Revised Rules on Civil Procedure, which seeks the reversal of the Decision3 in C.A.-G.R. S.P. No. 33316 of the Court of Appeals, challenges the validity of Manila City Ordinance No. 7774 entitled, "An Ordinance Prohibiting Short-Time Admission, Short-Time Admission Rates, and Wash-Up Rate Schemes in Hotels, Motels, Inns, Lodging Houses, Pension Houses, and Similar Establishments in the City of Manila" (the Ordinance). I. The facts are as follows: On December 3, 1992, City Mayor Alfredo S. Lim (Mayor Lim) signed into law the Ordinance.4 The Ordinance is reproduced in full, hereunder: SECTION 1. Declaration of Policy. It is hereby the declared policy of the City Government to protect the best interest, health and welfare, and the morality of its constituents in general and the youth in particular. SEC. 2. Title. This ordinance shall be known as "An Ordinance" prohibiting short time admission in hotels, motels, lodging houses, pension houses and similar establishments in the City of Manila. SEC. 3. Pursuant to the above policy, short-time admission and rate [sic], wash-up rate or other similarly concocted terms, are hereby prohibited in hotels, motels, inns, lodging houses, pension houses and similar establishments in the City of Manila. SEC. 4. Definition of Term[s]. Short-time admission shall mean admittance and charging of room rate for less than twelve (12) hours at any given time or the renting out of rooms more than twice a day or any other term that may be concocted by owners or managers of said establishments but would mean the same or would bear the same meaning.

246 SEC. 5. Penalty Clause. Any person or corporation who shall violate any provision of this ordinance shall upon conviction thereof be punished by a fine of Five Thousand (P5,000.00) Pesos or imprisonment for a period of not exceeding one (1) year or both such fine and imprisonment at the discretion of the court; Provided, That in case of [a] juridical person, the president, the manager, or the persons in charge of the operation thereof shall be liable: Provided, further, That in case of subsequent conviction for the same offense, the business license of the guilty party shall automatically be cancelled. SEC. 6. Repealing Clause. Any or all provisions of City ordinances not consistent with or contrary to this measure or any portion hereof are hereby deemed repealed. SEC. 7. Effectivity. This ordinance shall take effect immediately upon approval. Enacted by the city Council of Manila at its regular session today, November 10, 1992. Approved by His Honor, the Mayor on December 3, 1992. On December 15, 1992, the Malate Tourist and Development Corporation (MTDC) filed a complaint for declaratory relief with prayer for a writ of preliminary injunction and/or temporary restraining order ( TRO)5 with the Regional Trial Court (RTC) of Manila, Branch 9 impleading as defendant, herein respondent City of Manila (the City) represented by Mayor Lim.6 MTDC prayed that the Ordinance, insofar as it includes motels and inns as among its prohibited establishments, be declared invalid and unconstitutional. MTDC claimed that as owner and operator of the Victoria Court in Malate, Manila it was authorized by Presidential Decree (P.D.) No. 259 to admit customers on a short time basis as well as to charge customers wash up rates for stays of only three hours. On December 21, 1992, petitioners White Light Corporation (WLC), Titanium Corporation (TC) and Sta. Mesa Tourist and Development Corporation (STDC) filed a motion to intervene and to admit attached complaint-in-intervention7 on the ground that the Ordinance directly affects their business interests as operators of drive-in-hotels and motels in Manila.8 The three companies are components of the Anito Group of Companies which owns and operates several hotels and motels in Metro Manila.9 On December 23, 1992, the RTC granted the motion to intervene.10 The RTC also notified the Solicitor General of the proceedings pursuant to then Rule 64, Section 4 of the Rules of Court. On the same date, MTDC moved to withdraw as plaintiff.11 On December 28, 1992, the RTC granted MTDC's motion to withdraw.12 The RTC issued a TRO on January 14, 1993, directing the City to cease and desist from enforcing the Ordinance.13 The City filed an Answer dated January 22, 1993 alleging that the Ordinance is a legitimate exercise of police power.14 On February 8, 1993, the RTC issued a writ of preliminary injunction ordering the city to desist from the enforcement of the Ordinance.15 A month later, on March 8, 1993, the Solicitor General filed his Comment arguing that the Ordinance is constitutional. During the pre-trial conference, the WLC, TC and STDC agreed to submit the case for decision without trial as the case involved a purely legal question.16 On October 20, 1993, the RTC rendered a decision declaring the Ordinance null and void. The dispositive portion of the decision reads: WHEREFORE, in view of all the foregoing, [O]rdinance No. 7774 of the City of Manila is hereby declared null and void. Accordingly, the preliminary injunction heretofor issued is hereby made permanent. SO ORDERED.17 The RTC noted that the ordinance "strikes at the personal liberty of the individual guaranteed and jealously guarded by the Constitution."18 Reference was made to the provisions of the Constitution encouraging private enterprises and the incentive to needed investment, as well as the right to operate economic enterprises. Finally, from the observation that the illicit relationships the Ordinance sought to

247 dissuade could nonetheless be consummated by simply paying for a 12-hour stay, the RTC likened the law to the ordinance annulled in Ynot v. Intermediate Appellate Court,19 where the legitimate purpose of preventing indiscriminate slaughter of carabaos was sought to be effected through an inter-province ban on the transport of carabaos and carabeef. The City later filed a petition for review on certiorari with the Supreme Court.20 The petition was docketed as G.R. No. 112471. However in a resolution dated January 26, 1994, the Court treated the petition as a petition forcertiorari and referred the petition to the Court of Appeals.21 Before the Court of Appeals, the City asserted that the Ordinance is a valid exercise of police power pursuant to Section 458 (4)(iv) of the Local Government Code which confers on cities, among other local government units, the power: [To] regulate the establishment, operation and maintenance of cafes, restaurants, beerhouses, hotels, motels, inns, pension houses, lodging houses and other similar establishments, including tourist guides and transports.22 The Ordinance, it is argued, is also a valid exercise of the power of the City under Article III, Section 18(kk) of the Revised Manila Charter, thus: "to enact all ordinances it may deem necessary and proper for the sanitation and safety, the furtherance of the prosperity and the promotion of the morality, peace, good order, comfort, convenience and general welfare of the city and its inhabitants, and such others as be necessary to carry into effect and discharge the powers and duties conferred by this Chapter; and to fix penalties for the violation of ordinances which shall not exceed two hundred pesos fine or six months imprisonment, or both such fine and imprisonment for a single offense.23 Petitioners argued that the Ordinance is unconstitutional and void since it violates the right to privacy and the freedom of movement; it is an invalid exercise of police power; and it is an unreasonable and oppressive interference in their business. The Court of Appeals reversed the decision of the RTC and affirmed the constitutionality of the Ordinance.24 First, it held that the Ordinance did not violate the right to privacy or the freedom of movement, as it only penalizes the owners or operators of establishments that admit individuals for short time stays. Second, the virtually limitless reach of police power is only constrained by having a lawful object obtained through a lawful method. The lawful objective of the Ordinance is satisfied since it aims to curb immoral activities. There is a lawful method since the establishments are still allowed to operate. Third, the adverse effect on the establishments is justified by the well-being of its constituents in general. Finally, as held in Ermita-Malate Motel Operators Association v. City Mayor of Manila, liberty is regulated by law. TC, WLC and STDC come to this Court via petition for review on certiorari.25 In their petition and Memorandum, petitioners in essence repeat the assertions they made before the Court of Appeals. They contend that the assailed Ordinance is an invalid exercise of police power. II. We must address the threshold issue of petitioners standing. Petitioners allege that as owners of establishments offering "wash-up" rates, their business is being unlawfully interfered with by the Ordinance. However, petitioners also allege that the equal protection rights of their clients are also being interfered with. Thus, the crux of the matter is whether or not these establishments have the requisite standing to plead for protection of their patrons' equal protection rights. Standing or locus standi is the ability of a party to demonstrate to the court sufficient connection to and harm from the law or action challenged to support that party's participation in the case. More importantly, the doctrine of standing is built on the principle of separation of powers,26 sparing as it does unnecessary interference or invalidation by the judicial branch of the actions rendered by its coequal branches of government.

248 The requirement of standing is a core component of the judicial system derived directly from the Constitution.27The constitutional component of standing doctrine incorporates concepts which concededly are not susceptible of precise definition.28 In this jurisdiction, the extancy of "a direct and personal interest" presents the most obvious cause, as well as the standard test for a petitioner's standing.29 In a similar vein, the United States Supreme Court reviewed and elaborated on the meaning of the three constitutional standing requirements of injury, causation, and redressability in Allen v. Wright.30 Nonetheless, the general rules on standing admit of several exceptions such as the overbreadth doctrine, taxpayer suits, third party standing and, especially in the Philippines, the doctrine of transcendental importance.31 For this particular set of facts, the concept of third party standing as an exception and the overbreadth doctrine are appropriate. In Powers v. Ohio,32 the United States Supreme Court wrote that: "We have recognized the right of litigants to bring actions on behalf of third parties, provided three important criteria are satisfied: the litigant must have suffered an injury-in-fact, thus giving him or her a "sufficiently concrete interest" in the outcome of the issue in dispute; the litigant must have a close relation to the third party; and there must exist some hindrance to the third party's ability to protect his or her own interests."33 Herein, it is clear that the business interests of the petitioners are likewise injured by the Ordinance. They rely on the patronage of their customers for their continued viability which appears to be threatened by the enforcement of the Ordinance. The relative silence in constitutional litigation of such special interest groups in our nation such as the American Civil Liberties Union in the United States may also be construed as a hindrance for customers to bring suit.34 American jurisprudence is replete with examples where parties-in-interest were allowed standing to advocate or invoke the fundamental due process or equal protection claims of other persons or classes of persons injured by state action. In Griswold v. Connecticut,35 the United States Supreme Court held that physicians had standing to challenge a reproductive health statute that would penalize them as accessories as well as to plead the constitutional protections available to their patients. The Court held that: "The rights of husband and wife, pressed here, are likely to be diluted or adversely affected unless those rights are considered in a suit involving those who have this kind of confidential relation to them."36 An even more analogous example may be found in Craig v. Boren,37 wherein the United States Supreme Court held that a licensed beverage vendor has standing to raise the equal protection claim of a male customer challenging a statutory scheme prohibiting the sale of beer to males under the age of 21 and to females under the age of 18. The United States High Court explained that the vendors had standing "by acting as advocates of the rights of third parties who seek access to their market or function."38 Assuming arguendo that petitioners do not have a relationship with their patrons for the former to assert the rights of the latter, the overbreadth doctrine comes into play. In overbreadth analysis, challengers to government actionare in effect permitted to raise the rights of third parties. Generally applied to statutes infringing on the freedom of speech, the overbreadth doctrine applies when a statute needlessly restrains even constitutionally guaranteed rights.39 In this case, the petitioners claim that the Ordinance makes a sweeping intrusion into the right to liberty of their clients. We can see that based on the allegations in the petition, the Ordinance suffers from overbreadth. We thus recognize that the petitioners have a right to assert the constitutional rights of their clients to patronize their establishments for a "wash-rate" time frame. III. To students of jurisprudence, the facts of this case will recall to mind not only the recent City of Manila ruling, but our 1967 decision in Ermita-Malate Hotel and Motel Operations Association, Inc., v. Hon. City Mayor of Manila.40Ermita-Malate concerned the City ordinance requiring patrons to fill up a prescribed form stating personal information such as name, gender, nationality, age, address and occupation before they could be admitted to a motel, hotel or lodging house. This earlier ordinance was

249 precisely enacted to minimize certain practices deemed harmful to public morals. A purpose similar to the annulled ordinance in City of Manila which sought a blanket ban on motels, inns and similar establishments in the Ermita-Malate area. However, the constitutionality of the ordinance in ErmitaMalate was sustained by the Court. The common thread that runs through those decisions and the case at bar goes beyond the singularity of the localities covered under the respective ordinances. All three ordinances were enacted with a view of regulating public morals including particular illicit activity in transient lodging establishments. This could be described as the middle case, wherein there is no wholesale ban on motels and hotels but the services offered by these establishments have been severely restricted. At its core, this is another case about the extent to which the State can intrude into and regulate the lives of its citizens. The test of a valid ordinance is well established. A long line of decisions including City of Manila has held that for an ordinance to be valid, it must not only be within the corporate powers of the local government unit to enact and pass according to the procedure prescribed by law, it must also conform to the following substantive requirements: (1) must not contravene the Constitution or any statute; (2) must not be unfair or oppressive; (3) must not be partial or discriminatory; (4) must not prohibit but may regulate trade; (5) must be general and consistent with public policy; and (6) must not be unreasonable.41 The Ordinance prohibits two specific and distinct business practices, namely wash rate admissions and renting out a room more than twice a day. The ban is evidently sought to be rooted in the police power as conferred on local government units by the Local Government Code through such implements as the general welfare clause. A. Police power, while incapable of an exact definition, has been purposely veiled in general terms to underscore its comprehensiveness to meet all exigencies and provide enough room for an efficient and flexible response as the conditions warrant.42 Police power is based upon the concept of necessity of the State and its corresponding right to protect itself and its people.43 Police power has been used as justification for numerous and varied actions by the State. These range from the regulation of dance halls,44 movie theaters,45 gas stations46 and cockpits.47 The awesome scope of police power is best demonstrated by the fact that in its hundred or so years of presence in our nations legal system, its use has rarely been denied. The apparent goal of the Ordinance is to minimize if not eliminate the use of the covered establishments for illicit sex, prostitution, drug use and alike. These goals, by themselves, are unimpeachable and certainly fall within the ambit of the police power of the State. Yet the desirability of these ends do not sanctify any and all means for their achievement. Those means must align with the Constitution, and our emerging sophisticated analysis of its guarantees to the people. The Bill of Rights stands as a rebuke to the seductive theory of Macchiavelli, and, sometimes even, the political majorities animated by his cynicism. Even as we design the precedents that establish the framework for analysis of due process or equal protection questions, the courts are naturally inhibited by a due deference to the co-equal branches of government as they exercise their political functions. But when we are compelled to nullify executive or legislative actions, yet another form of caution emerges. If the Court were animated by the same passing fancies or turbulent emotions that motivate many political decisions, judicial integrity is compromised by any perception that the judiciary is merely the third political branch of government. We derive our respect and good standing in the annals of history by acting as judicious and neutral arbiters of the rule of law, and there is no surer way to that end than through the development of rigorous and sophisticated legal standards through which the courts analyze the most fundamental and far-reaching constitutional questions of the day. B.

