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Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No.

L-49705-09 February 8, 1979 TOMATIC ARATUC, SERGIO TOCAO, CISCOLARIO DIAZ, FRED TAMULA, MANGONTAWAR GURO and BONIFACIO LEGASPI, petitioners, vs. The COMMISSION ON ELECTIONS, REGIONAL BOARD OF CANVASSERS for Region XII (Central Mindanao), ABDULLAH DIMAPORO, JESUS AMPARO, ANACLETO BADOY, et al., respondents. Nos. L-49717-21 February 8,1979.

LINANG MANDANGAN, petitioner, vs. THE COMMISSION ON ELECTIONS, THE REGIONAL BOARD OF CANVASSERS for Region XII, and ERNESTO ROLDAN, respondents. L-49705-09 Lino M. Patajo for petitioners. Estanislao A. Fernandez for private respondents. L-49717-21 Estanislao A. Fernandez for petitioner. Lino M. Patajo for private respondent. Office of the Solicitor General, for Public respondents.

BARREDO, J.: Petition in G. R. Nos. L-49705-09 for certiorari with restraining order and preliminary injunction filed by six (6) independent candidates for representatives to tile Interim Batasang Pambansa who had joined together under the banner of the Kunsensiya ng Bayan which, however, was not registered as a political party or group under the 1976 Election Code, P.D. No. 1296, namely Tomatic Aratuc, Sorgio Tocao, Ciscolario Diaz, Fred Tamula, Mangontawar Guro and Bonifacio Legaspi her referred to as petitioners, to review the decision of the respondent Commission on Election (Comelec) resolving their appeal from the Of the respondent Regional Board of Canvasses for Region XII regarding the canvass of the results of the election in said region for representatives to the I.B.P. held on April 7, 1978. Similar petition in G.R. Nos. L49717-21, for certiorari with restraining order and preliminary injunction
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filed by Linang Mandangan, abo a candidate for representative in the same election in that region, to review the decision of the Comelec declaring respondent Ernesto Roldan as entitled to be proclaimed as one of the eight winners in said election. The instant proceedings are sequels of Our decision in G.R. No. L- 48097, wherein Tomatic Aratuc et al. sought the suspension of the canvass then being undertaken by respondent dent Board in Cotabato city and in which canvass, the returns in 1966 out of a total of 4,107 voting centers in the whole region had already been canvassed showing partial results as follows: NAMES OF CANDIDATES NO. OF VOTES 1. Roldan, Ernesto (KB) 225,674 2. Valdez, Estanislao (KBL) 217,789 3. Dimporo, Abdullah (KBL) 199,244 4. Tocao, Sergio (KB) 199,062 5. Badoy, Anacleto (KBL) 198,966 6. Amparo, Jesus (KBL) 184,764 7. Pangandaman, Sambolayan (KBL) 183,646
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8. Sinsuat, Datu Blah (KBL) 182,457 9. Baga, Tomas (KBL) 171,656 10. Aratuc, Tomatic (KB) 165,795 11. Mandangan, Linang(KB) 165,032 12. Diaz, Ciscolario (KB) 159,977 13. Tamalu, Fred (KB) 153,734 14. Legaspi Bonifacio (KB) 148,200 15. Guro, Mangontawar (KB) 139,386 16. Loma, Nemesio (KB) 107,455 17. Macapeges, Malamama (Independent) 101,350
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(Votes Of the independent candidates who actually were not in contention omitted)" (Page 6, Record, L-49705-09.) A supervening panel headed by Commissioner of Elections, Hon- Venancio S. Duque, had conducted of the complaints of the petitioners therein of alleged irregularities in the election records in all the voting centers in the whole province of Lanao del Sur, the whole City of Marawi, eight (8) towns of Lanao del Norte, namely, Baloi, Karomatan, Matungao, Munai, Nunungan, Pantao Ragat, Tagoloan and Tangcal, seven (7) towns in Maguindanao, namely, Barrira, Datu Piang, Dinaig, Matanog Parang, South Upi and Upi, ten (10) towns in North Cotabato, namely, Carmen, Kabacan, Kidapwan, Magpet, Matalam Midsayap, Pigcawayan, Pikit, Pres. Roxas and Tulonan, and eleven (11) towns in Sultan Kudarat, namely, Bagumbayan, Columbia Don Mariano Marcos, Esperanza, Isulan, Kalamansig, Lebak, Lutayan, Palimbang, President Quirino and Tacurong, by reason for which, petitioners had asked that the returns from said voting centers be excluded from the canvass. Before the start of the hearings, the canvass was suspended but after the supervisory panel presented its report, on May 15, 1978, the Comelec lifted its order of suspension and directed the resumption of the canvass to be done in Manila. This order was the one assailed in this Court. We issued a restraining order. After hearing the parties, the Court allowed the resumption of the canvass but issued the following guidelines to be observed thereat: 1. That the resumption of said canvass shall be held in the Comelec main office in Manila starting not later than June 1, 1978;

2. That in preparation therefor, respondent Commission on Elections shall see to it that all the material election paragraph corresponding to all the voting center involved in Election Nos. 78-8, 78-9, 78-10, 78-11 and 78-12 are taken to its main office in Manila, more particularly, the ballot boxes, with the contents, used during the said elections, the books of voters or records of voting and the lists or records of registered voters, on or before May 31, 1978; 3. That as soon as the corresponding records are available, petitioners and their counsel shall be allowed to examine the same under such security measures as the respondent Board may determine, except the contents of the ballot boxes which shall be opened only upon orders of either the respondent Board or respondent Commission, after the need therefor has become evident, the purpose of such examination being to enable petitioners, and their counsel to expeditiously determine which of them they would wish to be scrutinized and passed upon by the Board as supporting their charges of election frauds and anomalies, petitioners and their counsel being admonished in this connection, that no dilatory tactics should be in by them and that only such records substantial objections should be offered by them for the scrutiny by the Board; 4. That none of the election returns reffered to in the petition herein shall be canvassed without first giving the herein petitioners ample opportunity to make their specific objections thereto, if they have any, and to show sufficient basis for the rejection of any of the returns, and, in this connection, the respondent Regional Board of Canvassers should give due consideration to the points raised in the memorandum filed by said petitioners with the Commission on Election in the above cases dated April 26, 1978; 5. That should it appear to the board upon summary scrutiny of the records to be offered by petitioners indication that in the voting center actually held and/or that election returns were prepared either before the day of the election returns or at any other time, without regard thereto or that there has been massive substitution of voters, or that ballots and/or returns were prepared by the same groups of persons or individuals or outside of the voting centers, the Board should exclude the corresponding returns from the canvass;
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6. That appeals to the commission on Election of the Board may be made only after all the returns in question in all the above, the above five cases shall have been passed upon by the Board and, accordingly, no proclamation made until after the Commission shall have finally resolved the appeal without prejudice to recourse to this court, if warranted as provided by the Code and the Constitution, giving the parties reasonable time therefor; 7. That the copies of the election returns found in the corresponding ballot boxes shall be the one used in the canvass;

8. That the canvass shall be conducted with utmost dispatch, to the end that a proclamation, if feasible, may be made not later than June 10, 1978; thus, the canvass may be terminated as soon as it is evident that the possible number of votes in the still uncanvassed returns with no longer affect the general results of the elections here in controversy; 9. That respondent Commission shall promulgate such other directive not inconsistent with this resolution y necessary to expedite the proceedings herein contemplated and to accomplish the purposes herein intended. (Pp. 8-9, Record. On June 1, 1978, upon proper motion, said guidelines were modified: ... in the sense that the ballot boxes for the voting centers just referred to need not be taken to Manila, EXCEPT those of the particular voting centers as to which the petitioners have the right to demand that the corresponding ballot boxes be opened in order that the votes therein may be counted because said ballots unlike the election returns, have not been tampered with or substituted, which instances the results of the counting shall be specified and made known by petitioners to the Regional Board of Canvassers not later than June 3, 1978; it being understood, that for the purposes of the canvass, the petitioners shall not be allowed to invoke any objection not already alleged in or comprehend within the allegations in their complaint in the election cases above- mentioned. (Page 8, Id.) Thus respondent Board proceeded with the canvass, with the herein petitioners presenting objections, most of them supported by the report of handwriting and finger print experts who had examined the voting records and lists of voters in 878 voting centers, out of 2,700 which they specified in their complaints or petitions in Election Cases 78-8, 78-9, 78-10, 78-11 and 7812 in the Comelec. In regard to 501 voting centers, the records cf. which, consisting of the voters lists and voting records were not available- and could not be brought to Manila, petitions asked that the results therein be completely excluded from the canvass. On July 11, 1978, respondent Board terminated its canvass and declared the result of the voting to be as follows: NAME OF CANDIDATE VOTES OBTAIN VALDEZ, Estanislao 436,069 DIMAPORO, Abdullah 429,351
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PANGANDAMAN, Sambolayan 406,106 SINSUAT, Blah 403,445 AMPARO, Jesus 399,997 MANDANGAN, Linang 387,025 BAGA, Tomas 386,393 BADOY,Anacleto 374,933 ROLDAN, Ernesto 275,141 TOCAO, Sergio 239,914 ARATUC, Tomatic 205,829 GURO, Mangontawar
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190,489 DIAZ, Ciscolario 190,077 TAMULA, Fred 180,280 LEGASPI, Bonifacio 174,396 MACAPEGES, Malamana 160,271 (Pp. 11-12, Record.)

Without loss of time, the petitioners brought the resolution of respondent Board to the Comelec. Hearing was held on April 25, 1978, after which , the case was declared submitted for decision. However, on August 30,1978, the Comelec issued a resolution stating inter alia that : In order to enable the Commission to decide the appeal properly : a. It will have to go deeper into the examination of the voting records and registration records and in the case of voting centers whose voting and registration records which have not yet been submitted for the Commission to decide to open the ballot boxes; and b. To interview and get statements under oath of impartial and disinterested persons from the area to determine whether actual voting took place on April 7, 1978, as well as those of the military authorities in the areas affects (Page 12). Record, L-49705-09 .) On December 11, 1978, the Comelec required the parties "to file their respective written comments on the reports they shall periodically receive from the NBI-Comelec team of finger-print and signature experts within the inextendible period of seven (7) days from their receipt thereof". According to counsel for Aratuc, et al., "Petitioners submitted their various comments on the report 4, the principal gist of which was that it would appear uniformly in all the reports submitted by the Comelec-NBI experts that the registered voters were not the ones who voted as shown by the fact that the thumbprints appearing in Form 1 were different from the thumbprints of the voters in Form 5. " But the Comelec denied a motion of petitioners asking that the ballot boxes corresponding to the voting centers the record of which are not available be opened and that a date be set when the statements of witnesses
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referred to in the August 30, 1978 resolution would be taken, on the ground that in its opinion, it was no longer necessary to proceed with such opening of ballot boxes and taking of statements. For his part, counsel for petitioner M in G.R. No. L-49717-21 filed with Comelec on December 19,1978 a Memorandum. To quote from the petition: On December 19, 1978, the KBL, through counsel, filed a Memorandum for the Kilusang Bagong Lipunan (KBL) Candidates on the Comelec's Resolution of December 11, 1978, a xerox copy of which is attached hereto and made a part hereof as Annex 2, wherein they discussed the following topics: (I) Brief History of the President Case; (II) Summary of Our Position and Submission Before the Honorable commission; and (III) KBL's Appeal Ad Cautelam. And the fourth topic, because of its relevance to the case now before this Honorable Court, we hereby quote for ready reference: IV OUR POSITION WITH RESPECT TO THE ESOLUTION OF THE HONORABLE COMMISSION OF DECEMBER 11, 1978 We respectfully submit that the Resolution of this case by this Honorable Commission should be limited to the precincts and municipalities involved in the KB'S Petitions in Cases Nos. 78-8 to 78-12, on which evidence had been submitted by the parties, and on which the KB submitted the reports of their handwriting-print. Furthermore, it should be limited by the appeal of the KB. For under the Supreme Court Resolution of May 23, 1978, original jurisdiction was given to the Board, with appeal to this Honorable Commission-Considerations of other matters beyond these would be, in our humble opinion, without jurisdiction. For the present, we beg to inform this Honorable Commission that we stand by the reports and findings of the COMELEC/NBI experts as submitted by them to the Regional Board of Canvassers and as confirmed by the said Regional Board of Canvassers in its Resolution of July 11, 1978, giving the 8 KBL candidates the majorities we have already above mentioned. The Board did more than make a summary scrutiny of the records' required by the Supreme Court Resolution, Guideline No. 5, of May 23, 1978. Hence, if for lack of material time we cannot file any Memorandum within the nonextendible period of seven (7) days, we would just stand by said COMELEC/NBI experts' reports to the Regional Board, as confirmed by the Board (subject to our appeal ad cautelam). The COMELEC sent to the parties copies of the reports of the NBI-COMELEC experts. For lack of material time due to the voluminous reports and number of voting centers involved, the Christmas holidays, and our impression that the COMELEC will exercise only its appellate jurisdiction, specially as per resolution of this Honorable Court of May 23, 1978 (in G.R. No. L-48097), we, the KBL, did not comment any more on said reports. (Pp. 5-6, Record, L-49717-21.) On January 13, 1979, the Comelec rendered its resolution being assailed in these cases, declaring the final result of the canvass to be as follows: CANDIDATES
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VOTES VALDEZ, Estanislao 319,514 DIMAPORO, Abdullah 289.751 AMPARO, Jesus 286,180 BADOY, Anacleto 285,985 BAGA, Tomas 271,473 PANGANDAMAN, Sambolayan 271,393 SINSUAT, Blah 269,905 ROLDAN, Ernesto 268,287 MANDANGAN, Linang 251,226
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TACAO, Sergio 229,124 DIAZ, Ciscolario 187,986 ARATUC, Tomatic 183,316 LEGASPI, Bonifacio 178,564 TAMULA, Fred 177,270 GURO, Mangontawar 163,449 LOMA, Nemesio 129,450 (Page 14, Record, L-49705-09.)

It is alleged in the Aratuc petition that: The Comelec committee grave abuse of dicretion, amounting to lack of jurisdiction: 1. In not pursuing further the examination of the registration records and voting records from the other voting centers questioned by petitioners after it found proof of massive substitute voting in all of the voting records and registration records examined by Comelec and NBI experts;
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2. In including in the canvass returns from the voting centers whose book of voters and voting records could not be recovered by the Commission in spite of its repeated efforts to retrieve said records; 3. In not excluding from the canvass returns from voting centers showing a very high percentage of voting and in not considering that high percentage of voting, coupled with massive substitution of voters is proof of manufacturing of election returns; 4. In denying petitioners' petition for the opening of the ballot boxes from voting centers whose records are not available for examination to determine whether or not there had been voting in said voting centers; 5. In not Identifying the ballot boxes that had no padlocks and especially those that were found to be empty while they were shipped to Manila pursuant to the directive of the Commission in compliance with the guidelines of this Honorable Court; 6. In not excluding from the canvass returns where the results of examination of the voting records and registration records show that the thumbprints of the voters in CE Form 5 did not correspond to those of the registered voters as shown in CE Form 1; 7. In giving more credence to the affidavits of chairmen and members of the voting centers, municipal treasurers and other election officials in the voting centers where irregularities had been committed and not giving credence to the affidavits of watchers of petitioners; 8. In not including among those questioned before the Board by petitioners those included among the returns questioned by them in their Memorandum filed with the Commission on April 26, 1978, which Memorandum was attached as Annex 'I' to their petition filed with this Honorable Court G.R. No. L-48097 and which the Supreme Court said in its Guidelines should be considered by the Board in the course of the canvass (Guidelines No. 4). (Pp. 15-16, Record, Id.) On the other hand, the Mandangan petition submits that the Comelec comitted the following errors: 1. In erroneously applying the earlier case of Diaz vs. Commission on Elections (November 29, 1971; 42 SCRA 426), and particularly the highly restrictive criterion that when the votes obtained by the candidates with the highest number of votes exceed the total number of highest possible valid votes, the COMELEC ruled to exclude from the canvass the election return reflecting such rests, under which the COMELEC excluded 1,004 election returns, involving around 100,000 votes, 95 % of which are for KBL candidates, particularly the petitioner Linang Mandangan, and which rule is so patently unfair, unjust and oppressive. 2. In not holding that the real doctrine in the Diaz Case is not the total exclusion of election returns simply because the total number of votes exceed the total number of highest possible valid votes, but 'even if all the votes cast by persons Identified as registered voters were added to the votes cast by persons who can not be definitely ascertained as registered or not, and granting, ad arguendo, that all of them voted for respondent Daoas, still the resulting total is much below the number of votes credited to the latter in returns for Sagada, 'and that 'of the 2,188 ballots cast in Sagada, nearly one-half (1,012) were cast by persons definitely Identified as not registered therein or still more than 40 % of substitute voting which was the rule followed in the later case of Bashier/Basman (Diaz Case, November 19,1971,42 SCRA 426,432).

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3. In not applying the rule and formula in the later case of Bashier and Basman vs. Commission on Election (February 24, 1972, 43 SCRA 238) which was the one followed by the Regional Board of Canvassers, to wit: In Basman vs Comelec (L-33728, Feb. 24, 1972) the Supreme Court upheld the Supreme Court upheld the ruling of the Commission setting the standard of 40 % excess votes to justify the exclusion of election returns. In line with the above ruling, the Board of Canvassers may likewise set aside election returns with 40 % substitute votes. Likewise, where excess voting occured and the excess was such as to destroy the presumption of innocent mistake, the returns was excluded. (COMELEC'S Resolution, Annex I hereof, p. 22), which this Honorable Court must have meant when its Resolution of May 23, 1978 (G.R. No. 7), it referred to "massive substitution of voters. 4. In examining, through the NBI/COMELEC experts, the records in more than 878 voting centers examined by the KB experts and passed upon by the Regional Board of Canvassers which was all that was within its appellate jurisdiction is examination of more election records to make a total of 1,085 voting centers (COMELEC'S Resolution, Annex 1 hereof, p. 100), being beyond its jurisdiction and a denial of due process as far as the KBL, particularly the petitioner Mandangan, were concerned because they were informed of it only on December, 1978, long after the case has been submitted for decision in September, 1978; and the statement that the KBL acquiesced to the same is absolutely without foundation. 5. In excluding election returns from areas where the conditions of peace and order were allegedly unsettled or where there was a military operation going on immediately before and during election and where the voter turn out was high (90 % to 100 %), and where the people had been asked to evacuate, as a ruling without jurisdiction and in violation of due process because no evidence was at all submitted by the parties before the Regional Board of Canvasssers. (Pp. 23-25, Record, L-47917-21.) Now before discussing the merits of the foregoing contentions, it is necessary to clarify first the nature and extent of the Supreme Court's power of review in the premises. The Aratuc petition is expressly predicated on the ground that respondent Comelec "committed grave abuse of discretion, amounting to lack of jurisdiction" in eight specifications. On the other hand, the Mandangan petition raises pure questions of law and jurisdiction. In other words, both petitions invoked the Court's certiorari jurisdiction, not its appellate authority of review. This is as it should be. While under the Constitution of 1935, "the decisions, orders and rulings of the Commission shall be subject to review by the Supreme Court" (Sec. 2, first paragraph, Article X) and pursuant to the Rules of Court, the petition for "certiorari or review" shall be on the ground that the Commission "has decided a question of substance not theretofore determined by the Supreme Court, or has decided it in a way not in accord with law or the applicable decisions of the Supreme Court" (Sec. 3. Rule 43), and such provisions refer not only to election contests but even to pre-proclamation proceedings, the 1973 Constitution provides somewhat differently thus: "Any decision, order or ruling of the Commission may be brought to the Supreme Court on certiorari by the aggrieved party within thirty days from his receipt of a copy thereof" (Section 11, Article XII c), even as it ordains that the Commission shall "be the sole judge of all contests relating to the elections, returns and qualifications of all members of the National Assembly and elective provincial and city official" (Section 2(2).) Correspondingly, the ElectionCode of 1978, which is the first legislative constructionof the pertinent constitutional provisions, makes the Commission also the "sole judge of all pre-proclamation controversies" and further provides that "any of its decisions, orders or rulings (in such contoversies) shall be final and executory", just as in election contests, "the decision of the Commission shall be final, and executory and inappealable." (Section 193)
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It is at once evident from these constitutional and statutory modifications that there is a definite tendency to enhance and invigorate the role of the Commission on Elections as the independent constitutinal body charged with the safeguarding of free, peaceful and honest elections. The framers of the new Constitution must be presumed ot have definite knowledge of what it means to make the decisions, orders and rulings of the Commission "subject to review by the Supreme Court". And since instead of maintaining that provision intact, it ordained that the Commission's actuations be instead "brought to the Supreme Court on certiorari", We cannot insist that there was no intent to change the nature of the remedy, considering that the limited scope of certiorari, compared to a review, is well known in remedial law. Withal, as already stated, the legislative construction of the modified peritinent constitutional provision is to the effect that the actuations of the Commission are final, executory and even inappealable. While such construction does not exclude the general certiorari jurisdiction of the Supreme Court which inheres in it as the final guardian of the Constitution, particularly, of its imperious due process mandate, it correspondingly narrows down the scope and extent of the inquiry the Court is supposed to undertake to what is strictly the office of certiorari as distinguished from review. We are of the considered opinion that the statutory modifications are consistent with the apparent new constitional intent. Indeed, it is obvious that to say that actuations of the Commission may be brought to the Supreme Court on certiorari technically connotes something less than saying that the same "shall be subject to review by the Supreme Court", when it comes to the measure of the Court's reviewing authority or prerogative in the premises. A review includes digging into the merits and unearthing errors of judgment, while certiorari deals exclusively with grave abuse of discretion, which may not exist even when the decision is otherwise erroneous. certiorari implies an indifferent disregard of the law, arbitrariness and caprice, an omission to weight pertinent considerations, a decision arrived at without rational deliberation. While the effecdts of an error of judgment may not differ from that of an indiscretion, as a matter of policy, there are matters taht by their nature ought to be left for final determination to the sound discretion of certain officers or entities, reserving it to the Supreme Court to insure the faithful observance of due process only in cases of patent arbitrariness. Such, to Our mind, is the constitutional scheme relative to the Commission on Elections. Conceived by the charter as the effective instrument to preserve the sanctity of popular suffrage, endowed with independence and all the needed concommittant powers, it is but proper that the Court should accord the greatest measure of presumption of regularity to its course of action and choice of means in performing its duties, to the end that it may achieve its designed place in the democratic fabric of our government. Ideally, its members should be free from all suspicions of partisan inclinations, but the fact that actually some of them have had stints in the arena of politics should not, unless the contrary is shown, serve as basis for denying to its actuations the respect and consideration that the Constitution contemplates should be accorded to it, in the same manner that the Supreme Court itself which from time to time may have members drawn from the political ranks or even from military is at all times deemed insulated from every degree or form of external pressure and influence as well as improper internal motivations that could arise from such background or orientation. We hold, therefore that under the existing constitution and statutory provisions, the certiorari jurisdiction of the Court over orders, and decisions of the Comelec is not as broad as it used to be and should be confined to instances of grave abuse of discretion amounting to patent and substantial denial of due process. Accordingly, it is in this light that We the opposing contentions of the parties in this cases. THE MANDANGAN CASE Being more simple in Our view, We shall deal with the petition in G.R. No. L-49717-21 first.
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The errors assigned in this petition boil down to two main propositions, namely, (1) that it was an error of law on the part of respondent Comelec to have applied to the extant circumstances hereof the ruling of this Court in Diaz vs. Comelec 42 SCRA 426 instead of that of Bashier vs. Comelec 43 SCRA 238; and (2) that respondent Comelec exceeded its jurisdiction and denied due process to petitioner Mandangan in extending its inquiry beyond the election records of "the 878 voting centers examined by the KB experts and passed upon by the Regional Board of Canvassers" and in excluding from the canvass the returns showing 90 to 100 % voting, from voting centers where military operations were by the Army to be going on, to the extent that said voting centers had to be transferred to the poblaciones the same being by evidence. Anent the first proposition, it must be made clear that the Diaz and Bashier rulings are not mutually exclusive of each other, each being an outgrowth of the basic rationale of statistical improbability laid down in Lagumbay vs. Comelec and , 16 SCRA 175. Whether they be apply together or separately or which of them be applied depends on the situation on hand. In the factual milieu of the instant case as found by the Comelec, We see no cogent reason, and petitioner has not shown any, why returns in voting centers showing that the votes of the candidate obtaining highest number of votes of the candidate obtaining the highest number of votes exceeds the highest possible number of valid votes cast therein should not be deemed as spurious and manufactured just because the total number of excess votes in said voting centers were not more than 40 %. Surely, this is not the occasion, consider the historical antecedents relative to the highly questionable manner in which elections have been bad in the past in the provinces herein involved, of which the Court has judicial notice as attested by its numerous decisions in cases involving practically every such election, of the Court to move a whit back from the standards it has enunciated in those decisions. In regard to the jurisdictional and due process points raised by herein petitioner, it is of decisive importance to bear in mind that under Section 168 of the Revised Election Code of 1978, "the Commission (on Elections) shall have direct control and supervision on over the board of canvassers" and that relatedly, Section 175 of the same Code provides that it "shall be the sole judge of all pre-proclamation controversies." While nominally, the procedure of bringing to the Commission objections to the actuations of boards of canvassers has been quite loosely referred to in certain quarters, even by the Commission and by this Court, such as in the guidelines of May 23,1978 quoted earlier in this opinion, as an appeal, the fact of the matter is that the authority of the Commission in reviewing such actuations does not spring from any appellate jurisdiction conferred by any specific provision of law, for there is none such provision anywhere in the Election Code, but from the plenary prerogative of direct control and supervision endowed to it by the abovequoted provisions of Section 168. And in administrative law, it is a too well settled postulate to need any supporting citation here, that a superior body or office having supervision and control over another may do directly what the latter is supposed to do or ought to have done. Consequently, anything said in Lucman vs. Dimaporo, 33 SCRA 387, cited by petitioner, to the contrary notwithstanding, We cannot fault respondent Comelec for its having extended its inquiry beyond that undertaken by the Board of Canvass On the contrary, it must be stated that Comelec correctly and commendably asserted its statutory authority born of its envisaged constitutional duties vis-a-vis the preservation of the purity of elections and electoral processes and p in doing what petitioner it should not have done. Incidentally, it cannot be said that Comelec went further than even what Aratuc et al. have asked, since said complaints had impugned from the outset not only the returns from the 878 voting centers examined by their experts but all those mentioned in their complaints in the election cases filed originally with the Comelec enumerated in the opening statements hereof, hence respondent Comelec had that much field to work on. The same principle should apply in respect to the ruling of the Commission regarding the voting centers affected by military operations. It took cognizance of the fact, not considered by the board of canvass, that said voting centers had been transferred to the poblaciones. And, if only for purposes of preproclamation proceedings, We are persuaded it did not constitute a denial of due process for the Commission to have taken into account, without the
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need or presentation of evidence by the parties, a matter so publicly notorious as the unsettled situation of peace and order in localities in the provinces herein involved that their may perhaps be taken judicial notice of, the same being capable of unquestionable demonstration. (See 1, Rule 129) In this connection, We may as well perhaps, say here as later that regrettably We cannot, however, go along with the view, expressed in the dissent of our respected Chief Justice, that from the fact that some of the voting centers had been transferred to the poblaciones there is already sufficient basis for Us to rule that the Commission should have also subjected all the returns from the other voting centers of the some municipalities, if not provinces, to the same degree of scrutiny as in the former. The majority of the Court feels that had the Commission done so, it would have fallen into the error by petitioner Mandangan about denial of due process, for it is relatively unsafe to draw adverse conclusions as to the exact conditions of peace and order in those other voting centers without at list some prima facie evidence to rely on considering that there is no allegation, much less any showing at all that the voting centers in question are so close to those excluded by the Comelec on as to warrant the inescapable conclusion that the relevant circumstances by the Comelec as obtaining in the latter were Identical to those in the former. Premises considered the petition in G.R. Nos. L-49717-21 is hereby dismiss for lack of merit. THE ARATUC ET AL. PETITION Of the eight errors assigned by herein petitioners earlier adverted to, the seventh and the sight do not require any extended disquisition. As to the issue of whether the elections in the voting centers concerned were held on April 7, 1978, the date designated by law, or earlier, to which the seventh alleged error is addressed, We note that apparently petitioners are not seriously pressing on it anymore, as evidenced by the complete absence of any reference thereto during the oral argument of their counsel and the practically cavalier discussion thereof in the petition. In any event, We are satisfied from a careful review of the analysis by the Comelec in its resolution now before Us that it took pains to consider as meticulously as the nature of the evidence presented by both parties would permit all the contentions of petitioners relative to the weight that should be given to such evidence. The detailed discussion of said evidence is contained in not less than nineteen pages (pp. 70-89) of the resolution. In these premises, We are not prepared to hold that Comelec acted wantonly and arbitrarily in drawing its conclusions adverse to petitioners' position. If errors there are in any of those conclusions, they are errors of judgment which are not reviewable in certiorari, so long as they are founded on substantial evidence. As to eighth assigned error. the thrust of respondents, comment is that the results in the voting centers mentioned in this assignment of error had already been canvassed at the regional canvass center in Cotabato City. Again, We cannot say that in sustaining the board of canvassers in this regard, Comelec gravely abused its discretion, if only because in the guidelines set by this Court, what appears to have been referred to is, rightly or wrongly, the resumption only of the canvass, which does not necessarily include the setting aside and repetition of the canvass already made in Cotabato City. The second and fourth assignments of error concern the voting centers the corresponding voters' record (C.E. Form 1) and record of voting, (C.E. Form 5) of which have never been brought to Manila because they, were not available The is not clear as to how many are these voting centers. According to petitioners they are 501, but in the Comelec resolution in question, the number mentioned is only 408, and this number is directly challenged in the petition. Under the second assignment, it is contended that the Comelec gravely abused its discretion in including in the canvass the election returns from these voting centers and, somewhat alternatively, it is alleged as fourth assignment that the petitioners motion for the opening of the ballot boxes pertaining to said voting centers was arbitraly denied by respondent Comelec. The resolution under scrutiny explains the situation that confronted the Commission in regard to the 408 voting centers reffered to as follows :
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The Commission had the option of excluding from the canvass the election returns under category. By deciding to exclude, the Commission would be summarily disenfranchising the voters registered in the voting centers affected without any basis. The Commission could also order the inclusion in the canvass of these elections returns under the injunction of the Supreme Court that extremes caution must be exercised in rejecting returns unless these are palpably irregular. The Commission chose to give prima facie validity to the election returns mentioned and uphold the votes cast by the voters in those areas. The Commission held the view that the failure of some election officials to comply with Commission orders(to submit the records) should not parties to such official disobedience. In the case of Lino Luna vs. Rodriguez, 39 Phil. 208, the Supreme Court ruled that when voters have honestly cast their ballots, the same should not be nullified because the officers appointed under the law to direct the election and guard the purity of the ballot have not complied with their duty. (cited in Laurel on Elections, p. 24) On page 14 of the comment of the Solicitor General, however, it is stated that: At all events, the returns corresponding to these voting centers were examined by the Comelec and 141 of such returns were excluded, as follows: SUMMARY PROVINCE TOTAL EXCLUDED INCLUDED Lanao del Norte 30 30 Lanao del Sur 342 137 205
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Maguindanao 21 1 20 North Cotabato 7 1 6 Sultan Kudarat 12 2 10 totals ----412 141 271 (Page 301, Record.) This assertion has not been denied by petitioners. Thus, it appears that precisely use of the absence or unavailability of the CE Forms 1 and 5 corresponding to the more than 400 voting centers concerned in our present discussion the Comelec examined the returns from said voting centers to determine their trustworthiness by scrutinizing the purported
17

relevant data appearing on their faces, believing that such was the next best thing that could be done to avoid total disenfranchisement of the voters in all of them On the Other hand, Petitioners' insist that the right thing to do was to order the opening of the ballot boxes involved. In connection with such opposing contentions, Comelec's explanation in its resolution is: ... The commission had it seen fit to so order, could have directed the opening of the ballot boxes. But the Commission did not see the necessity of going to such length in a that was in nature and decided that there was sufficient bases for the revolution of the appeal. That the Commission has discretion to determine when the ballot boxes should be opened is implicit in the guidelines set by the Supreme Court which states that '. . . the ballot bones [which] shall be opened only upon orders of either the respondent Board or respondent Commission, after the need therefor has become evident ... ' (guideline No. 3; emphasissupplied). Furthermore, the Court on June 1, 1978, amended the guidelines that the "ballot boxes for the voting centers ... need not be taken to Manila EXCEPT those of the centers as to which the petitioners have the right to demand that the corresponding ballot boxes be opened ... provided that the voting centers concerned shall be specified and made known by petitioners to the Regional Board of Canvassers not later than June 3,1978 ... ' (Emphasis supplied). The KB, candidates did not take advantage of the option granted them under these guidelines.( Pp 106-107, Record.) Considering that Comelec, if it had wished to do so, had the facilities to Identify on its own the voting centers without CE Forms I and 5, thereby precluding the need for the petitioners having to specify them, and under the circumstances the need for opening the ballot boxes in question should have appeared to it to be quite apparent, it may be contended that Comelec would have done greater service to the public interest had it proceeded to order such opening, as it had announced it had thoughts of doing in its resolution of August 30, 1978. On the other hand, We cannot really blame the Commission too much, since the exacting tenor of the guidelines issued by Us left it with very little elbow room, so to speak, to use its own discretion independently of what We had ordered. What could have saved matters altogether would have been a timely move on the part of petitioners on or before June 3, 1978, as contemplated in Our resolution. After all come to think of it, that the possible outcome of the opening of the ballot boxes would favor the petitioners was not a certainty the contents them could conceivably boomerang against them, such as, for example, if the ballots therein had been found to be regular and preponderantly for their opponents. Having in mind that significantly, petitioners filed their motion for only on January 9, 1979, practically on the eve of the promulgation of the resolution, We hold that by having adhered to Our guidelines of June 1, 1978, Comelec certainly cannot be held to be guilty of having gravely abused its discretion, in examining and passing on the returns from the voting centers reffered to in the second and fourth assignments of error in the canvass or in denying petitioners' motion for the of the ballot boxes concerned. The first, third and sixth assignment of involve related matters and maybe discussed together. They all deal with the inclusion in or exclusion from the canvass of returns on the basis of the percentage of voting in specified voting centers and the corresponding findings of the Comelec on the extent of substitute voting therein as indicated by the result of either the technical examination by experts of the signatures and thumb-prints of the voters threat. To begin with, petitioners' complaint that the Comelec did not examine and study 1,694 of the records in an the 2,775 voting centers questioned by them is hardly accurate. To be more exact, the Commission excluded a total of 1,267 returns coming under four categories namely: 1,001 under the Diaz, supra, ruling, 79 because of 90-100 % turnout of voters despite military operations, 105 palpably manufactured owe and 82 returns excluded by the board of canvass on other grounds. Thus, 45.45 % of the of the petitioners were sustained by the Comelec. In contrast, in the board of canvassers, only 453 returns were excluded. The board was reversed as to 6 of these, and 821 returns were excluded by Comelec over and above those excluded by the board. In other words, the Comelec almost doubled the exclusions by the board.