250 The primary constitutional question that confronts us is one of due process, as guaranteed under Section 1, Article III of the Constitution. Due process evades a precise definition.48 The purpose of the guaranty is to prevent arbitrary governmental encroachment against the life, liberty and property of individuals. The due process guaranty serves as a protection against arbitrary regulation or seizure. Even corporations and partnerships are protected by the guaranty insofar as their property is concerned. The due process guaranty has traditionally been interpreted as imposing two related but distinct restrictions on government, "procedural due process" and "substantive due process." Procedural due process refers to the procedures that the government must follow before it deprives a person of life, liberty, or property.49 Procedural due process concerns itself with government action adhering to the established process when it makes an intrusion into the private sphere. Examples range from the form of notice given to the level of formality of a hearing. If due process were confined solely to its procedural aspects, there would arise absurd situation of arbitrary government action, provided the proper formalities are followed. Substantive due process completes the protection envisioned by the due process clause. It inquires whether the government has sufficient justification for depriving a person of life, liberty, or property.50 The question of substantive due process, moreso than most other fields of law, has reflected dynamism in progressive legal thought tied with the expanded acceptance of fundamental freedoms. Police power, traditionally awesome as it may be, is now confronted with a more rigorous level of analysis before it can be upheld. The vitality though of constitutional due process has not been predicated on the frequency with which it has been utilized to achieve a liberal result for, after all, the libertarian ends should sometimes yield to the prerogatives of the State. Instead, the due process clause has acquired potency because of the sophisticated methodology that has emerged to determine the proper metes and bounds for its application. C. The general test of the validity of an ordinance on substantive due process grounds is best tested when assessed with the evolved footnote 4 test laid down by the U.S. Supreme Court in U.S. v. Carolene Products.51 Footnote 4 of the Carolene Products case acknowledged that the judiciary would defer to the legislature unless there is a discrimination against a "discrete and insular" minority or infringement of a "fundamental right."52 Consequently, two standards of judicial review were established: strict scrutiny for laws dealing with freedom of the mind or restricting the political process, and the rational basis standard of review for economic legislation. A third standard, denominated as heightened or immediate scrutiny, was later adopted by the U.S. Supreme Court for evaluating classifications based on gender53 and legitimacy.54 Immediate scrutiny was adopted by the U.S. Supreme Court in Craig,55 after the Court declined to do so in Reed v. Reed.56 While the test may have first been articulated in equal protection analysis, it has in the United States since been applied in all substantive due process cases as well. We ourselves have often applied the rational basis test mainly in analysis of equal protection challenges.57 Using the rational basis examination, laws or ordinances are upheld if they rationally further a legitimate governmental interest.58 Under intermediate review, governmental interest is extensively examined and the availability of less restrictive measures is considered.59 Applying strict scrutiny, the focus is on the presence of compelling, rather than substantial, governmental interest and on the absence of less restrictive means for achieving that interest. In terms of judicial review of statutes or ordinances, strict scrutiny refers to the standard for determining the quality and the amount of governmental interest brought to justify the regulation of fundamental freedoms.60 Strict scrutiny is used today to test the validity of laws dealing with the regulation of speech, gender, or race as well as other fundamental rights as expansion from its earlier applications to equal protection.61 The United States Supreme Court has expanded the scope of strict scrutiny to protect fundamental rights such as suffrage,62 judicial access63 and interstate travel.64

251 If we were to take the myopic view that an Ordinance should be analyzed strictly as to its effect only on the petitioners at bar, then it would seem that the only restraint imposed by the law which we are capacitated to act upon is the injury to property sustained by the petitioners, an injury that would warrant the application of the most deferential standard the rational basis test. Yet as earlier stated, we recognize the capacity of the petitioners to invoke as well the constitutional rights of their patrons those persons who would be deprived of availing short time access or wash-up rates to the lodging establishments in question. Viewed cynically, one might say that the infringed rights of these customers were are trivial since they seem shorn of political consequence. Concededly, these are not the sort of cherished rights that, when proscribed, would impel the people to tear up their cedulas. Still, the Bill of Rights does not shelter gravitas alone. Indeed, it is those "trivial" yet fundamental freedoms which the people reflexively exercise any day without the impairing awareness of their constitutional consequence that accurately reflect the degree of liberty enjoyed by the people. Liberty, as integrally incorporated as a fundamental right in the Constitution, is not a Ten Commandments-style enumeration of what may or what may not be done; but rather an atmosphere of freedom where the people do not feel labored under a Big Brother presence as they interact with each other, their society and nature, in a manner innately understood by them as inherent, without doing harm or injury to others. D. The rights at stake herein fall within the same fundamental rights to liberty which we upheld in City of Manila v. Hon. Laguio, Jr. We expounded on that most primordial of rights, thus: Liberty as guaranteed by the Constitution was defined by Justice Malcolm to include "the right to exist and the right to be free from arbitrary restraint or servitude. The term cannot be dwarfed into mere freedom from physical restraint of the person of the citizen, but is deemed to embrace the right of man to enjoy the facilities with which he has been endowed by his Creator, subject only to such restraint as are necessary for the common welfare."[65] In accordance with this case, the rights of the citizen to be free to use his faculties in all lawful ways; to live and work where he will; to earn his livelihood by any lawful calling; and to pursue any avocation are all deemed embraced in the concept of liberty.[66] The U.S. Supreme Court in the case of Roth v. Board of Regents, sought to clarify the meaning of "liberty." It said: While the Court has not attempted to define with exactness the liberty . . . guaranteed [by the Fifth and Fourteenth Amendments], the term denotes not merely freedom from bodily restraint but also the right of the individual to contract, to engage in any of the common occupations of life, to acquire useful knowledge, to marry, establish a home and bring up children, to worship God according to the dictates of his own conscience, and generally to enjoy those privileges long recognized . . . as essential to the orderly pursuit of happiness by free men. In a Constitution for a free people, there can be no doubt that the meaning of "liberty" must be broad indeed.67[Citations omitted] It cannot be denied that the primary animus behind the ordinance is the curtailment of sexual behavior. The City asserts before this Court that the subject establishments "have gained notoriety as venue of prostitution, adultery and fornications in Manila since they provide the necessary atmosphere for clandestine entry, presence and exit and thus became the ideal haven for prostitutes and thrillseekers."68 Whether or not this depiction of a mise-en-scene of vice is accurate, it cannot be denied that legitimate sexual behavior among willing married or consenting single adults which is constitutionally protected69 will be curtailed as well, as it was in the City of Manila case. Our holding therein retains significance for our purposes: The concept of liberty compels respect for the individual whose claim to privacy and interference demands respect. As the case of Morfe v. Mutuc, borrowing the words of Laski, so very aptly stated: Man is one among many, obstinately refusing reduction to unity. His separateness, his isolation, are indefeasible; indeed, they are so fundamental that they are the basis on which his civic obligations are built. He cannot abandon the consequences of his isolation, which are, broadly speaking, that his

252 experience is private, and the will built out of that experience personal to himself. If he surrenders his will to others, he surrenders himself. If his will is set by the will of others, he ceases to be a master of himself. I cannot believe that a man no longer a master of himself is in any real sense free. Indeed, the right to privacy as a constitutional right was recognized in Morfe, the invasion of which should be justified by a compelling state interest. Morfe accorded recognition to the right to privacy independently of its identification with liberty; in itself it is fully deserving of constitutional protection. Governmental powers should stop short of certain intrusions into the personal life of the citizen.70 We cannot discount other legitimate activities which the Ordinance would proscribe or impair. There are very legitimate uses for a wash rate or renting the room out for more than twice a day. Entire families are known to choose pass the time in a motel or hotel whilst the power is momentarily out in their homes. In transit passengers who wish to wash up and rest between trips have a legitimate purpose for abbreviated stays in motels or hotels. Indeed any person or groups of persons in need of comfortable private spaces for a span of a few hours with purposes other than having sex or using illegal drugs can legitimately look to staying in a motel or hotel as a convenient alternative. E. That the Ordinance prevents the lawful uses of a wash rate depriving patrons of a product and the petitioners of lucrative business ties in with another constitutional requisite for the legitimacy of the Ordinance as a police power measure. It must appear that the interests of the public generally, as distinguished from those of a particular class, require an interference with private rights and the means must be reasonably necessary for the accomplishment of the purpose and not unduly oppressive of private rights.71 It must also be evident that no other alternative for the accomplishment of the purpose less intrusive of private rights can work. More importantly, a reasonable relation must exist between the purposes of the measure and the means employed for its accomplishment, for even under the guise of protecting the public interest, personal rights and those pertaining to private property will not be permitted to be arbitrarily invaded.72 Lacking a concurrence of these requisites, the police measure shall be struck down as an arbitrary intrusion into private rights. As held in Morfe v. Mutuc, the exercise of police power is subject to judicial review when life, liberty or property is affected.73 However, this is not in any way meant to take it away from the vastness of State police power whose exercise enjoys the presumption of validity.74 Similar to the Comelec resolution requiring newspapers to donate advertising space to candidates, this Ordinance is a blunt and heavy instrument.75 The Ordinance makes no distinction between places frequented by patrons engaged in illicit activities and patrons engaged in legitimate actions. Thus it prevents legitimate use of places where illicit activities are rare or even unheard of. A plain reading of section 3 of the Ordinance shows it makes no classification of places of lodging, thus deems them all susceptible to illicit patronage and subject them without exception to the unjustified prohibition. The Court has professed its deep sentiment and tenderness of the Ermita-Malate area, its longtime home,76 and it is skeptical of those who wish to depict our capital city the Pearl of the Orient as a modern-day Sodom or Gomorrah for the Third World set. Those still steeped in Nick Joaquin-dreams of the grandeur of Old Manila will have to accept that Manila like all evolving big cities, will have its problems. Urban decay is a fact of mega cities such as Manila, and vice is a common problem confronted by the modern metropolis wherever in the world. The solution to such perceived decay is not to prevent legitimate businesses from offering a legitimate product. Rather, cities revive themselves by offering incentives for new businesses to sprout up thus attracting the dynamism of individuals that would bring a new grandeur to Manila. The behavior which the Ordinance seeks to curtail is in fact already prohibited and could in fact be diminished simply by applying existing laws. Less intrusive measures such as curbing the proliferation of prostitutes and drug dealers through active police work would be more effective in easing the situation. So would the strict enforcement of existing laws and regulations penalizing prostitution and drug use. These measures would have minimal intrusion on the businesses of the petitioners and other legitimate merchants. Further, it is apparent that the Ordinance can easily be circumvented by merely paying the

253 whole day rate without any hindrance to those engaged in illicit activities. Moreover, drug dealers and prostitutes can in fact collect "wash rates" from their clientele by charging their customers a portion of the rent for motel rooms and even apartments. IV. We reiterate that individual rights may be adversely affected only to the extent that may fairly be required by the legitimate demands of public interest or public welfare. The State is a leviathan that must be restrained from needlessly intruding into the lives of its citizens. However well-intentioned the Ordinance may be, it is in effect an arbitrary and whimsical intrusion into the rights of the establishments as well as their patrons. The Ordinance needlessly restrains the operation of the businesses of the petitioners as well as restricting the rights of their patrons without sufficient justification. The Ordinance rashly equates wash rates and renting out a room more than twice a day with immorality without accommodating innocuous intentions. The promotion of public welfare and a sense of morality among citizens deserves the full endorsement of the judiciary provided that such measures do not trample rights this Court is sworn to protect.77 The notion that the promotion of public morality is a function of the State is as old as Aristotle.78 The advancement of moral relativism as a school of philosophy does not de-legitimize the role of morality in law, even if it may foster wider debate on which particular behavior to penalize. It is conceivable that a society with relatively little shared morality among its citizens could be functional so long as the pursuit of sharply variant moral perspectives yields an adequate accommodation of different interests.79 To be candid about it, the oft-quoted American maxim that "you cannot legislate morality" is ultimately illegitimate as a matter of law, since as explained by Calabresi, that phrase is more accurately interpreted as meaning that efforts to legislate morality will fail if they are widely at variance with public attitudes about right and wrong.80 Our penal laws, for one, are founded on age-old moral traditions, and as long as there are widely accepted distinctions between right and wrong, they will remain so oriented. Yet the continuing progression of the human story has seen not only the acceptance of the right-wrong distinction, but also the advent of fundamental liberties as the key to the enjoyment of life to the fullest. Our democracy is distinguished from non-free societies not with any more extensive elaboration on our part of what is moral and immoral, but from our recognition that the individual liberty to make the choices in our lives is innate, and protected by the State. Independent and fair-minded judges themselves are under a moral duty to uphold the Constitution as the embodiment of the rule of law, by reason of their expression of consent to do so when they take the oath of office, and because they are entrusted by the people to uphold the law.81 Even as the implementation of moral norms remains an indispensable complement to governance, that prerogative is hardly absolute, especially in the face of the norms of due process of liberty. And while the tension may often be left to the courts to relieve, it is possible for the government to avoid the constitutional conflict by employing more judicious, less drastic means to promote morality. WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals is REVERSED, and the Decision of the Regional Trial Court of Manila, Branch 9, is REINSTATED. Ordinance No. 7774 is hereby declared UNCONSTITUTIONAL. No pronouncement as to costs. SO ORDERED.

254 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 74457 March 20, 1987 RESTITUTO YNOT, petitioner, vs. INTERMEDIATE APPELLATE COURT, THE STATION COMMANDER, INTEGRATED NATIONAL POLICE, BAROTAC NUEVO, ILOILO and THE REGIONAL DIRECTOR, BUREAU OF ANIMAL INDUSTRY, REGION IV, ILOILO CITY, respondents. Ramon A. Gonzales for petitioner.

CRUZ, J.: The essence of due process is distilled in the immortal cry of Themistocles to Alcibiades "Strike but hear me first!" It is this cry that the petitioner in effect repeats here as he challenges the constitutionality of Executive Order No. 626-A. The said executive order reads in full as follows: WHEREAS, the President has given orders prohibiting the interprovincial movement of carabaos and the slaughtering of carabaos not complying with the requirements of Executive Order No. 626 particularly with respect to age; WHEREAS, it has been observed that despite such orders the violators still manage to circumvent the prohibition against inter-provincial movement of carabaos by transporting carabeef instead; and WHEREAS, in order to achieve the purposes and objectives of Executive Order No. 626 and the prohibition against interprovincial movement of carabaos, it is necessary to strengthen the said Executive Order and provide for the disposition of the carabaos and carabeef subject of the violation; NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me by the Constitution, do hereby promulgate the following: SECTION 1. Executive Order No. 626 is hereby amended such that henceforth, no carabao regardless of age, sex, physical condition or purpose and no carabeef shall be transported from one province to another. The carabao or carabeef transported in violation of this Executive Order as amended shall be subject to confiscation and forfeiture by the government, to be distributed to charitable institutions and other similar institutions as the Chairman of the National Meat Inspection Commission may ay see fit, in the case of carabeef, and to deserving farmers through dispersal as the Director of Animal Industry may see fit, in the case of carabaos. SECTION 2. This Executive Order shall take effect immediately. Done in the City of Manila, this 25th day of October, in the year of Our Lord, nineteen hundred and eighty. (SGD.) FERDINAND E. MARCOS

255 Preside nt Republic of the Philippines The petitioner had transported six carabaos in a pump boat from Masbate to Iloilo on January 13, 1984, when they were confiscated by the police station commander of Barotac Nuevo, Iloilo, for violation of the above measure. 1The petitioner sued for recovery, and the Regional Trial Court of Iloilo City issued a writ of replevin upon his filing of a supersedeas bond of P12,000.00. After considering the merits of the case, the court sustained the confiscation of the carabaos and, since they could no longer be produced, ordered the confiscation of the bond. The court also declined to rule on the constitutionality of the executive order, as raise by the petitioner, for lack of authority and also for its presumed validity. 2 The petitioner appealed the decision to the Intermediate Appellate Court,* 3 which upheld the trial court, ** and he has now come before us in this petition for review on certiorari. The thrust of his petition is that the executive order is unconstitutional insofar as it authorizes outright confiscation of the carabao or carabeef being transported across provincial boundaries. His claim is that the penalty is invalid because it is imposed without according the owner a right to be heard before a competent and impartial court as guaranteed by due process. He complains that the measure should not have been presumed, and so sustained, as constitutional. There is also a challenge to the improper exercise of the legislative power by the former President under Amendment No. 6 of the 1973 Constitution. 4 While also involving the same executive order, the case of Pesigan v. Angeles 5 is not applicable here. The question raised there was the necessity of the previous publication of the measure in the Official Gazette before it could be considered enforceable. We imposed the requirement then on the basis of due process of law. In doing so, however, this Court did not, as contended by the Solicitor General, impliedly affirm the constitutionality of Executive Order No. 626-A. That is an entirely different matter. This Court has declared that while lower courts should observe a becoming modesty in examining constitutional questions, they are nonetheless not prevented from resolving the same whenever warranted, subject only to review by the highest tribunal. 6 We have jurisdiction under the Constitution to "review, revise, reverse, modify or affirm on appeal or certiorari, as the law or rules of court may provide," final judgments and orders of lower courts in, among others, all cases involving the constitutionality of certain measures. 7 This simply means that the resolution of such cases may be made in the first instance by these lower courts. And while it is true that laws are presumed to be constitutional, that presumption is not by any means conclusive and in fact may be rebutted. Indeed, if there be a clear showing of their invalidity, and of the need to declare them so, then "will be the time to make the hammer fall, and heavily," 8 to recall Justice Laurel's trenchant warning. Stated otherwise, courts should not follow the path of least resistance by simply presuming the constitutionality of a law when it is questioned. On the contrary, they should probe the issue more deeply, to relieve the abscess, paraphrasing another distinguished jurist, 9 and so heal the wound or excise the affliction. Judicial power authorizes this; and when the exercise is demanded, there should be no shirking of the task for fear of retaliation, or loss of favor, or popular censure, or any other similar inhibition unworthy of the bench, especially this Court. The challenged measure is denominated an executive order but it is really presidential decree, promulgating a new rule instead of merely implementing an existing law. It was issued by President Marcos not for the purpose of taking care that the laws were faithfully executed but in the exercise of his legislative authority under Amendment No. 6. It was provided thereunder that whenever in his judgment there existed a grave emergency or a threat or imminence thereof or whenever the legislature failed or was unable to act adequately on any matter that in his judgment required immediate action, he could, in order to meet the exigency, issue decrees, orders or letters of instruction that were to have the

256 force and effect of law. As there is no showing of any exigency to justify the exercise of that extraordinary power then, the petitioner has reason, indeed, to question the validity of the executive order. Nevertheless, since the determination of the grounds was supposed to have been made by the President "in his judgment, " a phrase that will lead to protracted discussion not really necessary at this time, we reserve resolution of this matter until a more appropriate occasion. For the nonce, we confine ourselves to the more fundamental question of due process. It is part of the art of constitution-making that the provisions of the charter be cast in precise and unmistakable language to avoid controversies that might arise on their correct interpretation. That is the Ideal. In the case of the due process clause, however, this rule was deliberately not followed and the wording was purposely kept ambiguous. In fact, a proposal to delineate it more clearly was submitted in the Constitutional Convention of 1934, but it was rejected by Delegate Jose P. Laurel, Chairman of the Committee on the Bill of Rights, who forcefully argued against it. He was sustained by the body. 10 The due process clause was kept intentionally vague so it would remain also conveniently resilient. This was felt necessary because due process is not, like some provisions of the fundamental law, an "iron rule" laying down an implacable and immutable command for all seasons and all persons. Flexibility must be the best virtue of the guaranty. The very elasticity of the due process clause was meant to make it adapt easily to every situation, enlarging or constricting its protection as the changing times and circumstances may require. Aware of this, the courts have also hesitated to adopt their own specific description of due process lest they confine themselves in a legal straitjacket that will deprive them of the elbow room they may need to vary the meaning of the clause whenever indicated. Instead, they have preferred to leave the import of the protection open-ended, as it were, to be "gradually ascertained by the process of inclusion and exclusion in the course of the decision of cases as they arise." 11 Thus, Justice Felix Frankfurter of the U.S. Supreme Court, for example, would go no farther than to define due process and in so doing sums it all up as nothing more and nothing less than "the embodiment of the sporting Idea of fair play." 12 When the barons of England extracted from their sovereign liege the reluctant promise that that Crown would thenceforth not proceed against the life liberty or property of any of its subjects except by the lawful judgment of his peers or the law of the land, they thereby won for themselves and their progeny that splendid guaranty of fairness that is now the hallmark of the free society. The solemn vow that King John made at Runnymede in 1215 has since then resounded through the ages, as a ringing reminder to all rulers, benevolent or base, that every person, when confronted by the stern visage of the law, is entitled to have his say in a fair and open hearing of his cause. The closed mind has no place in the open society. It is part of the sporting Idea of fair play to hear "the other side" before an opinion is formed or a decision is made by those who sit in judgment. Obviously, one side is only one-half of the question; the other half must also be considered if an impartial verdict is to be reached based on an informed appreciation of the issues in contention. It is indispensable that the two sides complement each other, as unto the bow the arrow, in leading to the correct ruling after examination of the problem not from one or the other perspective only but in its totality. A judgment based on less that this full appraisal, on the pretext that a hearing is unnecessary or useless, is tainted with the vice of bias or intolerance or ignorance, or worst of all, in repressive regimes, the insolence of power. The minimum requirements of due process are notice and hearing 13 which, generally speaking, may not be dispensed with because they are intended as a safeguard against official arbitrariness. It is a gratifying commentary on our judicial system that the jurisprudence of this country is rich with applications of this guaranty as proof of our fealty to the rule of law and the ancient rudiments of fair play. We have consistently declared that every person, faced by the awesome power of the State, is entitled to "the law of the land," which Daniel Webster described almost two hundred years ago in the famous Dartmouth College Case, 14 as "the law which hears before it condemns, which proceeds upon inquiry and renders judgment only after trial." It has to be so if the rights of every person are to be secured beyond the reach of officials who, out of mistaken zeal or plain arrogance, would degrade the due process clause into a worn and empty catchword.

257 This is not to say that notice and hearing are imperative in every case for, to be sure, there are a number of admitted exceptions. The conclusive presumption, for example, bars the admission of contrary evidence as long as such presumption is based on human experience or there is a rational connection between the fact proved and the fact ultimately presumed therefrom. 15 There are instances when the need for expeditions action will justify omission of these requisites, as in the summary abatement of a nuisance per se, like a mad dog on the loose, which may be killed on sight because of the immediate danger it poses to the safety and lives of the people. Pornographic materials, contaminated meat and narcotic drugs are inherently pernicious and may be summarily destroyed. The passport of a person sought for a criminal offense may be cancelled without hearing, to compel his return to the country he has fled. 16 Filthy restaurants may be summarily padlocked in the interest of the public health and bawdy houses to protect the public morals. 17 In such instances, previous judicial hearing may be omitted without violation of due process in view of the nature of the property involved or the urgency of the need to protect the general welfare from a clear and present danger. The protection of the general welfare is the particular function of the police power which both restraints and is restrained by due process. The police power is simply defined as the power inherent in the State to regulate liberty and property for the promotion of the general welfare. 18 By reason of its function, it extends to all the great public needs and is described as the most pervasive, the least limitable and the most demanding of the three inherent powers of the State, far outpacing taxation and eminent domain. The individual, as a member of society, is hemmed in by the police power, which affects him even before he is born and follows him still after he is dead from the womb to beyond the tomb in practically everything he does or owns. Its reach is virtually limitless. It is a ubiquitous and often unwelcome intrusion. Even so, as long as the activity or the property has some relevance to the public welfare, its regulation under the police power is not only proper but necessary. And the justification is found in the venerable Latin maxims, Salus populi est suprema lex and Sic utere tuo ut alienum non laedas, which call for the subordination of individual interests to the benefit of the greater number. It is this power that is now invoked by the government to justify Executive Order No. 626-A, amending the basic rule in Executive Order No. 626, prohibiting the slaughter of carabaos except under certain conditions. The original measure was issued for the reason, as expressed in one of its Whereases, that "present conditions demand that the carabaos and the buffaloes be conserved for the benefit of the small farmers who rely on them for energy needs." We affirm at the outset the need for such a measure. In the face of the worsening energy crisis and the increased dependence of our farms on these traditional beasts of burden, the government would have been remiss, indeed, if it had not taken steps to protect and preserve them. A similar prohibition was challenged in United States v. Toribio, 19 where a law regulating the registration, branding and slaughter of large cattle was claimed to be a deprivation of property without due process of law. The defendant had been convicted thereunder for having slaughtered his own carabao without the required permit, and he appealed to the Supreme Court. The conviction was affirmed. The law was sustained as a valid police measure to prevent the indiscriminate killing of carabaos, which were then badly needed by farmers. An epidemic had stricken many of these animals and the reduction of their number had resulted in an acute decline in agricultural output, which in turn had caused an incipient famine. Furthermore, because of the scarcity of the animals and the consequent increase in their price, cattle-rustling had spread alarmingly, necessitating more effective measures for the registration and branding of these animals. The Court held that the questioned statute was a valid exercise of the police power and declared in part as follows: To justify the State in thus interposing its authority in behalf of the public, it must appear, first, that the interests of the public generally, as distinguished from those of a particular class, require such interference; and second, that the means are reasonably necessary for the accomplishment of the purpose, and not unduly oppressive upon individuals. ... From what has been said, we think it is clear that the enactment of the provisions of the statute under consideration was required by "the interests of the public generally, as distinguished from those of a particular class" and that the prohibition of the slaughter of carabaos for human consumption, so long as these animals are fit for agricultural