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Petitioners would give the impression by their third assignment of error that Comelec refused to consider high percentage of voting, coupled with mass substitute voting, as proof that the pertinent returns had been manufactured. That such was not the case is already shown in the above specifications. To add more, it can be gleaned from the resolution that in t to the 1,065 voting centers in Lanao del Sur and Marawi City where a high percentage of voting appeared, the returns from the 867 voting centers were excluded by the Comelec and only 198 were included a ratio of roughly 78 % to 22 %. The following tabulation drawn from the figures in the resolution shows how the Comelec went over those returns center by center and acted on them individually: 90% 100% VOTING MARAWI CITY AND LANAO DEL SUR NO. OF V/C THAT V/C WITH 90% to 100% MUNICIPALITIES FUNCTIONED VOTING

No. of V/C Excluded Included Marawi City 151 112 107 5 Bacolod Grande 28 28
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27 1 Balabagan 53 53 49 4 Balindong 22 22 15 7 Bayang 29 20 13 7 Binidayan 37


20

33 29 4 Buadiposo Bunton 41 10 10 0 Bubong 24 23 21 2 Bumbaran 21 (All excluded)

Butig 35
21

33 32 1 Calanogas 23 21 21 0 Ditsaan-Ramain 42 39 38 1 Ganassi 39 38 23 15 Lumba Bayabao


22

64 63 47 16 Lumbatan 30 28 17 11 Lumbayanague 37 33 28 5 Madalum 14 13 6 7 Madamba


23

20 20 5 15 Maguing 57 55 53 2 Malabang 59 47 5 42 Marantao 79 63 41 22


24

Marugong 37 35 32 3 Masiu 27 26 24 2 Pagayawan 15 13 9 4 Piagapo 39 39 36 3


25

Poona-Bayabao 44 44 42 2 Pualas 23 20 20 0 Saguiaran 36 32 21 11 Sultan Gumander 35 31 31


26

0 Tamparan 24 21 15 6 Taraka 31 31 31 0 Tubaran 23 19 19 0 TOTALS: Marawi &

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Lanao del Sur 1,218 1,065 867 198 We are convinced, apart from presuming regularity in the performance of its duties, that there is enough showing in the record that it did examine and study the returns and pertinent records corresponding to all the 2775 voting centers subject of petitioners' complaints below. In one part of its resolution the Comelec states: The Commission as earlier stated examined on its own the Books of Voters (Comelec Form No. 1) and the Voters Rewards Comelec Form No. 5) to determine for itself which of these elections form needed further examination by the COMELEC-NBI experts. The Commission, aware of the nature of this pre-proclamation controversy, believes that it can decide, using common sense and perception, whether the election forms in controversy needed further examination by the experts based on the presence or absence of patent signs of irregularity. (Pp. 137-138, Record.) In the face of this categorical assertion of fact of the Commission, the bare charge of petitioners that the records pertaining to the 1,694 voting centers assailed by them should not create any ripple of serious doubt. As We view this point under discussion, what is more factually accurate is that those records complained of were not examined with the aid of experts and that Comelec passed upon the returns concerned "using common sense and perception only." And there is nothing basically objectionable in this. The defunct Presidential Senate and House Electoral Tribunals examine passed upon and voided millions of votes in several national elections without the assistance of experts and "using" only common sense and perception". No one ever raised any eyebrows about such procedure. Withal, what we discern from the resolution is that Comelec preliminary screened the records and whatever it could not properly pass upon by "using common sense and perception" it left to the experts to work on. We might disagree with he Comelec as to which voting center should be excluded or included, were We to go over the same records Ourselves, but still a case of grave abuse of discretion would not come out, considering that Comelec cannot be said to have acted whimsically or capriciously or without any rational basis, particularly if it is considered that in many respects and from the very nature of our respective functions, becoming candor would dictate to Us to concede that the Commission is in a better position to appreciate and assess the vital circumstances closely and accurately. By and large, therefore, the first, third and sixth assignments of error of the petitioners are not well taken. The fifth assignment of error is in Our view moot and academic. The Identification of the ballot boxes in defective condition, in some instances open and allegedly empty, is at best of secondary import because, as already discussed, the records related thereto were after all examined, studied and passed upon. If at all, deeper inquiry into this point would be of real value in an electoral protest.
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CONCLUSION Before closing, it may not be amiss to state here that the Court had initially agreed to dispose of the cases in a minute resolution, without prejudice to an extended or reasoned out opinion later, so that the Court's decision may be known earlier. Considering, however, that no less than the Honorable Chief Justice has expressed misgivings as to the propriety of yielding to the conclusions of respondent Commission because in his view there are strong considerations warranting farther meticulous inquiry of what he deems to be earmarks of seemingly traditional faults in the manner elections are held in the municipalities and provinces herein involved, and he is joined in this pose by two other distinguished colleagues of Ours, the majority opted to ask for more time to put down at least some of the important considerations that impelled Us to see the matters in dispute the other way, just as the minority bidded for the opportunity to record their points of view. In this manner, all concerned will perhaps have ample basis to place their respective reactions in proper perspective. In this connection, the majority feels it is but meet to advert to the following portion of the ratiocination of respondent Board of Canvassers adopted by respondent Commission with approval in its resolution under question: First of all this Board was guided by the legal doctrine that canvassing boards must exercise "extreme caution" in rejecting returns and they may do so only when the returns are palpably irregular. A conclusion that an election return is obviously manufactured or false and consequently should be disregarded in the canvass must be approached with extreme caution, and only upon the most convincing proof. Any plausible explanation one which is acceptable to a reasonable man in the light of experience and of the probabilities of the situation, should suffice to avoid outright nullification, with the resulting t of those who exercised their right of suffrage. (Anni vs. Isquierdo et at L-35918, Jude 28,1974; Villavon v. Comelec L-32008, August 31,1970; Tagoranao v. Comelec 22 SCRA 978). In the absence of strong evidence establishing the spuriousness of the return, the basis rule of their being accorded prima facie status as bona fide reports of the results of the count of the votes for canvassing and proclamation purposes must be applied, without prejudice to the question being tried on the merits with the presentation of evidence, testimonial and real in the corresponding electoral protest. (Bashier vs. Comelec L-33692, 33699, 33728, 43 SCRA 238, February 24, 1972). The decisive factor is that where it has been duly de ed after investigation and examination of the voting and registration records hat actual voting and election by the registered voters had taken place in the questioned voting centers, the election returns cannot be disregarded and excluded with the resting disenfranchisement of the voters, but must be accorded prima facie status as bona fide reports of the results of the voting for canvassing and registration purposes. Where the grievances relied upon is the commission of irregularities and violation of the Election Law the proper remedy is election protest. (Anni vs. Isquierdo et al. Supra). (P. 69, Record, L49705-09). The writer of this opinion has taken care to personally check on the citations to be doubly sure they were not taken out of context, considering that most, if not all of them arose from similar situations in the very venues of the actual milieu of the instant cases, and We are satisfied they do fit our chosen posture. More importantly, they actually came from the pens of different members of the Court, already retired or still with Us, distinguished by their perspicacity and their perceptive prowess. In the context of the constitutional and legislative intent expounded at the outset of this opinion and evident in the modifications of the duties and responsibilities of the Commission on Elections vis-a-vis the matters that have concerned Us herein, particularly the elevation of the Commission as the "sole judge of pre-proclamation controversies" as well as of all electoral contests, We find the afore-quoted doctrines compelling as they reveal through the clouds of existing jurisprudence the pole star by which the future should be guided in delineating and circumscribing separate spheres of action of the Commission as it functions in its equally important dual role just indicated bearing as they do on the purity and sanctity of elections in this country.
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In conclusion, the Court finds insufficient merit in the petition to warrant its being given due course. Petition dismissed, without pronouncement as to costs. Justices Fernando, Antonio and Guerrero who are presently on official missions abroad voted for such dismissal.

EN BANC [G.R. Nos. 95203-05 : December 18, 1990.] 192 SCRA 363 SENATOR ERNESTO MACEDA, Petitioner, vs. ENERGY REGULATORY BOARD (ERB); MARCELO N. FERNANDO, ALEJANDRO B. AFURONG; REX V. TANTIONGCO; and OSCAR E. ALA, in their collective official capacities as Chairman and Members of the Board (ERB), respectively; CATALINO MACARAIG, in his quadruple official capacities as Executive Secretary, Chairman of Philippine National Oil Company; Office of the Energy Affairs, and with MANUEL ESTRELLA, in their respective official capacities as Chairman and President of the Petron Corporation; PILIPINAS SHELL PETROLEUM CORPORATION; with CESAR BUENAVENTURA and REY GAMBOA as chairman and President, respectively; CALTEX PHILIPPINES with FRANCIS ABLAN, President and Chief Executive Officer; and the Presidents of Philippine Petroleum Dealer's Association, Caltex Dealer's Co., Petron Dealer's Asso., Shell Dealer's Asso. of the Phil., Liquefied Petroleum Gas Institute of the Phils., any and all concerned gasoline and petrol dealers or stations; and such other persons, officials, and parties, acting for and on their behalf; or in representation of and/or under their authority, Respondents. [G.R. Nos. 95119-21 : December 18, 1990.] 192 SCRA 363 OLIVER O. LOZANO, Petitioner, vs. ENERGY REGULATORY BOARD (ERB), PILIPINAS SHELL PETROLEUM CORPORATION, CALTEX (PHIL.), INC., and PETRON CORPORATION, Respondents.

DECISION

SARMIENTO, J.:

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The petitioners pray for injunctive relief, to stop the Energy Regulatory Board (Board hereinafter) from implementing its Order, dated September 21, 1990, mandating a provisional increase in the prices of petroleum and petroleum products, as follows: PRODUCTS IN PESOS PER LITER OPSF Premium Gasoline 1.7700 Regular Gasoline 1.7700 Avturbo 1.8664 Kerosene 1.2400 Diesel Oil 1.2400 Fuel Oil 1.4900 Feedstock 1.4900 LPG 0.8487 Asphalts 2.7160 Thinners 1.7121 1 It appears that on September 10, 1990, Caltex (Philippines), Inc., Pilipinas Shell Petroleum Corporation, and Petron Corporation proferred separate applications with the Board for permission to increase the wholesale posted prices of petroleum products, as follows: Caltex P3.2697 per liter Shell 2.0338 per liter Petron 2.00 per liter 2 and meanwhile, for provisional authority to increase temporarily such wholesale posted prices pending further proceedings.:-cralaw On September 21, 1990, the Board, in a joint (on three applications) Order granted provisional relief as follows:
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WHEREFORE, considering the foregoing, and pursuant to Section 8 of Executive Order No. 172, this Board hereby grants herein applicants' prayer for provisional relief and, accordingly, authorizes said applicants a weighted average provisional increase of ONE PESO AND FORTY-TWO CENTAVOS (P1.42) per liter in the wholesale posted prices of their various petroleum products enumerated below, refined and/or marketed by them locally. 3 The petitioners submit that the above Order had been issued with grave abuse of discretion, tantamount to lack of jurisdiction, and correctible by Certiorari. The petitioner, Senator Ernesto Maceda, 4 also submits that the same was issued without proper notice and hearing in violation of Section 3, paragraph (e), of Executive Order No. 172; that the Board, in decreeing an increase, had created a new source for the Oil Price Stabilization Fund (OPSF), or otherwise that it had levied a tax, a power vested in the legislature, and/or that it had "re-collected", by an act of taxation, ad valorem taxes on oil which Republic Act No. 6965 had abolished. The petitioner, Atty. Oliver Lozano, 5 likewise argues that the Board's Order was issued without notice and hearing, and hence, without due process of law. The intervenor, the Trade Union of the Philippines and Allied Services (TUPAS/FSM)-W.F.T.U., 6 argues on the other hand, that the increase cannot be allowed since the respondents oil companies had not exhausted their existing oil stock which they had bought at old prices and that they cannot be allowed to charge new rates for stock purchased at such lower rates. The Court set the cases (in G.R. Nos. 95203-05) for hearing on October 25, 1990, in which Senator Maceda and his counsel, Atty. Alexander Padilla, argued. The Solicitor General, on behalf of the Board, also presented his arguments, together with Board Commissioner Rex Tantiangco. Attys. Federico Alikpala, Jr. and Joselia Poblador represented the oil firms (Petron and Caltex, respectively). The parties were thereafter required to submit their memorandums after which, the Court considered the cases submitted for resolution. On November 20, 1990, the Court ordered these cases consolidated. On November 27, 1990, we gave due course to both petitions. The Court finds no merit in these petitions. Senator Maceda and Atty. Lozano, in questioning the lack of a hearing, have overlooked the provisions of Section 8 of Executive Order No. 172, which we quote: "SECTION 8. Authority to Grant Provisional Relief . The Board may, upon the filing of an application, petition or complaint or at any stage thereafter and without prior hearing, on the basis of supporting papers duly verified or authenticated, grant provisional relief on motion of a party in the case or on its own initiative, without prejudice to a final decision after hearing, should the Board find that the pleadings, together with such affidavits, documents and
32

other evidence which may be submitted in support of the motion, substantially support the provisional order: Provided, That the Board shall immediately schedule and conduct a hearing thereon within thirty (30) days thereafter, upon publication and notice to all affected parties.: nad As the Order itself indicates, the authority for provisional increase falls within the above provision. There is no merit in the Senator's contention that the "applicable" provision is Section 3, paragraph (e) of the Executive Order, which we quote: (e) Whenever the Board has determined that there is a shortage of any petroleum product, or when public interest so requires, it may take such steps as it may consider necessary, including the temporary adjustment of the levels of prices of petroleum products and the payment to the Oil Price Stabilization Fund created under Presidential Decree No. 1956 by persons or entities engaged in the petroleum industry of such amounts as may be determined by the Board, which will enable the importer to recover its cost of importation. What must be stressed is that while under Executive Order No. 172, a hearing is indispensable, it does not preclude the Board from ordering, ex parte, a provisional increase, as it did here, subject to its final disposition of whether or not: (1) to make it permanent; (2) to reduce or increase it further; or (3) to deny the application. Section 37 paragraph (e) is akin to a temporary restraining order or a writ of preliminary attachment issued by the courts, which are given ex parte, and which are subject to the resolution of the main case. Section 3, paragraph (e) and Section 8 do not negate each other, or otherwise, operate exclusively of the other, in that the Board may resort to one but not to both at the same time. Section 3(e) outlines the jurisdiction of the Board and the grounds for which it may decree a price adjustment, subject to the requirements of notice and hearing. Pending that, however, it may order, under Section 8, an authority to increase provisionally, without need of a hearing, subject to the final outcome of the proceeding. The Board, of course, is not prevented from conducting a hearing on the grant of provisional authority which is of course, the better procedure however, it cannot be stigmatized later if it failed to conduct one. As we held in Citizens' Alliance for Consumer Protection v. Energy Regulatory Board. 7 In the light of Section 8 quoted above, public respondent Board need not even have conducted formal hearings in these cases prior to issuance of its Order of 14 August 1987 granting a provisional increase of prices. The Board, upon its own discretion and on the basis of documents and evidence submitted by private respondents, could have issued an order granting provisional relief immediately upon filing by private respondents of their respective applications. In this respect, the Court considers the evidence presented by private respondents in support of their applications i.e., evidence showing that importation costs of petroleum products had gone up; that the peso had depreciated in value; and that the Oil Price Stabilization Fund (OPSF) had by then been depleted as substantial and hence constitutive of at least prima facie basis for issuance by the Board of a provisional relief order granting an increase in the prices of petroleum products. 8 We do not therefore find the challenged action of the Board to have been done in violation of the due process clause. The petitioners may contest however, the applications at the hearings proper. Senator Maceda's attack on the Order in question on premises that it constitutes an act of taxation or that it negates the effects of Republic Act No. 6965, cannot prosper. Republic Act No. 6965 operated to lower taxes on petroleum and petroleum products by imposing specific taxes rather than ad valorem taxes thereon; it is, not, however, an insurance against an "oil hike", whenever warranted, or is it a price control mechanism on petroleum and petroleum products. The statute had possibly forestalled a larger hike, but it operated no more.: nad
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The Board Order authorizing the proceeds generated by the increase to be deposited to the OPSF is not an act of taxation. It is authorized by Presidential Decree No. 1956, as amended by Executive Order No. 137, as follows: SECTION 8. There is hereby created a Trust Account in the books of accounts of the Ministry of Energy to be designated as Oil Price Stabilization Fund (OPSF) for the purpose of minimizing frequent price changes brought about by exchange rate adjustments and/or changes in world market prices of crude oil and imported petroleum products. The Oil Price Stabilization Fund (OPSF) may be sourced from any of the following: a) Any increase in the tax collection from ad valorem tax or customs duty imposed on petroleum products subject to tax under this Decree arising from exchange rate adjustment, as may be determined by the Minister of Finance in consultation with the Board of Energy; b) Any increase in the tax collection as a result of the lifting of tax exemptions of government corporations, as may be determined by the Minister of Finance in consultation with the Board of Energy; c) Any additional amount to be imposed on petroleum products to augment the resources of the Fund through an appropriate Order that may be issued by the Board of Energy requiring payment by persons or companies engaged in the business of importing, manufacturing and/or marketing petroleum products; d) Any resulting peso cost differentials in case the actual peso costs paid by oil companies in the importation of crude oil and petroleum products is less than the peso costs computed using the reference foreign exchange rates as fixed by the Board of Energy. Anent claims that oil companies cannot charge new prices for oil purchased at old rates, suffice it to say that the increase in question was not prompted alone by the increase in world oil prices arising from tension in the Persian Gulf. What the Court gathers from the pleadings as well as events of which it takes judicial notice, is that: (1) as of June 30, 1990, the OPSF has incurred a deficit of P6.1 Billion; (2) the exchange rate has fallen to P28.00 to $1.00; (3) the country's balance of payments is expected to reach $1 Billion; (4) our trade deficit is at $2.855 Billion as of the first nine months of the year. Evidently, authorities have been unable to collect enough taxes necessary to replenish the OPSF as provided by Presidential Decree No. 1956, and hence, there was no available alternative but to hike existing prices. The OPSF, as the Court held in the aforecited CACP cases, must not be understood to be a funding designed to guarantee oil firms' profits although as a subsidy, or a trust account, the Court has no doubt that oil firms make money from it. As we held there, however, the OPSF was established precisely to protect the consuming public from the erratic movement of oil prices and to preclude oil companies from taking advantage of fluctuations occurring every so often. As a buffer mechanism, it stabilizes domestic prices by bringing about a uniform rate rather than leaving pricing to the caprices of the market. In all likelihood, therefore, an oil hike would have probably been imminent, with or without trouble in the Gulf, although trouble would have probably aggravated it.: nad The Court is not to be understood as having prejudged the justness of an oil price increase amid the above premises. What the Court is saying is that it thinks that based thereon, the Government has made out a prima facie case to justify the provisional increase in question. Let the Court therefore make
34

clear that these findings are not final; the burden, however, is on the petitioners' shoulders to demonstrate the fact that the present economic picture does not warrant a permanent increase. There is no doubt that the increase in oil prices in question (not to mention another one impending, which the Court understands has been under consideration by policy-makers) spells hard(er) times for the Filipino people. The Court can not, however, debate the wisdom of policy or the logic behind it (unless it is otherwise arbitrary), not because the Court agrees with policy, but because the Court is not the suitable forum for debate. It is a question best judged by the political leadership which after all, determines policy, and ultimately, by the electorate, that stands to be better for it or worse off, either in the short or long run. At this point, the Court shares the indignation of the people over the conspiracy of events and regrets its own powerlessness, if by this Decision it has been powerless. The constitutional scheme of things has simply left it with no choice. In fine, we find no grave abuse of discretion committed by the respondent Board in issuing its questioned Order. WHEREFORE, these petitions are DISMISSED. No costs. SO ORDERED.

G.R. No. 86695. September 3, 1992. MARIA ELENA MALAGA, doing business under the name B.E. CONSTRUCTION; JOSIELEEN NAJARRO, doing business under the name BEST BUILT CONSTRUCTION; JOSE N. OCCEA, doing business under the name THE FIRM OF JOSE N. OCCEA; and the ILOILO BUILDERS CORPORATION, petitioners, vs. MANUEL R. PENACHOS, JR., ALFREDO MATANGGA, ENRICO TICAR AND TERESITA VILLANUEVA, in their respective capacities as Chairman and Members of the Pre-qualification Bids and Awards Committee (PBAC)-BENIGNO PANISTANTE, in his capacity as President of Iloilo State College of Fisheries, as well as in their respective personal capacities; and HON. LODRIGIO L. LEBAQUIN, respondents. Salas, Villareal & Velasco for petitioners. Virgilio A. Sindico for respondents. SYLLABUS 1. ADMINISTRATIVE LAW; GOVERNMENT INSTRUMENTALITY, DEFINED. The 1987 Administrative Code defines a government instrumentality as follows: Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all
35

corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions, and government-owned or controlled corporations. (Sec. 2 (5) Introductory Provisions). 2. ID.; CHARTERED INSTITUTION; DEFINED; APPLICATION IN CASE AT BAR. The 1987 Administrative Code describes a chartered institution thus: Chartered institution refers to any agency organized or operating under a special charter, and vested by law with functions relating to specific constitutional policies or objectives. This term includes the state universities and colleges, and the monetary authority of the state. (Sec. 2 (12) Introductory Provisions). It is clear from the above definitions that ISCOF is a chartered institution and is therefore covered by P.D. 1818. There are also indications in its charter that ISCOF is a government instrumentality. First, it was created in pursuance of the integrated fisheries development policy of the State, a priority program of the government to effect the socio- economic life of the nation. Second, the Treasurer of the Republic of the Philippines shall also be the exofficio Treasurer of the state college with its accounts and expenses to be audited by the Commission on Audit or its duly authorized representative. Third, heads of bureaus and offices of the National Government are authorized to loan or transfer to it, upon request of the president of the state college, such apparatus, equipment, or supplies and even the services of such employees as can be spared without serious detriment to public service. Lastly, an additional amount of P1.5M had been appropriated out of the funds of the National Treasury and it was also decreed in its charter that the funds and maintenance of the state college would henceforth be included in the General Appropriations Law. (Presidential Decree No. 1523) 3. ID.; PROHIBITION OF ANY COURT FROM ISSUING INJUNCTION IN CASES INVOLVING INFRASTRUCTURE PROJECTS OF GOVERNMENT (P.D. 1818); POWER OF THE COURTS TO RESTRAIN APPLICATION. In the case of Datiles and Co. vs. Sucaldito, (186 SCRA 704) this Court interpreted a similar prohibition contained in P.D. 605, the law after which P.D. 1818 was patterned. It was there declared that the prohibition pertained to the issuance of injunctions or restraining orders by courts against administrative acts in controversies involving facts or the exercise of discretion in technical cases. The Court observed that to allow the courts to judge these matters would disturb the smooth functioning of the administrative machinery. Justice Teodoro Padilla made it clear, however, that on issues definitely outside of this dimension and involving questions of law, courts could not be prevented by P.D. No. 605 from exercising their power to restrain or prohibit administrative acts. We see no reason why the above ruling should not apply to P.D. 1818. There are at least two irregularities committed by PBAC that justified injunction of the bidding and the award of the project. 4. ID.; POLICIES AND GUIDELINES PRESCRIBED FOR GOVERNMENT INFRASTRUCTURE (PD 1594); RULES IMPLEMENTING THEREOF, NOT SUFFICIENTLY COMPLIED WITH IN CASE AT BAR. Under the Rules Implementing P.D. 1594, prescribing policies and guidelines for government infrastructure contracts, PBAC shall provide prospective bidders with the Notice to Pre-qualification and other relevant information regarding the proposed work. Prospective contractors shall be required to file their ARC-Contractors Confidential Application for Registration & Classifications & the PRE-C2 Confidential Pre-qualification Statement for the Project (prior to the amendment of the rules, this was referred to as Pre- C1) not later than the deadline set in the published Invitation to Bid, after which date no PRE-C2 shall be submitted and received. Invitations to Bid shall be advertised for at least three times within a reasonable period but in no case less than two weeks in at least two newspapers of general circulations. (IB 13 1.2-19, Implementing Rules and Regulations of P.D. 1594 as amended) PBAC advertised the pre-qualification deadline as December 2, 1988, without stating the hour thereof, and announced that the opening of bids would be at 3 o'clock in the afternoon of December 12, 1988. This scheduled was changed and a notice of such change was
36

merely posted at the ISCOF bulletin board. The notice advanced the cut-off time for the submission of pre-qualification documents to 10 o'clock in the morning of December 2, 1988, and the opening of bids to 1 o'clock in the afternoon of December 12, 1988. The new schedule caused the pre-disqualification of the petitioners as recorded in the minutes of the PBAC meeting held on December 6, 1988. While it may be true that there were fourteen contractors who were pre-qualified despite the change in schedule, this fact did not cure the defect of the irregular notice. Notably, the petitioners were disqualified because they failed to meet the new deadline and not because of their expired licenses. (B.E. & Best Built's licenses were valid until June 30, 1989. [Ex. P & O respectively: both were marked on December 28, 1988]) We have held that where the law requires a previous advertisement before government contracts can be awarded, non-compliance with the requirement will, as a general rule, render the same void and of no effect. (Caltex Phil. v. Delgado Bros., 96 Phil. 368) The fact that an invitation for bids has been communicated to a number of possible bidders is not necessarily sufficient to establish compliance with the requirements of the law if it is shown that other possible bidders have not been similarly notified. 5. ID.; ID.; ID.; PURPOSE THEREOF; CASE AT BAR. The purpose of the rules implementing P.D. 1594 is to secure competitive bidding and to prevent favoritism, collusion and fraud in the award of these contracts to the detriment of the public. This purpose was defeated by the irregularities committed by PBAC. It has been held that the three principles in public bidding are the offer to the public, an opportunity for competition and a basis for exact comparison of bids. A regulation of the matter which excludes any of these factors destroys the distinctive character of the system and thwarts the purpose of its adoption. (Hannan v. Board of Education, 25 Okla. 372) In the case at bar, it was the lack of proper notice regarding the pre-qualification requirement and the bidding that caused the elimination of petitioners B.E. and Best Built. It was not because of their expired licenses, as private respondents now claim. Moreover, the plans and specifications which are the contractors' guide to an intelligent bid, were not issued on time, thus defeating the guaranty that contractors be placed on equal footing when they submit their bids. The purpose of competitive bidding is negated if some contractors are informed ahead of their rivals of the plans and specifications that are to be the subject of their bids. 6. ID.; ID.; ID.; EFFECT OF NON-COMPLIANCE THEREOF. It has been held in a long line of cases that a contract granted without the competitive bidding required by law is void, and the party to whom it is awarded cannot benefit from it. It has not been shown that the irregularities committed by PBAC were induced by or participated in by any of the contractors. Hence, liability shall attach only to the private respondents for the prejudice sustained by the petitioners as a result of the anomalies described above. 7. CIVIL LAW; NOMINAL DAMAGES; AWARD THEREOF, WHEN AVAILABLE. As there is no evidence of the actual loss suffered by the petitioners, compensatory damage may not be awarded to them. Moral damages do not appear to be due either. Even so, the Court cannot close its eyes to the evident bad faith that characterized the conduct of the private respondents, including the irregularities in the announcement of the bidding and their efforts to persuade the ISCOF president to award the project after two days from receipt of the restraining order and before they moved to lift such order. For such questionable acts, they are liable in nominal damages at least in accordance with Article 2221 of the Civil Code, which states: Art. 2221. Nominal damages are 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. These damages are to be assessed against the private respondents in the amount of P10,000.00 each, to be paid separately for each of petitioners B.E. Construction and Best Built Construction. DECISION
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CRUZ, J: This controversy involves the extent and applicability of P.D. 1818, which prohibits any court from issuing injunctions in cases involving infrastructure projects of the government. The facts are not disputed. The Iloilo State College of Fisheries (henceforth ISCOF) through its Pre-qualification, Bids and Awards Committee (henceforth PBAC) caused the publication in the November 25, 26, 28, 1988 issues of the Western Visayas Daily an Invitation to Bid for the construction of the Micro Laboratory Building at ISCOF. The notice announced that the last day for the submission of pre-qualification requirements (PRE C-1) ** was December 2, 1988, and that the bids would be received and opened on December 12, 1988, 3 o'clock in the afternoon. 1 Petitioners Maria Elena Malaga and Josieleen Najarro, respectively doing business under the name of the B.E. Construction and Best Built Construction, submitted their pre-qualification documents at two o'clock in the afternoon of December 2, 1988. Petitioner Jose Occea submitted his own PRE-C1 on December 5, 1988. All three of them were not allowed to participate in the bidding because their documents were considered late, having been submitted after the cut-off time of ten o'clock in the morning of December 2, 1988. On December 12, 1988, the petitioners filed a complaint with the Regional Trial Court of Iloilo against the chairman and members of PBAC in their official and personal capacities. The plaintiffs claimed that although they had submitted their PRE-C1 on time, the PBAC refused without just cause to accept them. As a result, they were not included in the list of pre-qualified bidders, could not secure the needed plans and other documents, and were unable to participate in the scheduled bidding. In their prayer, they sought the resetting of the December 12, 1988 bidding and the acceptance of their PRE-C1 documents. They also asked that if the bidding had already been conducted, the defendants be directed not to award the project pending resolution of their complaint. On the same date, Judge Lodrigio L. Lebaquin issued a restraining order prohibiting PBAC from conducting the bidding and awarding the project. 2 On December 16, 1988, the defendants filed a motion to lift the restraining order on the ground that the Court was prohibited from issued restraining orders, preliminary injunctions and preliminary mandatory injunctions by P.D. 1818. cdll The decree reads pertinently as follows: Section 1. No Court in the Philippines shall have jurisdiction to issue any restraining order, preliminary injunction, or preliminary infrastructure project, or a mining, fishery, forest or other natural resource development project of the government, or any public utility operated by the government, including among others public utilities for the transport of the goods and commodities, stevedoring and arrastre contracts, to prohibit any person or persons, entity or government official from proceeding with, or continuing the execution or implementation of any such project, or the operation of such public utility, or pursuing any lawful activity necessary for such execution, implementation or operation.
38