258 work or draft purposes was a "reasonably necessary" limitation on private ownership, to protect the community from the loss of the services of such animals by their slaughter by improvident owners, tempted either by greed of momentary gain, or by a desire to enjoy the luxury of animal food, even when by so doing the productive power of the community may be measurably and dangerously affected. In the light of the tests mentioned above, we hold with the Toribio Case that the carabao, as the poor man's tractor, so to speak, has a direct relevance to the public welfare and so is a lawful subject of Executive Order No. 626. The method chosen in the basic measure is also reasonably necessary for the purpose sought to be achieved and not unduly oppressive upon individuals, again following the abovecited doctrine. There is no doubt that by banning the slaughter of these animals except where they are at least seven years old if male and eleven years old if female upon issuance of the necessary permit, the executive order will be conserving those still fit for farm work or breeding and preventing their improvident depletion. But while conceding that the amendatory measure has the same lawful subject as the original executive order, we cannot say with equal certainty that it complies with the second requirement, viz., that there be a lawful method. We note that to strengthen the original measure, Executive Order No. 626-A imposes an absolute ban not on theslaughter of the carabaos but on their movement, providing that "no carabao regardless of age, sex, physical condition or purpose (sic) and no carabeef shall be transported from one province to another." The object of the prohibition escapes us. The reasonable connection between the means employed and the purpose sought to be achieved by the questioned measure is missing We do not see how the prohibition of the inter-provincial transport of carabaos can prevent their indiscriminate slaughter, considering that they can be killed anywhere, with no less difficulty in one province than in another. Obviously, retaining the carabaos in one province will not prevent their slaughter there, any more than moving them to another province will make it easier to kill them there. As for the carabeef, the prohibition is made to apply to it as otherwise, so says executive order, it could be easily circumvented by simply killing the animal. Perhaps so. However, if the movement of the live animals for the purpose of preventing their slaughter cannot be prohibited, it should follow that there is no reason either to prohibit their transfer as, not to be flippant dead meat. Even if a reasonable relation between the means and the end were to be assumed, we would still have to reckon with the sanction that the measure applies for violation of the prohibition. The penalty is outright confiscation of the carabao or carabeef being transported, to be meted out by the executive authorities, usually the police only. In the Toribio Case, the statute was sustained because the penalty prescribed was fine and imprisonment, to be imposed by the court after trial and conviction of the accused. Under the challenged measure, significantly, no such trial is prescribed, and the property being transported is immediately impounded by the police and declared, by the measure itself, as forfeited to the government. In the instant case, the carabaos were arbitrarily confiscated by the police station commander, were returned to the petitioner only after he had filed a complaint for recovery and given a supersedeas bond of P12,000.00, which was ordered confiscated upon his failure to produce the carabaos when ordered by the trial court. The executive order defined the prohibition, convicted the petitioner and immediately imposed punishment, which was carried out forthright. The measure struck at once and pounced upon the petitioner without giving him a chance to be heard, thus denying him the centuries-old guaranty of elementary fair play. It has already been remarked that there are occasions when notice and hearing may be validly dispensed with notwithstanding the usual requirement for these minimum guarantees of due process. It is also conceded that summary action may be validly taken in administrative proceedings as procedural due process is not necessarily judicial only. 20 In the exceptional cases accepted, however. there is a justification for the omission of the right to a previous hearing, to wit, the immediacy of the problem sought to be corrected and the urgency of the need to correct it.

259 In the case before us, there was no such pressure of time or action calling for the petitioner's peremptory treatment. The properties involved were not even inimical per se as to require their instant destruction. There certainly was no reason why the offense prohibited by the executive order should not have been proved first in a court of justice, with the accused being accorded all the rights safeguarded to him under the Constitution. Considering that, as we held in Pesigan v. Angeles, 21 Executive Order No. 626-A is penal in nature, the violation thereof should have been pronounced not by the police only but by a court of justice, which alone would have had the authority to impose the prescribed penalty, and only after trial and conviction of the accused. We also mark, on top of all this, the questionable manner of the disposition of the confiscated property as prescribed in the questioned executive order. It is there authorized that the seized property shall "be distributed to charitable institutions and other similar institutions as the Chairman of the National Meat Inspection Commissionmay see fit, in the case of carabeef, and to deserving farmers through dispersal as the Director of Animal Industrymay see fit, in the case of carabaos." (Emphasis supplied.) The phrase "may see fit" is an extremely generous and dangerous condition, if condition it is. It is laden with perilous opportunities for partiality and abuse, and even corruption. One searches in vain for the usual standard and the reasonable guidelines, or better still, the limitations that the said officers must observe when they make their distribution. There is none. Their options are apparently boundless. Who shall be the fortunate beneficiaries of their generosity and by what criteria shall they be chosen? Only the officers named can supply the answer, they and they alone may choose the grantee as they see fit, and in their own exclusive discretion. Definitely, there is here a "roving commission," a wide and sweeping authority that is not "canalized within banks that keep it from overflowing," in short, a clearly profligate and therefore invalid delegation of legislative powers. To sum up then, we find that the challenged measure is an invalid exercise of the police power because the method employed to conserve the carabaos is not reasonably necessary to the purpose of the law and, worse, is unduly oppressive. Due process is violated because the owner of the property confiscated is denied the right to be heard in his defense and is immediately condemned and punished. The conferment on the administrative authorities of the power to adjudge the guilt of the supposed offender is a clear encroachment on judicial functions and militates against the doctrine of separation of powers. There is, finally, also an invalid delegation of legislative powers to the officers mentioned therein who are granted unlimited discretion in the distribution of the properties arbitrarily taken. For these reasons, we hereby declare Executive Order No. 626-A unconstitutional. We agree with the respondent court, however, that the police station commander who confiscated the petitioner's carabaos is not liable in damages for enforcing the executive order in accordance with its mandate. The law was at that time presumptively valid, and it was his obligation, as a member of the police, to enforce it. It would have been impertinent of him, being a mere subordinate of the President, to declare the executive order unconstitutional and, on his own responsibility alone, refuse to execute it. Even the trial court, in fact, and the Court of Appeals itself did not feel they had the competence, for all their superior authority, to question the order we now annul. The Court notes that if the petitioner had not seen fit to assert and protect his rights as he saw them, this case would never have reached us and the taking of his property under the challenged measure would have become afait accompli despite its invalidity. We commend him for his spirit. Without the present challenge, the matter would have ended in that pump boat in Masbate and another violation of the Constitution, for all its obviousness, would have been perpetrated, allowed without protest, and soon forgotten in the limbo of relinquished rights. The strength of democracy lies not in the rights it guarantees but in the courage of the people to invoke them whenever they are ignored or violated. Rights are but weapons on the wall if, like expensive tapestry, all they do is embellish and impress. Rights, as weapons, must be a promise of protection. They become truly meaningful, and fulfill the role assigned to them in the free society, if they are kept bright and sharp with use by those who are not afraid to assert them. WHEREFORE, Executive Order No. 626-A is hereby declared unconstitutional. Except as affirmed above, the decision of the Court of Appeals is reversed. The supersedeas bond is cancelled and the amount thereof is ordered restored to the petitioner. No costs.SO ORDERED

260

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 77372 April 29, 1988 LUPO L. LUPANGCO, RAYMOND S. MANGKAL, NORMAN A. MESINA, ALEXANDER R. REGUYAL, JOCELYN P. CATAPANG, ENRICO V. REGALADO, JEROME O. ARCEGA, ERNESTOC. BLAS, JR., ELPEDIO M. ALMAZAN, KARL CAESAR R. RIMANDO, petitioner, vs. COURT OF APPEALS and PROFESSIONAL REGULATION COMMISSION, respondent. Balgos & Perez Law Offices for petitioners. The Solicitor General for respondents.

GANCAYCO, J.: Is the Regional Trial Court of the same category as the Professional Regulation Commission so that it cannot pass upon the validity of the administrative acts of the latter? Can this Commission lawfully prohibit the examiness from attending review classes, receiving handout materials, tips, or the like three (3) days before the date of the examination? Theses are the issues presented to the court by this petition for certiorari to review the decision of the Court of Appeals promulagated on January 13, 1987, in CA-G.R. SP No. 10598, * declaring null and void the other dated Ocober 21, 1986 issued by the Regional Trial Court of Manila, Branch 32 in Civil Case No. 86-37950 entitled " Lupo L. Lupangco, et al. vs. Professional Regulation Commission." The records shows the following undisputed facts: On or about October 6, 1986, herein respondent Professional Regulation Commission (PRC) issued Resolution No. 105 as parts of its "Additional Instructions to Examiness," to all those applying for admission to take the licensure examinations in accountancy. The resolution embodied the following pertinent provisions: No examinee shall attend any review class, briefing, conference or the like conducted by, or shall receive any hand-out, review material, or any tip from any school, college or university, or any review center or the like or any reviewer, lecturer, instructor official or employee of any of the aforementioned or similars institutions during the three days immediately proceeding every examination day including examination day. Any examinee violating this instruction shall be subject to the sanctions prescribed by Sec. 8, Art. III of the Rules and Regulations of the Commission. 1 On October 16, 1986, herein petitioners, all reviewees preparing to take the licensure examinations in accountancy schedule on October 25 and November 2 of the same year, filed on their own behalf of all others similarly situated like them, with the Regional Trial Court of Manila, Branch XXXII, a complaint for injuction with a prayer with the issuance of a writ of a preliminary injunction against respondent PRC to restrain the latter from enforcing the above-mentioned resolution and to declare the same unconstitution. Respondent PRC filed a motion to dismiss on October 21, 1987 on the ground that the lower court had no jurisdiction to review and to enjoin the enforcement of its resolution. In an Order of October 21,

261 1987, the lower court declared that it had jurisdiction to try the case and enjoined the respondent commission from enforcing and giving effect to Resolution No. 105 which it found to be unconstitutional. Not satisfied therewith, respondent PRC, on November 10, 1986, filed with the Court of Appeals a petition for the nullification of the above Order of the lower court. Said petiton was granted in the Decision of the Court of Appeals promulagated on January 13, 1987, to wit: WHEREFORE, finding the petition meritorious the same is hereby GRANTED and the other dated October 21, 1986 issued by respondent court is declared null and void. The respondent court is further directed to dismiss with prejudice Civil Case No. 86-37950 for want of jurisdiction over the subject matter thereof. No cost in this instance. SO ORDERED. 2 Hence, this petition. The Court of Appeals, in deciding that the Regional Trial Court of Manila had no jurisdiction to entertain the case and to enjoin the enforcement of the Resolution No. 105, stated as its basis its conclusion that the Professional Regulation Commission and the Regional Trial Court are co-equal bodies. Thus it held That the petitioner Professional Regulatory Commission is at least a co-equal body with the Regional Trial Court is beyond question, and co-equal bodies have no power to control each other or interfere with each other's acts. 3 To strenghten its position, the Court of Appeals relied heavily on National Electrification Administration vs. Mendoza, 4 which cites Pineda vs. Lantin 5 and Philippine Pacific Fishing, Inc. vs. Luna, 6 where this Court held that a Court of First Instance cannot interfere with the orders of the Securities and Exchange Commission, the two being co-equal bodies. After a close scrutiny of the facts and the record of this case, We rule in favor of the petitioner. The cases cited by respondent court are not in point. It is glaringly apparent that the reason why this Court ruled that the Court of First Instance could not interfere with the orders of the Securities and Exchange Commission was that this was so provided for by the law. In Pineda vs. Lantin, We explained that whenever a party is aggrieved by or disagree with an order or ruling of the Securities and Exchange Commission, he cannot seek relief from courts of general jurisdiction since under the Rules of Court and Commonwealth Act No. 83, as amended by Republic Act No. 635, creating and setting forth the powers and functions of the old Securities and Exchange Commission, his remedy is to go the Supreme Court on a petition for review. Likewise, in Philippine Pacific Fishing Co., Inc. vs. Luna, it was stressed that if an order of the Securities and Exchange Commission is erroneous, the appropriate remedy take is first, within the Commission itself, then, to the Supreme Court as mandated in Presidential Decree No. 902-A, the law creating the new Securities and Exchange Commission. Nowhere in the said cases was it held that a Court of First Instance has no jurisdiction over all other government agencies. On the contrary, the ruling was specifically limited to the Securities and Exchange Commission. The respondent court erred when it place the Securities and Exchange Commission and the Professional Regulation Commsision in the same category. As alraedy mentioned, with respect to the Securities and Exchange Commission, the laws cited explicitly provide with the procedure that need be taken when one is aggrieved by its order or ruling. Upon the other hand, there is no law providing for the next course of action for a party who wants to question a ruling or order of the Professional Regulation Commission. Unlike Commonwealth Act No. 83 and Presidential Decree No. 902-A, there is no provision in Presidential Decree No. 223, creating the Professional Regulation Commission, that orders or resolutions of the Commission are appealable either to the Court of Appeals or to theSupreme Court. Consequently, Civil Case No. 86-37950, which was filed in order to enjoin the enforcement of a resolution of the

262 respondent Professional Regulation Commission alleged to be unconstitutional, should fall within the general jurisdiction of the Court of First Instance, now the Regional Trial Court. 7 What is clear from Presidential Decree No. 223 is that the Professional Regulation Commission is attached to the Office of the President for general direction and coordination. 8 Well settled in our jurisprudence is the view that even acts of the Office of the President may be reviewed by the Court of First Instance (now the Regional Trial Court). In Medalla vs. Sayo, 9 this rule was thoroughly propounded on, to wit: In so far as jurisdiction of the Court below to review by certiorari decisions and/or resolutions of the Civil Service Commission and of the residential Executive Asssistant is concerned, there should be no question but that the power of judicial review should be upheld. The following rulings buttress this conclusion: The objection to a judicial review of a Presidential act arises from a failure to recognize the most important principle in our system of government, i.e., the separation of powers into three co-equal departments, the executives, the legislative and the judicial, each supreme within its own assigned powers and duties. When a presidential act is challenged before the courts of justice, it is not to be implied therefrom that the Executive is being made subject and subordinate to the courts. The legality of his acts are under judicial review, not because the Executive is inferior to the courts, but because the law is above the Chief Executive himself, and the courts seek only to interpret, apply or implement it (the law). A judicial review of the President's decision on a case of an employee decided by the Civil Service Board of Appeals should be viewed in this light and the bringing of the case to the Courts should be governed by the same principles as govern the jucucial review of all administrative acts of all administrative officers. 10 Republic vs. Presiding Judge, CFI of Lanao del Norte, Br. II, 11 is another case in point. Here, "the Executive Office"' of the Department of Education and Culture issued Memorandum Order No. 93 under the authority of then Secretary of Education Juan Manuel. As in this case, a complaint for injunction was filed with the Court of First Instance of Lanao del Norte because, allegedly, the enforcement of the circular would impair some contracts already entered into by public school teachers. It was the contention of petitioner therein that "the Court of First Instance is not empowered to amend, reverse and modify what is otherwise the clear and explicit provision of the memorandum circular issued by the Executive Office which has the force and effect of law." In resolving the issue, We held: ... We definitely state that respondent Court lawfully acquired jurisdiction in Civil Case No. II-240 (8) because the plaintiff therein asked the lower court for relief, in the form of injunction, in defense of a legal right (freedom to enter into contracts) . . . . . Hence there is a clear infringement of private respondent's constitutional right to enter into agreements not contrary to law, which might run the risk of being violated by the threatened implementation of Executive Office Memorandum Circular No. 93, dated February 5, 1968, which prohibits, with certain exceptions, cashiers and disbursing officers from honoring special powers of attorney executed by the payee employees. The respondent Court is not only right but duty bound to take cognizance of cases of this nature wherein a constitutional and statutory right is allegedly infringed by the administrative action of a government office. Courts of first Instance have original jurisdiction over all civil actions in which the subject of the litigation is not capable of pecuniary estimation (Sec. 44, Republic Act 296, as amended). 12 (Emphasis supplied.) In San Miguel Corporation vs. Avelino, 13 We ruled that a judge of the Court of First Instance has the authority to decide on the validity of a city tax ordinance even after its validity had been contested before the Secretary of Justice and an opinion thereon had been rendered.

263 In view of the foregoing, We find no cogent reason why Resolution No. 105, issued by the respondent Professional Regulation Commission, should be exempted from the general jurisdiction of the Regional Trial Court. Respondent PRC, on the other hand, contends that under Section 9, paragraph 3 of B.P. Blg. 129, it is the Court of Appeals which has jurisdiction over the case. The said law provides: SEC. 9. Jurisdiction. The Intermediate Appellate Court shall exercise: xxx xxx xxx (3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders, or awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948. The contention is devoid of merit. In order to invoke the exclusive appellate jurisdiction of the Court of Appeals as provided for in Section 9, paragraph 3 of B.P. Blg. 129, there has to be a final order or ruling which resulted from proceedings wherein the administrative body involved exercised its quasi-judicial functions. In Black's Law Dictionary, quasi-judicial is defined as a term applied to the action, discretion, etc., of public administrative officers or bodies required to investigate facts, or ascertain the existence of facts, hold hearings, and draw conclusions from them, as a basis for their official action, and to exercise discretion of a judicial nature. To expound thereon, quasi-judicial adjudication would mean a determination of rights, privileges and duties resulting in a decision or order which applies to a specific situation . 14 This does not cover rules and regulations of general applicability issued by the administrative body to implement its purely administrative policies and functions like Resolution No. 105 which was adopted by the respondent PRC as a measure to preserve the integrity of licensure examinations. The above rule was adhered to in Filipinas Engineering and Machine Shop vs. Ferrer. 15 In this case, the issue presented was whether or not the Court of First Instance had jurisdiction over a case involving an order of the Commission on Elections awarding a contract to a private party which originated from an invitation to bid. The said issue came about because under the laws then in force, final awards, judgments, decisions or orders of the Commission on Elections fall within the exclusive jurisdiction of the Supreme Court by way of certiorari. Hence, it has been consistently held that "it is the Supreme Court, not the Court of First Instance, which has exclusive jurisdiction to review on certiorari final decisions, orders, or rulings of the Commission on Elections relative to the conduct of elections and the enforcement of election laws." 16 As to whether or not the Court of First Instance had jurisdiction in saidcase, We said: We are however, far from convinced that an order of the COMELEC awarding a contract to a private party, as a result of its choice among various proposals submitted in response to its invitation to bid comes within the purview of a "final order" which is exclusively and directly appealable to this court on certiorari. What is contemplated by the term "final orders, rulings and decisions, of the COMELEC reviewable by certiorari by the Supreme Court as provided by law are those rendered in actions or proceedings before the COMELEC and taken cognizance of by the said body in the exercise of its adjudicatory or quasi-judicial powers. (Emphasis supplied.) xxx xxx xxx We agree with petitioner's contention that the order of the Commission granting the award to a bidder is not an order rendered in a legal controversy before it wherein the parties filed their respective pleadings and presented evidence after which the

264 questioned order was issued; and that this order of the commission was issued pursuant to its authority to enter into contracts in relation to election purposes. In short, the COMELEC resolution awarding the contract in favor of Acme was not issued pursuant to its quasi-judicial functions but merely as an incident of its inherent administrative functions over the conduct of elections, and hence, the said resolution may not be deemed as a "final order reviewable by certiorari by the Supreme Court. Being nonjudicial in character, no contempt order may be imposed by the COMELEC from said order, and no direct and exclusive appeal by certiorari to this Tribunal lie from such order. Any question arising from said order may be well taken in an ordinary civil action before the trial courts. (Emphasis supplied.) 17 One other case that should be mentioned in this regard is Salud vs. Central Bank of the Philippines. 18 Here, petitioner Central Bank, like respondent in this case, argued that under Section 9, paragraph 3 of B.P. Blg. 129, orders of the Monetary Board are appealable only to the Intermediate Appellate Court. Thus: The Central Bank and its Liquidator also postulate, for the very first time, that the Monetary Board is among the "quasi-judicial ... boards" whose judgments are within the exclusive appellate jurisdiction of the IAC; hence, it is only said Court, "to the exclusion of the Regional Trial Courts," that may review the Monetary Board's resolutions. 19 Anent the posture of the Central Bank, We made the following pronouncement: The contention is utterly devoid of merit. The IAC has no appellate jurisdiction over resolution or orders of the Monetary Board. No law prescribes any mode of appeal from the Monetary Board to the IAC. 20 In view of the foregoing, We hold that the Regional Trial Court has jurisdiction to entertain Civil Case No. 86-37950 and enjoin the respondent PRC from enforcing its resolution. Although We have finally settled the issue of jurisdiction, We find it imperative to decide once and for all the validity of Resolution No. 105 so as to provide the much awaited relief to those who are and will be affected by it. Of course, We realize that the questioned resolution was adopted for a commendable purpose which is "to preserve the integrity and purity of the licensure examinations." However, its good aim cannot be a cloak to conceal its constitutional infirmities. On its face, it can be readily seen that it is unreasonable in that an examinee cannot even attend any review class, briefing, conference or the like, or receive any hand-out, review material, or any tip from any school, collge or university, or any review center or the like or any reviewer, lecturer, instructor, official or employee of any of the aforementioned or similar institutions . ... 21 The unreasonableness is more obvious in that one who is caught committing the prohibited acts even without any ill motives will be barred from taking future examinations conducted by the respondent PRC. Furthermore, it is inconceivable how the Commission can manage to have a watchful eye on each and every examinee during the three days before the examination period. It is an aixiom in administrative law that administrative authorities should not act arbitrarily and capriciously in the issuance of rules and regulations. To be valid, such rules and regulations must be reasonable and fairly adapted to the end in view. If shown to bear no reasonable relation to the purposes for which they are authorized to be issued, then they must be held to be invalid. 22 Resolution No. 105 is not only unreasonable and arbitrary, it also infringes on the examinees' right to liberty guaranteed by the Constitution. Respondent PRC has no authority to dictate on the reviewees as to how they should prepare themselves for the licensure examinations. They cannot be restrained from taking all the lawful steps needed to assure the fulfillment of their ambition to become public accountants. They have every right to make use of their faculties in attaining success in their endeavors.

265 They should be allowed to enjoy their freedom to acquire useful knowledge that will promote their personal growth. As defined in a decision of the United States Supreme Court: The term "liberty" means more than mere freedom from physical restraint or the bounds of a prison. It means freedom to go where one may choose and to act in such a manner not inconsistent with the equal rights of others, as his judgment may dictate for the promotion of his happiness, to pursue such callings and vocations as may be most suitable to develop his capacities, and giv to them their highest enjoyment. 23 Another evident objection to Resolution No. 105 is that it violates the academic freedom of the schools concerned. Respondent PRC cannot interfere with the conduct of review that review schools and centers believe would best enable their enrolees to meet the standards required before becoming a full fledged public accountant. Unless the means or methods of instruction are clearly found to be inefficient, impractical, or riddled with corruption, review schools and centers may not be stopped from helping out their students. At this juncture, We call attention to Our pronouncement in Garcia vs. The Faculty Admission Committee, Loyola School of Theology, 24 regarding academic freedom to wit: ... It would follow then that the school or college itself is possessed of such a right. It decides for itself its aims and objectives and how best to attain them. It is free from outside coercion or interference save possibly when the overriding public welfare calls for some restraint. It has a wide sphere of autonomy certainly extending to the choice of students. This constitutional provision is not to be construed in a niggardly manner or in a grudging fashion. Needless to say, the enforcement of Resolution No. 105 is not a guarantee that the alleged leakages in the licensure examinations will be eradicated or at least minimized. Making the examinees suffer by depriving them of legitimate means of review or preparation on those last three precious days-when they should be refreshing themselves with all that they have learned in the review classes and preparing their mental and psychological make-up for the examination day itself-would be like uprooting the tree to get ride of a rotten branch. What is needed to be done by the respondent is to find out the source of such leakages and stop it right there. If corrupt officials or personnel should be terminated from their loss, then so be it. Fixers or swindlers should be flushed out. Strict guidelines to be observed by examiners should be set up and if violations are committed, then licenses should be suspended or revoked. These are all within the powers of the respondent commission as provided for in Presidential Decree No. 223. But by all means the right and freedom of the examinees to avail of all legitimate means to prepare for the examinations should not be curtailed. In the light of the above, We hereby REVERSE and SET ASIDE, the decision of the Court of Appeals in CAG.R. SP No. 10591 and another judgment is hereby rendered declaring Resolution No. 105 null and void and of no force and effect for being unconstitutional. This decision is immediately executory. No costs. SO ORDERED.

266 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-38429 June 30, 1988 CARLOS BALACUIT, LAMBERTO TAN and SERGIO YU CARCEL, petitioners-appellants, vs. COURT OF FIRST INSTANCE OF AGUSAN DEL NORTE AND BUTUAN CITY, Branch 11, and the CITY OF BUTUAN, respondents-appellees. Romeo B. Sanchez, Eduardo Deza Mercado and Wilfred D. Asis for petitioners. The City Legal Officer for respondents-appeliees.