The movants also contended that the question of the propriety of a preliminary injunction had become moot and academic because the restraining order was received late, at 2 o'clock in the afternoon of December 12, 1988, after the bidding had been conducted and closed at eleven thirty in the morning of that date. In their opposition of the motion, the plaintiffs argued against the applicability of P.D. 1818, pointing out that while ISCOF was a state college, it had its own charter and separate existence and was not part of the national government or of any local political subdivision. Even if P.D. 1818 were applicable, the prohibition presumed a valid and legal government project, not one tainted with anomalies like the project at bar. They also cited Filipinas Marble Corp. vs. IAC, 3 where the Court allowed the issuance of a writ of preliminary injunction despite a similar prohibition found in P.D. 385. The Court therein stated that: The government, however, is bound by basic principles of fairness and decency under the due process clauses of the Bill of Rights. P.D. 385 was never meant to protect officials of government-lending institutions who take over the management of a borrower corporation, lead that corporation to bankruptcy through mismanagement or misappropriation of its funds, and who, after ruining it, use the mandatory provisions of the decree to avoid the consequences of their misleads (p. 188, emphasis supplied). On January 2, 1989, the trial court lifted the restraining order and denied the petition for preliminary injunction. It declared that the building sought to be construed at the ISCOF was an infrastructure project of the government falling within the coverage of P.D. 1818. Even if it were not, the petition for the issuance of a writ of preliminary injunction would still fail because the sheriff's return showed that PBAC was served a copy of the restraining order after the bidding sought to be restrained had already been held. Furthermore, the members of the PBAC could not be restrained from awarding the project because the authority to do so was lodged in the President of the ISCOF, who was not a party to the case. 4 In the petition now before us, it is reiterated that P.D. 1818 does not cover the ISCOF because of its separate and distinct corporate personality. It is also stressed again that the prohibition under P.D. 1818 could not apply to the present controversy because the project was vitiated with irregularities, to wit: 1. The invitation to bid as published fixed the deadline of submission of pre- qualification document on December 2, 1988 without indicating any time, yet after 10:00 o'clock of the given late, the PBAC already refused to accept petitioners' documents. 2. The time and date of bidding was published as December 12, 1988 at 3:00 p.m. yet it was held at 10:00 o'clock in the morning.

3. Private respondents, for the purpose of inviting bidders to participate, issued a mimeographed "Invitation to Bid" form, which by law (P.D. 1594 and Implementing
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Rules, Exh. B-1) is to contain the particulars of the project subject of bidding for the purpose of. (i) enabling bidders to make an intelligent and accurate bids; (ii) for PBAC to have a uniform basis for evaluating the bids; (iii) to prevent collusion between a bidder and the PBAC, by opening to all the particulars of a project. Additionally, the Invitation to Bid prepared by the respondents and the Itemized Bill of Quantities therein were left blank. 5 the project in question was a "Construction," the private respondents used an Invitation to Bid form for "Materials." 6 And although

The petitioners also point out that the validity of the writ of preliminary injunction had not yet become moot and academic because even if the bids had been opened before the restraining order was issued, the project itself had not yet been awarded. The ISCOF president was not an indispensable party because the signing of the award was merely a ministerial function which he could perform only upon the recommendation of the Award Committee. At any rate, the complaint had already been duly amended to include him as a party defendant. In their Comment, the private respondents maintain that since the members of the board of trustees of the ISCOF are all government officials under Section 7 of P.D. 1523 and since the operations and maintenance of the ISCOF are provided for in the General Appropriations Law, it is should be considered a government institution whose infrastructure project is covered by P.D. 1818. Regarding the schedule for pre-qualification, the private respondents insist that PBAC posted on the ISCOF bulletin board an announcement that the deadline for the submission of pre-qualifications documents was at 10 o'clock of December 2, 1988, and the opening of bids would be held at 1 o'clock in the afternoon of December 12, 1988. As of ten o'clock in the morning of December 2, 1988, B.E. construction and Best Built construction had filed only their letters of intent. At two o'clock in the afternoon, B.E., and Best Built filed through their common representative, Nenette Garuello, their pre-qualification documents which were admitted but stamped "submitted late." The petitioners were informed of their disqualification on the same date, and the disqualification became final on December 6, 1988. Having failed to take immediate action to compel PBAC to pre-qualify them despite their notice of disqualification, they cannot now come to this Court to question the binding proper in which they had not participated. In the petitioners' Reply, they raise as an additional irregularity the violation of the rule that where the estimate project cost is from P1M to P5M, the issuance of plans, specifications and proposal book forms should made thirty days before the date of bidding. 7 They point out that these forms were issued only on December 2, 1988, and not at the latest on November 12, 1988, the beginning of the 30-day period prior to the scheduled bidding. In their Rejoinder, the private respondents aver that the documents of B.E. and Best Built were received although filed late and were reviewed by the Award Committee, which discovered that the contractors had expired licenses. B.E.'s temporary certificate of Renewal of Contractor's License was valid only until September 30, 1988, while Best Built's license was valid only up to June 30, 1988. The Court has considered the arguments of the parties in light of their testimonial and documentary evidence and the applicable laws and jurisprudence. It finds for the petitioners. The 1987 Administrative Code defines a government instrumentality as follows: Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by
40

law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions, and government-owned or controlled corporations. (Sec. 2 (5) Introductory Provisions). The same Code describes a chartered institution thus: Chartered institution refers to any agency organized or operating under a special charter, and vested by law with functions relating to specific constitutional policies or objectives. This term includes the state universities and colleges, and the monetary authority of the state. (Sec. 2 (12) Introductory Provisions). It is clear from the above definitions that ISCOF is a chartered institution and is therefore covered by P.D. 1818. There are also indications in its charter that ISCOF is a government instrumentality. First, it was created in pursuance of the integrated fisheries development policy of the State, a priority program of the government of effect the socio-economic life of the nation. Second, the Treasurer of the Republic of the Philippines also be the ex-officio Treasurer of the state college with its accounts and expenses to be audited by the Commission on Audit or its duly authorized representative. Third, heads of bureaus and offices of the National Government are authorized to loan or transfer to it, upon request of the president of the state college, such apparatus, equipment, or supplies and even the services of such employees as can be spared without serious detriment to public service. Lastly, an additional amount of P1.5M had been appropriated out of the funds of the National Treasury and it was also decreed in its charter that the funds and maintenance of the state college would henceforth be included in the General Appropriations Law. 8 Nevertheless, it does not automatically follow that ISCOF is covered by the prohibition in the said decree. In the case of Datiles and Co. vs. Sucaldito, 9 this Court interpreted a similar prohibition contained in P.D. 605, the law after which P.D. 1818 was patterned. It was there declared that the prohibition pertained to the issuance of injunctions or restraining orders by courts against administrative acts in controversies involving facts or the exercise of discretion in technical cases. The Court observed that to allow the courts to judge these matters would disturb the smooth functioning of the administrative machinery. Justice Teodoro Padilla made it clear, however, that on issues definitely outside of this dimension and involving questions of law, courts could not be prevented by P.D. No. 605 from exercising their power to restrain or prohibit administrative acts. We see no reason why the above ruling should not apply to P.D. 1818. There are at least two irregularities committed by PBAC that justified injunction of the bidding and the award of the project. First, PBAC set deadlines for the filing of the PRE-C1 and the opening of bids and then changed these deadlines without prior notice to prospective participants. Under the Rules Implementing P.D. 1594, prescribing policies and guidelines for government infrastructure contracts, PBAC shall provide prospective bidders with the Notice of Pre- qualification and other relevant information regarding the proposed work. Prospective contractors shall be required to file
41

their ARC-Contractors Confidential Application for Registration & Classifications & the PRE-C2 Confidential Pre-qualification Statement for the Project (prior to the amendment of the rules, this was referred to as PRE-C1) not later than the deadline set in the published Invitation to Bid, after which date no PRE-C2 shall be submitted and received. Invitations to Bid shall be advertised for at least three times within a reasonable period but in no case less than two weeks in at least two newspapers of general circulations. 10 PBAC advertised the pre-qualification deadline as December 2, 1988, without stating the hour thereof, and announced that the opening of bids would be at 3 o'clock in the afternoon of December 12, 1988. This schedule was changed and a notice of such change was merely posted at the ISCOF bulletin board. The notice advanced the cut-off time for the submission of pre-qualification documents to 10 o'clock in the morning of December 2, 1988, and the opening of bids to 1 o'clock in the afternoon of December 12, 1988. The new schedule caused the pre-disqualification of the petitioners as recorded in the minutes of the PBAC meeting held on December 6, 1988. While it may be true that there were fourteen contractors who were pre-qualified despite the change in schedule, this fact did not cure the defect of the irregular notice. Notably, the petitioners were disqualified because they failed to meet the new deadline and not because of their expired licenses. *** We have held that where the law requires a previous advertisement before government contracts can be awarded, non-compliance with the requirement will, as a general rule, render the same void and of no effect 11 The facts that an invitation for bids has been communicated to a number of possible bidders is not necessarily sufficient to establish compliance with the requirements of the law if it is shown that other public bidders have not been similarly notified. 12 Second, PBAC was required to issue to pre-qualified applicants the plans, specifications and proposal book forms for the project to be bid thirty days before the date of bidding if the estimate project cost was between P1M and P5M. PBAC has not denied that these forms were issued only on December 2, 1988, or only ten days before the bidding scheduled for December 12, 1988. At the very latest, PBAC should have issued them on November 12, 1988, or 30 days before the scheduled bidding. It is apparent that the present controversy did not arise from the discretionary acts of the administrative body nor does it involve merely technical matters. What is involved here is non-compliance with the procedural rules on bidding which required strict observance. The purpose of the rules implementing P.D. 1594 is to secure competitive bidding and to prevent favoritism, collusion and fraud in the award of these contracts to the detriment of the public. This purpose was defeated by the irregularities committed by PBAC. It has been held that the three principles in public bidding are the offer to the public, an opportunity for competition and a basis for exact comparison of bids. A regulation of the matter which excludes any of these factors destroys the distinctive character of the system and thwarts and purpose of its adoption. 13 In the case at bar, it was the lack of proper notice regarding the pre-qualification requirement and the bidding that caused the elimination of petitioners B.E. and Best Built. It was not because of their expired licenses, as private respondents now claim. Moreover, the plans and specifications which are the contractors' guide to an intelligent bid, were not issued on time, thus defeating the guaranty that contractors be placed on equal footing
42

when they submit their bids. The purpose of competitive bidding is negated if some contractors are informed ahead of their rivals of the plans and specifications that are to be the subject of their bids. P.D. 1818 was not intended to shield from judicial scrutiny irregularities committed by administrative agencies such as the anomalies above described. Hence, the challenged restraining order was not improperly issued by the respondent judge and the writ of preliminary injunction should not have been denied. We note from Annex Q of the private respondent's memorandum, however, that the subject project has already been "100% completed as to the Engineering Standard." This fait accompli has made the petition for a writ of preliminary injunction moot and academic. We come now to the liabilities of the private respondents. It has been held in a long line of cases that a contract granted without the competitive bidding required by law is void, and the party to whom it is awarded cannot benefit from it14. It has not been shown that the irregularities committed by PBAC were induced by or participated in by any of the contractors. Hence, liability shall attach only to the private respondents for the prejudice sustained by the petitioners as a result of the anomalies described above. As there is no evidence of the actual loss suffered by the petitioners, compensatory damage may not be awarded to them. Moral damages do not appear to be due either. Even so, the Court cannot close its eyes to the evident bad faith that characterized the conduct of the private respondents, including the irregularities in the announcement of the bidding and their efforts to persuade the ISCOF president to award the project after two days from receipt of the restraining order and before they moved to lift such order. For such questionable acts, they are liable in nominal damages at least in accordance with Article 2221 of the Civil Code, which states: "Art. 2221. Nominal damages are 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. These damages are to assessed against the private respondents in the amount of P10,000.00 each, to be paid separately for each of petitioners B.E. Construction and Best Built Construction. The other petitioner, Occea Builders, is not entitled to relief because it admittedly submitted its pre-qualification documents on December 5, 1988, or three days after the deadline. WHEREFORE, judgment is hereby rendered: a) upholding the restraining order dated December 12, 1988, as not covered by the prohibition in P.D. 1818; b) ordering the chairman and the members of the PBAC board of trustees, namely Manuel R. Penachos, Jr., Alfredo Matangga, Enrico Ticar, and Teresita Villanueva, to each pay separately to petitioners Maria Elena Malaga and Josieleen Najarro nominal damages P10,000.00 each; and c) removing the said chairman and members from the PBAC board of trustees, or whoever among them is still incumbent therein, for their malfeasance in office. Costs against PBAC.

Let a copy of this decision be sent to the Office of the Ombudsman. SO ORDERED.
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THE UNITED RESIDENTS OF DOMINICAN HILL, INC., represented by its President RODRIGO S. MACARIO, SR., petitioner, vs. COMMISSION ON THE SETTLEMENT OF LAND PROBLEMS, represented by its Commissioner, RUFINO V. MIJARES; MARIO PADILAN, PONCIANO BASILAN, HIPOLITO ESLAVA, WILLIAM LUMPISA, PACITO MOISES, DIONISIO ANAS, NOLI DANGLA, NAPOLEON BALESTEROS, ELSIE MOISES, SEBIO LACWASAN, BEN FLORES, DOMINGO CANUTAB, MARCELINO GABRIANO, TINA TARNATE, ANDREW ABRAZADO, DANNY LEDDA, FERNANDO DAYAO, JONATHAN DE LA PENA, JERRY PASSION, PETER AGUINSOD, and LOLITA DURAN, respondents. DE LEON, JR., J.: Before us is a petition for prohibition and declaratory relief seeking the annulment of a status quo order 1 dated September 29, 1998 issued by the public respondent Commission on the Settlement of Land Problems (COSLAP, for brevity) in COSLAP Case No. 98-253. The facts are: The property being fought over by the parties is a 10.36-hectare property in Baguio City called Dominican Hills, formerly registered in the name of Diplomat Hills, Inc. It appeared that the property was mortgaged to the United Coconut Planters Bank (UCPB) which eventually foreclosed the mortgage thereon and acquired the same as highest bidder. On April 11, 1983, it was donated to the Republic of the Philippines by UCPB through its President, Eduardo Cojuangco. The deed of donation stipulated that Dominican Hills would be utilized for the "priority programs, projects, activities in human settlements and economic development and governmental purposes" of the Ministry of Human Settlements. On December 12, 1986, the then President Corazon C. Aquino issued Executive Order No. 85 abolishing the Office of Media Affairs and the Ministry of Human Settlements. All agencies under the latter's supervision as well as all its assets, programs and projects, were transferred to the Presidential Management Staff (PMS).2 On October 18, 1988, the PMS received an application from petitioner UNITED RESIDENTS OF DOMINICAN HILL, INC. (UNITED, for brevity), a community housing association composed of non-real property owning residents of Baguio City, to acquire a portion of the Dominican Hills property. On February 2, 1990, PMS Secretary Elfren Cruz referred the application to the HOME INSURANCE GUARANTY CORPORATION (HIGC). HIGC consented to act as originator for UNITED.3 Accordingly, on May 9, 1990, a Memorandum of Agreement was signed by and among the PMS, the HIGC, and UNITED. The Memorandum of Agreement called for the PMS to sell the Dominican Hills property to HIGC which would, in turn, sell the same to UNITED. The parties agreed on a selling price of P75.00 per square meter. Thus, on June 12, 1991, HIGC sold 2.48 hectares of the property to UNITED. The deed of conditional sale provided that ten (10) per cent of the purchase price would be paid upon signing, with the balance to be amortized within one year from its date of execution. After UNITED made its final payment on January 31, 1992, HIGC executed a Deed of Absolute Sale dated July 1, 1992. Petitioner alleges that sometime in 1993, private respondents entered the Dominican Hills property allocated to UNITED and constructed houses thereon. Petitioner was able to secure a demolition order from the city mayor.4

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Unable to stop the razing of their houses, private respondents, under the name DOMINICAN HILL BAGUIO RESIDENTS HOMELESS ASSOCIATION (ASSOCIATION, for brevity) filed an action5 for injunction docketed as Civil Case No. 3316-R, in the Regional Trial Court of Baguio City, Branch 4. Private respondents were able to obtain a temporary restraining order but their prayer for a writ of preliminary injunction was later denied in an Order dated March 18, 1996.6 While Civil Case No. 3316-R was pending, the ASSOCIATION, this time represented by the Land Reform Beneficiaries Association, Inc. (BENEFICIARIES, for brevity), filed Civil Case No. 3382-R before Branch 61 of the same court. The complaint7 prayed for damages, injunction and annulment of the said Memorandum of Agreement between UNITED and HIGC. Upon motion of UNITED, the trial court in an Order dated May 27, 1996 dismissed Civil Case No. 3382-R.8 The said Order of dismissal is currently on appeal with the Court of Appeals.9 Demolition Order No. 1-96 was subsequently implemented by the Office of the City Mayor and the City Engineer's Office of Baguio City. However, petitioner avers that private respondents returned and reconstructed the demolished structures. To forestall the re-implementation of the demolition order, private respondents filed on September 29, 1998 a petition10 for annulment of contracts with prayer for a temporary restraining order, docketed as COSLAP Case No. 98-253, in the Commission on the Settlement of Land Problems (COSLAP) against petitioner, HIGC, PMS, the City Engineer's Office, the City Mayor, as well as the Register of Deeds of Baguio City. On the very same day, public respondent COSLAP issued the contested order requiring the parties to maintain the status quo. Without filing a motion for reconsideration from the aforesaid status quo order, petitioner filed the instant petition questioning the jurisdiction of the COSLAP. The issues we are called upon to resolve are: 1 IS THE COMMISSION ON THE SETTLEMENT OF LAND PROBLEMS [COSLAP] CREATED UNDER EXECUTIVE ORDER NO. 561 BY THE OFFICE OF THE PHILIPPINES [sic] EMPOWERED TO HEAR AND TRY A PETITION FOR ANNULMENT OF CONTRACTS WITH PRAYER FOR A TEMPORARY RESTRAINING ORDER AND THUS, ARROGATE UNTO ITSELF THE POWER TO ISSUE STATUS QUO ORDER AND CONDUCT A HEARING THEREOF [sic]? 2 ASSUMING THAT THE COMMISSION ON THE SETTLEMENT OF LAND PROBLEMS [COSLAP] HAS JURISDICTION ON THE MATTER, IS IT EXEMPTED FROM OBSERVING A CLEAR CASE OF FORUM SHOPPING ON THE PART OF THE PRIVATE RESPONDENTS? To the extent that the instant case is denominated as one for declaratory relief, we initially clarify that we do not possess original jurisdiction to entertain such petitions.11 Such is vested in the Regional Trial Courts.12Accordingly, we shall limit our review to ascertaining if the proceedings before public
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respondent COSLAP are without or in excess, of its jurisdiction. In this wise, a recounting of the history of the COSLAP may provide useful insights into the extent of its powers and functions. The COSLAP was created by virtue of Executive Order No. 561 dated September 21, 1979. Its forerunner was the Presidential Action Committee on Land Problems (PACLAP) founded on July 31, 1970 by virtue of Executive Order No. 251. As originally conceived, the committee was tasked "to expedite and coordinate the investigation and resolution of land disputes, streamline and shorten administrative procedures, adopt bold and decisive measures to solve land problems, and/or recommend other solutions." It was given the power to issue subpoenas duces tecum and ad testificandum and to call upon any department, office, agency or instrumentality of the government, including government owned or controlled corporations and local government units, for assistance in the performance of its functions. At the time, the PACLAP did not exercise quasi-judicial functions. On March 19, 1971, Executive Order No. 305 was issued reconstituting the PACLAP.13 The committee was given exclusive jurisdiction over all cases involving public lands and other lands of the public domain and accordingly was tasked: 1. To investigate, coordinate, and resolve expeditiously land disputes, streamline administrative procedures, and in general, to adopt bold and decisive measures to solve problems involving public lands and lands of the public domain; 2. To coordinate and integrate the activities of all government agencies having to do with public lands or lands of the public domain; 3. To study and review present policies as embodied in land laws and administrative rules and regulations, in relation to the needs for land of the agro-industrial sector and small farmers, with the end in view to evolving and recommending new laws and policies and establishing priorities in the grant of public land, and the simplification of processing of land applications in order to relieve the small man from the complexities of existing laws, rules and regulations; 4. To evolve and implement a system for the speedy investigation and resolution of land disputes; 5. To receive all complaints of settlers and small farmers, involving public lands or other lands of the public domain; 6. To look into the conflicts between Christians and non-Christians, between corporations and small settlers and farmers; cause the speedy settlement of such conflicts in accordance with priorities or policies established by the Committee; and 7. To perform such other functions as may be assigned to it by the President. Thereafter, the PACLAP was reorganized pursuant to Presidential Decree No. 832 dated November 27, 1975.14Its jurisdiction was revised thus: xxx xxx xxx

2. Refer for immediate action any land problem or dispute brought to the attention of the PACLAP, to any member agency having jurisdiction thereof: Provided, that when the Executive Committee decides to act on a case, its resolution, order or decision thereon, shall have the force and
46

effect of a regular administrative resolution, order or decision, and shall be binding upon the parties therein involved and upon the member agency having jurisdiction thereof; xxx xxx xxx

Notably, the said Presidential Decree No. 832 did not contain any provision for judicial review of the resolutions, orders or decisions of the PACLAP. On September 21, 1979, the PACLAP was abolished and its functions transferred to the present Commission on the Settlement of Land Problems by virtue of Executive Order No. 561. This reorganization, effected in line with Presidential Decree No. 1416, brought the COSLAP directly under the Office of the President.15 It was only at this time that a provision for judicial review was made from resolutions, orders or decisions of the said agency, as embodied in section 3(2) thereof, to wit: Powers and functions. The Commission shall have the following powers and functions: 1. Coordinate the activities, particularly the investigation work, of the various government offices and agencies involved in the settlement of land problems or disputes, and streamline administrative procedures to relieve small settlers and landholders and members of cultural minorities of the expense and time-consuming delay attendant to the solution of such problems or disputes; 2. Refer and follow-up for immediate action by the agency having appropriate jurisdiction any land problem or dispute referred to the Commission: Provided, that the Commission may, in the following cases, assume jurisdiction and resolve land problems or disputes which are critical and explosive in nature considering, for instance, the large number of the parties involved, the presence or emergence of social tension or unrest, or other similar critical situations requiring immediate action: (a) Between occupants/squatters and pasture lease agreement holders or timber concessionaires; (b) Between occupants/squatters and government reservation grantees; (c) Between occupants/squatters and public land claimants or applicants; (d) Petitions for classification, release and/or subdivision of lands of the public domain; and (e) Other similar land problems of grave urgency and magnitude. The Commission shall promulgate such rules of procedure as will insure expeditious resolution and action on the above cases. The resolution, order or decision of the Commission on any of the foregoing cases shall have the force and effect of a regular administrative resolution, order or decision and shall be binding upon the parties therein and upon the agency having jurisdiction over the same. Said resolution, order or decision shall become final and executory within thirty (30) days from its promulgation and shall be appealable by certiorari only to the Supreme Court.
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xxx

xxx

xxx

In the performance of its functions and discharge of its duties, the Commission is authorized, through the Commission, to issue subpoena and subpoena duces tecum for the appearance of witnesses and the production of records, books and documents before it. It may also call upon any ministry, office, agency or instrumentality of the National Government, including government-owned or controlled corporations, and local governments for assistance. This authority is likewise, conferred upon the provincial offices as may be established pursuant to Section 5 of this Executive Order. In Baaga v. Commission on the Settlement of Land Problems,16 we characterized the COSLAP's jurisdiction as being general in nature, as follows: Petitioners also contend in their petition that the COSLAP itself has no jurisdiction to resolve the protest and counter-protest of the parties because its power to resolve land problems is confined to those cases "which are critical and explosive in nature." This contention is devoid of merit. It is true that Executive Order No. 561 provides that the COSLAP may take cognizance of cases which are "critical and explosive in nature considering, for instance, the large number of parties involved, the presence or emergence of social tension or unrest, or other similar critical situations requiring immediate action." However, the use of the word "may" does not mean that the COSLAP's jurisdiction is merely confined to the above mentioned cases. The provisions of the said Executive Order are clear that the COSLAP was created as a means of providing a more effective mechanism for the expeditious settlement of land problems in general, which are frequently the source of conflicts among settlers, landowners and cultural minorities. Besides, the COSLAP merely took over from the abolished PACLAP whose functions, including its jurisdiction, power and authority to act on, decide and resolve land disputes (Sec. 2, P.D. No. 832) were all assumed by it. The said Executive Order No. 561 containing said provision, being enacted only on September 21, 1979, cannot affect the exercise of jurisdiction of the PACLAP Provincial Committee of Koronadal on September 29, 1978. Neither can it affect the decision of the COSLAP which merely affirmed said exercise of jurisdiction. Given the facts of the case, it is our view that the COSLAP is not justified in assuming jurisdiction over the controversy. As matters stand, it is not the judiciary's place to question the wisdom behind a law;17 our task is to interpret the law. We feel compelled to observe, though, that by reason of the ambiguous terminology employed in Executive Order No. 561, the power to assume jurisdiction granted to the COSLAP provides an ideal breeding ground for forum shopping, as we shall explain subsequently. Suffice it to state at this stage that the COSLAP may not assume jurisdiction over cases which are already pending in the regular courts. The reason is simple. Section 3(2) of Executive Order 561 speaks of any resolution, order or decision of the COSLAP as having the "force and effect of a regular administrative resolution, order or decision." The qualification places an unmistakable emphasis on the administrative character of the COSLAP's determination, amplified by the statement that such resolutions, orders or decisions "shall be binding upon the parties therein and upon the agency having jurisdiction over the same." An agency is defined by statute as "any of the various units of the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein." 18 A department, on the other hand, "refers to anexecutive department created by law."19 Whereas, a bureau is understood to refer "to any principal subdivision of any department."20 In turn, an office "refers, within the framework of governmental organization, to any major functional unit of a department or bureau including regional offices. It may also refer to any position held or occupied by individual persons, whose functions are defined by law or regulation."21 An instrumentality is deemed to refer "to any agency of the National Government, not integrated within the department framework, vested with special
48

functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations."22 Applying the principle in statutory construction ofejusdem generis, i.e., "where general words follow an enumeration or persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applying only to persons or things of the same kind or class as those specifically mentioned,"23 section 3(2) of Executive Order 561 patently indicates that the COSLAP's dispositions are binding on administrative or executiveagencies. The history of the COSLAP itself bolsters this view. Prior enactments enumerated its member agencies among which it was to exercise a coordinating function. The COSLAP discharges quasi-judicial functions: "Quasi-judicial function" is a term which applies to the actions, discretion, etc. of public administrative officers or bodies, who are 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."24 However, it does not depart from its basic nature as an administrative agency, albeit one that exercises quasi-judicial functions. Still, administrative agencies are not considered courts; they are neither part of the judicial system nor are they deemed judicial tribunals.25 The doctrine of separation of powers observed in our system of government reposes the three (3) great powers into its three (3) branches the legislative, the executive, and the judiciary each department being co-equal and coordinate, and supreme in its own sphere. Accordingly, the executive department may not, by its own fiat, impose the judgment of one of its own agencies, upon the judiciary. Indeed, under the expanded jurisdiction of the Supreme Court, it is empowered "to determine whether or not there has been grave abuse of discretion amounting to lack of or excess of jurisdiction on the part of any branch or instrumentality of the Government."26 There is an equally persuasive reason to grant the petition. As an additional ground for the annulment of the assailed status quo order of COSLAP, UNITED accuses private respondents of engaging in forum shopping. Forum shopping exists when a party "repetitively avail[s] of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances, and all raising substantially the same issues either pending in, or already resolved adversely by some other court."27 In this connection, Supreme Court Administrative Circular No. 04-94 dated February 8, 1994 provides: Revised Circular No. 28-91, dated February 8, 1994, applies to and governs the filing of petitions in the Supreme Court and the Court of Appeals and is intended to prevent the multiple filing of petitions or complaints involving the same issues in other tribunals or agencies as a form of forum shopping. Complementary thereto and for the same purpose, the following requirements, in addition to those in pertinent provisions of the Rules of Court and existing circulars, shall be strictly complied with in the filing of complaints, petitions, applications or other initiatory pleadings in all courts and agencies other than the Supreme Court and the Court of Appeals and shall be subject to the sanctions provided hereunder. 1. The plaintiff, petitioner, applicant or principal part seeking relief in the complaint, petition, application or other initiatory pleading shall certify under oath in such original pleading, or in a sworn certification annexed thereto and simultaneously filed therewith, to the truth of the following facts and undertakings: (a) he has not theretofore commenced any other action or proceeding involving the same
49

issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no such action or proceedings is pending in the Supreme Court, the Court of Appeals, or any other tribunal or agency; (c) if there is any such action or proceeding which is either pending or may have been terminated, he must state the status thereof; and (d) if he should thereafter learn that a similar action or proceeding has been filed or is pending before the Supreme Court, the Court of Appeals or any other tribunal or agency, he undertakes to report that fact within five (5) days therefrom to the court or agency wherein the original pleading and sworn certification contemplated herein have been filed. The complaint and other initiatory pleadings referred to and subject of this Circular are the original civil complaint, counterclaim, crossclaim, third (fourth, etc.) party complaint, or complaint-in-intervention, petition, or application wherein a party asserts his claim for relief. 2. Any violation of this Circular shall be a cause for the dismissal of the complaint, petition, application or other initiatory pleading, upon motion and after hearing. However, any clearly willful and deliberate forum shopping by any other party and his counsel through the filing of multiple complaints or other initiatory pleadings to obtain favorable action shall be a ground for the summary dismissal thereof and shall constitute contempt of court. Furthermore, the submission of a false certification or non-compliance with the undertakings therein, as provided in Paragraph 1 hereof, shall constitute indirect contempt of court, without prejudice to disciplinary proceedings against the counsel and the filing of a criminal action against the part. [emphasis supplied] xxx xxx xxx