GANCAYCO, J.: At issue in the petition for review before Us is the validity and constitutionality of Ordinance No. 640 passed by the Municipal Board of the City of Butuan on April 21, 1969, the title and text of which are reproduced below: ORDINANCE--640 ORDINANCE PENALIZING ANY PERSON, GROUP OF PERSONS, ENTITY OR CORPORATION ENGAGED IN THE BUSINESS OF SELLING ADMISSION TICKETS TO ANY MOVIE OR OTHER PUBLIC EXHIBITIONS, GAMES, CONTESTS OR OTHER PERFORMANCES TO REQUIRE CHILDREN BETWEEN SEVEN (7) AND TWELVE (12) YEARS OF AGE TO PAY FULL PAYMENT FOR TICKETS INTENDED FOR ADULTS BUT SHOULD CHARGE ONLY ONE-HALF OF THE SAID TICKET xxx xxx xxx Be it ordained by the Municipal Board of the City of Butuan in session assembled, that: SECTION 1It shall be unlawful for any person, group of persons, entity, or corporation engaged in the business of selling admission tickets to any movie or other public exhibitions, games, contests, or other performances to require children between seven (7) and twelve (12) years of age to pay full payment for admission tickets intended for adults but should charge only one-half of the value of the said tickets. SECTION 2Any person violating the provisions of this Ordinance shall upon conviction be punished by a fine of not less than TWO HUNDRED PESOS (P200.00) but not more than SIX HUNDRED PESOS (P600.00) or an imprisonment of not less than TWO (2) MONTHS or not more than SIX (6) MONTHS or both such firm and imprisonment in the discretion of the Court. If the violator be a firm or corporation the penalty shall be imposed upon the Manager, Agent or Representative of such firm or corporation. SECTION 3This ordinance shall take effect upon its approval. Petitioners are Carlos Balacuit Lamberto Tan, and Sergio Yu Carcel managers of the Maya and Dalisay Theaters, the Crown Theater, and the Diamond Theater, respectively. Aggrieved by the effect of Ordinance No. 640, they filed a complaint before the Court of First Instance of Agusan del Norte and

267 Butuan City docketed as Special Civil Case No. 237 on June 30, 1969 praying, inter alia, that the subject ordinance be declared unconstitutional and, therefore, void and unenforceable. 1 Upon motion of the petitioners, 2 a temporary restraining order was issued on July 14, 1969 by the court a quo enjoining the respondent City of Butuan and its officials from enforcing Ordinance No. 640. 3 On July 29, 1969, respondents filed their answer sustaining the validity of the ordinance. 4 On January 30, 1973, the litigants filed their stipulation of facts. 5 On June 4, 1973, the respondent court rendered its decision, 6 the dispositive part of which reads: IN THE LIGHT OF ALL THE FOREGOING, the Court hereby adjudges in favor of the respondents and against the petitioners, as follows: 1. Declaring Ordinance No. 640 of the City of Butuan constitutional and valid: Provided, however, that the fine for a single offense shall not exceed TWO HUNDRED PESOS, as prescribed in the aforequoted Section 15 (nn) of Rep. Act No. 523; 2. Dissolving the restraining order issued by this Court; and; 3. Dismissing the complaint, with costs against the petitioners. 4. SO ORDERED. 7 Petitioners filed their motion for reconsideration 8 of the decision of the court a quo which was denied in a resolution of the said court dated November 10, 1973. 9 Hence, this petition. Petitioners attack the validity and constitutionality of Ordinance No. 640 on the grounds that it is ultra vires and an invalid exercise of police power. Petitioners contend that Ordinance No. 640 is not within the power of' the Municipal Board to enact as provided for in Section 15(n) of Republic Act No. 523, the Charter of the City of Butuan, which states: Sec. 15. General powers and duties of the Board Except as otherwise provided by law, and subject to the conditions and limitations thereof, the Municipal Board shall have the following legislative powers: xxx xxx xxx (n) To regulate and fix the amount of the license fees for the following; . . . theaters, theatrical performances, cinematographs, public exhibitions and all other performances and places of amusements ... xxx xxx xxx Respondent City of Butuan, on the other hand, attempts to justify the enactment of the ordinance by invoking the general welfare clause embodied in Section 15 (nn) of the cited law, which provides: (nn) To enact all ordinances it may deem necessary and proper for the sanitation and safety, the furtherance of the prosperity, and the promotion of the morality, peace, good order, comfort, convenience, and general welfare of the city and its inhabitants, and such others as may be necessary to carry into effect and discharge the powers and duties conferred by this Act, and to fix the penalties for the violation of the ordinances, which shall not exceed a two hundred peso fine or six months imprisonment, or both such fine and imprisonment, for a single offense.

268 We can see from the aforecited Section 15(n) that the power to regulate and fix the amount of license fees for theaters, theatrical performances, cinematographs, public exhibitions and other places of amusement has been expressly granted to the City of Butuan under its charter. But the question which needs to be resolved is this: does this power to regulate include the authority to interfere in the fixing of prices of admission to these places of exhibition and amusement whether under its general grant of power or under the general welfare clause as invoked by the City? This is the first time this Court is confronted with the question of direct interference by the local government with the operation of theaters, cinematographs and the like to the extent of fixing the prices of admission to these places. Previous decisions of this Court involved the power to impose license fees upon businesses of this nature as a corollary to the power of the local government to regulate them. Ordinances which required moviehouses or theaters to increase the price of their admission tickets supposedly to cover the license fees have been held to be invalid for these impositions were considered as not merely license fees but taxes for purposes of revenue and not regulation which the cities have no power to exact, 10 unless expressly granted by its charter. 11 Applying the ruling in Kwong Sing v. City of Manila, 12 where the word "regulate" was interpreted to include the power to control, to govern and to restrain, it would seem that under its power to regulate places of exhibitions and amusement, the Municipal Board of the City of Butuan could make proper police regulations as to the mode in which the business shall be exercised. While in a New York case, 13 an ordinance which regulates the business of selling admission tickets to public exhibitions or performances by virtue of the power of cities under the General City Law "to maintain order, enforce the laws, protect property and preserve and care for the safety, health, comfort and general welfare of the inhabitants of the city and visitors thereto; and for any of said purposes, to regulate and license occupations" was considered not to be within the scope of any duty or power implied in the charter. It was held therein that the power of regulation of public exhibitions and places of amusement within the city granted by the charter does not carry with it any authority to interfere with the price of admission to such places or the resale of tickets or tokens of admission. In this jurisdiction, it is already settled that the operation of theaters, cinematographs and other places of public exhibition are subject to regulation by the municipal council in the exercise of delegated police power by the local government. 14 Thus, in People v. Chan, 15 an ordinance of the City of Manila prohibiting first run cinematographs from selling tickets beyond their seating capacity was upheld as constitutional for being a valid exercise of police power. Still in another case, 16 the validity of an ordinance of the City of Bacolod prohibiting admission of two or more persons in moviehouses and other amusement places with the use of only one ticket was sustained as a valid regulatory police measure not only in the interest of preventing fraud in so far as municipal taxes are concerned but also in accordance with public health, public safety, and the general welfare. The City of Butuan, apparently realizing that it has no authority to enact the ordinance in question under its power to regulate embodied in Section 15(n), now invokes the police power as delegated to it under the general welfare clause to justify the enactment of said ordinance. To invoke the exercise of police power, not only must it appear that the interest of the public generally requires an interference with private rights, but the means adopted must be reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. 17 The legislature may not, under the guise of protecting the public interest, arbitrarily interfere with private business, or impose unusual and unnecessary restrictions upon lawful occupations. In other words, the determination as to what is a proper exercise of its police power is not final or conclusive, but is subject to the supervision of the courts. 18 Petitioners maintain that Ordinance No. 640 violates the due process clause of the Constitution for being oppressive, unfair, unjust, confiscatory, and an undue restraint of trade, and violative of the right of persons to enter into contracts, considering that the theater owners are bound under a contract with the film owners for just admission prices for general admission, balcony and lodge.

269 In Homeowners' Association of the Philippines, Inc. v. Municipal Board of the City of Manila, 19 this Court held: The authority of municipal corporations to regulate is essentially police power, Inasmuch as the same generally entails a curtailment of the liberty, the rights and/or the property of persons, which are protected and even guaranteed by the Constitution, the exercise of police power is necessarily subject to a qualification, limitation or restriction demanded by the regard, the respect and the obedience due to the prescriptions of the fundamental law, particularly those forming part of the Constitution of Liberty, otherwise known as the Bill of Rights the police power measure must be reasonable. In other words, individual rights may be adversely affected by the exercise of police power to the extent only and only to the extent--that may be fairly required by the legitimate demands of public interest or public welfare. What is the reason behind the enactment of Ordinance No. 640? A reading of the minutes of the regular session of the Municipal Board when the ordinance in question was passed shows that a certain Councilor Calo, the proponent of the measure, had taken into account the complaints of parents that for them to pay the full price of admission for their children is too financially burdensome. The trial court advances the view that "even if the subject ordinance does not spell out its raison d'etre in all probability the respondents were impelled by the awareness that children are entitled to share in the joys of their elders, but that considering that, apart from size, children between the ages of seven and twelve cannot fully grasp the nuance of movies or other public exhibitions, games, contests or other performances, the admission prices with respect to them ought to be reduced. 19a We must bear in mind that there must be public necessity which demands the adoption of proper measures to secure the ends sought to be attained by the enactment of the ordinance, and the large discretion is necessarily vested in the legislative authority to determine not only what the interests of the public require, but what measures are necessary for the protection of such interests. 20 The methods or means used to protect the public health, morals, safety or welfare, must have some relation to the end in view, for under the guise of the police power, personal rights and those pertaining to private property will not be permitted to be arbitralily invaded by the legislative department. 21 We agree with petitioners that the ordinance is not justified by any necessity for the public interest. The police power legislation must be firmly grounded on public interest and welfare, and a reasonable relation must exist between purposes and means. 22 The evident purpose of the ordinance is to help ease the burden of cost on the part of parents who have to shell out the same amount of money for the admission of their children, as they would for themselves, A reduction in the price of admission would mean corresponding savings for the parents; however, the petitioners are the ones made to bear the cost of these savings. The ordinance does not only make the petitioners suffer the loss of earnings but it likewise penalizes them for failure to comply with it. Furthermore, as petitioners point out, there will be difficulty in its implementation because as already experienced by petitioners since the effectivity of the ordinance, children over 12 years of age tried to pass off their age as below 12 years in order to avail of the benefit of the ordinance. The ordinance does not provide a safeguard against this undesirable practice and as such, the respondent City of Butuan now suggests that birth certificates be exhibited by movie house patrons to prove the age of children. This is, however, not at all practicable. We can see that the ordinance is clearly unreasonable if not unduly oppressive upon the business of petitioners. Moreover, there is no discernible relation between the ordinance and the promotion of public health, safety, morals and the general welfare. Respondent City of Butuan claims that it was impelled to protect the youth from the pernicious practice of movie operators and other public exhibitions promoters or the like of demanding equal price for their admission tickets along with the adults. This practice is allegedly repugnant and unconscionable to the interest of the City in the furtherance of the prosperity, peace, good order, comfort, convenience and the general well-being of its inhabitants.

270 There is nothing pernicious in demanding equal price for both children and adults. The petitioners are merely conducting their legitimate businesses. The object of every business entrepreneur is to make a profit out of his venture. There is nothing immoral or injurious in charging the same price for both children and adults. In fact, no person is under compulsion to purchase a ticket. It is a totally voluntary act on the part of the purchaser if he buys a ticket to such performances. Respondent City of Butuan claims that Ordinance No. 640 is reasonable and necessary to lessen the economic burden of parents whose minor children are lured by the attractive nuisance being maintained by the petitioners. Respondent further alleges that by charging the full price, the children are being exploited by movie house operators. We fail to see how the children are exploited if they pay the full price of admission. They are treated with the same quality of entertainment as the adults. The supposition of the trial court that because of their age children cannot fully grasp the nuances of such entertainment as adults do fails to convince Us that the reduction in admission ticket price is justifiable. In fact, by the very claim of respondent that movies and the like are attractive nuisances, it is difficult to comprehend why the municipal board passed the subject ordinance. How can the municipal authorities consider the movies an attractive nuisance and yet encourage parents and children to patronize them by lowering the price of admission for children? Perhaps, there is some ,truth to the argument of petitioners that Ordinance No. 640 is detrimental to the public good and the general welfare of society for it encourages children of tender age to frequent the movies, rather than attend to their studies in school or be in their homes. Moreover, as a logical consequence of the ordinance, movie house and theater operators will be discouraged from exhibiting wholesome movies for general patronage, much less children's pictures if only to avoid compliance with the ordinance and still earn profits for themselves. For after all, these movie house and theater operators cannot be compelled to exhibit any particular kind of film except those films which may be dictated by public demand and those which are restricted by censorship laws. So instead of children being able to share in the joys of their elders as envisioned by the trial court, there will be a dearth of wholesome and educational movies for them to enjoy. There are a number of cases decided by the Supreme Court and the various state courts of the United States which upheld the right of the proprietor of a theater to fix the price of an admission ticket as against the right of the state to interfere in this regard and which We consider applicable to the case at bar. A theater ticket has been described to be either a mere license, revocable at the will of the proprietor of the theater or it may be evidence of a contract whereby, for a valuable consideration, the purchaser has acquired the right to enter the theater and observe the performance on condition that he behaves properly. 23 Such ticket, therefore, represents a right, Positive or conditional, as the case may be, according to the terms of the original contract of sale. This right is clearly a right of property. The ticket which represents that right is also, necessarily, a species of property. As such, the owner thereof, in the absence of any condition to the contrary in the contract by which he obtained it, has the clear right to dispose of it, to sell it to whom he pleases and at such price as he can obtain. 24 So that an act prohibiting the sale of tickets to theaters or other places of amusement at more than the regular price was held invalid as conflicting with the state constitution securing the right of property. 25 In Collister vs. Hayman, 26 it was held: The defendants were conducting a private business, which, even if clothed with a public interest, was without a franchise to accommodate the public, and they had the right to control it, the same as the proprietors of any other business, subject to such obligations as were placed upon them by statute. Unlike a carrier of passengers, for instance, with a franchise from the state, and hence under obligation to transport anyone who applies and to continue the business year in and year out, the proprietors of a theater can open and close their place at will, and no one can make a lawful complaint. They can charge what they choose for admission to their theater. They can limit the number admitted. They can refuse to sell tickets and collect the price of admission at the door. They can preserve order and enforce quiet while the performance is going on. They can make it a part of the contract and condition of admission, by giving due notice and printing the

271 condition in the ticket that no one shall be admitted under 21 years of age, or that men only or women only shall be admitted, or that a woman cannot enter unless she is accompanied by a male escort, and the like. The proprietors, in the control of their business, may regulate the terms of admission in any reasonable way. If those terms are not satisfactory, no one is obliged to buy a ticket or make the contract. If the terms are satisfactory, and the contract is made, the minds of the parties meet upon the condition, and the purchaser impliedly promises to perform it. In Tyson and Bro. United Theater Ticket Officers, Inc. vs. Banton, 27 the United States Supreme Court held: ... And certainly a place of entertainment is in no legal sense a public utility; and quite as certainly, its activities are not such that their enjoyment can be regarded under any conditions from the point of view of an emergency. The interest of the public in theaters and other places of entertainment may be more nearly, and with better reason, assimilated to the like interest in provision stores and markets and in the rental of houses and apartments for residence purposes; although in importance it fails below such an interest in the proportion that food and shelter are of more moment than amusement or instruction. As we have shown there is no legislative power to fix the prices of provisions or clothing, or the rental charges for houses and apartments, in the absence of some controlling emergency; and we are unable to perceive any dissimilarities of such quality or degree as to justify a different rule in respect of amusements and entertainment ... We are in consonance with the foregoing observations and conclusions of American courts. In this jurisdiction, legislation had been passed controlling the prices of goods commodities and drugs during periods of emergency,28 limiting the net profits of public utility 29 as well as regulating rentals of residential apartments for a limited period, 30 as a matter of national policy in the interest of public health and safety, economic security and the general welfare of the people. And these laws cannot be impugned as unconstitutional for being violative of the due process clause. However, the same could not be said of theaters, cinematographs and other exhibitions. In no sense could these businesses be considered public utilities. The State has not found it appropriate as a national policy to interfere with the admission prices to these performances. This does not mean however, that theaters and exhibitions are not affected with public interest even to a certain degree. Motion pictures have been considered important both as a medium for the communication of Ideas and expression of the artistic impulse. Their effects on the perceptions by our people of issues and public officials or public figures as well as the prevailing cultural traits are considerable. 31 People of all ages flock to movie houses, games and other public exhibitions for recreation and relaxation. The government realizing their importance has seen it fit to enact censorship laws to regulate the movie industry. 32 Their aesthetic entertainment and even educational values cannot be underestimated. Even police measures regulating the operation of these businesses have been upheld in order to safeguard public health and safety. Nonetheless, as to the question of the subject ordinance being a valid exercise of police power, the same must be resolved in the negative. While it is true that a business may be regulated, it is equally true that such regulation must be within the bounds of reason, that is, the regulatory ordinance must be reasonable, and its provisions cannot be oppressive amounting to an arbitrary interference with the business or calling subject of regulation. A lawful business or calling may not, under the guise of regulation, be unreasonably interfered with even by the exercise of police power. 33 A police measure for the regulation of the conduct, control and operation of a business should not encroach upon the legitimate and lawful exercise by the citizens of their property rights. 34The right of the owner to fix a price at which his property shall be sold or used is an inherent attribute of the property itself and, as such, within the protection of the due process clause."" Hence, the proprietors of a theater have a right to manage their property in their own way, to fix what prices of admission they think most for their own advantage, and that any person who did not approve could stay away. 36

272 Respondent City of Butuan argues that the presumption is always in favor of the validity of the ordinance. This maybe the rule but it has already been held that although the presumption is always in favor of the validity or reasonableness of the ordinance, such presumption must nevertheless be set aside when the invalidity or unreasonableness appears on the face of the ordinance itself or is established by proper evidence. 37 The exercise of police power by the local government is valid unless it contravenes the fundamental law of the land, or an act of the legislature, or unless it is against public policy or is unreasonable, oppressive, partial, discriminating or in derogation of a common right. 38 Ordinance No. 640 clearly invades the personal and property rights of petitioners for even if We could assume that, on its face, the interference was reasonable, from the foregoing considerations, it has been fully shown that it is an unwarranted and unlawful curtailment of the property and personal rights of citizens. For being unreasonable and an undue restraint of trade, it cannot, under the guise of exercising police power, be upheld as valid. WHEREFORE, the decision of the trial court in Special Civil Case No. 237 is hereby REVERSED and SET ASIDE and a new judgment is hereby rendered declaring Ordinance No. 640 unconstitutional and, therefore, null and void. This decision is immediately executory. SO ORDERED.

273 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-49112 February 2, 1979 LEOVILLO C. AGUSTIN, petitioner, vs. HON. ROMEO F. EDU, in his capacity as Land Transportation Commissioner; HON. JUAN PONCE ENRILE, in his capacity as Minister of National Defense; HON. ALFREDO L. JUINIO, in his capacity as Minister Of Public Works, Transportation and Communications; and HON: BALTAZAR AQUINO, in his capacity as Minister of Public Highways, respondents. Leovillo C. Agustin Law Office for petitioner. Solicitor General Estelito P. Mendoza, Assistant Solicitor General Ruben E. Agpalo and Solicitor Amado D. Aquino for respondents.

FERNANDO, J.: The validity of a letter of Instruction 1 providing for an early seaming device for motor vehicles is assailed in this prohibition proceeding as being violative of the constitutional guarantee of due process and, insofar as the rules and regulations for its implementation are concerned, for transgressing the fundamental principle of non- delegation of legislative power. The Letter of Instruction is stigmatized by petitioner who is possessed of the requisite standing, as being arbitrary and oppressive. A temporary restraining order as issued and respondents Romeo F. Edu, Land Transportation Commissioner Juan Ponce Enrile, Minister of National Defense; Alfredo L. Juinio, Minister of Public Works, Transportation and Communications; and Baltazar Aquino, Minister of Public Highways; were to answer. That they did in a pleading submitted by Solicitor General Estelito P. Mendoza. 2Impressed with a highly persuasive quality, it makes devoid clear that the imputation of a constitutional infirmity is devoid of justification The Letter of Instruction on is a valid police power measure. Nor could the implementing rules and regulations issued by respondent Edu be considered as amounting to an exercise of legislative power. Accordingly, the petition must be dismissed. The facts are undisputed. The assailed Letter of Instruction No. 229 of President Marcos, issued on December 2, 1974, reads in full: "[Whereas], statistics show that one of the major causes of fatal or serious accidents in land transportation is the presence of disabled, stalled or parked motor vehicles along streets or highways without any appropriate early warning device to signal approaching motorists of their presence; [Whereas], the hazards posed by such obstructions to traffic have been recognized by international bodies concerned with traffic safety, the 1968 Vienna Convention on Road Signs and Signals and the United Nations Organization (U.N.); [Whereas], the said Vienna Convention which was ratified by the Philippine Government under P.D. No. 207, recommended the enactment of local legislation for the installation of road safety signs and devices; [Now, therefore, I, Ferdinand E. Marcos], President of the Philippines, in the interest of safety on all streets and highways, including expressways or limited access roads, do hereby direct: 1. That all owners, users or drivers of motor vehicles shall have at all times in their motor vehicles at least one (1) pair of early warning device consisting of triangular, collapsible reflectorized plates in red and yellow colors at least 15 cms. at the base and 40 cms. at the sides. 2. Whenever any motor vehicle is stalled or disabled or is parked for thirty (30) minutes or more on any street or highway, including expressways or limited access roads, the owner, user or driver thereof shall cause the warning device mentioned herein to be installed at least four meters away to the front and rear of the motor vehicle staged, disabled or parked. 3. The Land Transportation Commissioner shall cause Reflectorized Triangular Early Warning Devices, as herein described, to be prepared and issued to registered owners of motor vehicles, except motorcycles and trailers, charging for each piece not more than 15 % of the acquisition cost. He shall also promulgate such rules and

274 regulations as are appropriate to effectively implement this order. 4. All hereby concerned shall closely coordinate and take such measures as are necessary or appropriate to carry into effect then instruction. 3 Thereafter, on November 15, 1976, it was amended by Letter of Instruction No. 479 in this wise. "Paragraph 3 of Letter of Instruction No. 229 is hereby amended to read as follows: 3. The Land transportation Commissioner shall require every motor vehicle owner to procure from any and present at the registration of his vehicle, one pair of a reflectorized early warning device, as d bed of any brand or make chosen by mid motor vehicle . The Land Transportation Commissioner shall also promulgate such rule and regulations as are appropriate to effectively implement this order.'" 4 There was issued accordingly, by respondent Edu, the implementing rules and regulations on December 10, 1976. 5 They were not enforced as President Marcos on January 25, 1977, ordered a six-month period of suspension insofar as the installation of early warning device as a pre-registration requirement for motor vehicle was concerned. 6 Then on June 30, 1978, another Letter of Instruction 7 the lifting of such suspension and directed the immediate implementation of Letter of Instruction No. 229 as amended. 8 It was not until August 29, 1978 that respondent Edu issued Memorandum Circular No. 32, worded thus: "In pursuance of Letter of Instruction No. 716, dated June 30, 1978, the implementation of Letter of Instruction No. 229, as amended by Letter of Instructions No. 479, requiring the use of Early Warning Devices (EWD) on motor vehicle, the following rules and regulations are hereby issued: 1. LTC Administrative Order No. 1, dated December 10, 1976; shall now be implemented provided that the device may come from whatever source and that it shall have substantially complied with the EWD specifications contained in Section 2 of said administrative order; 2. In order to insure that every motor vehicle , except motorcycles, is equipped with the device, a pair of serially numbered stickers, to be issued free of charge by this Commission, shall be attached to each EWD. The EWD. serial number shall be indicated on the registration certificate and official receipt of payment of current registration fees of the motor vehicle concerned. All Orders, Circulars, and Memoranda in conflict herewith are hereby superseded, This Order shall take effect immediately. 9 It was for immediate implementation by respondent Alfredo L. Juinio, as Minister of Public Works, transportation, and Communications.10 Petitioner, after setting forth that he "is the owner of a Volkswagen Beetle Car, Model 13035, already properly equipped when it came out from the assembly lines with blinking lights fore and aft, which could very well serve as an early warning device in case of the emergencies mentioned in Letter of Instructions No. 229, as amended, as well as the implementing rules and regulations in Administrative Order No. 1 issued by the land transportation Commission," 11 alleged that said Letter of Instruction No. 229, as amended, "clearly violates the provisions and delegation of police power, [sic] * * *: " For him they are "oppressive, unreasonable, arbitrary, confiscatory, nay unconstitutional and contrary to the precepts of our compassionate New Society." 12 He contended that they are "infected with arbitrariness because it is harsh, cruel and unconscionable to the motoring public;" 13 are "one-sided, onerous and patently illegal and immoral because [they] will make manufacturers and dealers instant millionaires at the expense of car owners who are compelled to buy a set of the so-called early warning device at the rate of P 56.00 to P72.00 per set." 14 are unlawful and unconstitutional and contrary to the precepts of a compassionate New Society [as being] compulsory and confiscatory on the part of the motorists who could very well provide a practical alternative road safety device, or a better substitute to the specified set of EWD's." 15 He therefore prayed for a judgment both the assailed Letters of Instructions and Memorandum Circular void and unconstitutional and for a restraining order in the meanwhile. A resolution to this effect was handed down by this Court on October 19, 1978: "L-49112 (Leovillo C. Agustin v. Hon. Romeo F. Edu, etc., et al.) Considering the allegations contained, the issues raised and the arguments adduced in the petition for prohibition with writ of p prohibitory and/or mandatory injunction, the Court Resolved to (require) the respondents to file an answer thereto within ton (10) days from notice and not to move to dismiss the petition. The Court further Resolved to [issue] a [temporary restraining order] effective as of this date and continuing until otherwise ordered by this Court. 16 Two motions for extension were filed by the Office of the Solicitor General and granted. Then on November 15, 1978, he Answer for respondents was submitted. After admitting the factual allegations and stating that they lacked knowledge or information sufficient to form a belief as to petitioner owning a Volkswagen Beetle car," they "specifically deny the allegations and stating they lacked knowledge or information sufficient to form a belief as to petitioner owning a Volkswagen Beetle Car, 17 they specifically deny the allegations in paragraphs X and XI (including its subparagraphs 1, 2, 3, 4) of Petition