The said Administrative Circular's use of the auxiliary verb "shall" imports "an imperative obligation . . . inconsistent with the idea of discretion."28 Hence, compliance therewith is mandatory.29 It bears stressing that there is a material distinction between the requirement of submission of the certification against forum shopping from the undertakings stated therein. Accordingly, x x x [f]ailure to comply with this requirement cannot be excused by the fact that plaintiff is not guilty of forum shopping. The Court of Appeals, therefore, erred in concluding that Administrative Circular No. 04-94 did not apply to private respondent's case merely because her complaint was not based on petitioner's cause of action. The Circular applies to any complaint, petition, application, or other initiatory pleading, regardless of whether the party filing it has actually committed forum shopping. Every party filing a complaint or any other initiatory pleading is required to swear under oath that he has not committed nor will he commit forum shopping. Otherwise, we would have an absurd situation where the parties themselves would be the judge of whether their actions constitute a violation of said Circular, and compliance therewith would depend on their belief that they might or might not have violated the requirement. Such interpretation of the requirement would defeat the very purpose of Circular 04-94. Indeed, compliance with the certification against forum shopping is separate from, and independent of, the avoidance of forum shopping itself. Thus, there is a difference in the treatment in terms of imposable sanctions between failure to comply with the certification requirement and violation of the prohibition against forum shopping. The former is merely a cause for the dismissal, without prejudice, of the complaint or initiatory pleading, while the latter is a ground for summary dismissal thereof and constitutes direct contempt.30
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A scrutiny of the pleadings filed before the trial courts and the COSLAP sufficiently establishes private respondents' propensity for forum shopping. We lay the premise that the certification against forum shopping must be executed by the plaintiff or principal party, and not by his counsel.31 Hence, one can deduce that the certification is a peculiar personal representation on the part of the principal party, an assurance given to the court or other tribunal that there are no other pending cases involving basically the same parties, issues and causes of action. In the case at bar, private respondents' litany of omissions range from failing to submit the required certification against forum shopping to filing a false certification, and then to forum shopping itself. First, the petition filed before the COSLAP conspicuously lacked a certification against forum shopping. Second, it does not appear from the record that the ASSOCIATION informed Branch 4 of the Regional Trial Court of Baguio City before which Civil Case No. 3316-R was pending, that another action, Civil Case No. 3382-R, was filed before Branch 61 of the same court. Another group of homeless residents of Dominican Hill, the LAND REFORM BENEFICIARIES ASSOCIATION, INC. initiated the latter case. The aforesaid plaintiff, however, does not hesitate to admit that it filed the second case in representation of private respondent, as one of its affiliates. In the same manner, the certification against forum shopping accompanying the complaint in Civil Case No. 3382-R does not mention the pendency of Civil Case No. 3316-R. In fact, the opposite assurance was given, that there was no action pending before any other tribunal. Another transgression is that both branches of the trial court do not appear to have been notified of the filing of the subject COSLAP Case No. 98-253. It is evident from the foregoing facts that private respondents, in filing multiple petitions, have mocked our attempts to eradicate forum shopping and have thereby upset the orderly administration of justice. They sought recourse from three (3) different tribunals in order to obtain the writ of injunction they so desperately desired. "The willful attempt by private respondents to obtain a preliminary injunction in another court after it failed to acquire the same from the original court constitutes grave abuse of the judicial process."32 In this connection, we expounded on forum shopping in Viva Productions, Inc. v. Court of Appeals33 that: Private respondent's intention to engage in forum shopping becomes manifest with undoubted clarity upon the following considerations. Notably, if not only to ensure the issuance of an injunctive relief, the significance of the action for damages before the Makati court would be nil. What damages against private respondent would there be to speak about if the Paraaque court already enjoins the performance of the very same act complained of in the Makati court? Evidently, the action for damages is premature if not for the preliminary injunctive relief sought. Thus, we find grave abuse of discretion on the part of the Makati court, being a mere co-equal of the Paraaque court, in not giving due deference to the latter before which the issue of the alleged violation of the sub-judice rule had already been raised and submitted. In such instance, the Makati court, if it was wary of dismissing the action outrightly under Administrative Circular No. 04-94, should have, at least, ordered the consolidation of its case with that of the Paraaque court, which had first acquired jurisdiction over the related case x x x, or it should have suspended the proceedings until the Paraaque court may have ruled on the issue x x x. xxx xxx xxx

Thus, while we might admit that the causes of action before the Makati court and the Paraaque court are distinct, and that private respondent cannot seek civil indemnity in the contempt proceedings, the same being in the nature of criminal contempt, we nonetheless cannot ignore private respondent's intention of seeking exactly identical reliefs when it sought the preliminary relief of injunction in the Makati court. As earlier indicated, had private respondent been completely in good faith there would have been no hindrance in filing the action for damages with the regional trial court of Paraaque and having it consolidated with the contempt proceedings before Branch 274, so that the same issue on the alleged violation
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of the sub judicerule will not have to be passed upon twice, and there would be no possibility of having two courts of concurrent jurisdiction making two conflicting resolutions. Yet from another angle, it may be said that when the Paraaque court acquired jurisdiction over the said issue, it excluded all other courts of concurrent jurisdiction from acquiring jurisdiction over the same. To hold otherwise would be to risk instances where courts of concurrent jurisdiction might have conflicting orders. This will create havoc and result in an extremely disordered administration of justice. Therefore, even on the assumption that the Makati court may acquire jurisdiction over the subject matter of the action for damages, without prejudice to the application of Administrative Circular No. 04-94, it cannot nonetheless acquire jurisdiction over the issue of whether or not petitioner has violated the sub judice rule. At best, the Makati court may hear the case only with respect to the alleged injury suffered by private respondent after theParaaque court shall have ruled favorably on the said issue. We also noted several indications of private respondents' bad faith. The complaint filed in Civil Case No. 3316-R was prepared by the ASSOCIATION's counsel, Atty. Conrado Villamor Catral, Jr. whereas the complaint filed in Civil Case No. 3382-R was signed by a different lawyer, Atty. Thomas S. Tayengco. With regard to the petition filed with the COSLAP, the same was signed by private respondents individually. As to the latter case, we noted that the petition itself could not have been prepared by ordinary laymen, inasmuch as it exhibits familiarity with statutory provisions and legal concepts, and is written in a lawyerly style. In the same manner, the plaintiffs in the three (3) different cases were made to appear as dissimilar: in Civil Case No. 3316-R, the plaintiff was ASSOCIATION of which private respondent Mario Padilan was head, while the plaintiff in Civil Case No. 3382-R was the BENEFICIARIES. Before the COSLAP, private respondents themselves were the petitioners, led again by Padilan.34 Private respondents also attempted to vary their causes of action: in Civil Case No. 3382-R and COSLAP Case No. 98-253, they seek the annulment of the Memorandum of Agreement executed by and among UNITED, the PMS, and HIGC as well as the transfer certificates of title accordingly issued to petitioner. All three (3) cases sought to enjoin the demolition of private respondents' houses. It has been held that forum shopping is evident where the elements of litis pendentia or res judicata are present. Private respondents' subterfuge comes to naught, for the effects of res judicata or litis pendentia may not be avoided by varying the designation of the parties or changing the form of the action or adopting a different mode of presenting one's case.35 In view of the foregoing, all that remains to be done is the imposition of the proper penalty. A party's willful and deliberate act of forum shopping is punishable by summary dismissal of the actions filed.36 The summary dismissal of both COSLAP Case No. 98-253 and Civil Case No. 3316-R is therefore warranted under the premises. We shall refrain from making any pronouncement on Civil Case No. 3382-R, the dismissal of which was elevated on appeal to the Court of Appeals where it is still pending. WHEREFORE, the petition is hereby GRANTED. The status quo order dated September 29, 1998 issued in COSLAP Case No. 98-253 by respondent Commission On The Settlement Of Land Problems (COSLAP) is hereby SET ASIDE; and the petition filed in COSLAP Case No. 98-253 and the complaint in Civil Case No. 3316-R are hereby DISMISSED for lack of jurisdiction and forum shopping. Costs against private respondents. SO ORDERED.
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G.R. No. 97149

March 31, 1992

FIDENCIO Y. BEJA, SR., petitioner, vs. COURT OF APPEALS, HONORABLE REINERIO O. REYES, in his capacity as Secretary of the Department of Transportation and Communications; COMMODORE ROGELIO A. DAYAN, in his capacity as General Manager of the Philippine Ports Authority; DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, ADMINISTRATIVE ACTION BOARD; and JUSTICE ONOFRE A. VILLALUZ, in his capacity as Chairman of the Administrative Action Board, DOTC, respondents.

ROMERO, J.: The instant petition for certiorari questions the jurisdiction of the Secretary of the Department of Transportation and Communications (DOTC) and/or its Administrative Action Board (AAB) over administrative cases involving personnel below the rank of Assistant General Manager of the Philippine Ports Authority (PPA), an agency attached to the said Department. Petitioner Fidencio Y. Beja, Sr. 1 was first employed by the PPA as arrastre supervisor in 1975. He became Assistant Port Operations Officer in 1976 and Port Operations Officer in 1977. In February 1988, as a result of the reorganization of the PPA, he was appointed Terminal Supervisor. On October 21, 1988, the PPA General Manager, Rogelio A. Dayan, filed Administrative Case No. 11-04-88 against petitioner Beja and Hernando G. Villaluz for grave dishonesty, grave misconduct, willful violation of reasonable office rules and regulations and conduct prejudicial to the best interest of the service. Beja and Villaluz allegedly erroneously assessed storage fees resulting in the loss of P38,150.77 on the part of the PPA. Consequently, they were preventively suspended for the charges. After a preliminary investigation conducted by the district attorney for Region X, Administrative Case No. 11-04-88 was "considered closed for lack of merit." On December 13, 1988, another charge sheet, docketed as Administrative Case No. 12-01-88, was filed against Beja by the PPA General Manager also for dishonesty, grave misconduct, violation of reasonable office rules and regulations, conduct prejudicial to the best interest of the service and for being notoriously undesirable. The charge consisted of six (6) different specifications of administrative offenses including fraud against the PPA in the total amount of P218,000.00. Beja was also placed under preventive suspension pursuant to Sec. 41 of P.D. No. 807. The case was redocketed as Administrative Case No. PPA-AAB-1-049-89 and thereafter, the PPA general manager indorsed it to the AAB for "appropriate action." At the scheduled hearing, Beja asked for continuance on the ground that he needed time to study the charges against him. The AAB
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proceeded to hear the case and gave Beja an opportunity to present evidence. However, on February 20, 1989, Beja filed a petition for certiorari with preliminary injunction before the Regional Trial Court of Misamis Oriental. 2 Two days later, he filed with the AAB a manifestation and motion to suspend the hearing of Administrative Case No. PPA-AAB-1-049-89 on account of the pendency of the certiorari proceeding before the court. AAB denied the motion and continued with the hearing of the administrative case. Thereafter, Beja moved for the dismissal of the certiorari case below and proceeded to file before this Court a petition for certiorari with preliminary injunction and/or temporary restraining order. The case was docketed as G.R. No. 87352 captioned "Fidencio Y. Beja v. Hon. Reinerio 0. Reyes, etc., et al." In the en banc resolution of March 30, 1989, this Court referred the case to the Court of Appeals for "appropriate action." 3 G.R. No. 87352 was docketed in the Court of Appeals as CA-G.R. SP No. 17270.

Meanwhile, a decision was rendered by the AAB in Administrative Case No. PPA-AAB-049-89. Its dispositive portion reads: WHEREFORE, judgment is hereby rendered, adjudging the following, namely: a) b) c) d) e) That respondents Geronimo Beja, Jr. and Hernando Villaluz are exonerated from the charge against them; That respondent Fidencio Y. Beja be dismissed from the service; That his leave credits and retirement benefits are declared forfeited; That he be disqualified from re-employment in the government service; That his eligibility is recommended to be cancelled.

Pasig, Metro Manila, February 28, 1989. On December 10, 1990, after appropriate proceedings, the Court of Appeals also rendered a decision 4 in CA-G.R. SP No. 17270 dismissing the petition for certiorari for lack of merit. Hence, Beja elevated the case back to this Court through an "appeal by certiorari with preliminary injunction and/or temporary restraining order." We find the pleadings filed in this case to be sufficient bases for arriving at a decision and hence, the filing of memoranda has been dispensed with. In his petition, Beja assails the Court of Appeals for having "decided questions of substance in a way probably not in accord with law or with the applicable decisions" of this Court. 5 Specifically, Beja contends that the Court of Appeals failed to declare that: (a) he was denied due process; (b) the PPA general manager has no power to issue a preventive suspension order without the necessary approval of the PPA board of directors; (c) the PPA general manager has no power to refer the administrative case filed against him to the DOTC-AAB, and (d) the DOTC Secretary, the Chairman of the DOTC-AAB and DOTC-AAB itself as an adjudicatory body, have no jurisdiction to try the administrative case against him. Simply put, Beja challenges the legality of
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the preventive suspension and the jurisdiction of the DOTC Secretary and/or the AAB to initiate and hear administrative cases against PPA personnel below the rank of Assistant General Manager. Petitioner anchors his contention that the PPA general manager cannot subject him to a preventive suspension on the following provision of Sec. 8, Art. V of Presidential Decree No. 857 reorganizing the PPA: (d) the General Manager shall, subject to the approval of the Board, appoint and remove personnel below the rank of Assistant General Manager. (Emphasis supplied.) Petitioner contends that under this provision, the PPA Board of Directors and not the PPA General Manager is the "proper disciplining authority. 6 As correctly observed by the Solicitor General, the petitioner erroneously equates "preventive suspension" as a remedial measure with "suspension" as a penalty for administrative dereliction. The imposition of preventive suspension on a government employee charged with an administrative offense is subject to the following provision of the Civil Service Law, P.D. No. 807: Sec. 41. Preventive Suspension. The proper disciplining authority may preventively suspend any subordinate officer or employee under his authority pending an investigation, if the charge against such officer or employee involves dishonesty, oppression or grave misconduct, or neglect in the performance of duty, or if there are reasons to believe that the respondent is guilty of charges which would warrant his removal from the service. Imposed during the pendency of an administrative investigation, preventive suspension is not a penalty in itself. It is merely a measure of precaution so that the employee who is charged may be separated, for obvious reasons, from the scene of his alleged misfeasance while the same is being investigated. 7 Thus, preventive suspension is distinct from the administrative penalty of removal from office such as the one mentioned in Sec. 8(d) of P.D. No 857. While the former may be imposed on a respondent during the investigation of the charges against him, the latter is the penalty which may only be meted upon him at the termination of the investigation or the final disposition of the case. The PPA general manager is the disciplining authority who may, by himself and without the approval of the PPA Board of Directors, subject a respondent in an administrative case to preventive suspension. His disciplinary powers are sanctioned, not only by Sec. 8 of P.D. No. 857 aforequoted, but also by Sec. 37 of P.D. No. 807 granting heads of agencies the "jurisdiction to investigate and decide matters involving disciplinary actions against officers and employees" in the PPA. Parenthetically, the period of preventive suspension is limited. It may be lifted even if the disciplining authority has not finally decided the administrative case provided the ninety-day period from the effectivity of the preventive suspension has been exhausted. The employee concerned may then be reinstated. 8 However, the said ninety-day period may be interrupted. Section 42 of P.D. No. 807 also mandates that any fault, negligence or petition of a suspended employee may not be considered in the computation of the said period. Thus, when a suspended employee obtains from a court of justice a restraining order or a preliminary injunction inhibiting proceedings in an administrative case, the lifespan of such court order should be excluded in the reckoning of the permissible period of the preventive suspension. 9 With respect to the issue of whether or not the DOTC Secretary and/or the AAB may initiate and hear administrative cases against PPA Personnel below the rank of Assistant General Manager, the Court qualifiedly rules in favor of petitioner.
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The PPA was created through P.D. No. 505 dated July 11, 1974. Under that Law, the corporate powers of the PPA were vested in a governing Board of Directors known as the Philippine Port Authority Council. Sec. 5(i) of the same decree gave the Council the power "to appoint, discipline and remove, and determine the composition of the technical staff of the Authority and other personnel." On December 23, 1975, P.D. No. 505 was substituted by P.D. No. 857, See. 4(a) thereof created the Philippine Ports Authority which would be "attached" to the then Department of Public Works, Transportation and Communication. When Executive Order No. 125 dated January 30, 1987 reorganizing the Ministry of Transportation and Communications was issued, the PPA retained its "attached" status. 10 Even Executive Order No. 292 or the Administrative Code of 1987 classified the PPA as an agency "attached" to the Department of Transportation and Communications (DOTC). Sec. 24 of Book IV, Title XV, Chapter 6 of the same Code provides that the agencies attached to the DOTC "shall continue to operate and function in accordance with the respective charters or laws creating them, except when they conflict with this Code." Attachment of an agency to a Department is one of the three administrative relationships mentioned in Book IV, Chapter 7 of the Administrative Code of 1987, the other two being supervision and control and administrative supervision. "Attachment" is defined in Sec. 38 thereof as follows: (3) Attachment. (a) This refers to the lateral relationship between the Department or its equivalent and the attached agency or corporation for purposes of policy and program coordination. The coordination shall be accomplished by having the department represented in the governing board of the attached agency or corporation, either as chairman or as a member, with or without voting rights, if this is permitted by the charter; having the attached corporation or agency comply with a system of periodic reporting which shall reflect the progress of programs and projects; and having the department or its equivalent provide general policies through its representative in the board, which shall serve as the framework for the internal policies of the attached corporation or agency; (b) Matters of day-to-day administration or all those pertaining to internal operations shall he left to the discretion or judgment of the executive officer of the agency or corporation. In the event that the Secretary and the head of the board or the attached agency or corporation strongly disagree on the interpretation and application of policies, and the Secretary is unable to resolve the disagreement, he shall bring the matter to the President for resolution and direction; (c) Government-owned or controlled corporations attached to a department shall submit to the Secretary concerned their audited financial statements within sixty (60) days after the close of the fiscal year; and (d) Pending submission of the required financial statements, the corporation shall continue to operate on the basis of the preceding year's budget until the financial statements shall have been submitted. Should any government-owned or controlled corporation incur an operation deficit at the close of its fiscal year, it shall be subject to administrative supervision of the department; and the corporation's operating and capital budget shall be subject to the department's examination, review, modification and approval. (emphasis supplied.) An attached agency has a larger measure of independence from the Department to which it is attached than one which is under departmental supervision and control or administrative supervision. This is borne out by the "lateral relationship" between the Department and the attached agency. The attachment is merely for "policy and program coordination." With respect to administrative matters, the independence of an attached agency from Departmental control and supervision is further reinforced by the fact that even an agency under a Department's administrative supervision is free from Departmental
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interference with respect to appointments and other personnel actions "in accordance with the decentralization of personnel functions" under the Administrative Code of 1987. 11 Moreover, the Administrative Code explicitly provides that Chapter 8 of Book IV on supervision and control shall not apply to chartered institutions attached to a Department. 12 Hence, the inescapable conclusion is that with respect to the management of personnel, an attached agency is, to a certain extent, free from Departmental interference and control. This is more explicitly shown by P.D. No. 857 which provides: Sec. 8. Management and Staff. a) The President shall, upon the recommendation of the Board, appoint the General Manager and the Assistant General Managers. (b) All other officials and employees of the Authority shall be selected and appointed on the basis of merit and fitness based on a comprehensive and progressive merit system to be established by the Authority immediately upon its organization and consistent with Civil Service rules and regulations. The recruitment, transfer, promotion, and dismissal of all personnel of the Authority, including temporary workers, shall be governed by such merit system. (c) The General Manager shall, subject to the approval of the Board, determine the staffing pattern and the number of personnel of the Authority, define their duties and responsibilities, and fix their salaries and emoluments. For professional and technical positions, the General Manager shall recommend salaries and emoluments that are comparable to those of similar positions in other government-owned corporations, the provisions of existing rules and regulations on wage and position classification notwithstanding. (d) xxx The General Manager shall, subject to the approval by the Board, appoint and remove personnel below the rank of Assistant General Manager. xxx xxx

(emphasis supplied.) Although the foregoing section does not expressly provide for a mechanism for an administrative investigation of personnel, by vesting the power to remove erring employees on the General Manager, with the approval of the PPA Board of Directors, the law impliedly grants said officials the power to investigate its personnel below the rank of Assistant Manager who may be charged with an administrative offense. During such investigation, the PPA General Manager, as earlier stated, may subject the employee concerned to preventive suspension. The investigation should be conducted in accordance with the procedure set out in Sec. 38 of P.D. No. 807. 13 Only after gathering sufficient facts may the PPA General Manager impose the proper penalty in accordance with law. It is the latter action which requires the approval of the PPA Board of Directors. 14 From an adverse decision of the PPA General Manager and the Board of Directors, the employee concerned may elevate the matter to the Department Head or Secretary. Otherwise, he may appeal directly to the Civil Service Commission. The permissive recourse to the Department Secretary is sanctioned by the Civil Service Law (P.D. No. 807) under the following provisions: Sec. 37. Disciplinary Jurisdiction. (a) The Commission shall decide upon appeal all administrative disciplinary cases involving the imposition of a penalty of suspension for more than thirty days, or fine in an amount exceeding thirty days salary, demotion in rank or salary or transfer, removal or dismissal from office. A complaint may be filed directly with the Commission by a private citizen against a government official or employee in which case it
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may hear and decide the case or it may deputize any department or agency or official or group of officials to conduct the investigation. The results of the investigation shall be submitted to the Commission with recommendation as to the penalty to be imposed or other action to be taken. (b) The heads of departments, agencies and instrumentalities, provinces, cities and municipalities shall have jurisdiction to investigate and decide matters involving disciplinary action against officers and employees under their jurisdiction. The decisions shall be final in case the penalty imposed is suspension for not more than thirty days or fine in an amount not exceeding thirty days' salary. In case the decision rendered by a bureau or office head is appealable to the Commission, the same may be initially appealed to the department and finally to the Commission and pending appeal, the same shall be executory except when the penalty is removal, in which case the same shall be executory only after confirmation by the department head. xxx xxx xxx

(Emphasis supplied.) It is, therefore, clear that the transmittal of the complaint by the PPA General Manager to the AAB was premature. The PPA General Manager should have first conducted an investigation, made the proper recommendation for the imposable penalty and sought its approval by the PPA Board of Directors. It was discretionary on the part of the herein petitioner to elevate the case to the then DOTC Secretary Reyes. Only then could the AAB take jurisdiction of the case. The AAB, which was created during the tenure of Secretary Reyes under Office Order No. 88-318 dated July 1, 1988, was designed to act, decide and recommend to him "all cases of administrative malfeasance, irregularities, grafts and acts of corruption in the Department." Composed of a Chairman and two (2) members, the AAB came into being pursuant to Administrative Order No. 25 issued by the President on May 25, 1987. 15 Its special nature as a quasi-judicial administrative body notwithstanding, the AAB is not exempt from the observance of due process in its proceedings. 16 We are not satisfied that it did so in this case the respondents protestation that petitioner waived his right to be heard notwithstanding. It should be observed that petitioner was precisely questioning the AAB's jurisdiction when it sought judicial recourse. WHEREFORE, the decision of the Court of Appeals is AFFIRMED insofar as it upholds the power of the PPA General Manager to subject petitioner to preventive suspension and REVERSED insofar as it validates the jurisdiction of the DOTC and/or the AAB to act on Administrative Case No. PPA-AAB-1049-89 and rules that due process has been accorded the petitioner. The AAB decision in said case is hereby declared NULL and VOID and the case in REMANDED to the PPA whose General Manager shall conduct with dispatch its reinvestigation. The preventive suspension of petitioner shall continue unless after a determination of its duration, it is found that he had served the total of ninety (90) days in which case he shall be reinstated immediately. SO ORDERED.

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G.R. No. 115863 March 31, 1995 AIDA D. EUGENIO, petitioner, vs. CIVIL SERVICE COMMISSION, HON. TEOFISTO T. GUINGONA, JR. & HON. SALVADOR ENRIQUEZ, JR.,respondents.