275 to the effect that Letter of Instruction No. 229 as amended by Letters of Instructions Nos. 479 and 716 as well as Land transportation Commission Administrative Order No. 1 and its Memorandum Circular No. 32 violates the constitutional provisions on due process of law, equal protection of law and undue delegation of police power, and that the same are likewise oppressive, arbitrary, confiscatory, onesided, onerous, immoral unreasonable and illegal the truth being that said allegations are without legal and factual basis and for the reasons alleged in the Special and Affirmative Defenses of this Answer." 18 Unlike petitioner who contented himself with a rhetorical recital of his litany of grievances and merely invoked the sacramental phrases of constitutional litigation, the Answer, in demonstrating that the assailed Letter of Instruction was a valid exercise of the police power and implementing rules and regulations of respondent Edu not susceptible to the charge that there was unlawful delegation of legislative power, there was in the portion captioned Special and Affirmative Defenses, a citation of what respondents believed to be the authoritative decisions of this Tribunal calling for application. They are Calalang v. Williams, 19 Morfe v. Mutuc, 20 and Edu v. Ericta. 21 Reference was likewise made to the 1968 Vienna Conventions of the United Nations on road traffic, road signs, and signals, of which the Philippines was a signatory and which was duly ratified. 22 Solicitor General Mendoza took pains to refute in detail, in language calm and dispassionate, the vigorous, at times intemperate, accusation of petitioner that the assailed Letter of Instruction and the implementing rules and regulations cannot survive the test of rigorous scrutiny. To repeat, its highly-persuasive quality cannot be denied. This Court thus considered the petition submitted for decision, the issues being clearly joined. As noted at the outset, it is far from meritorious and must be dismissed. 1. The Letter of Instruction in question was issued in the exercise of the police power. That is conceded by petitioner and is the main reliance of respondents. It is the submission of the former, however, that while embraced in such a category, it has offended against the due process and equal protection safeguards of the Constitution, although the latter point was mentioned only in passing. The broad and expansive scope of the police power which was originally Identified by Chief Justice Taney of the American Supreme Court in an 1847 decision as "nothing more or less than the powers of government inherent in every sovereignty" 23 was stressed in the aforementioned case of Edu v. Ericta thus: "Justice Laurel, in the first leading decision after the Constitution came into force,Calalang v. Williams, Identified police power with state authority to enact legislation that may interfere with personal liberty or property in order to promote the general welfare. Persons and property could thus 'be subjected to all kinds of restraints and burdens in order to we the general comfort, health and prosperity of the state.' Shortly after independence in 1948, Primicias v. Fugoso reiterated the doctrine, such a competence being referred to as 'the power to prescribe regulations to promote the health, morals, peace, education, good order or safety, and general welfare of the people. The concept was set forth in negative terms by Justice Malcolm in a pre-Commonwealth decision as 'that inherent and plenary power in the State which enables it to prohibit all things hurtful to the comfort, safety and welfare of society. In that sense it could be hardly distinguishable as noted by this Court in Morfe v. Mutuc with the totality of legislative power. It is in the above sense the greatest and most powerful at. tribute of government. It is, to quote Justice Malcolm anew, 'the most essential, insistent, and at least table powers, I extending as Justice Holmes aptly pointed out 'to all the great public needs.' Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future where it could be done, provides enough room for an efficient and flexible response to conditions and circumstances thus assuring the greatest benefits. In the language of Justice Cardozo: 'Needs that were narrow or parochial in the past may be interwoven in the present with the well-being of the nation. What is critical or urgent changes with the time.' The police power is thus a dynamic agency, suitably vague and far from precisely defined, rooted in the conception that men in organizing the state and imposing upon its government limitations to safeguard constitutional rights did not intend thereby to enable an individual citizen or a group of citizens to obstruct unreasonably the enactment of such salutary measures calculated to communal peace, safety, good order, and welfare." 24 2. It was thus a heavy burden to be shouldered by petitioner, compounded by the fact that the particular police power measure challenged was clearly intended to promote public safety. It would be a rare occurrence indeed for this Court to invalidate a legislative or executive act of that character. None has been called to our attention, an indication of its being non-existent. The latest decision in point, Edu v. Ericta, sustained the validity of the Reflector Law, 25 an enactment conceived with the same end in view. Calalang v. Williams found nothing objectionable in a statute, the purpose of which was: "To

276 promote safe transit upon, and. avoid obstruction on roads and streets designated as national roads * * *. 26 As a matter of fact, the first law sought to be nullified after the effectivity of the 1935 Constitution, the National Defense Act, 27 with petitioner failing in his quest, was likewise prompted by the imperative demands of public safety. 3. The futility of petitioner's effort to nullify both the Letter of Instruction and the implementing rules and regulations becomes even more apparent considering his failure to lay the necessary factual foundation to rebut the presumption of validity. So it was held in Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila. 28 The rationale was clearly set forth in an excerpt from a decision of Justice Branders of the American Supreme Court, quoted in the opinion: "The statute here questioned deals with a subject clearly within the scope of the police power. We are asked to declare it void on the ground that the specific method of regulation prescribed is unreasonable and hence deprives the plaintiff of due process of law. As underlying questions of fact may condition the constitutionality of legislation of this character, the presumption of constitutionality must prevail in the absence of some factual foundation of record in overthrowing the statute. 29 4. Nor did the Solicitor General as he very well could, rely solely on such rebutted presumption of validity. As was pointed out in his Answer "The President certainly had in his possession the necessary statistical information and data at the time he issued said letter of instructions, and such factual foundation cannot be defeated by petitioner's naked assertion that early warning devices 'are not too vital to the prevention of nighttime vehicular accidents' because allegedly only 390 or 1.5 per cent of the supposed 26,000 motor vehicle accidents that in 1976 involved rear-end collisions (p. 12 of petition). Petitioner's statistics is not backed up by demonstrable data on record. As aptly stated by this Honorable Court: Further: "It admits of no doubt therefore that there being a presumption of validity, the necessity for evidence to rebut it is unavoidable, unless the statute or ordinance is void on its face, which is not the case here"' * * *. But even as g the verity of petitioner's statistics, is that not reason enough to require the installation of early warning devices to prevent another 390 rear-end collisions that could mean the death of 390 or more Filipinos and the deaths that could likewise result from head-on or frontal collisions with stalled vehicles?" 30 It is quite manifest then that the issuance of such Letter of Instruction is encased in the armor of prior, careful study by the Executive Department. To set it aside for alleged repugnancy to the due process clause is to give sanction to conjectural claims that exceeded even the broadest permissible limits of a pleader's well known penchant for exaggeration. 5. The rather wild and fantastic nature of the charge of oppressiveness of this Letter of Instruction was exposed in the Answer of the Solicitor General thus: "Such early warning device requirement is not an expensive redundancy, nor oppressive, for car owners whose cars are already equipped with 1) blinking lights in the fore and aft of said motor vehicles,' 2) "battery-powered blinking lights inside motor vehicles," 3) "built-in reflectorized tapes on front and rear bumpers of motor vehicles," or 4) "well-lighted two (2) petroleum lamps (the Kinke) * * * because: Being universal among the signatory countries to the said 1968 Vienna Conventions, and visible even under adverse conditions at a distance of at least 400 meters, any motorist from this country or from any part of the world, who sees a reflectorized rectangular early seaming device installed on the roads, highways or expressways, will conclude, without thinking, that somewhere along the travelled portion of that road, highway, or expressway, there is a motor vehicle which is stationary, stalled or disabled which obstructs or endangers passing traffic. On the other hand, a motorist who sees any of the aforementioned other built in warning devices or the petroleum lamps will not immediately get adequate advance warning because he will still think what that blinking light is all about. Is it an emergency vehicle? Is it a law enforcement car? Is it an ambulance? Such confusion or uncertainty in the mind of the motorist will thus increase, rather than decrease, the danger of collision. 31 6. Nor did the other extravagant assertions of constitutional deficiency go unrefuted in the Answer of the Solicitor General "There is nothing in the questioned Letter of Instruction No. 229, as amended, or in Administrative Order No. 1, which requires or compels motor vehicle owners to purchase the early warning device prescribed thereby. All that is required is for motor vehicle owners concerned like petitioner, to equip their motor vehicles with a pair of this early warning device in question, procuring or obtaining the same from whatever source. In fact, with a little of industry and practical ingenuity, motor vehicle owners can even personally make or produce this early warning device so long as the same substantially conforms with the specifications laid down in said letter of instruction and administrative

277 order. Accordingly the early warning device requirement can neither be oppressive, onerous, immoral, nor confiscatory, much less does it make manufacturers and dealers of said devices 'instant millionaires at the expense of car owners' as petitioner so sweepingly concludes * * *. Petitioner's fear that with the early warning device requirement 'a more subtle racket may be committed by those called upon to enforce it * * * is an unfounded speculation. Besides, that unscrupulous officials may try to enforce said requirement in an unreasonable manner or to an unreasonable degree, does not render the same illegal or immoral where, as in the instant case, the challenged Letter of Instruction No. 229 and implementing order disclose none of the constitutional defects alleged against it. 32 7 It does appear clearly that petitioner's objection to this Letter of Instruction is not premised on lack of power, the justification for a finding of unconstitutionality, but on the pessimistic, not to say negative, view he entertains as to its wisdom. That approach, it put it at its mildest, is distinguished, if that is the appropriate word, by its unorthodoxy. It bears repeating "that this Court, in the language of Justice Laurel, 'does not pass upon questions of wisdom justice or expediency of legislation.' As expressed by Justice Tuason: 'It is not the province of the courts to supervise legislation and keep it within the bounds of propriety and common sense. That is primarily and exclusively a legislative concern.' There can be no possible objection then to the observation of Justice Montemayor. 'As long as laws do not violate any Constitutional provision, the Courts merely interpret and apply them regardless of whether or not they are wise or salutary. For they, according to Justice Labrador, 'are not supposed to override legitimate policy and * * * never inquire into the wisdom of the law.' It is thus settled, to paraphrase Chief Justice Concepcion in Gonzales v. Commission on Elections, that only congressional power or competence, not the wisdom of the action taken, may be the basis for declaring a statute invalid. This is as it ought to be. The principle of separation of powers has in the main wisely allocated the respective authority of each department and confined its jurisdiction to such a sphere. There would then be intrusion not allowable under the Constitution if on a matter left to the discretion of a coordinate branch, the judiciary would substitute its own. If there be adherence to the rule of law, as there ought to be, the last offender should be courts of justice, to which rightly litigants submit their controversy precisely to maintain unimpaired the supremacy of legal norms and prescriptions. The attack on the validity of the challenged provision likewise insofar as there may be objections, even if valid and cogent on is wisdom cannot be sustained. 33 8. The alleged infringement of the fundamental principle of non-delegation of legislative power is equally without any support well-settled legal doctrines. Had petitioner taken the trouble to acquaint himself with authoritative pronouncements from this Tribunal, he would not have the temerity to make such an assertion. An exempt from the aforecited decision of Edu v. Ericta sheds light on the matter: "To avoid the taint of unlawful delegation, there must be a standard, which implies at the very least that the legislature itself determines matters of principle and lays down fundamental policy. Otherwise, the charge of complete abdication may be hard to repel A standard thus defines legislative policy, marks its maps out its boundaries and specifies the public agency to apply it. It indicates the circumstances under which the legislative command is to be effected. It is the criterion by which legislative purpose may be carried out. Thereafter, the executive or administrative office designated may in pursuance of the above guidelines promulgate supplemental rules and regulations. The standard may be either express or implied. If the former, the non-delegation objection is easily met. The standard though does not have to be spelled out specifically. It could be implied from the policy and purpose of the act considered as a whole. In the Reflector Law clearly, the legislative objective is public safety. What is sought to be attained as in Calalang v. Williams is "safe transit upon the roads.' This is to adhere to the recognition given expression by Justice Laurel in a decision announced not too long after the Constitution came into force and effect that the principle of non-delegation "has been made to adapt itself to the complexities of modern governments, giving rise to the adoption, within certain limits, of the principle of "subordinate legislation" not only in the United States and England but in practically all modern governments.' He continued: 'Accordingly, with the growing complexity of modern life, the multiplication of the subjects of governmental regulation, and the increased difficulty of administering the laws, there is a constantly growing tendency toward the delegation of greater powers by the legislature and toward the approval of the practice by the courts.' Consistency with the conceptual approach requires the reminder that what is delegated is authority non-legislative in character, the completeness of the statute when it leaves the hands of Congress being assumed." 34

278 9. The conclusion reached by this Court that this petition must be dismissed is reinforced by this consideration. The petition itself quoted these two whereas clauses of the assailed Letter of Instruction: "[Whereas], the hazards posed by such obstructions to traffic have been recognized by international bodies concerned with traffic safety, the 1968 Vienna Convention on Road Signs and Signals and the United Nations Organization (U.N.); [Whereas], the said Vionna Convention, which was ratified by the Philippine Government under P.D. No. 207, recommended the enactment of local legislation for the installation of road safety signs and devices; * * * " 35 It cannot be disputed then that this Declaration of Principle found in the Constitution possesses relevance: "The Philippines * * * adopts the generally accepted principles of international law as part of the law of the land * * *." 36 The 1968 Vienna Convention on Road Signs and Signals is impressed with such a character. It is not for this country to repudiate a commitment to which it had pledged its word. The concept of Pacta sunt servanda stands in the way of such an attitude, which is, moreover, at war with the principle of international morality. 10. That is about all that needs be said. The rather court reference to equal protection did not even elicit any attempt on the Part of Petitioner to substantiate in a manner clear, positive, and categorical why such a casual observation should be taken seriously. In no case is there a more appropriate occasion for insistence on what was referred to as "the general rule" in Santiago v. Far Eastern Broadcasting Co., 37 namely, "that the constitutionality of a law wig not be considered unless the point is specially pleaded, insisted upon, and adequately argued." 38"Equal protection" is not a talismanic formula at the mere invocation of which a party to a lawsuit can rightfully expect that success will crown his efforts. The law is anything but that. WHEREFORE, this petition is dismissed. The restraining order is lifted. This decision is immediately executory. No costs.