PUNO, J.: The power of the Civil Service Commission to abolish the Career Executive Service Board is challenged in this petition for certiorari and prohibition. First the facts. Petitioner is the Deputy Director of the Philippine Nuclear Research Institute. She applied for a Career Executive Service (CES) Eligibility and a CESO rank on August 2, 1993, she was given a CES eligibility. On September 15, 1993, she was recommended to the President for a CESO rank by the Career Executive Service Board. 1 All was not to turn well for petitioner. On October 1, 1993, respondent Civil Service Commission 2 passed Resolution No. 93-4359, viz: RESOLUTION NO. 93-4359 WHEREAS, Section 1(1) of Article IX-B provides that Civil Service shall be administered by the Civil Service Commission, . . .; WHEREAS, Section 3, Article IX-B of the 1987 Philippine Constitution provides that "The Civil Service Commission, as the central personnel agency of the government, is mandated to establish a career service and adopt measures to promote morale, efficiency, integrity, responsiveness, progresiveness and courtesy in the civil service, . . ."; WHEREAS, Section 12 (1), Title I, Subtitle A, Book V of the Administrative Code of 1987 grants the Commission the power, among others, to administer and enforce the constitutional and statutory provisions on the merit system for all levels and ranks in the Civil Service; WHEREAS, Section 7, Title I, Subtitle A, Book V of the Administrative Code of 1987 Provides, among others, that The Career Service shall be characterized by (1) entrance based on merit and fitness to be determined as far as practicable by competitive examination, or based highly technical qualifications; (2) opportunity for advancement to higher career positions; and (3) security of tenure;
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WHEREAS, Section 8 (c), Title I, Subtitle A, Book V of the administrative Code of 1987 provides that "The third level shall cover Positions in the Career Executive Service"; WHEREAS, the Commission recognizes the imperative need to consolidate, integrate and unify the administration of all levels of positions in the career service. WHEREAS, the provisions of Section 17, Title I, Subtitle A. Book V of the Administrative Code of 1987 confers on the Commission the power and authority to effect changes in its organization as the need arises. WHEREAS, Section 5, Article IX-A of the Constitution provides that the Civil Service Commission shall enjoy fiscal autonomy and the necessary implications thereof; NOW THEREFORE, foregoing premises considered, the Civil Service Commission hereby resolves to streamline reorganize and effect changes in its organizational structure. Pursuant thereto, the Career Executive Service Board, shall now be known as the Office for Career Executive Service of the Civil Service Commission. Accordingly, the existing personnel, budget, properties and equipment of the Career Executive Service Board shall now form part of the Office for Career Executive Service. The above resolution became an impediment. to the appointment of petitioner as Civil Service Officer, Rank IV. In a letter to petitioner, dated June 7, 1994, the Honorable Antonio T. Carpio, Chief Presidential legal Counsel, stated: xxx xxx xxx On 1 October 1993 the Civil Service Commission issued CSC Resolution No. 93-4359 which abolished the Career Executive Service Board. Several legal issues have arisen as a result of the issuance of CSC Resolution No. 93-4359, including whether the Civil Service Commission has authority to abolish the Career Executive Service Board. Because these issues remain unresolved, the Office of the President has refrained from considering appointments of career service eligibles to career executive ranks. xxx xxx xxx You may, however, bring a case before the appropriate court to settle the legal issues arising from issuance by the Civil Service Commission of CSC Resolution No. 93-4359, for guidance of all concerned. Thank You. Finding herself bereft of further administrative relief as the Career Executive Service Board which recommended her CESO Rank IV has been abolished, petitioner filed the petition at bench to annul, among others, resolution No. 93-4359. The petition is anchored on the following arguments:
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A. IN VIOLATION OF THE CONSTITUTION, RESPONDENT COMMISSION USURPED THE LEGISLATIVE FUNCTIONS OF CONGRESS WHEN IT ABOLISHED THE CESB, AN OFFICE CREATED BY LAW, THROUGH THE ISSUANCE OF CSC: RESOLUTION NO. 93-4359; B. ALSO IN VIOLATION OF THE CONSTITUTION, RESPONDENT CSC USURPED THE LEGISLATIVE FUNCTIONS OF CONGRESS WHEN IT ILLEGALLY AUTHORIZED THE TRANSFER OF PUBLIC MONEY, THROUGH THE ISSUANCE OF CSC RESOLUTION NO. 93-4359. Required to file its Comment, the Solicitor General agreed with the contentions of petitioner. Respondent Commission, however, chose to defend its ground. It posited the following position: ARGUMENTS FOR PUBLIC RESPONDENT-CSC I. THE INSTANT PETITION STATES NO CAUSE OF ACTION AGAINST THE PUBLIC RESPONDENT-CSC. II. THE RECOMMENDATION SUBMITTED TO THE PRESIDENT FOR APPOINTMENT TO A CESO RANK OF PETITIONER EUGENIO WAS A VALID ACT OF THE CAREER EXECUTIVE SERVICE BOARD OF THE CIVIL SERVICE COMMISSION AND IT DOES NOT HAVE ANY DEFECT. III. THE OFFICE OF THE PRESIDENT IS ESTOPPED FROM QUESTIONING THE VALIDITY OF THE RECOMMENDATION OF THE CESB IN FAVOR OF PETITIONER EUGENIO SINCE THE PRESIDENT HAS PREVIOUSLY APPOINTED TO CESO RANK FOUR (4) OFFICIALS SIMILARLY SITUATED AS SAID PETITIONER. FURTHERMORE, LACK OF MEMBERS TO CONSTITUTE A QUORUM. ASSUMING THERE WAS NO QUORUM, IS NOT THE FAULT OF PUBLIC RESPONDENT CIVIL SERVICE COMMISSION BUT OF THE PRESIDENT WHO HAS THE POWER TO APPOINT THE OTHER MEMBERS OF THE CESB. IV. THE INTEGRATION OF THE CESB INTO THE COMMISSION IS AUTHORIZED BY LAW (Sec. 12 (1), Title I, Subtitle A, Book V of the Administrative Code of the 1987). THIS PARTICULAR ISSUE HAD ALREADY BEEN SETTLED WHEN THE HONORABLE COURT DISMISSED THE PETITION FILED BY THE HONORABLE MEMBERS OF THE HOUSE OF REPRESENTATIVES, NAMELY: SIMEON A. DATUMANONG, FELICIANO R. BELMONTE, JR., RENATO V. DIAZ, AND MANUEL M. GARCIA IN G.R. NO. 114380. THE AFOREMENTIONED PETITIONERS ALSO QUESTIONED THE INTEGRATION OF THE CESB WITH THE COMMISSION. We find merit in the petition. 3 The controlling fact is that the Career Executive Service Board (CESB) was created in the Presidential Decree (P.D.) No. 1 on September 1, 1974 4 which adopted the Integrated Plan. Article IV, Chapter I, Part of the III of the said Plan provides:
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Article IV Career Executive Service 1. A Career Executive Service is created to form a continuing pool of well-selected and development oriented career administrators who shall provide competent and faithful service. 2. A Career Executive Service hereinafter referred to in this Chapter as the Board, is created to serve as the governing body of the Career Executive Service. The Board shall consist of the Chairman of the Civil Service Commission as presiding officer, the Executive Secretary and the Commissioner of the Budget as ex-officio members and two other members from the private sector and/or the academic community who are familiar with the principles and methods of personnel administration. xxx xxx xxx 5. The Board shall promulgate rules, standards and procedures on the selection, classification, compensation and career development of members of the Career Executive Service. The Board shall set up the organization and operation of the service. (Emphasis supplied) It cannot be disputed, therefore, that as the CESB was created by law, it can only be abolished by the legislature. This follows an unbroken stream of rulings that the creation and abolition of public offices is primarily a legislative function. As aptly summed up in AM JUR 2d on Public Officers and Employees, 5 viz: Except for such offices as are created by the Constitution, the creation of public offices is primarily a legislative function. In so far as the legislative power in this respect is not restricted by constitutional provisions, it supreme, and the legislature may decide for itself what offices are suitable, necessary, or convenient. When in the exigencies of government it is necessary to create and define duties, the legislative department has the discretion to determine whether additional offices shall be created, or whether these duties shall be attached to and become ex-officio duties of existing offices. An office created by the legislature is wholly within the power of that body, and it may prescribe the mode of filling the office and the powers and duties of the incumbent, and if it sees fit, abolish the office. In the petition at bench, the legislature has not enacted any law authorizing the abolition of the CESB. On the contrary, in all the General Appropriations Acts from 1975 to 1993, the legislature has set aside funds for the operation of CESB. Respondent Commission, however, invokes Section 17, Chapter 3, Subtitle A. Title I, Book V of the Administrative Code of 1987 as the source of its power to abolish the CESB. Section 17 provides: Sec. 17. Organizational Structure. Each office of the Commission shall be headed by a Director with at least one Assistant Director, and may have such divisions as are necessary independent constitutional body, the Commission may effect changes in the organization as the need arises. But as well pointed out by petitioner and the Solicitor General, Section 17 must be read together with Section 16 of the said Code which enumerates the offices under the respondent Commission, viz: Sec. 16. Offices in the Commission. The Commission shall have the following offices:
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(1) The Office of the Executive Director headed by an Executive Director, with a Deputy Executive Director shall implement policies, standards, rules and regulations promulgated by the Commission; coordinate the programs of the offices of the Commission and render periodic reports on their operations, and perform such other functions as may be assigned by the Commission. (2) The Merit System Protection Board composed of a Chairman and two (2) members shall have the following functions: xxx xxx xxx (3) The Office of Legal Affairs shall provide the Chairman with legal advice and assistance; render counselling services; undertake legal studies and researches; prepare opinions and ruling in the interpretation and application of the Civil Service law, rules and regulations; prosecute violations of such law, rules and regulations; and represent the Commission before any court or tribunal. (4) The Office of Planning and Management shall formulate development plans, programs and projects; undertake research and studies on the different aspects of public personnel management; administer management improvement programs; and provide fiscal and budgetary services. (5) The Central Administrative Office shall provide the Commission with personnel, financial, logistics and other basic support services. (6) The Office of Central Personnel Records shall formulate and implement policies, standards, rules and regulations pertaining to personnel records maintenance, security, control and disposal; provide storage and extension services; and provide and maintain library services. (7) The Office of Position Classification and Compensation shall formulate and implement policies, standards, rules and regulations relative to the administration of position classification and compensation. (8) The Office of Recruitment, Examination and Placement shall provide leadership and assistance in developing and implementing the overall Commission programs relating to recruitment, execution and placement, and formulate policies, standards, rules and regulations for the proper implementation of the Commission's examination and placement programs. (9) The Office of Career Systems and Standards shall provide leadership and assistance in the formulation and evaluation of personnel systems and standards relative to performance appraisal, merit promotion, and employee incentive benefit and awards. (10) The Office of Human Resource Development shall provide leadership and assistance in the development and retention of qualified and efficient work force in the Civil Service; formulate standards for training and staff development; administer service-wide scholarship programs; develop training literature and materials; coordinate and integrate all training activities and evaluate training programs. (11) The Office of Personnel Inspection and Audit shall develop policies, standards, rules and regulations for the effective conduct or inspection and audit personnel and personnel management programs and the exercise of delegated authority; provide technical and
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advisory services to Civil Service Regional Offices and government agencies in the implementation of their personnel programs and evaluation systems. (12) The Office of Personnel Relations shall provide leadership and assistance in the development and implementation of policies, standards, rules and regulations in the accreditation of employee associations or organizations and in the adjustment and settlement of employee grievances and management of employee disputes. (13) The Office of Corporate Affairs shall formulate and implement policies, standards, rules and regulations governing corporate officials and employees in the areas of recruitment, examination, placement, career development, merit and awards systems, position classification and compensation, performing appraisal, employee welfare and benefit, discipline and other aspects of personnel management on the basis of comparable industry practices. (14) The Office of Retirement Administration shall be responsible for the enforcement of the constitutional and statutory provisions, relative to retirement and the regulation for the effective implementation of the retirement of government officials and employees. (15) The Regional and Field Offices. The Commission shall have not less than thirteen (13) Regional offices each to be headed by a Director, and such field offices as may be needed, each to be headed by an official with at least the rank of an Assistant Director. As read together, the inescapable conclusion is that respondent Commission's power to reorganize is limited to offices under its control as enumerated in Section 16, supra. From its inception, the CESB was intended to be an autonomous entity, albeit administratively attached to respondent Commission. As conceptualized by the Reorganization Committee "the CESB shall be autonomous. It is expected to view the problem of building up executive manpower in the government with a broad and positive outlook." 6 The essential autonomous character of the CESB is not negated by its attachment to respondent Commission. By said attachment, CESB was not made to fall within the control of respondent Commission. Under the Administrative Code of 1987, the purpose of attaching one functionally inter-related government agency to another is to attain "policy and program coordination." This is clearly etched out in Section 38(3), Chapter 7, Book IV of the aforecited Code, to wit: (3) Attachment. (a) This refers to the lateral relationship between the department or its equivalent and attached agency or corporation for purposes of policy and program coordination. The coordination may be accomplished by having the department represented in the governing board of the attached agency or corporation, either as chairman or as a member, with or without voting rights, if this is permitted by the charter; having the attached corporation or agency comply with a system of periodic reporting which shall reflect the progress of programs and projects; and having the department or its equivalent provide general policies through its representative in the board, which shall serve as the framework for the internal policies of the attached corporation or agency. Respondent Commission also relies on the case of Datumanong, et al., vs. Civil Service Commission, G. R. No. 114380 where the petition assailing the abolition of the CESB was dismissed for lack of cause of action. Suffice to state that the reliance is misplaced considering that the cited case was dismissed for lack of standing of the petitioner, hence, the lack of cause of action. IN VIEW WHEREOF, the petition is granted and Resolution No. 93-4359 of the respondent Commission is hereby annulled and set aside. No costs.
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SO ORDERED.

LUZON DEVELOPMENT BANK, petitioner, vs. ASSOCIATION OF LUZON DEVELOPMENT BANK EMPLOYEES and ATTY. ESTER S. GARCIA in her capacity as VOLUNTARY ARBITRATOR, respondents.

ROMERO, J.: From a submission agreement of the Luzon Development Bank (LDB) and the Association of Luzon Development Bank Employees (ALDBE) arose an arbitration case to resolve the following issue: Whether or not the company has violated the Collective Bargaining Agreement provision and the Memorandum of Agreement dated April 1994, on promotion. At a conference, the parties agreed on the submission of their respective Position Papers on December 1-15, 1994. Atty. Ester S. Garcia, in her capacity as Voluntary Arbitrator, received ALDBE's Position Paper on January 18, 1995. LDB, on the other hand, failed to submit its Position Paper despite a letter from the Voluntary Arbitrator reminding them to do so. As of May 23, 1995 no Position Paper had been filed by LDB. On May 24, 1995, without LDB's Position Paper, the Voluntary Arbitrator rendered a decision disposing as follows: WHEREFORE, finding is hereby made that the Bank has not adhered to the Collective Bargaining Agreement provision nor the Memorandum of Agreement on promotion. Hence, this petition for certiorari and prohibition seeking to set aside the decision of the Voluntary Arbitrator and to prohibit her from enforcing the same. In labor law context, arbitration is the reference of a labor dispute to an impartial third person for determination on the basis of evidence and arguments presented by such parties who have bound themselves to accept the decision of the arbitrator as final and binding. Arbitration may be classified, on the basis of the obligation on which it is based, as either compulsory or voluntary.
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Compulsory arbitration is a system whereby the parties to a dispute are compelled by the government to forego their right to strike and are compelled to accept the resolution of their dispute through arbitration by a third party. 1The essence of arbitration remains since a resolution of a dispute is arrived at by resort to a disinterested third party whose decision is final and binding on the parties, but in compulsory arbitration, such a third party is normally appointed by the government. Under voluntary arbitration, on the other hand, referral of a dispute by the parties is made, pursuant to a voluntary arbitration clause in their collective agreement, to an impartial third person for a final and binding resolution. 2Ideally, arbitration awards are supposed to be complied with by both parties without delay, such that once an award has been rendered by an arbitrator, nothing is left to be done by both parties but to comply with the same. After all, they are presumed to have freely chosen arbitration as the mode of settlement for that particular dispute. Pursuant thereto, they have chosen a mutually acceptable arbitrator who shall hear and decide their case. Above all, they have mutually agreed to de bound by said arbitrator's decision. In the Philippine context, the parties to a Collective Bargaining Agreement (CBA) are required to include therein provisions for a machinery for the resolution of grievances arising from the interpretation or implementation of the CBA or company personnel policies. 3 For this purpose, parties to a CBA shall name and designate therein a voluntary arbitrator or a panel of arbitrators, or include a procedure for their selection, preferably from those accredited by the National Conciliation and Mediation Board (NCMB). Article 261 of the Labor Code accordingly provides for exclusive original jurisdiction of such voluntary arbitrator or panel of arbitrators over (1) the interpretation or implementation of the CBA and (2) the interpretation or enforcement of company personnel policies. Article 262 authorizes them, but only upon agreement of the parties, to exercise jurisdiction over other labor disputes. On the other hand, a labor arbiter under Article 217 of the Labor Code has jurisdiction over the following enumerated cases: . . . (a) Except as otherwise provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural: 1. Unfair labor practice cases; 2. Termination disputes; 3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates of pay, hours of work and other terms and conditions of employment; 4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations; 5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of strikes and lockouts; 6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other claims, arising from employeremployee relations, including those of persons in domestic or household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement.
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xxx xxx xxx It will thus be noted that the jurisdiction conferred by law on a voluntary arbitrator or a panel of such arbitrators is quite limited compared to the original jurisdiction of the labor arbiter and the appellate jurisdiction of the National Labor Relations Commission (NLRC) for that matter. 4 The state of our present law relating to voluntary arbitration provides that "(t)he award or decision of the Voluntary Arbitrator . . . shall be final and executory after ten (10) calendar days from receipt of the copy of the award or decision by the parties," 5 while the "(d)ecision, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders." 6 Hence, while there is an express mode of appeal from the decision of a labor arbiter, Republic Act No. 6715 is silent with respect to an appeal from the decision of a voluntary arbitrator. Yet, past practice shows that a decision or award of a voluntary arbitrator is, more often than not, elevated to the Supreme Court itself on a petition for certiorari, 7 in effect equating the voluntary arbitrator with the NLRC or the Court of Appeals. In the view of the Court, this is illogical and imposes an unnecessary burden upon it. In Volkschel Labor Union, et al. v. NLRC, et al., 8 on the settled premise that the judgments of courts and awards of quasi-judicial agencies must become final at some definite time, this Court ruled that the awards of voluntary arbitrators determine the rights of parties; hence, their decisions have the same legal effect as judgments of a court. In Oceanic Bic Division (FFW), et al. v. Romero, et al., 9 this Court ruled that "a voluntary arbitrator by the nature of her functions acts in a quasi-judicial capacity." Under these rulings, it follows that the voluntary arbitrator, whether acting solely or in a panel, enjoys in law the status of a quasi-judicial agency but independent of, and apart from, the NLRC since his decisions are not appealable to the latter. 10 Section 9 of B.P. Blg. 129, as amended by Republic Act No. 7902, provides that the Court of Appeals shall exercise: xxx xxx xxx (B) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial Courts and quasijudicial agencies, instrumentalities, boards or commissions, including the Securities and Exchange Commission, the Employees Compensation Commission and the Civil Service Commission, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the Labor Code of the Philippines under Presidential Decree No. 442, as amended, 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. xxx xxx xxx Assuming arguendo that the voluntary arbitrator or the panel of voluntary arbitrators may not strictly be considered as a quasi-judicial agency, board or commission, still both he and the panel are comprehended within the concept of a "quasi-judicial instrumentality." It may even be stated that it was to meet the very situation presented by the quasi-judicial functions of the voluntary arbitrators here, as well as the subsequent arbitrator/arbitral tribunal operating under the Construction Industry Arbitration Commission, 11 that the broader term "instrumentalities" was purposely included in the above-quoted provision.
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An "instrumentality" is anything used as a means or agency. 12 Thus, the terms governmental "agency" or "instrumentality" are synonymous in the sense that either of them is a means by which a government acts, or by which a certain government act or function is performed. 13 The word "instrumentality," with respect to a state, contemplates an authority to which the state delegates governmental power for the performance of a state function. 14 An individual person, like an administrator or executor, is a judicial instrumentality in the settling of an estate, 15 in the same manner that a sub-agent appointed by a bankruptcy court is an instrumentality of the court,16 and a trustee in bankruptcy of a defunct corporation is an instrumentality of the state. 17 The voluntary arbitrator no less performs a state function pursuant to a governmental power delegated to him under the provisions therefor in the Labor Code and he falls, therefore, within the contemplation of the term "instrumentality" in the aforequoted Sec. 9 of B.P. 129. The fact that his functions and powers are provided for in the Labor Code does not place him within the exceptions to said Sec. 9 since he is a quasi-judicial instrumentality as contemplated therein. It will be noted that, although the Employees Compensation Commission is also provided for in the Labor Code, Circular No. 1-91, which is the forerunner of the present Revised Administrative Circular No. 1-95, laid down the procedure for the appealability of its decisions to the Court of Appeals under the foregoing rationalization, and this was later adopted by Republic Act No. 7902 in amending Sec. 9 of B.P. 129. A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators should likewise be appealable to the Court of Appeals, in line with the procedure outlined in Revised Administrative Circular No. 1-95, just like those of the quasi-judicial agencies, boards and commissions enumerated therein. This would be in furtherance of, and consistent with, the original purpose of Circular No. 1-91 to provide a uniform procedure for the appellate review of adjudications of all quasi-judicial entities 18 not expressly excepted from the coverage of Sec. 9 of B.P. 129 by either the Constitution or another statute. Nor will it run counter to the legislative intendment that decisions of the NLRC be reviewable directly by the Supreme Court since, precisely, the cases within the adjudicative competence of the voluntary arbitrator are excluded from the jurisdiction of the NLRC or the labor arbiter. In the same vein, it is worth mentioning that under Section 22 of Republic Act No. 876, also known as the Arbitration Law, arbitration is deemed a special proceeding of which the court specified in the contract or submission, or if none be specified, the Regional Trial Court for the province or city in which one of the parties resides or is doing business, or in which the arbitration is held, shall have jurisdiction. A party to the controversy may, at any time within one (1) month after an award is made, apply to the court having jurisdiction for an order confirming the award and the court must grant such order unless the award is vacated, modified or corrected. 19 In effect, this equates the award or decision of the voluntary arbitrator with that of the regional trial court. Consequently, in a petition for certiorari from that award or decision, the Court of Appeals must be deemed to have concurrent jurisdiction with the Supreme Court. As a matter of policy, this Court shall henceforth remand to the Court of Appeals petitions of this nature for proper disposition. ACCORDINGLY, the Court resolved to REFER this case to the Court of Appeals.

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IRON AND STEEL AUTHORITY, petitioner, vs. THE COURT OF APPEALS and MARIA CRISTINA FERTILIZER CORPORATION, respondents.

FELICIANO, J.: Petitioner Iron and Steel Authority ("ISA") was created by Presidential Decree (P.D.) No. 272 dated 9 August 1973 in order, generally, to develop and promote the iron and steel industry in the Philippines. The objectives of the ISA are spelled out in the following terms: Sec. 2. Objectives The Authority shall have the following objectives: (a) to strengthen the iron and steel industry of the Philippines and to expand the domestic and export markets for the products of the industry; (b) to promote the consolidation, integration and rationalization of the industry in order to increase industry capability and viability to service the domestic market and to compete in international markets; (c) to rationalize the marketing and distribution of steel products in order to achieve a balance between demand and supply of iron and steel products for the country and to ensure that industry prices and profits are at levels that provide a fair balance between the interests of investors, consumers suppliers, and the public at large; (d) to promote full utilization of the existing capacity of the industry, to discourage investment in excess capacity, and in coordination, with appropriate government agencies to encourage capital investment in priority areas of the industry; (e) to assist the industry in securing adequate and low-cost supplies of raw materials and to reduce the excessive dependence of the country on imports of iron and steel. The list of powers and functions of the ISA included the following: Sec. 4. Powers and Functions. The authority shall have the following powers and functions: xxx xxx xxx
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(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent resale and/or lease to the companies involved if it is shown that such use of the State's power is necessary to implement the construction of capacity which is needed for the attainment of the objectives of the Authority; xxx xxx xxx (Emphasis supplied) P.D. No. 272 initially created petitioner ISA for a term of five (5) years counting from 9 August 1973. 1 When ISA's original term expired on 10 October 1978, its term was extended for another ten (10) years by Executive Order No. 555 dated 31 August 1979. The National Steel Corporation ("NSC") then a wholly owned subsidiary of the National Development Corporation which is itself an entity wholly owned by the National Government, embarked on an expansion program embracing, among other things, the construction of an integrated steel mill in Iligan City. The construction of such a steel mill was considered a priority and major industrial project of the Government. Pursuant to the expansion program of the NSC, Proclamation No. 2239 was issued by the President of the Philippines on 16 November 1982 withdrawing from sale or settlement a large tract of public land (totalling about 30.25 hectares in area) located in Iligan City, and reserving that land for the use and immediate occupancy of NSC. Since certain portions of the public land subject matter Proclamation No. 2239 were occupied by a non-operational chemical fertilizer plant and related facilities owned by private respondent Maria Cristina Fertilizer Corporation ("MCFC"), Letter of Instruction (LOI), No. 1277, also dated 16 November 1982, was issued directing the NSC to "negotiate with the owners of MCFC, for and on behalf of the Government, for the compensation of MCFC's present occupancy rights on the subject land." LOI No. 1277 also directed that should NSC and private respondent MCFC fail to reach an agreement within a period of sixty (60) days from the date of LOI No. 1277, petitioner ISA was to exercise its power of eminent domain under P.D. No. 272 and to initiate expropriation proceedings in respect of occupancy rights of private respondent MCFC relating to the subject public land as well as the plant itself and related facilities and to cede the same to the NSC. 2 Negotiations between NSC and private respondent MCFC did fail. Accordingly, on 18 August 1983, petitioner ISA commenced eminent domain proceedings against private respondent MCFC in the Regional Trial Court, Branch 1, of Iligan City, praying that it (ISA) be places in possession of the property involved upon depositing in court the amount of P1,760,789.69 representing ten percent (10%) of the declared market values of that property. The Philippine National Bank, as mortgagee of the plant facilities and improvements involved in the expropriation proceedings, was also impleaded as party-defendant. On 17 September 1983, a writ of possession was issued by the trial court in favor of ISA. ISA in turn placed NSC in possession and control of the land occupied by MCFC's fertilizer plant installation. The case proceeded to trial. While the trial was ongoing, however, the statutory existence of petitioner ISA expired on 11 August 1988. MCFC then filed a motion to dismiss, contending that no valid judgment could be rendered against ISA which had ceased to be a juridical person. Petitioner ISA filed its opposition to this motion.

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In an Order dated 9 November 1988, the trial court granted MCFC's motion to dismiss and did dismiss the case. The dismissal was anchored on the provision of the Rules of Court stating that "only natural or juridical persons or entities authorized by law may be parties in a civil case." 3 The trial court also referred to non-compliance by petitioner ISA with the requirements of Section 16, Rule 3 of the Rules of Court. 4 Petitioner ISA moved for reconsideration of the trial court's Order, contending that despite the expiration of its term, its juridical existence continued until the winding up of its affairs could be completed. In the alternative, petitioner ISA urged that the Republic of the Philippines, being the real party-in-interest, should be allowed to be substituted for petitioner ISA. In this connection, ISA referred to a letter from the Office of the President dated 28 September 1988 which especially directed the Solicitor General to continue the expropriation case. The trial court denied the motion for reconsideration, stating, among other things that: The property to be expropriated is not for public use or benefit [__] but for the use and benefit [__] of NSC, a government controlled private corporation engaged in private business and for profit, specially now that the government, according to newspaper reports, is offering for sale to the public its [shares of stock] in the National Steel Corporation in line with the pronounced policy of the present administration to disengage the government from its private business ventures. 5 (Brackets supplied) Petitioner went on appeal to the Court of Appeals. In a Decision dated 8 October 1991, the Court of Appeals affirmed the order of dismissal of the trial court. The Court of Appeals held that petitioner ISA, "a government regulatory agency exercising sovereign functions," did not have the same rights as an ordinary corporation and that the ISA, unlike corporations organized under the Corporation Code, was not entitled to a period for winding up its affairs after expiration of its legally mandated term, with the result that upon expiration of its term on 11 August 1987, ISA was "abolished and [had] no more legal authority to perform governmental functions." The Court of Appeals went on to say that the action for expropriation could not prosper because the basis for the proceedings, the ISA's exercise of its delegated authority to expropriate, had become ineffective as a result of the delegate's dissolution, and could not be continued in the name of Republic of the Philippines, represented by the Solicitor General: It is our considered opinion that under the law, the complaint cannot prosper, and therefore, has to be dismissed without prejudice to the refiling of a new complaint for expropriation if the Congress sees it fit." (Emphases supplied) At the same time, however, the Court of Appeals held that it was premature for the trial court to have ruled that the expropriation suit was not for a public purpose, considering that the parties had not yet rested their respective cases. In this Petition for Review, the Solicitor General argues that since ISA initiated and prosecuted the action for expropriation in its capacity as agent of the Republic of the Philippines, the Republic, as principal of ISA, is entitled to be substituted and to be made a party-plaintiff after the agent ISA's term had expired. Private respondent MCFC, upon the other hand, argues that the failure of Congress to enact a law further extending the term of ISA after 11 August 1988 evinced a "clear legislative intent to terminate the juridical existence of ISA," and that the authorization issued by the Office of the President to the Solicitor General for continued prosecution of the expropriation suit could not prevail over such negative intent. It is also contended that the exercise of the eminent domain by ISA or the Republic is improper, since that power would be exercised "not on behalf of the National Government but for the benefit of NSC."
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The principal issue which we must address in this case is whether or not the Republic of the Philippines is entitled to be substituted for ISA in view of the expiration of ISA's term. As will be made clear below, this is really the only issue which we must resolve at this time. Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil action: Sec. 1. Who May Be Parties. Only natural or juridical persons or entities authorized by law may be parties in a civil action. Under the above quoted provision, it will be seen that those who can be parties to a civil action may be broadly categorized into two (2) groups: (a) those who are recognized as persons under the law whether natural, i.e., biological persons, on the one hand, or juridical person such as corporations, on the other hand; and (b) entities authorized by law to institute actions. Examination of the statute which created petitioner ISA shows that ISA falls under category (b) above. P.D. No. 272, as already noted, contains express authorization to ISA to commence expropriation proceedings like those here involved: Sec. 4. Powers and Functions. The Authority shall have the following powers and functions: xxx xxx xxx (j) to initiate expropriation of land required for basic iron and steel facilities for subsequent resale and/or lease to the companies involved if it is shown that such use of the State's power is necessary to implement the construction of capacity which is needed for the attainment of the objectives of the Authority; xxx xxx xxx (Emphasis supplied) It should also be noted that the enabling statute of ISA expressly authorized it to enter into certain kinds of contracts "for and in behalf of the Government" in the following terms: xxx xxx xxx (i) to negotiate, and when necessary, to enter into contracts for and in behalf of the government, for the bulk purchase of materials, supplies or services for any sectors in the industry, and to maintain inventories of such materials in order to insure a continuous and adequate supply thereof and thereby reduce operating costs of such sector;
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xxx xxx xxx (Emphasis supplied) Clearly, ISA was vested with some of the powers or attributes normally associated with juridical personality. There is, however, no provision in P.D. No. 272 recognizing ISA as possessing general or comprehensive juridical personality separate and distinct from that of the Government. The ISA in fact appears to the Court to be a non-incorporated agency or instrumentality of the Republic of the Philippines, or more precisely of the Government of the Republic of the Philippines. It is common knowledge that other agencies or instrumentalities of the Government of the Republic are cast in corporate form, that is to say, are incorporated agencies or instrumentalities, sometimes with and at other times without capital stock, and accordingly vested with a juridical personality distinct from the personality of the Republic. Among such incorporated agencies or instrumentalities are: National Power Corporation; 6 Philippine Ports Authority; 7 National Housing Authority; 8 Philippine National Oil Company; 9Philippine National Railways; 10 Public Estates Authority; 11 Philippine Virginia Tobacco Administration, 12 and so forth. It is worth noting that the term "Authority" has been used to designate both incorporated and non-incorporated agencies or instrumentalities of the Government. We consider that the ISA is properly regarded as an agent or delegate of the Republic of the Philippines. The Republic itself is a body corporate and juridical person vested with the full panoply of powers and attributes which are compendiously described as "legal personality." The relevant definitions are found in the Administrative Code of 1987: Sec. 2. General Terms Defined. Unless the specific words of the text, or the context as a whole, or a particular statute, require a different meaning: (1) Government of the Republic of the Philippines refers to the corporate governmental entity through which the functions of government are exercised throughout the Philippines, including, save as the contrary appears from the context, the various arms through which political authority is made effective in the Philippines, whether pertaining to the autonomous regions, the provincial, city, municipal or barangay subdivisions or other forms of local government. xxx xxx xxx (4) Agency of the Government refers to any of the various units of the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein. xxx xxx xxx (10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations.
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xxx xxx xxx (Emphases supplied) When the statutory term of a non-incorporated agency expires, the powers, duties and functions as well as the assets and liabilities of that agency revert back to, and are re-assumed by, the Republic of the Philippines, in the absence of special provisions of law specifying some other disposition thereof such as, e.g., devolution or transmission of such powers, duties, functions, etc. to some other identified successor agency or instrumentality of the Republic of the Philippines. When the expiring agency is an incorporated one, the consequences of such expiry must be looked for, in the first instance, in the charter of that agency and, by way of supplementation, in the provisions of the Corporation Code. Since, in the instant case, ISA is a non-incorporated agency or instrumentality of the Republic, its powers, duties, functions, assets and liabilities are properly regarded as folded back into the Government of the Republic of the Philippines and hence assumed once again by the Republic, no special statutory provision having been shown to have mandated succession thereto by some other entity or agency of the Republic. The procedural implications of the relationship between an agent or delegate of the Republic of the Philippines and the Republic itself are, at least in part, spelled out in the Rules of Court. The general rule is, of course, that an action must be prosecuted and defended in the name of the real party in interest. (Rule 3, Section 2) Petitioner ISA was, at the commencement of the expropriation proceedings, a real party in interest, having been explicitly authorized by its enabling statute to institute expropriation proceedings. The Rules of Court at the same time expressly recognize the role of representative parties: Sec. 3. Representative Parties. A trustee of an expressed trust, a guardian, an executor or administrator, or a party authorized by statute may sue or be sued without joining the party for whose benefit the action is presented or defended; but the court may, at any stage of the proceedings, order such beneficiary to be made a party. . . . . (Emphasis supplied) In the instant case, ISA instituted the expropriation proceedings in its capacity as an agent or delegate or representative of the Republic of the Philippines pursuant to its authority under P.D. No. 272. The present expropriation suit was brought on behalf of and for the benefit of the Republic as the principal of ISA. Paragraph 7 of the complaint stated: 7. The Government, thru the plaintiff ISA, urgently needs the subject parcels of land for the construction and installation of iron and steel manufacturing facilities that are indispensable to the integration of the iron and steel making industry which is vital to the promotion of public interest and welfare. (Emphasis supplied) The principal or the real party in interest is thus the Republic of the Philippines and not the National Steel Corporation, even though the latter may be an ultimate user of the properties involved should the condemnation suit be eventually successful. From the foregoing premises, it follows that the Republic of the Philippines is entitled to be substituted in the expropriation proceedings as party-plaintiff in lieu of ISA, the statutory term of ISA having expired. Put a little differently, the expiration of ISA's statutory term did not by itself require or justify the dismissal of the eminent domain proceedings.

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It is also relevant to note that the non-joinder of the Republic which occurred upon the expiration of ISA's statutory term, was not a ground for dismissal of such proceedings since a party may be dropped or added by order of the court, on motion of any party or on the court's own initiative at any stage of the action and on such terms as are just. 13 In the instant case, the Republic has precisely moved to take over the proceedings as party-plaintiff. In E.B. Marcha Transport Company, Inc. v. Intermediate Appellate Court, 14 the Court recognized that the Republic may initiate or participate in actions involving its agents. There the Republic of the Philippines was held to be a proper party to sue for recovery of possession of property although the "real" or registered owner of the property was the Philippine Ports Authority, a government agency vested with a separate juridical personality. The Court said: It can be said that in suing for the recovery of the rentals, the Republic of the Philippines acted as principal of the Philippine Ports Authority, directly exercising the commission it had earlier conferred on the latter as its agent. . . . 15 (Emphasis supplied) In E.B. Marcha, the Court also stressed that to require the Republic to commence all over again another proceeding, as the trial court and Court of Appeals had required, was to generate unwarranted delay and create needless repetition of proceedings: More importantly, as we see it, dismissing the complaint on the ground that the Republic of the Philippines is not the proper party would result in needless delay in the settlement of this matter and also in derogation of the policy against multiplicity of suits. Such a decision would require the Philippine Ports Authority to refile the very same complaint already proved by the Republic of the Philippines and bring back as it were to square one. 16(Emphasis supplied) As noted earlier, the Court of Appeals declined to permit the substitution of the Republic of the Philippines for the ISA upon the ground that the action for expropriation could not prosper because the basis for the proceedings, the ISA's exercise of its delegated authority to expropriate, had become legally ineffective by reason of the expiration of the statutory term of the agent or delegated i.e., ISA. Since, as we have held above, the powers and functions of ISA have reverted to the Republic of the Philippines upon the termination of the statutory term of ISA, the question should be addressed whether fresh legislative authority is necessary before the Republic of the Philippines may continue the expropriation proceedings initiated by its own delegate or agent. While the power of eminent domain is, in principle, vested primarily in the legislative department of the government, we believe and so hold that no new legislative act is necessary should the Republic decide, upon being substituted for ISA, in fact to continue to prosecute the expropriation proceedings. For the legislative authority, a long time ago, enacted a continuing or standing delegation of authority to the President of the Philippines to exercise, or cause the exercise of, the power of eminent domain on behalf of the Government of the Republic of the Philippines. The 1917 Revised Administrative Code, which was in effect at the time of the commencement of the present expropriation proceedings before the Iligan Regional Trial Court, provided that: Sec. 64. Particular powers and duties of the President of the Philippines. In addition to his general supervisory authority, the President of the Philippines shall have such other specific powers and duties as are expressly conferred or imposed on him by law, and also, in particular, the powers and duties set forth in this Chapter. Among such special powers and duties shall be: xxx xxx xxx
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(h) To determine when it is necessary or advantageous to exercise the right of eminent domain in behalf of the Government of the Philippines; and to direct the Secretary of Justice, where such act is deemed advisable, to cause the condemnation proceedings to be begun in the court having proper jurisdiction. (Emphasis supplied) The Revised Administrative Code of 1987 currently in force has substantially reproduced the foregoing provision in the following terms: Sec. 12. Power of eminent domain. The President shall determine when it is necessary or advantageous to exercise the power of eminent domain in behalf of the National Government, anddirect the Solicitor General, whenever he deems the action advisable, to institute expopriation proceedings in the proper court. (Emphasis supplied) In the present case, the President, exercising the power duly delegated under both the 1917 and 1987 Revised Administrative Codes in effect made a determination that it was necessary and advantageous to exercise the power of eminent domain in behalf of the Government of the Republic and accordingly directed the Solicitor General to proceed with the suit. 17 It is argued by private respondent MCFC that, because Congress after becoming once more the depository of primary legislative power, had not enacted a statute extending the term of ISA, such non-enactment must be deemed a manifestation of a legislative design to discontinue or abort the present expropriation suit. We find this argument much too speculative; it rests too much upon simple silence on the part of Congress and casually disregards the existence of Section 12 of the 1987 Administrative Code already quoted above. Other contentions are made by private respondent MCFC, such as, that the constitutional requirement of "public use" or "public purpose" is not present in the instant case, and that the indispensable element of just compensation is also absent. We agree with the Court of Appeals in this connection that these contentions, which were adopted and set out by the Regional Trial Court in its order of dismissal, are premature and are appropriately addressed in the proceedings before the trial court. Those proceedings have yet to produce a decision on the merits, since trial was still on going at the time the Regional Trial Court precipitously dismissed the expropriation proceedings. Moreover, as a pragmatic matter, the Republic is, by such substitution as party-plaintiff, accorded an opportunity to determine whether or not, or to what extent, the proceedings should be continued in view of all the subsequent developments in the iron and steel sector of the country including, though not limited to, the partial privatization of the NSC. WHEREFORE, for all the foregoing, the Decision of the Court of Appeals dated 8 October 1991 to the extent that it affirmed the trial court's order dismissing the expropriation proceedings, is hereby REVERSED and SET ASIDE and the case is REMANDED to the court a quo which shall allow the substitution of the Republic of the Philippines for petitioner Iron and Steel Authority and for further proceedings consistent with this Decision. No pronouncement as to costs. SO ORDERED.

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MANUEL M. LEYSON JR., petitioner, vs. OFFICE OF THE OMBUDSMAN, TIRSO ANTIPORDA, Chairman, UCPB and CIIF Oil Mills, and OSCAR A. TORRALBA, President, CIIF Oil Mills, respondents.

BELLOSILLO, J.: On 7 February 1996 International Towage and Transport Corporation (ITTC), a domestic corporation engaged in the lighterage or shipping business, entered into a one (1)-year contract with Legaspi Oil Company, Inc. (LEGASPI OIL), Granexport Manufacturing Corporation (GRANEXPORT) and United Coconut Chemicals, Inc. (UNITED COCONUT), comprising the Coconut Industry Investment Fund (CIIF) companies, for the transport of coconut oil in bulk through MT Transasia. The majority shareholdings of these CIIF companies are owned by the United Coconut Planters Bank (UCPB) as administrator of the CIIF. Under the terms of the contract, either party could terminate the agreement provided a three (3)-month advance notice was given to the other party. However, in August 1996, or prior to the expiration of the contract, the CIIF companies with their new President, respondent Oscar A. Torralba, terminated the contract without the requisite advance notice. The CIIF companies engaged the services of another vessel, MT Marilag, operated by Southwest Maritime Corporation. On 11 March 1997 petitioner Manuel M. Leyson Jr., Executive Vice President of ITTC, filed with public respondent Office of the Ombudsman a grievance case against respondent Oscar A. Torralba. The following is a summary of the irregularities and corrupt practices allegedly committed by respondent Torralba: (a) breach of contract - unilateral cancellation of valid and existing contract; (b) bad faith - falsification of documents and reports to stop the operation of MT Transasia; (c) manipulation - influenced their insurance to disqualify MT Transasia; (d) unreasonable denial of requirement imposed; (e) double standards and inconsistent in favor of MT Marilag; (f) engaged and entered into a contract with Southwest Maritime Corp. which is not the owner of MT Marilag, where liabilities were waived and whose paid-up capital is only P250,000.00; and, (g) overpricing in the freight rate causing losses of millions of pesos to Cocochem.1 On 2 January 1998 petitioner charged respondent Tirso Antiporda, Chairman of UCPB and CIIF Oil Mills, and respondent Oscar A. Torralba with violation of The Anti-Graft and Corrupt Practices Act also before the Ombudsman anchored on the aforementioned alleged irregularities and corrupt practices. On 30 January 1998 public respondent dismissed the complaint based on its finding that The case is a simple case of breach of contract with damages which should have been filed in the regular court. This Office has no jurisdiction to determine the legality or validity of the termination of the contract entered into by CIIF and ITTC. Besides the entities involved are private corporations (over) which this Office has no jurisdiction.2
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On 4 June 1998 reconsideration of the dismissal of the complaint was denied. The Ombudsman was unswayed in his finding that the present controversy involved breach of contract as he also took into account the circumstance that petitioner had already filed a collection case before the Regional Trial Court of Manila-Br. 15, docketed as Civil Case No. 97-83354. Moreover, the Ombudsman found that the filing of the motion for reconsideration on 31 March 1998 was beyond the inextendible period of five (5) days from notice of the assailed resolution on 19 March 1998. 3 Petitioner now imputes grave abuse of discretion on public respondent in dismissing his complaint. He submits that inasmuch as Philippine Coconut Producers Federation, Inc. (COCOFED) v. PCGG4 and Republic v.Sandiganbayan5 have declared that the coconut levy funds are public funds then, conformably with Quimpo v. Tanodbayan,6 corporations formed and organized from those funds or whose controlling stocks are from those funds should be regarded as government owned and/or controlled corporations. As in the present case, since the funding or controlling interest of the companies being headed by private respondents was given or owned by the CIIF as shown in the certification of their Corporate Secretary, 7 it follows that they are government owned and/or controlled corporations. Corollarily, petitioner asserts that respondents Antiporda and Torralba are public officers subject to the jurisdiction of the Ombudsman. Petitioner alleges next that public respondent's conclusion that his complaint refers to a breach of contract is whimsical, capricious and irresponsible amounting to a total disregard of its main point, i. e., whether private respondents violated The Anti-Graft and Corrupt Practices Act when they entered into a contract with Southwest Maritime Corporation which was grossly disadvantageous to the government in general and to the CIIF in particular. Petitioner admits that his motion for reconsideration was filed out of time. Nonetheless, he advances that public respondent should have relaxed its rules in the paramount interest of justice; after all, the delay was just a matter of days and he, a layman not aware of technicalities, personally filed the complaint. Private respondents counter that the CIIF companies were duly organized and are existing by virtue of the Corporation Code. Their stockholders are private individuals and entities. In addition, private respondents contend that they are not public officers as defined under The Anti-Graft and Corrupt Practices Act but are private executives appointed by the Boards of Directors of the CIIF companies. They asseverate that petitioner's motion for reconsideration was filed through the expert assistance of a learned counsel. They then charge petitioner with forum shopping since he had similarly filed a case for collection of a sum of money plus damages before the trial court. The Office of the Solicitor General maintains that the Ombudsman approved the recommendation of the investigating officer to dismiss the complaint because he sincerely believed there was no sufficient basis for the criminal indictment of private respondents. We find no grave abuse of discretion committed by the Ombudsman. COCOFED v. PCGG referred to in Republic v. Sandiganbayan reviewed the history of the coconut levy funds. These funds actually have four (4) general classes: (a) the Coconut Investment Fund created under R. A. No. 6260;8 (b) the Coconut Consumers Stabilization Fund created under P. D. No. 276;9 (c) the Coconut Industry Development Fund created under P. D. No. 582; 10 and, (d) the Coconut Industry Stabilization Fund created under P. D. No. 1841. 11 The various laws relating to the coconut industry were codified in 1976. On 21 October of that year, P. D. No. 96112 was promulgated. On 11 June 1978 it was amended by P. D. No. 1468 13 by inserting a new provision authorizing the use of the balance of the Coconut Industry Development Fund for the acquisition of "shares of stocks in corporations organized for the purpose of engaging in the establishment and operation of industries . . . commercial activities and other allied business undertakings relating to coconut and other palm oil indust(ries)." 14From this fund thus created, or the CIIF, shares of stock in what have come to be known as the "CIIF companies" were purchased.
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We then stated in COCOFED that the coconut levy funds were raised by the State's police and taxing powers such that the utilization and proper management thereof were certainly the concern of the Government. These funds have a public character and are clearly affected with public interest. Quimpo v. Tanodbayan involved the issue as to whether PETROPHIL was a government owned or controlled corporation the employees of which fell within the jurisdictional purview of the Tanodbayan for purposes of The Anti-Graft and Corrupt Practices Act. We upheld the jurisdiction of the Tanodbayan on the ratiocination that While it may be that PETROPHIL was not originally "created" as a government-owned or controlled corporation, after it was acquired by PNOC, which is a government-owned or controlled corporation, PETROPHIL became a subsidiary of PNOC and thus shed-off its private status. It is now funded and owned by the government as, in fact, it was acquired to perform functions related to government programs and policies on oil, a vital commodity in the economic life of the nation. It was acquired not temporarily but as a permanent adjunct to perform essential government or government-related functions, as the marketing arm of the PNOC to assist the latter in selling and distributing oil and petroleum products to assure and maintain an adequate and stable domestic supply. But these jurisprudential rules invoked by petitioner in support of his claim that the CIIF companies are government owned and/or controlled corporations are incomplete without resorting to the definition of "government owned or controlled corporation" contained in par. (13), Sec. 2, Introductory Provisions of the Administrative Code of 1987, i. e., any agency organized as a stock or non-stock corporation vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock. The definition mentions three (3) requisites, namely, first, any agency organized as a stock or non-stock corporation; second, vested with functions relating to public needs whether governmental or proprietary in nature; and, third, owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock. In the present case, all three (3) corporations comprising the CIIF companies were organized as stock corporations.1wphi1 The UCPB-CIIF owns 44.10% of the shares of LEGASPI OIL, 91.24% of the shares of GRANEXPORT, and 92.85% of the shares of UNITED COCONUT. 15 Obviously, the below 51% shares of stock in LEGASPI OIL removes this firm from the definition of a government owned or controlled corporation. Our concern has thus been limited to GRANEXPORT and UNITED COCONUT as we go back to the second requisite. Unfortunately, it is in this regard that petitioner failed to substantiate his contentions. There is no showing that GRANEXPORT and/or UNITED COCONUT was vested with functions relating to public needs whether governmental or proprietary in nature unlike PETROPHIL in Quimpo. The Court thus concludes that the CIIF companies are, as found by public respondent, private corporations not within the scope of its jurisdiction. With the foregoing conclusion, we find it unnecessary to resolve the other issues raised by petitioner. A brief note on private respondents' charge of forum shopping. Executive Secretary v. Gordon 16 is instructive that forum shopping consists of filing multiple suits involving the same parties for the same cause of action, either simultaneously or successively, for the purpose of obtaining a favorable judgment. It is readily apparent that the present charge will not prosper because the cause of action herein, i. e., violation of The Anti-Graft and Corrupt Practices Act, is different from the cause of action in the case pending before the trial court which is collection of a sum of money plus damages.

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WHEREFORE, the petition is DISMISSED. The Resolution of public respondent Office of the Ombudsman of 30 January 1998 which dismissed the complaint of petitioner Manuel M. Leyson Jr., as well as its Order of 4 June 1998 denying his motion for reconsideration, is AFFIRMED. Costs against petitioner.1wphi1.nt SO ORDERED.

PEOPLE OF THE PHILIPPINES, petitioner, vs. THE HONORABLE SANDIGANBAYAN (Fifth Division) and EFREN L. ALAS, respondents. DECISION CORONA, J.: Does the Sandiganbayan have jurisdiction over presidents, directors or trustees, or managers of government-owned or controlled corporations organized and incorporated under the Corporation Code for purposes of the provisions of RA 3019, otherwise known as the Anti-Graft and Corrupt Practices Act? The petitioner, represented by the Office of the Special Prosecutor (OSP), takes the affirmative position in this petition for certiorari under Rule 65 of the Rules of Court. Respondent Efren L. Alas contends otherwise, together with the respondent court. Pursuant to a resolution dated September 30, 1999 of the Office of the Ombudsman, two separate informations[1] for violation of Section 3(e) of RA 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, were filed with the Sandiganbayan on November 17, 1999 against Efren L. Alas. The charges emanated from the alleged anomalous advertising contracts entered into by Alas, in his capacity as President and Chief Operating Officer of the Philippine Postal Savings Bank (PPSB), with Bagong Buhay Publishing Company which purportedly caused damage and prejudice to the government. On October 30, 2002, Alas filed a motion to quash the informations for lack of jurisdiction, which motion was vehemently opposed by the prosecution. After considering the arguments of both parties, the respondent court ruled that PPSB was a private corporation and that its officers, particularly herein respondent Alas, did not fall under Sandiganbayan jurisdiction. According to the Sandiganbayan: After a careful consideration of the arguments of the accused-movant as well as of that of the prosecution, we are of the considered opinion that the instant motion of the accused is well taken. Indeed, it is the basic thrust of Republic Act as well as (sic) Presidential Decree No. 1606 as amended by President Decree No. 1486 and Republic Act No. 7975 and Republic Act No. 8249 that the Sandiganbayan has jurisdiction only over public officers unless private persons are charged with them in the commission of the offenses. The records disclosed that while Philippine Postal Savings Bank is a subsidiary of the Philippine Postal Corporation which is a government owned corporation, the same is not created by a special law. It was organized and incorporated under the Corporation Code which is Batas Pambansa Blg. 68.
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It was registered with the Securities and Exchange Commission under SEC No. AS094-005593 on June 22, 1994 with a lifetime of fifty (50) years. Under its Articles of Incorporation the purpose for which said entity is formed was primarily for business, xxx Likewise, a scrutiny of the seven (7) secondary purposes of the corporation points to the conclusion that it exists for business. Obviously, it is not involved in the performance of a particular function in the exercise of government power. Thus, its officers and employees are not covered by the GSIS and are under the SSS law, and actions for reinstatement and backwages are not within the jurisdiction of the Civil Service Commission but by the National Labor Relations Commission (NLRC). The Supreme Court, in the case of Trade Unions of the Philippines and Allied Services vs. National Housing Corp., 173 SCRA 33, held that the Civil Service now covers only government owned or controlled corporations with original or legislative charters, those created by an act of Congress or by special law, and not those incorporated under and pursuant to a general legislation. The Highest Court categorically ruled that the Civil Service does not include government-owned or controlled corporation which are organized as subsidiaries of government-owned or controlled corporation under the general corporation law. In Philippine National Oil Company Energy Development Corporation vs. Leogardo, 175 SCRA 26, the Supreme Court emphasized that: The test in determining whether a government-owned or controlled corporation is subject to the Civil Service Law is the manner of its creation such that government corporation created by special charter are subject to its provision while those incorporated under the general corporation law are not within its coverage. Likewise in Davao City Water District vs. Civil Service Commission, 201 SCRA 601 it was held that by government-owned or controlled corporation with original charter we mean government-owned or controlled corporation created by a special law and not under the Corporation Code of the Philippines while in Llenes vs. Dicdican, et al., 260 SCRA 207, a public officer has been ruled, as a person whose duties involve the exercise of discretion in the performance of the function of government. Clearly, on the basis of the foregoing pronouncements of the Supreme Court, the accused herein cannot be considered a public officer. Thus, this Court may not exercise jurisdiction over his act.[2] Dissatisfied, the People, through the Office of the Special Prosecutor (OSP), filed this petition[3] arguing, in essence, that the PPSB was a government-owned or controlled corporation as the term was defined under Section 2(13) of the Administrative Code of 1987.[4] Likewise, in further defining the jurisdiction of the Sandiganbayan, RA 8249 did not make a distinction as to the manner of creation of the government-owned or controlled corporations for their officers to fall under its jurisdiction. Hence, being President and Chief Operating Officer of the PPSB at the time of commission of the crimes charged, respondent Alas came under the jurisdiction of the Sandiganbayan. Quoting at length from the assailed resolution dated February 15, 2001, respondent Alas, on the other hand, practically reiterated the pronouncements made by the respondent court in support of his conclusion that the PPSB was not created by special law, hence, its officers did not fall within the jurisdiction of the Sandiganbayan.[5] We find merit in the petition.
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Section 2(13) of EO 292[6] defines government-owned or controlled corporations as follows: Sec. 2. General Terms Defined Unless the specific words of the text or the context as a whole or a particular statute, shall require a different meaning: xxx xxx xxx

(13) government owned or controlled corporations refer to any agency organized as a stock or non-stock corporation vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the government directly or indirectly or through its instrumentalities either wholly, or where applicable as in the case of stock corporations to the extent of at least 51% of its capital stock: provided, that government owned or controlled corporations maybe further categorized by the department of the budget, the civil service commission and the commission on audit for the purpose of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations. From the foregoing, PPSB fits the bill as a government-owned or controlled corporation, and organized and incorporated under the Corporation Code as a subsidiary of the Philippine Postal Corporation (PHILPOST). More than 99% of the authorized capital stock of PPSB belongs to the government while the rest is nominally held by its incorporators who are/were themselves officers of PHILPOST. The creation of PPSB was expressly sanctioned by Section 32 of RA 7354, otherwise known as the Postal Service Act of 1992, for purposes of, among others, to encourage and pr omote the virtue of thrift and the habit of savings among the general public, especially the youth and the marginalized sector in the countryside xxx and to facilitate postal service by receiving collections and making payments, including postal money orders.[7] It is not disputed that the Sandiganbayan has jurisdiction over presidents, directors or trustees, or managers of government-owned or controlled corporations with original charters whenever charges of graft and corruption are involved. However, a question arises whether the Sandiganbayan has jurisdiction over the same officers in government-owned or controlled corporations organized and incorporated under the Corporation Code in view of the delimitation provided for in Article IX-B Section 2(1) of the 1987 Constitution which states that: SEC. 2. (1) The Civil Service embraces all branches, subdivisions, instrumentalities, and agencies of the government, including government-owned or controlled corporations with original charters. It should be pointed out however, that the jurisdiction of the Sandiganbayan is separate and distinct from the Civil Service Commission. The same is governed by Article XI, Section 4 of the 1987 Constitution which provides that the present anti-graft court known as the Sandiganbayan shall continue to function and exercise its jurisdiction as now or hereafter may be provided by law. This provision, in effect, retained the jurisdiction of the anti-graft court as defined under Article XIII, Section 5 of the 1973 Constitution which mandated its creation, thus: Sec. 5. The Batasang Pambansa shall create a special court, to be known as Sandiganbayan, which shall have jurisdiction over criminal and civil cases involving graft and corrupt practices and such other offense committed by public officers and employees, including those in government-owned or controlled corporations, in relation to their office as may be determined by law. (Italics ours) On March 30, 1995, Congress, pursuant to its authority vested under the 1987 Constitution, enacted RA 7975[8] maintaining the jurisdiction of the Sandiganbayan over presidents, directors or trustees, or managers of government-owned or controlled corporations without any distinction whatsoever. Thereafter, on February 5, 1997, Congress enacted RA 8249[9] which preserved the subject provision:
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Section 4, Jurisdiction. The Sandiganbayan shall exercise exclusive original jurisdiction in all cases involving: a. Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section, Title VII, Book II of the Revised Penal Code, where one or more of the accused are officials occupying the following positions in the government, whether in a permanent, acting or interim capacity, at the time of the commission of the offense, (1) Officials of the executive branch occupying the positions of regional director, and higher, otherwise classified as grade 27 and higher, of the Compensation and Position Classification Act of 1989 (Republic Act No. 6758) specifically including: xxx xxx xxx (g) Presidents, directors or trustees, or managers of government-owned or controlled corporations, state universities or educational institutions or foundations. (Italics ours) The legislature, in mandating the inclusion of presidents, directors or trustees, or managers of government -owned or controlled corporations within the jurisdiction of the Sandiganbayan, has consistently refrained from making any distinction with respect to the manner of their creation. The deliberate omission, in our view, clearly reveals the intention of the legislature to include the presidents, directors or trustees, or managers of both types of corporations within the jurisdiction of the Sandiganbayan whenever they are involved in graft and corruption. Had it been otherwise, it could have simply made the necessary distinction. But it did not. It is a basic principle of statutory construction that when the law does not distinguish, we should not distinguish. Ubi lex non distinguit nec nos distinguere debemos. Corollarily, Article XI Section 12 of the 1987 Constitution, on the jurisdiction of the Ombudsman (the governments prosecutory arm against persons charged with graft and corruption), includes officers and employees of government-owned or controlled corporations, likewise without any distinction. In Quimpo v. Tanodbayan,[10] this Court, already mindful of the pertinent provisions of the 1987 Constitution, ruled that the concerned officers of government-owned or controlled corporations, whether created by special law or formed under the Corporation Code, come under the jurisdiction of the Sandiganbayan for purposes of the provisions of the Anti-Graft and Corrupt Practices Act. Otherwise, as we emphasized therein, a major policy of Government, which is to eradicate, or at the very least minimize, the graft and corruption that has permeated the fabric of the public service like a malignant social cancer, would be seriously undermined. In fact, Section 1 of the Anti-Graft and Corrupt Practices Act embodies this policy of the government, that is, to repress certain acts not only of public officers but also of private persons constituting graft or corrupt practices or which may lead thereto. The foregoing pronouncement has not outlived its usefulness. On the contrary, it has become even more relevant today due to the rampant cases of graft and corruption that erode the peoples faith in government. For indeed, a government-owned or controlled corporation can conceivably create as many subsidiary corporations under the Corporation Code as it might wish, use public funds, disclaim public accountability and escape the liabilities and responsibilities provided by law. By including the concerned officers of government-owned or controlled corporations organized and incorporated under the Corporation Code within the jurisdiction of the Sandiganbayan, the legislature evidently seeks to avoid just that.

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WHEREFORE, in view of the foregoing, the petition is hereby GRANTED and the assailed resolution dated February 15, 2001 of the respondent court is hereby REVERSED and SET ASIDE. SO ORDERED.

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. GENERAL FOODS (PHILS.), INC., respondent. CORONA, J.: Petitioner Commissioner of Internal Revenue (Commissioner) assails the resolution1 of the Court of Appeals reversing the decision2 of the Court of Tax Appeals which in turn denied the protest filed by respondent General Foods (Phils.), Inc., regarding the assessment made against the latter for deficiency taxes. The records reveal that, on June 14, 1985, respondent corporation, which is engaged in the manufacture of beverages such as "Tang," "Calumet" and "Kool-Aid," filed its income tax return for the fiscal year ending February 28, 1985. In said tax return, respondent corporation claimed as deduction, among other business expenses, the amount of P9,461,246 for media advertising for "Tang." On May 31, 1988, the Commissioner disallowed 50% or P4,730,623 of the deduction claimed by respondent corporation. Consequently, respondent corporation was assessed deficiency income taxes in the amount of P2,635, 141.42. The latter filed a motion for reconsideration but the same was denied. On September 29, 1989, respondent corporation appealed to the Court of Tax Appeals but the appeal was dismissed: With such a gargantuan expense for the advertisement of a singular product, which even excludes "other advertising and promotions" expenses, we are not prepared to accept that such amount is reasonable "to stimulate the current sale of merchandise" regardless of Pet itioners explanation that such expense "does not connote unreasonableness considering the grave economic situation taking place after the Aquino assassination characterized by capital fight, strong deterioration of the purchasing power of the Philippine peso and the slacking demand for consumer products"
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(Petitioners Memorandum, CTA Records, p. 273). We are not convinced with such an explanation. The staggering expense led us to believe that such expenditure was incurred "to create or maintain some form of good will for the taxpayers trade or business or for the i ndustry or profession of which the taxpayer is a member." The term "good will" can hardly be said to have any precise signification; it is generally used to denote the benefit arising from connection and reputation (Words and Phrases, Vol. 18, p. 556 citing Douhart vs. Loagan, 86 III. App. 294). As held in the case of Welch vs. Helvering, efforts to establish reputation are akin to acquisition of capital assets and, therefore, expenses related thereto are not business expenses but capital expenditures. (Atlas Mining and Development Corp. vs. Commissioner of Internal Revenue, supra). For sure such expenditure was meant not only to generate present sales but more for future and prospective benefits. Hence, "abnormally large expenditures for advertising are usually to be spread over the period of years during which the benefits of the expenditures are received" (Mertens, supra, citing Colonial Ice Cream Co., 7 BTA 154). WHEREFORE, in all the foregoing, and finding no error in the case appealed from, we hereby RESOLVE to DISMISS the instant petition for lack of merit and ORDER the Petitioner to pay the respondent Commissioner the assessed amount of P2,635,141.42 representing its deficiency income tax liability for the fiscal year ended February 28, 1985."3 Aggrieved, respondent corporation filed a petition for review at the Court of Appeals which rendered a decision reversing and setting aside the decision of the Court of Tax Appeals: Since it has not been sufficiently established that the item it claimed as a deduction is excessive, the same should be allowed. WHEREFORE, the petition of petitioner General Foods (Philippines), Inc. is hereby GRANTED. Accordingly, the Decision, dated 8 February 1994 of respondent Court of Tax Appeals is REVERSED and SET ASIDE and the letter, dated 31 May 1988 of respondent Commissioner of Internal Revenue is CANCELLED. SO ORDERED.4 Thus, the instant petition, wherein the Commissioner presents for the Courts consideration a lone issue: whether or not the subject media advertising expense for "Tang" incurred by respondent corporation was an ordinary and necessary expense fully deductible under the National Internal Revenue Code (NIRC). It is a governing principle in taxation that tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority;5 and he who claims an exemption must be able to justify his claim by the clearest grant of organic or statute law. An exemption from the common burden cannot be permitted to exist upon vague implications.6 Deductions for income tax purposes partake of the nature of tax exemptions; hence, if tax exemptions are strictly construed, then deductions must also be strictly construed. We then proceed to resolve the singular issue in the case at bar. Was the media advertising expense for "Tang" paid or incurred by respondent corporation for the fiscal year ending February 28, 1985 "necessary and ordinary," hence, fully deductible under the NIRC? Or was it a capital
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expenditure, paid in order to create "goodwill and reputation" for respondent corporation and/or its products, which should have been amortized over a reasonable period? Section 34 (A) (1), formerly Section 29 (a) (1) (A), of the NIRC provides: (A) Expenses.(1) Ordinary and necessary trade, business or professional expenses.(a) In general.- There shall be allowed as deduction from gross income all ordinary and necessary expenses paid or incurred during the taxable year in carrying on, or which are directly attributable to, the development, management, operation and/or conduct of the trade, business or exercise of a profession. Simply put, to be deductible from gross income, the subject advertising expense must comply with the following requisites: (a) the expense must be ordinary and necessary; (b) it must have been paid or incurred during the taxable year; (c) it must have been paid or incurred in carrying on the trade or business of the taxpayer; and (d) it must be supported by receipts, records or other pertinent papers. 7 The parties are in agreement that the subject advertising expense was paid or incurred within the corresponding taxable year and was incurred in carrying on a trade or business. Hence, it was necessary. However, their views conflict as to whether or not it was ordinary. To be deductible, an advertising expense should not only be necessary but also ordinary. These two requirements must be met. The Commissioner maintains that the subject advertising expense was not ordinary on the ground that it failed the two conditions set by U.S. jurisprudence: first, "reasonableness" of the amount incurred and second, the amount incurred must not be a capital outlay to create "goodwill" for the product and/or private respondents business. Otherwise, the expense must be considered a capital expenditure to be spread out over a reasonable time. We agree. There is yet to be a clear-cut criteria or fixed test for determining the reasonableness of an advertising expense. There being no hard and fast rule on the matter, the right to a deduction depends on a number of factors such as but not limited to: the type and size of business in which the taxpayer is engaged; the volume and amount of its net earnings; the nature of the expenditure itself; the intention of the taxpayer and the general economic conditions. It is the interplay of these, among other factors and properly weighed, that will yield a proper evaluation. In the case at bar, the P9,461,246 claimed as media advertising expense for "Tang" alone was almost one-half of its total claim for "marketing expenses." Aside from that, respondent-corporation also claimed P2,678,328 as "other advertising and promotions expense" and another P1,548,614, for consumer promotion. Furthermore, the subject P9,461,246 media advertising expense for "Tang" was almost double the amount of respondent corporations P4,640,636 general and administrative expenses.
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We find the subject expense for the advertisement of a single product to be inordinately large. Therefore, even if it is necessary, it cannot be considered an ordinary expense deductible under then Section 29 (a) (1) (A) of the NIRC. Advertising is generally of two kinds: (1) advertising to stimulate the current sale of merchandise or use of services and (2) advertising designed to stimulate the future sale of merchandise or use of services. The second type involves expenditures incurred, in whole or in part, to create or maintain some form of goodwill for the taxpayers trade or business or for the industry or profession of which the taxpayer is a membe r. If the expenditures are for the advertising of the first kind, then, except as to the question of the reasonableness of amount, there is no doubt such expenditures are deductible as business expenses. If, however, the expenditures are for advertising of the second kind, then normally they should be spread out over a reasonable period of time. We agree with the Court of Tax Appeals that the subject advertising expense was of the second kind. Not only was the amount staggering; the respondent corporation itself also admitted, in its letter protest8 to the Commissioner of Internal Revenues assessment, that the subject media expense was incurred in order to protect respondent corporations brand franchise, a critical point during the period under review. The protection of brand franchise is analogous to the maintenance of goodwill or title to ones property. This is a capital expenditure which should be spread out over a reasonable period of time.9 Respondent corporations venture to protect its brand franchise was tantamount to efforts to establish a reputation. This was akin to the acquisition of capital assets and therefore expenses related thereto were not to be considered as business expenses but as capital expenditures.10 True, it is the taxpayers prerogative to determine the amount of advertising expenses it will incur and where to apply them.11 Said prerogative, however, is subject to certain considerations. The first relates to the extent to which the expenditures are actually capital outlays; this necessitates an inquiry into the nature or purpose of such expenditures.12 The second, which must be applied in harmony with the first, relates to whether the expenditures are ordinary and necessary. Concomitantly, for an expense to be considered ordinary, it must be reasonable in amount. The Court of Tax Appeals ruled that respondent corporation failed to meet the two foregoing limitations. We find said ruling to be well founded. Respondent corporation incurred the subject advertising expense in order to protect its brand franchise. We consider this as a capital outlay since it created goodwill for its business and/or product. The P9,461,246 media advertising expense for the promotion of a single product, almost one-half of petitioner corporations entire claim for marketing expenses for that year under review, inclusive of other advertising and promotion expenses of P2,678,328 and P1,548,614 for consumer promotion, is doubtlessly unreasonable. It has been a long standing policy and practice of the Court to respect the conclusions of quasi-judicial agencies such as the Court of Tax Appeals, a highly specialized body specifically created for the purpose of reviewing tax cases. The CTA, by the nature of its functions, is dedicated exclusively to the study and consideration of tax problems. It has necessarily developed an expertise on the subject. We extend due consideration to its opinion unless there is an abuse or improvident exercise of authority.13 Since there is none in the case at bar, the Court adheres to the findings of the CTA. Accordingly, we find that the Court of Appeals committed reversible error when it declared the subject media advertising expense to be deductible as an ordinary and necessary expense on the ground that "it has not been established that the item being claimed as deduction is excessive." It is not
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incumbent upon the taxing authority to prove that the amount of items being claimed is unreasonable. The burden of proof to establish the validity of claimed deductions is on the taxpayer.14 In the present case, that burden was not discharged satisfactorily. WHEREFORE, premises considered, the instant petition is GRANTED. The assailed decision of the Court of Appeals is hereby REVERSED and SET ASIDE. Pursuant to Sections 248 and 249 of the Tax Code, respondent General Foods (Phils.), Inc. is hereby ordered to pay its deficiency income tax in the amount of P2,635,141.42, plus 25% surcharge for late payment and 20% annual interest computed from August 25, 1989, the date of the denial of its protest, until the same is fully paid. SO ORDERED.

COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. THE PHILIPPINE AMERICAN ACCIDENT INSURANCE COMPANY, INC., THE PHILIPPINE AMERICAN ASSURANCE COMPANY, INC., and THE PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC.,Respondents. DECISION CARPIO, J.: The Case Before the Court is a petition for review1 assailing the Decision2 of 7 January 2000 of the Court of Appeals in CA-G.R. SP No. 36816. The Court of Appeals affirmed the Decision3 of 5 January 1995 of the Court of Tax Appeals ("CTA") in CTA Cases Nos. 2514, 2515 and 2516. The CTA ordered the Commissioner of Internal Revenue ("petitioner") to refund a total of P29,575.02 to respondent companies ("respondents"). Antecedent Facts
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Respondents are domestic corporations licensed to transact insurance business in the country. From August 1971 to September 1972, respondents paid the Bureau of Internal Revenue under protest the 3% tax imposed on lending investors by Section 195-A4 of Commonwealth Act No. 466 ("CA 466"), as amended by Republic Act No. 6110 ("RA 6110") and other laws. CA 466 was the National Internal Revenue Code ("NIRC") applicable at the time. Respondents paid the following amounts: P7,985.25 from Philippine American ("PHILAM") Accident Insurance Company; P7,047.80 from PHILAM Assurance Company; and P14,541.97 from PHILAM General Insurance Company. These amounts represented 3% of each companys interest income from mortgage and other loans. Respondents also paid the taxes required of insurance companies under CA 466. On 31 January 1973, respondents sent a letter-claim to petitioner seeking a refund of the taxes paid under protest. When respondents did not receive a response, each respondent filed on 26 April 1973 a petition for review with the CTA. These three petitions, which were later consolidated, argued that respondents were not lending investors and as such were not subject to the 3% lending investors tax under Section 195-A. The CTA archived respondents case for several years while another case with a similar issue was pending before the higher courts. When respondents case was reinstated, the CTA ruled that respondents were entitled to their refund. The Ruling of the Court of Tax Appeals The CTA held that respondents are not taxable as lending investors because the term "lending investors" does not embrace insurance companies. The CTA traced the history of the tax on lending investors, as follows: Originally, a person who was engaged in lending money at interest was taxed as a money lender. [Sec. 1464(x), Rev. Adm. Code] The term money lenders was defined as including "all persons who make a practice of lending money for themselves or others at interest." [Sec. 1465(v), id.] Under this law, an insurance company was not considered a money lender and was not taxable as such. To quote from an old BIR Ruling: "The lending of money at interest by insurance companies constitutes a necessary incident of their regular business. For this reason, insurance companies are not liable to tax as money lenders or real estate brokers for making or negotiating loans secured by real property. (Ruling, February 28, 1920; BIR 135.2)" (The Internal Revenue Law, Annotated, 2nd ed., 1929, by B.L. Meer, page 143) The same rule has been applied to banks. "For making investments on salary loans, banks will not be required to pay the money lenders tax imposed by this subsection, for the reason that money lending is considered a mere incident of the banking business. [See Ruling No. 43, (October 8, 1926) 25 Off. Gaz. 1326)" (The Internal Revenue Law, Annotated, id.) The term "money lenders" was later changed to "lending investors" but the definition of the term remains the same. [Sec. 1464(x), Rev. Adm. Code, as finally amended by Com. Act No. 215, and Sec. 1465(v) of the same Code, as finally amended by Act No. 3963] The same law is embodied in the present National Internal Revenue Code (Com. Act No. 466) without change, except in the amount of the tax. [See Secs. 182(A) (3) (dd) and 194(u), National Internal Revenue Code.]
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It is a well-settled rule that an administrative interpretation of a law which has been followed and applied for a long time, and thereafter the law is re-enacted without substantial change, such administrative interpretation is deemed to have received legislative approval. In short, the administrative interpretation becomes part of the law as it is presumed to carry out the legislative purpose.5 The CTA held that the practice of lending money at interest is part of the insurance business. CA 466 already taxes the insurance business. The CTA pointed out that the law recognizes and even regulates this practice of lending money by insurance companies. The CTA observed that CA 466 also treated differently insurance companies from lending investors in regard to fixed taxes. Under Section 182(A)(3)(gg), insurance companies were subject to the same fixed tax as banks and finance companies. The CTA reasoned that insurance companies were grouped with banks and finance companies because the latters lending activities were also integral to their business. In contrast, lending investors were taxed at a different fixed tax under Section 182(A)(3)(dd) of CA 466. The CTA stated that "insurance companies xxx had never been required by respondent [CIR] to pay the fixed tax imposed on lending investors xxx."6 The dispositive portion of the Decision of 5 January 1995 of the Court of Tax Appeals ("CTA Decision") reads: WHEREFORE, premises considered, petitioners Philippine American Accident Insurance Co., Philippine American Assurance Co., and Philippine American General Insurance Co., Inc. are not taxable on their lending transactions independently of their insurance business. Accordingly, respondent is hereby ordered to refund to petitioner[s] the sum of P7,985.25, P7,047.80 and P14,541.97 in CTA Cases No. 2514, 2515 and 2516, respectively representing the fixed and percentage taxes when (sic) paid by petitioners as lending investor from August 1971 to September 1972. No pronouncement as to cost. SO ORDERED.7 Dissatisfied, petitioner elevated the matter to the Court of Appeals.8 The Ruling of the Court of Appeals The Court of Appeals ruled that respondents are not taxable as lending investors. In its Decision of 7 January 2000 ("CA Decision"), the Court of Appeals affirmed the ruling of the CTA, thus: WHEREFORE, premises considered, the petition is DISMISSED, hereby AFFIRMING the decision, dated January 5, 1995, of the Court of Tax Appeals in CTA Cases Nos. 2514, 2515 and 2516. SO ORDERED.9 Petitioner appealed the CA Decision to this Court.
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The Issues Petitioner raises the sole issue: WHETHER RESPONDENT INSURANCE COMPANIES ARE SUBJECT TO THE 3% PERCENTAGE TAX AS LENDING INVESTORS UNDER SECTIONS 182(A)(3)(DD) AND 195-A, RESPECTIVELY IN RELATION TO SECTION 194(U), ALL OF THE NIRC.10 The Ruling of the Court The petition lacks merit. On the Additional Issue Raised by Petitioner Section 182(A)(3)(dd) of CA 466 imposes an annual fixed tax on lending investors, depending on their location.11 The sole question before the CTA was whether respondents were subject to the percentage tax on lending investors under Section 195-A. Petitioner raised for the first time the issue of the fixed tax in the Petition for Review12 petitioner filed before the Court of Appeals. Ordinarily, a party cannot raise for the first time on appeal an issue not raised in the trial court. 13 The Court of Appeals should not have taken cognizance of the issue on respondents supposed liability under Section 182(A)(3)(dd). However, we cannot entirely fault the Court of Appeals or petitioner. Even if the percentage tax on lending investors was the sole issue before it, the CTA ordered petitioner to refund to the PHILAM companies "the fixed and percentage taxes [t]hen paid by petitioners as lending investor."14 Although the amounts for refund consisted only of what respondents paid as percentage taxes, the CTA Decision also ordered the refund to respondents of the fixed tax on lending investors. Respondents in their pleadings deny any liability under Section 182(A)(3)(dd), on the same ground that they are not lending investors. The question of whether respondents should pay the fixed tax under Section 182(A)(3)(dd) revolves around the same issue of whether respondents are taxable as lending investors. In similar circumstances, the Court has held that an appellate court may consider an unassigned error if it is closely related to an error that was properly assigned.15 This rule properly applies to the present case. Thus, we shall consider and rule on the issue of whether respondents are subject to the fixed tax under Section 182(A)(3)(dd). Whether Insurance Companies are Taxable as Lending Investors Invoking Sections 195-A and 182(A)(3)(dd) in relation to Section 194(u) of CA 466, petitioner argues that insurance companies are subject to two fixed taxes and two percentage taxes. Petitioner alleges that: As a lending investor, an insurance company is subject to an annual fixed tax of P500.00 and anotherP500.00 under Section 182 (A)(3)(dd) and (gg) of the Tax Code. As an underwriter, an insurance company is subject to the 3% tax of the total premiums collected and another 3% on the gross receipts as a lending investor under Sections 255 and 195-A, respectively of the same Code. xxx16
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Petitioner also contends that the refund granted to respondents is in the nature of a tax exemption, and cannot be allowed unless granted explicitly and categorically. The rule that tax exemptions should be construed strictly against the taxpayer presupposes that the taxpayer is clearly subject to the tax being levied against him. Unless a statute imposes a tax clearly, expressly and unambiguously, what applies is the equally well-settled rule that the imposition of a tax cannot be presumed.17Where there is doubt, tax laws must be construed strictly against the government and in favor of the taxpayer. 18This is because taxes are burdens on the taxpayer, and should not be unduly imposed or presumed beyond what the statutes expressly and clearly import.19 Section 182(A)(3)(dd) of CA 466 also provides: Sec. 182. Fixed taxes. (A) On business xxx xxx (3) Other fixed taxes. The following fixed taxes shall be collected as follows, the amount stated being for the whole year, when not otherwise specified; xxx (dd) Lending investors 1. In chartered cities and first class municipalities, five hundred pesos; 2. In second and third class municipalities, two hundred and fifty pesos; 3. In fourth and fifth class municipalities and municipal districts, one hundred and twenty-five pesos; Provided, That lending investors who do business as such in more than one province shall pay a tax of five hundred pesos. Section 195-A of CA 466 provides: Sec. 195-A. Percentage tax on dealers in securities; lending investors. Dealers in securities and lending investors shall pay a tax equivalent to three per centum on their gross income. Neither Section 182(A)(3)(dd) nor Section 195-A mentions insurance companies. Section 182(A)(3)(dd) provides for the taxation of lending investors in different localities. Section 195-A refers to dealers in securities and lending investors. The burden is thus on petitioner to show that insurance companies are lending investors for purposes of taxation.

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In this case, petitioner does not dispute that respondents are in the insurance business. Petitioner merely alleges that the definition of lending investors under CA 466 is broad enough to encompass insurance companies. Petitioner insists that because of Section 194(u), the two principal activities of the insurance business, namely, underwriting and investment, are separately taxable.20 Section 194(u) of CA 466 states: (u) "Lending investor" includes all persons who make a practice of lending money for themselves or others at interest. xxx As can be seen, Section 194(u) does not tax the practice of lending per se. It merely defines what lending investors are. The question is whether the lending activities of insurance companies make them lending investors for purposes of taxation. We agree with the CTA and Court of Appeals that it does not. Insurance companies cannot be considered lending investors under CA 466, as amended. Definition of Lending Investors under CA 466 Does Not Include Insurance Companies. The definition in Section 194(u) of CA 466 is not broad enough to include the business of insurance companies. The Insurance Code of 197821 is very clear on what constitutes an insurance company. It provides that an insurer or insurance company "shall include all individuals, partnerships, associations or corporations xxx engaged as principals in the insurance business, excepting mutual benefit associations."22 More specifically, respondents fall under the category of insurance corporations as defined in Section 185 of the Insurance Code, thus: SECTION 185. Corporations formed or organized to save any person or persons or other corporations harmless from loss, damage, or liability arising from any unknown or future or contingent event, or to indemnify or to compensate any person or persons or other corporations for any such loss, damage, or liability, or to guarantee the performance of or compliance with contractual obligations or the payment of debts of others shall be known as "insurance corporations." Plainly, insurance companies and lending investors are different enterprises in the eyes of the law. Lending investors cannot, for a consideration, hold anyone harmless from loss, damage or liability, nor provide compensation or indemnity for loss. The underwriting of risks is the prerogative of insurers, the great majority of which are incorporated insurance companies23 like respondents. Granting of Mortgage and other Loans are Investment Practices that are Part of the Insurance Business.
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True, respondents granted mortgage and other kinds of loans. However, this was not done independently of respondents insurance business. The granting of certain loans is one of several means of investment allowed to insurance companies. No less than the Insurance Code mandates and regulates this practice.24 Unlike the practice of lending investors, the lending activities of insurance companies are circumscribed and strictly regulated by the State. Insurance companies cannot freely lend to "themselves or others" as lending investors can,25 nor can insurance companies grant simply any kind of loan. Even prior to 1978, the Insurance Code prescribed strict rules for the granting of loans by insurance companies.26 These provisions on mortgage, collateral and policy loans were reiterated in the Insurance Code of 1978 and are still in force today. Petitioner concedes that respondents investment practices are as much a part of the insurance business as the task of underwriting. Nevertheless, petitioner argues that such investment practices are separately taxable under CA 466. The CTA and the Court of Appeals found that the investment of premiums and other funds received by respondents through the granting of mortgage and other loans was necessary to respondents business and hence, should not be taxed separately. Insurance companies are required by law to possess and maintain substantial legal reserves to meet their obligations to policyholders.27 This obviously cannot be accomplished through the collection of premiums alone, as the legal reserves and capital and surplus insurance companies are obligated to maintain run into millions of pesos. As such, the creation of "investment income" has long been held to be generally, if not necessarily,essential to the business of insurance.28 The creation of investment income in the manner sanctioned by the laws on insurance is thus part of the business of insurance, and the fruits of these investments are essentially income from the insurance business. This is particularly true if the invested assets are held either as reserved funds to provide for policy obligations or as capital and surplus to provide an extra margin of safety which will be attractive to insurance buyers.29 The Court has also held that when a company is taxed on its main business, it is no longer taxable further for engaging in an activity or work which is merely a part of, incidental to and is necessary to its main business.30Respondents already paid percentage and fixed taxes on their insurance business. To require them to pay percentage and fixed taxes again for an activity which is necessarily a part of the same business, the law must expressly require such additional payment of tax. There is, however, no provision of law requiring such additional payment of tax. Sections 195-A and 182(A)(3)(dd) of CA 466 do not require insurance companies to pay double percentage and fixed taxes. They merely tax lending investors, not lending activities. Respondents were not transformed into lending investors by the mere fact that they granted loans, as these investments were part of, incidental and necessary to their insurance business. Different Tax Treatment of Insurance Companies and Lending Investors. Section 182(A)(3) of CA 466 accorded different tax treatments to lending investors and insurance companies. The relevant portions of Section 182 state:
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Sec. 182. Fixed taxes. (A) On business xxx (3) Other fixed taxes. The following fixed taxes shall be collected as follows, the amount stated being for the whole year, when not otherwise specified; xxx (dd) Lending investors 1. In chartered cities and first class municipalities, five hundred pesos; 2. In second and third class municipalities, two hundred and fifty pesos; 3. In fourth and fifth class municipalities and municipal districts, one hundred and twenty-five pesos; Provided, That lending investors who do business as such in more than one province shall pay a tax of five hundred pesos. xxx (gg) Banks, insurance companies, finance and investment companies doing business in the Philippines and franchise grantees, five hundred pesos. xxx (Emphasis supplied.) The separate provisions on lending investors and insurance companies demonstrate an intention to treat these businesses differently. If Congress intended insurance companies to be taxed as lending investors, there would be no need for Section 182(A)(3)(gg). Section 182(A)(3)(dd) would have been sufficient. That insurance companies were included with banks, finance and investment companies also supports the CTAs conclusion that insurance companies had more in common with the latter enterprises than with lending investors. As the CTA pointed out, banks also regularly lend money at interest, but are not taxable as lending investors. We find no merit in petitioners contention that Congress intended to subject respondents to two percentage taxes and two fixed taxes. Petitioners argument goes against the doctrine of strict interpretation of tax impositions. Petitioners argument is likewise not in accord with existing jurisprudence. In Commissioner of Internal Revenue v. Michel J. Lhuillier Pawnshop, Inc.,31 the Court ruled that the different tax treatment accorded to pawnshops and lending investors in the NIRC of 1977 and the NIRC of 1986 showed "the intent of Congress to deal with both subjects differently." The same reasoning applies squarely to the present case.

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Even the current tax law does not treat insurance companies as lending investors. Under Section 108(A)32 of the NIRC of 1997, lending investors and non-life insurance companies, except for their crop insurances, are subject to value-added tax ("VAT"). Life insurance companies are exempt from VAT, but are subject to percentage tax under Section 123 of the NIRC of 1997. Indeed, the fact that Sections 195-A and 182(A)(3)(dd) of CA 466 failed to mention insurance companies already implies the latters exclusion from the coverage of these provisions. When a statute enumerates the things upon which it is to operate, everything else by implication must be excluded from its operation and effect.33 Definition of Lending Investors in CA 466 is Not New. Petitioner does not dispute that it issued a ruling in 1920 to the effect that the lending of money at interest was a necessary incident of the insurance business, and that insurance companies were thus not subject to the tax on money lenders. Petitioner argues only that the 1920 ruling does not apply to the instant case because RA 6110 introduced the definition of lending investors to CA 466 only in 1969. The subject definition was actually introduced much earlier, at a time when lending investors were still referred to as money lenders. Sections 45 and 46 of the Internal Revenue Law of 191434 ("1914 Tax Code") state: SECTION 45. Amount of Tax on Business. Fixed taxes on business shall be collected as follows, the amount stated being for the whole year, when not otherwise specified: xxx (x) Money lenders, eighty pesos; xxx SECTION 46. Words and Phrases Defined. In applying the provisions of the preceding section words and phrases shall be taken in the sense and extension indicated below: xxx "Money lender" includes all persons who make a practice of lending money for themselves or others at interest. (Emphasis supplied) As can be seen, the definitions of "money lender" under the 1914 Tax Code and "lending investor" under CA 466 are identical. The term "money lender" was merely changed to "lending investor" when Act No. 3963 amended the Revised Administrative Code in 1932.35 This same definition of lending investor has since appeared in Section 194(u) of CA 466 and later tax laws.
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Note that insurance companies were not included among the businesses subject to an annual fixed tax under the 1914 Tax Code.36 That Congress later saw the need to introduce Section 182(A)(3)(gg) in CA 466 bolsters our view that there was no legislative intent to tax insurance companies as lending investors. If insurance companies were already taxed as lending investors, there would have been no need for a separate provision specifically requiring insurance companies to pay fixed taxes. The Court Accords Great Weight to the Factual Findings of the CTA. Dedicated exclusively to the study and consideration of tax problems, the CTA has necessarily developed an expertise in the subject of taxation that this Court has recognized time and again. For this reason, the findings of fact of the CTA, particularly when affirmed by the Court of Appeals, are generally conclusive on this Court absent grave abuse of discretion or palpable error,37 which are not present in this case. WHEREFORE, we DENY the instant petition and AFFIRM the Decision of 7 January 2000 of the Court of Appeals in CA-G.R. SP No. 36816. SO ORDERED.

G.R. No. L-57883

March 12, 1982

GUALBERTO J. DE LA LLANA Presiding Judge, Branch II of the City Court of Olongapo, ESTANISLAO L. CESA, JR., FIDELA Y. VARGAS, BENJAMIN C. ESCOLANGO, JUANITO C. ATIENZA, MANUEL REYES ROSAPAPAN, JR., VIRGILIO E. ACIERTO, and PORFIRIO AGUILLON AGUILA, petitioners, vs. MANUEL ALBA, Minister of Budget, FRANCISCO TANTUICO, Chairman, Commission on Audit, and RICARDO PUNO, Minister of Justice, Respondents.

FERNANDO, C.J.: This Court, pursuant to its grave responsibility of passing upon the validity of any executive or legislative act in an appropriate cases, has to resolve the crucial issue of the constitutionality of Batas Pambansa Blg. 129, entitled "An act reorganizing the Judiciary, Appropriating Funds Therefor and for Other Purposes." The task of judicial review, aptly characterized as exacting and delicate, is never more so than when a conceded legislative power, that of judicial reorganization, 1 may possibly collide with the time-honored principle of the independence of the judiciary 2 as protected
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and safeguarded by this constitutional provision: "The Members of the Supreme Court and judges of inferior courts shall hold office during good behavior until they reach the age of seventy years or become incapacitated to discharge the duties of their office. The Supreme Court shall have the power to discipline judges of inferior courts and, by a vote of at least eight Members, order their dismissal." 3 For the assailed legislation mandates that Justices and judges of inferior courts from the Court of Appeals to municipal circuit courts, except the occupants of the Sandiganbayan and the Court of Tax Appeals, unless appointed to the inferior courts established by such Act, would be considered separated from the judiciary. It is the termination of their incumbency that for petitioners justifies a suit of this character, it being alleged that thereby the security of tenure provision of the Constitution has been ignored and disregarded, That is the fundamental issue raised in this proceeding, erroneously entitled Petition for Declaratory Relief and/or for Prohibition 4 considered by this Court as an action for prohibited petition, seeking to enjoin respondent Minister of the Budget, respondent Chairman of the Commission on Audit, and respondent Minister of Justice from taking any action implementing Batas Pambansa Blg. 129. Petitioners 5 sought to bolster their claim by imputing lack of good faith in its enactment and characterizing as an undue delegation of legislative power to the President his authority to fix the compensation and allowances of the Justices and judges thereafter appointed and the determination of the date when the reorganization shall be deemed completed. In the very comprehensive and scholarly Answer of Solicitor General Estelito P. Mendoza, 6 it was pointed out that there is no valid justification for the attack on the constitutionality of this statute, it being a legitimate exercise of the power vested in the Batasang Pambansa to reorganize the judiciary, the allegations of absence of good faith as well as the attack on the independence of the judiciary being unwarranted and devoid of any support in law. A Supplemental Answer was likewise filed on October 8, 1981, followed by a Reply of petitioners on October 13. After the hearing in the morning and afternoon of October 15, in which not only petitioners and respondents were heard through counsel but also the amici curiae, 7 and thereafter submission of the minutes of the proceeding on the debate on Batas Pambansa Blg. 129, this petition was deemed submitted for decision. The importance of the crucial question raised called for intensive and rigorous study of all the legal aspects of the case. After such exhaustive deliberation in several sessions, the exchange of views being supplemented by memoranda from the members of the Court, it is our opinion and so hold that Batas Pambansa Blg. 129 is not unconstitutional. 1. The argument as to the lack of standing of petitioners is easily resolved. As far as Judge de la Llana is concerned, he certainly falls within the principle set forth in Justice Laurel's opinion in People v. Vera. 8 Thus: "The unchallenged rule is that the person who impugns the validity of a statute must have a personal and substantial interest in the case such that he has sustained, or will sustain, direct injury as a result of its enforcement." 9 The other petitioners as members of the bar and officers of the court cannot be considered as devoid of "any personal and substantial interest" on the matter. There is relevance to this excerpt from a separate opinion in Aquino, Jr. v. Commission on Elections: 10 "Then there is the attack on the standing of petitioners, as vindicating at most what they consider a public right and not protecting their rights as individuals. This is to conjure the specter of the public right dogma as an inhibition to parties intent on keeping public officials staying on the path of constitutionalism. As was so well put by Jaffe: 'The protection of private rights is an essential constituent of public interest and, conversely, without a well-ordered state there could be no enforcement of private rights. Private and public interests are, both in substantive and procedural sense, aspects of the totality of the legal order.' Moreover, petitioners have convincingly shown that in their capacity as taxpayers, their standing to sue has been amply demonstrated. There would be a retreat from the liberal approach followed in Pascual v. Secretary of Public Works, foreshadowed by the very decision of People v. Vera where the doctrine was first fully discussed, if we act differently now. I do not think we are prepared to take that step. Respondents, however, would hark back to the American Supreme Court doctrine in Mellon v. Frothingham with their claim that what petitioners possess 'is an interest which is shared in common by other people and is comparatively so minute and indeterminate as
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to afford any basis and assurance that the judicial process can act on it.' That is to speak in the language of a bygone era even in the United States. For as Chief Justice Warren clearly pointed out in the later case of Flast v. Cohen, the barrier thus set up if not breached has definitely been lowered." 11 2. The imputation of arbitrariness to the legislative body in the enactment of Batas Pambansa Blg. 129 to demonstrate lack of good faith does manifest violence to the facts. Petitioners should have exercised greater care in informing themselves as to its antecedents. They had laid themselves open to the accusation of reckless disregard for the truth, On August 7, 1980, a Presidential Committee on Judicial Reorganization was organized. 12 This Executive Order was later amended by Executive Order No. 619-A., dated September 5 of that year. It clearly specified the task assigned to it: "1. The Committee shall formulate plans on the reorganization of the Judiciary which shall be submitted within seventy (70) days from August 7, 1980 to provide the President sufficient options for the reorganization of the entire Judiciary which shall embrace all lower courts, including the Court of Appeals, the Courts of First Instance, the City and Municipal Courts, and all Special Courts, but excluding the Sandigan Bayan." 13 On October 17, 1980, a Report was submitted by such Committee on Judicial Reorganization. It began with this paragraph: "The Committee on Judicial Reorganization has the honor to submit the following Report. It expresses at the outset its appreciation for the opportunity accorded it to study ways and means for what today is a basic and urgent need, nothing less than the restructuring of the judicial system. There are problems, both grave and pressing, that call for remedial measures. The felt necessities of the time, to borrow a phrase from Holmes, admit of no delay, for if no step be taken and at the earliest opportunity, it is not too much to say that the people's faith in the administration of justice could be shaken. It is imperative that there be a greater efficiency in the disposition of cases and that litigants, especially those of modest means much more so, the poorest and the humblest can vindicate their rights in an expeditious and inexpensive manner. The rectitude and the fairness in the way the courts operate must be manifest to all members of the community and particularly to those whose interests are affected by the exercise of their functions. It is to that task that the Committee addresses itself and hopes that the plans submitted could be a starting point for an institutional reform in the Philippine judiciary. The experience of the Supreme Court, which since 1973 has been empowered to supervise inferior courts, from the Court of Appeals to the municipal courts, has proven that reliance on improved court management as well as training of judges for more efficient administration does not suffice. I hence, to repeat, there is need for a major reform in the judicial so stem it is worth noting that it will be the first of its kind since the Judiciary Act became effective on June 16, 1901." 14 I t went to say: "I t does not admit of doubt that the last two decades of this century are likely to be attended with problems of even greater complexity and delicacy. New social interests are pressing for recognition in the courts. Groups long inarticulate, primarily those economically underprivileged, have found legal spokesmen and are asserting grievances previously ignored. Fortunately, the judicially has not proved inattentive. Its task has thus become even more formidable. For so much grist is added to the mills of justice. Moreover, they are likewise to be quite novel. The need for an innovative approach is thus apparent. The national leadership, as is well-known, has been constantly on the search for solutions that will prove to be both acceptable and satisfactory. Only thus may there be continued national progress." 15 After which comes: "To be less abstract, the thrust is on development. That has been repeatedly stressed and rightly so. All efforts are geared to its realization. Nor, unlike in the past, was it to b "considered as simply the movement towards economic progress and growth measured in terms of sustained increases in per capita income and Gross National Product (GNP). 16 For the New Society, its implication goes further than economic advance, extending to "the sharing, or more appropriately, the democratization of social and economic opportunities, the substantiation of the true meaning of social justice." 17 This process of modernization and change compels the government to extend its field of activity and its scope of operations. The efforts towards reducing the gap between the wealthy and the poor elements in the nation call for more regulatory legislation. That way the social justice and protection to labor mandates of the Constitution could be effectively implemented." 18 There is likelihood then "that some measures deemed inimical by interests adversely affected would be challenged in court on grounds of validity. Even if the question does not go that far, suits may be filed concerning their interpretation and application. ... There could be pleas for injunction or restraining orders. Lack of success of such moves
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would not, even so, result in their prompt final disposition. Thus delay in the execution of the policies embodied in law could thus be reasonably expected. That is not conducive to progress in development." 19 For, as mentioned in such Report, equally of vital concern is the problem of clogged dockets, which "as is well known, is one of the utmost gravity. Notwithstanding the most determined efforts exerted by the Supreme Court, through the leadership of both retired Chief Justice Querube Makalintal and the late Chief Justice Fred Ruiz Castro, from the time supervision of the courts was vested in it under the 1973 Constitution, the trend towards more and more cases has continued." 20 It is understandable why. With the accelerated economic development, the growth of population, the increasing urbanization, and other similar factors, the judiciary is called upon much oftener to resolve controversies. Thus confronted with what appears to be a crisis situation that calls for a remedy, the Batasang Pambansa had no choice. It had to act, before the ailment became even worse. Time was of the essence, and yet it did not hesitate to be duly mindful, as it ought to be, of the extent of its coverage before enacting Batas Pambansa Blg. 129. 3. There is no denying, therefore, the need for "institutional reforms," characterized in the Report as "both pressing and urgent." 21 It is worth noting, likewise, as therein pointed out, that a major reorganization of such scope, if it were to take place, would be the most thorough after four generations. 22 The reference was to the basic Judiciary Act generations . enacted in June of 1901, 23 amended in a significant way, only twice previous to the Commonwealth. There was, of course, the creation of the Court of Appeals in 1935, originally composed "of a Presiding Judge and ten appellate Judges, who shall be appointed by the President of the Philippines, with the consent of the Commission on Appointments of the National Assembly, 24 It could "sit en banc, but it may sit in two divisions, one of six and another of five Judges, to transact business, and the two divisions may sit at the same time." 25 Two years after the establishment of independence of the Republic of the Philippines, the Judiciary Act of 1948 26 was passed. It continued the existing system of regular inferior courts, namely, the Court of Appeals, Courts of First Instance, 27 the Municipal Courts, at present the City Courts, and the Justice of the Peace Courts, now the Municipal Circuit Courts and Municipal Courts. The membership of the Court of Appeals has been continuously increased. 28 Under a 1978 Presidential Decree, there would be forty-five members, a Presiding Justice and forty-four Associate Justices, with fifteen divisions. 29 Special courts were likewise created. The first was the Court of Tax Appeals in 1954, 30 next came the Court of Agrarian Relations in 1955, 31 and then in the same year a Court of the Juvenile and Domestic Relations for Manila in 1955, 32 subsequently followed by the creation of two other such courts for Iloilo and Quezon City in 1966. 33 In 1967, Circuit Criminal Courts were established, with the Judges having the same qualifications, rank, compensation, and privileges as judges of Courts of First Instance. 34 After the submission of such Report, Cabinet Bill No. 42, which later became the basis of Batas Pambansa Blg. 129, was introduced. After setting forth the background as above narrated, its Explanatory Note continues: "Pursuant to the President's instructions, this proposed legislation has been drafted in accordance with the guidelines of that report with particular attention to certain objectives of the reorganization, to wit, the attainment of more efficiency in disposal of cases, a reallocation of jurisdiction, and a revision of procedures which do not tend to the proper meeting out of justice. In consultation with, and upon a consensus of, the governmental and parliamentary leadership, however, it was felt that some options set forth in the Report be not availed of. Instead of the proposal to confine the jurisdiction of the intermediate appellate court merely to appellate adjudication, the preference has been opted to increase rather than diminish its jurisdiction in order to enable it to effectively assist the Supreme Court. This preference has been translated into one of the innovations in the proposed Bill." 35 In accordance with the parliamentary procedure, the Bill was sponsored by the Chairman of the Committee on Justice, Human Rights and Good Government to which it was referred. Thereafter, Committee Report No. 225 was submitted by such Committee to the Batasang Pambansa recommending the approval with some amendments. In the sponsorship speech of Minister Ricardo C. Puno, there was reference to the Presidential Committee on Judicial Reorganization. Thus: "On October 17, 1980, the Presidential Committee on Judicial Reorganization submitted its report to the President which contained the 'Proposed Guidelines for Judicial Reorganization.' Cabinet Bill No. 42 was drafted substantially in accordance with the options
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4.

presented by these guidelines. Some options set forth in the aforesaid report were not availed of upon consultation with and upon consensus of the government and parliamentary leadership. Moreover, some amendments to the bill were adopted by the Committee on Justice, Human Rights and Good Government, to which The bill was referred, following the public hearings on the bill held in December of 1980. The hearings consisted of dialogues with the distinguished members of the bench and the bar who had submitted written proposals, suggestions, and position papers on the bill upon the invitation of the Committee on Justice, Human Rights and Good Government." 36 Stress was laid by the sponsor that the enactment of such Cabinet Bill would, firstly, result in the attainment of more efficiency in the disposal of cases. Secondly, the improvement in the quality of justice dispensed by the courts is expected as a necessary consequence of the easing of the court's dockets. Thirdly, the structural changes introduced in the bill, together with the reallocation of jurisdiction and the revision of the rules of procedure, are designated to suit the court system to the exigencies of the present day Philippine society, and hopefully, of the foreseeable future." 37 it may be observed that the volume containing the minutes of the proceedings of the Batasang Pambansa show that 590 pages were devoted to its discussion. It is quite obvious that it took considerable time and effort as well as exhaustive study before the act was signed by the President on August 14, 1981. With such a background, it becomes quite manifest how lacking in factual basis is the allegation that its enactment is tainted by the vice of arbitrariness. What appears undoubted and undeniable is the good faith that characterized its enactment from its inception to the affixing of the Presidential signature. 5. Nothing is better settled in our law than that the abolition of an office within the competence of a legitimate body if done in good faith suffers from no infirmity. The ponencia of Justice J.B.L. Reyes in Cruz v. Primicias, Jr. 38 reiterated such a doctrine: "We find this point urged by respondents, to be without merit. No removal or separation of petitioners from the service is here involved, but the validity of the abolition of their offices. This is a legal issue that is for the Courts to decide. It is well-known rule also that valid abolition of offices is neither removal nor separation of the incumbents. ... And, of course, if the abolition is void, the incumbent is deemed never to have ceased to hold office. The preliminary question laid at rest, we pass to the merits of the case. As well-settled as the rule that the abolition of an office does not amount to an illegal removal of its incumbent is the principle that, in order to be valid, the abolition must be made in good faith." 39 The above excerpt was quoted with approval in Bendanillo, Sr. v. Provincial Governor, 40 two earlier cases enunciating a similar doctrine having preceded it. 41 As with the offices in the other branches of the government, so it is with the judiciary. The test remains whether the abolition is in good faith. As that element is conspicuously present in the enactment of Batas Pambansa Blg. 129, then the lack of merit of this petition becomes even more apparent. The concurring opinion of Justice Laurel in Zandueta v. De la Costa 42 cannot be any clearer. This is a quo warranto proceeding filed by petitioner, claiming that he, and not respondent, was entitled to he office of judge of the Fifth Branch of the Court of First Instance of Manila. There was a Judicial Reorganization Act in 1936, 43 a year after the inauguration of the Commonwealth, amending the Administrative Code to organize courts of original jurisdiction known as the Courts of First Instance Prior to such statute, petitioner was the incumbent of such branch. Thereafter, he received an ad interim appointment, this time to the Fourth Judicial District, under the new legislation. Unfortunately for him, the Commission on Appointments of then National Assembly disapproved the same, with respondent being appointed in his place. He contested the validity of the Act insofar as it resulted in his being forced to vacate his position This Court did not rule squarely on the matter. His petition was dismissed on the ground of estoppel. Nonetheless, the separate concurrence of Justice Laurel in the result reached, to repeat, reaffirms in no uncertain terms the standard of good faith to preclude any doubt as to the abolition of an inferior court, with due recognition of the security of tenure guarantee. Thus: " I am of the opinion that Commonwealth Act No. 145 in so far as it reorganizes, among other judicial districts, the Ninth Judicial District, and establishes an entirely new district comprising Manila and the provinces of Rizal and Palawan, is valid and constitutional. This conclusion flows from the fundamental proposition that the legislature may abolish courts inferior to the Supreme Court and therefore may reorganize them territorially or otherwise thereby necessitating new appointments and commissions. Section 2, Article VIII of the Constitution vests in the National Assembly the power to define, prescribe and apportion the jurisdiction of the various courts, subject to certain limitations in the case of the Supreme Court. It is admitted
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that section 9 of the same article of the Constitution provides for the security of tenure of all the judges. The principles embodied in these two sections of the same article of the Constitution must be coordinated and harmonized. A mere enunciation of a principle will not decide actual cases and controversies of every sort. (Justice Holmes in Lochner vs. New York, 198 U.S., 45; 49 Law. ed; 937)" 44 justice Laurel continued: "I am not insensible to the argument that the National Assembly may abuse its power and move deliberately to defeat the constitutional provision guaranteeing security of tenure to all judges, But, is this the case? One need not share the view of Story, Miller and Tucker on the one hand, or the opinion of Cooley, Watson and Baldwin on the other, to realize that the application of a legal or constitutional principle is necessarily factual and circumstantial and that fixity of principle is the rigidity of the dead and the unprogressive. I do say, and emphatically, however, that cases may arise where the violation of the constitutional provision regarding security of tenure is palpable and plain, and that legislative power of reorganization may be sought to cloak an unconstitutional and evil purpose. When a case of that kind arises, it will be the time to make the hammer fall and heavily. But not until then. I am satisfied that, as to the particular point here discussed, the purpose was the fulfillment of what was considered a great public need by the legislative department and that Commonwealth Act No. 145 was not enacted purposely to affect adversely the tenure of judges or of any particular judge. Under these circumstances, I am for sustaining the power of the legislative department under the Constitution. To be sure, there was greater necessity for reorganization consequent upon the establishment of the new government than at the time Acts Nos. 2347 and 4007 were approved by the defunct Philippine Legislature, and although in the case of these two Acts there was an express provision providing for the vacation by the judges of their offices whereas in the case of Commonwealth Act No. 145 doubt is engendered by its silence, this doubt should be resolved in favor of the valid exercise of the legislative power." 45 6. A few more words on the question of abolition. In the above-cited opinion of Justice Laurel in Zandueta, reference was made to Act No. 2347 46 on the reorganization of the Courts of First Instance and to Act No. 4007 47 on the reorganization of all branches of the government, including the courts of first instance. In both of them, the then Courts of First Instance were replaced by new courts with the same appellation. As Justice Laurel pointed out, there was no question as to the fact of abolition. He was equally categorical as to Commonwealth Act No. 145, where also the system of the courts of first instance was provided for expressly. It was pointed out by Justice Laurel that the mere creation of an entirely new district of the same court is valid and constitutional. such conclusion flowing "from the fundamental proposition that the legislature may abolish courts inferior to the Supreme Court and therefore may reorganize them territorially or otherwise thereby necessitating new appointments and commissions." 48 The challenged statute creates an intermediate appellate court, 49 regional trial courts, 50 metropolitan trial courts of the national capital region, 51 and other metropolitan trial courts, 52 municipal trial courts in cities, 53 as well as in municipalities, 54 and municipal circuit trial courts. 55 There is even less reason then to doubt the fact that existing inferior courts were abolished. For the Batasang Pambansa, the establishment of such new inferior courts was the appropriate response to the grave and urgent problems that pressed for solution. Certainly, there could be differences of opinion as to the appropriate remedy. The choice, however, was for the Batasan to make, not for this Court, which deals only with the question of power. It bears mentioning that in Brillo v. Eage 56 this Court, in an unanimous opinion penned by the late Justice Diokno, citing Zandueta v. De la Costa, ruled: "La segunda question que el recurrrido plantea es que la Carta de Tacloban ha abolido el puesto. Si efectivamente ha sido abolido el cargo, entonces ha quedado extinguido el derecho de recurente a ocuparlo y a cobrar el salario correspodiente. Mc Culley vs. State, 46 LRA, 567. El derecho de un juez de desempenarlo hasta los 70 aos de edad o se incapacite no priva al Congreso de su facultad de abolir, fusionar o reorganizar juzgados no constitucionales." 57 Nonetheless, such well-established principle was not held applicable to the situation there obtaining, the Charter of Tacloban City creating a city court in place of the former justice of the peace court. Thus: "Pero en el caso de autos el Juzgado de Tacloban no ha sido abolido. Solo se le ha cambiado el nombre con el cambio de forma del gobierno local." 58 The present case is anything but that. Petitioners did not and could not prove that the challenged statute was not within the bounds of legislative authority.
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This opinion then could very well stop at this point. The implementation of Batas Pambansa Blg. 129, concededly a task incumbent on the Executive, may give rise, however, to questions affecting a judiciary that should be kept independent. The all-embracing scope of the assailed legislation as far as all inferior courts from the Courts of Appeals to municipal courts are concerned, with the exception solely of the Sandiganbayan and the Court of Tax Appeals 59 gave rise, and understandably so, to misgivings as to its effect on such cherished Ideal. The first paragraph of the section on the transitory provision reads: "The provisions of this Act shall be immediately carried out in accordance with an Executive Order to be issued by the President. The Court of Appeals, the Courts of First Instance, the Circuit Criminal Courts, the Juvenile and Domestic Relations Courts, the Courts of Agrarian Relations, the City Courts, the Municipal Courts, and the Municipal Circuit Courts shall continue to function as presently constituted and organized, until the completion of the reorganization provided in this Act as declared by the President. Upon such declaration, the said courts shall be deemed automatically abolished and the incumbents thereof shall cease to hold the office." 60 There is all the more reason then why this Court has no choice but to inquire further into the allegation by petitioners that the security of tenure provision, an assurance of a judiciary free from extraneous influences, is thereby reduced to a barren form of words. The amended Constitution adheres even more clearly to the long-established tradition of a strong executive that antedated the 1935 Charter. As noted in the work of former Vice-Governor Hayden, a noted political scientist, President Claro M. Recto of the 1934 Convention, in his closing address, in stressing such a concept, categorically spoke of providing "an executive power which, subject to the fiscalization of the Assembly, and of public opinion, will not only know how to govern, but will actually govern, with a firm and steady hand, unembarrassed by vexatious interferences by other departments, or by unholy alliances with this and that social group." 61 The above excerpt was cited with approval by Justice Laurel in Planas v. Gil. 62 Moreover, under the 1981 Amendments, it may be affirmed that once again the principle of separation of powers, to quote from the same jurist as ponente in Angara v. Electoral Commission, 63 "obtains not through express provision but by actual division." 64 The president, under Article VII, shall be the head of state and chief executive of the Republic of the Philippines." 65 Moreover, it is equally therein expressly provided that all the powers he possessed under the 1935 Constitution are once again vested in him unless the Batasang Pambansa provides otherwise." 66 Article VII of the 1935 Constitution speaks categorically: "The Executive power shall be vested in a President of the Philippines." 67 As originally framed, the 1973 Constitution created the position of President as the "symbolic head of state." 68 In addition, there was a provision for a Prime Minister as the head of government exercising the executive power with the assistance of the Cabinet 69 Clearly, a modified parliamentary system was established. In the light of the 1981 amendments though, this Court in Free Telephone Workers Union v. Minister of Labor 70 could state: "The adoption of certain aspects of a parliamentary system in the amended Constitution does not alter its essentially presidential character." 71 The retention, however, of the position of the Prime Minister with the Cabinet, a majority of the members of which shall come from the regional representatives of the Batasang Pambansa and the creation of an Executive Committee composed of the Prime Minister as Chairman and not more than fourteen other members at least half of whom shall be members of the Batasang Pambansa, clearly indicate the evolving nature of the system of government that is now operative. 72 What is equally apparent is that the strongest ties bind the executive and legislative departments. It is likewise undeniable that the Batasang Pambansa retains its full authority to enact whatever legislation may be necessary to carry out national policy as usually formulated in a caucus of the majority party. It is understandable then why in Fortun v. Labang 73 it was stressed that with the provision transferring to the Supreme Court administrative supervision over the Judiciary, there is a greater need "to preserve unimpaired the independence of the judiciary, especially so at present, where to all intents and purposes, there is a fusion between the executive and the legislative branches." 74 To be more specific, petitioners contend that the abolition of the existing inferior courts collides with the security of tenure enjoyed by incumbent Justices and judges under Article X, Section 7 of the Constitution. There was a similar provision in the 1935 Constitution. It did not, however, go as far as conferring on this Tribunal the power to supervise administratively inferior courts. 75 Moreover, this Court is em powered "to discipline judges of inferior courts and, by a vote of at least eight members, order their dismissal." 76 Thus it possesses the competence to remove judges.
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Under the Judiciary Act, it was the President who was vested with such power. 77 Removal is, of course, to be distinguished from termination by virtue of the abolition of the office. There can be no tenure to a non-existent office. After the abolition, there is in law no occupant. In case of removal, there is an office with an occupant who would thereby lose his position. It is in that sense that from the standpoint of strict law, the question of any impairment of security of tenure does not arise. Nonetheless, for the incumbents of inferior courts abolished, the effect is one of separation. As to its effect, no distinction exists between removal and the abolition of the office. Realistically, it is devoid of significance. He ceases to be a member of the judiciary. In the implementation of the assailed legislation, therefore, it would be in accordance with accepted principles of constitutional construction that as far as incumbent justices and judges are concerned, this Court be consulted and that its view be accorded the fullest consideration. No fear need be entertained that there is a failure to accord respect to the basic principle that this Court does not render advisory opinions. No question of law is involved. If such were the case, certainly this Court could not have its say prior to the action taken by either of the two departments. Even then, it could do so but only by way of deciding a case where the matter has been put in issue. Neither is there any intrusion into who shall be appointed to the vacant positions created by the reorganization. That remains in the hands of the Executive to whom it properly belongs. There is no departure therefore from the tried and tested ways of judicial power, Rather what is sought to be achieved by this liberal interpretation is to preclude any plausibility to the charge that in the exercise of the conceded power of reorganizing tulle inferior courts, the power of removal of the present incumbents vested in this Tribunal is ignored or disregarded. The challenged Act would thus be free from any unconstitutional taint, even one not readily discernidble except to those predisposed to view it with distrust. Moreover, such a construction would be in accordance with the basic principle that in the choice of alternatives between one which would save and another which would invalidate a statute, the former is to be preferred. 78 There is an obvious way to do so. The principle that the Constitution enters into and forms part of every act to avoid any constitutional taint must be applied Nuez v. Sandiganbayan, 79 promulgated last January, has this relevant excerpt: "It is true that other Sections of the Decree could have been so worded as to avoid any constitutional objection. As of now, however, no ruling is called for. The view is given expression in the concurring and dissenting opinion of Justice Makasiar that in such a case to save the Decree from the direct fate of invalidity, they must be construed in such a way as to preclude any possible erosion on the powers vested in this Court by the Constitution. That is a proposition too plain to be committed. It commends itself for approval." 80 Nor would such a step be unprecedented. The Presidential Decree constituting Municipal Courts into Municipal Circuit Courts, specifically provides: "The Supreme Court shall carry out the provisions of this Decree through implementing orders, on a province-to-province basis." 81 It is true there is no such provision in this Act, but the spirit that informs it should not be ignored in the Executive Order contemplated under its Section 44. 82 Thus Batas Pambansa Blg. 129 could stand the most rigorous test of constitutionality. 83 9. Nor is there anything novel in the concept that this Court is called upon to reconcile or harmonize constitutional provisions. To be specific, the Batasang Pambansa is expressly vested with the authority to reorganize inferior courts and in the process to abolish existing ones. As noted in the preceding paragraph, the termination of office of their occupants, as a necessary consequence of such abolition, is hardly distinguishable from the practical standpoint from removal, a power that is now vested in this Tribunal. It is of the essence of constitutionalism to assure that neither agency is precluded from acting within the boundaries of its conceded competence. That is why it has long been well-settled under the constitutional system we have adopted that this Court cannot, whenever appropriate, avoid the task of reconciliation. As Justice Laurel put it so well in the previously cited Angara decision, while in the main, "the Constitution has blocked out with deft strokes and in bold lines, allotment of power to the executive, the legislative and the judicial departments of the government, the overlapping and interlacing of functions and duties between the several departments, however, sometimes makes it hard to say just where the one leaves off and the other begins." 84 It is well to recall another classic utterance from the same jurist, even more emphatic in its affirmation of such a view, moreover buttressed by one of those insights for which Holmes was so famous "The classical separation of government powers, whether viewed in the light of the political philosophy of Aristotle, Locke, or Motesquieu or of the postulations of Mabini, Madison, or Jefferson, is a relative theory of government. There is more truism and actuality
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in interdependence than in independence and separation of powers, for as observed by Justice Holmes in a case of Philippine origin, we cannot lay down 'with mathematical precision and divide the branches into water-tight compartments' not only because 'the great ordinances of the Constitution do not establish and divide fields of black and white but also because 'even the more specific of them are found to terminate in a penumbra shading gradually from one extreme to the other.'" 85 This too from Justice Tuazon, likewise expressing with force and clarity why the need for reconciliation or balancing is well-nigh unavodiable under the fundamental principle of separation of powers: "The constitutional structure is a complicated system, and overlappings of governmental functions are recognized, unavoidable, and inherent necessities of governmental coordination." 86 In the same way that the academe has noted the existence in constitutional litigation of right versus right, there are instances, and this is one of them, where, without this attempt at harmonizing the provisions in question, there could be a case of power against power. That we should avoid. 10. There are other objections raised but they pose no difficulty. Petitioners would characterize as an undue delegation of legislative power to the President the grant of authority to fix the compensation and the allowances of the Justices and judges thereafter appointed. A more careful reading of the challenged Batas Pambansa Blg. 129 ought to have cautioned them against raising such an issue. The language of the statute is quite clear. The questioned provisions reads as follows: "Intermediate Appellate Justices, Regional Trial Judges, Metropolitan Trial Judges, municipal Trial Judges, and Municipal Circuit Trial Judges shall receive such receive such compensation and allowances as may be authorized by the President along the guidelines set forth in Letter of Implementation No. 93 pursuant to Presidential Decree No. 985, as amended by Presidential Decree No. 1597." 87 The existence of a standard is thus clear. The basic postulate that underlies the doctrine of non-delegation is that it is the legislative body which is entrusted with the competence to make laws and to alter and repeal them, the test being the completeness of the statue in all its terms and provisions when enacted. As pointed out in Edu v. Ericta: 88 "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 limits, 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." 89 The undeniably strong links that bind the executive and legislative departments under the amended Constitution assure that the framing of policies as well as their implementation can be accomplished with unity, promptitude, and efficiency. There is accuracy, therefore, to this observation in the Free Telephone Workers Union decision: "There is accordingly more receptivity to laws leaving to administrative and executive agencies the adoption of such means as may be necessary to effectuate a valid legislative purpose. It is worth noting that a highly-respected legal scholar, Professor Jaffe, as early as 1947, could speak of delegation as the 'dynamo of modern government.'" 90 He warned against a "restrictive approach" which could be "a deterrent factor to much-needed legislation." 91 Further on this point from the same opinion" "The spectre of the non-delegation concept need not haunt, therefore, party caucuses, cabinet sessions or legislative chambers." 92 Another objection based on the absence in the statue of what petitioners refer to as a "definite time frame limitation" is equally bereft of merit. They ignore the categorical language of this provision: "The Supreme Court shall submit to the President, within thirty (30) days from the date of the effectivity of this act, a staffing pattern for all courts constituted pursuant to this Act which shall be the basis of the implementing order to be issued by the President in accordance with the immediately succeeding section." 93 The first sentence of the next section is even more categorical: "The provisions of this Act shall be immediately carried out in accordance with an Executive Order to be issued by the President." 94 Certainly petitioners cannot be heard to argue that the President is insensible to his constitutional duty to take care that the laws be faithfully executed. 95 In the meanwhile, the existing inferior courts affected continue functioning as before, "until the completion of the reorganization provided in this Act
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as declared by the President. Upon such declaration, the said courts shall be deemed automatically abolished and the incumbents thereof shall cease to hold office." 96 There is no ambiguity. The incumbents of the courts thus automatically abolished "shall cease to hold office." No fear need be entertained by incumbents whose length of service, quality of performance, and clean record justify their being named anew, 97 in legal contemplation without any interruption in the continuity of their service. 98 It is equally reasonable to assume that from the ranks of lawyers, either in the government service, private practice, or law professors will come the new appointees. In the event that in certain cases a little more time is necessary in the appraisal of whether or not certain incumbents deserve reappointment, it is not from their standpoint undesirable. Rather, it would be a reaffirmation of the good faith that will characterize its implementation by the Executive. There is pertinence to this observation of Justice Holmes that even acceptance of the generalization that courts ordinarily should not supply omissions in a law, a generalization qualified as earlier shown by the principle that to save a statute that could be done, "there is no canon against using common sense in construing laws as saying what they obviously mean." 99 Where then is the unconstitutional flaw 11. On the morning of the hearing of this petition on September 8, 1981, petitioners sought to have the writer of this opinion and Justices Ramon C. Aquino and Ameurfina Melencio-Herrera disqualified because the first-named was the chairman and the other two, members of the Committee on Judicial Reorganization. At the hearing, the motion was denied. It was made clear then and there that not one of the three members of the Court had any hand in the framing or in the discussion of Batas Pambansa Blg. 129. They were not consulted. They did not testify. The challenged legislation is entirely the product of the efforts of the legislative body. 100 Their work was limited, as set forth in the Executive Order, to submitting alternative plan for reorganization. That is more in the nature of scholarly studies. That the undertook. There could be no possible objection to such activity. Ever since 1973, this Tribunal has had administrative supervision over interior courts. It has had the opportunity to inform itself as to the way judicial business is conducted and how it may be improved. Even prior to the 1973 Constitution, it is the recollection of the writer of this opinion that either the then Chairman or members of the Committee on Justice of the then Senate of the Philippines 101 consulted members of the Court in drafting proposed legislation affecting the judiciary. It is not inappropriate to cite this excerpt from an article in the 1975 Supreme Court Review: "In the twentieth century the Chief Justice of the United States has played a leading part in judicial reform. A variety of conditions have been responsible for the development of this role, and foremost among them has been the creation of explicit institutional structures designed to facilitate reform." 102 Also: "Thus the Chief Justice cannot avoid exposure to and direct involvement in judicial reform at the federal level and, to the extent issues of judicial federalism arise, at the state level as well." 103 It is a cardinal article of faith of our constitutional regime that it is the people who are endowed with rights, to secure which a government is instituted. Acting as it does through public officials, it has to grant them either expressly or impliedly certain powers. Those they exercise not for their own benefit but for the body politic. The Constitution does not speak in the language of ambiguity: "A public office is a public trust." 104 That is more than a moral adjuration It is a legal imperative. The law may vest in a public official certain rights. It does so to enable them to perform his functions and fulfill his responsibilities more efficiently. It is from that standpoint that the security of tenure provision to assure judicial independence is to be viewed. It is an added guarantee that justices and judges can administer justice undeterred by any fear of reprisal or untoward consequence. Their judgments then are even more likely to be inspired solely by their knowledge of the law and the dictates of their conscience, free from the corrupting influence of base or unworthy motives. The independence of which they are assured is impressed with a significance transcending that of a purely personal right. As thus viewed, it is not solely for their welfare. The challenged legislation Thus subject d to the most rigorous scrutiny by this Tribunal, lest by lack of due care and circumspection, it allow the erosion of that Ideal so firmly embedded in the national consciousness There is this farther thought to consider. independence in thought and action necessarily is rooted in one's mind and heart. As emphasized by former Chief Justice Paras in Ocampo v. Secretary of Justice, 105 there is no surer guarantee of judicial independence than the God-given character and fitness of those appointed to the Bench. The judges may be guaranteed a fixed tenure of office during good
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behavior, but if they are of such stuff as allows them to be subservient to one administration after another, or to cater to the wishes of one litigant after another, the independence of the judiciary will be nothing more than a myth or an empty Ideal. Our judges, we are confident, can be of the type of Lord Coke, regardless or in spite of the power of Congress we do not say unlimited but as herein exercised to reorganize inferior courts." 106 That is to recall one of the greatest Common Law jurists, who at the cost of his office made clear that he would not just blindly obey the King's order but "will do what becomes [him] as a judge." So it was pointed out in the first leading case stressing the independence of the judiciary, Borromeo v. Mariano, 107 The ponencia of Justice Malcolm Identified good judges with "men who have a mastery of the principles of law, who discharge their duties in accordance with law, who are permitted to perform the duties of the office undeterred by outside influence, and who are independent and self-respecting human units in a judicial system equal and coordinate to the other two departments of government." 108 There is no reason to assume that the failure of this suit to annul Batas Pambansa Blg. 129 would be attended with deleterious consequences to the administration of justice. It does not follow that the abolition in good faith of the existing inferior courts except the Sandiganbayan and the Court of Tax Appeals and the creation of new ones will result in a judiciary unable or unwilling to discharge with independence its solemn duty or one recreant to the trust reposed in it. Nor should there be any fear that less than good faith will attend the exercise be of the appointing power vested in the Executive. It cannot be denied that an independent and efficient judiciary is something to the credit of any administration. Well and truly has it been said that the fundamental principle of separation of powers assumes, and justifiably so, that the three departments are as one in their determination to pursue the Ideals and aspirations and to fulfilling the hopes of the sovereign people as expressed in the Constitution. There is wisdom as well as validity to this pronouncement of Justice Malcolm in Manila Electric Co. v. Pasay Transportation Company, 109 a decision promulgated almost half a century ago: "Just as the Supreme Court, as the guardian of constitutional rights, should not sanction usurpations by any other department or the government, so should it as strictly confine its own sphere of influence to the powers expressly or by implication conferred on it by the Organic Act." 110 To that basic postulate underlying our constitutional system, this Court remains committed. WHEREFORE, the unconstitutionality of Batas Pambansa Blg. 129 not having been shown, this petition is dismissed. No costs.

DRIANITA BAGAOISAN, FELY MADRIAGA, SHIRLY TAGABAN, RICARDO SARANDI, SUSAN IMPERIAL, BENJAMIN DEMDEM, RODOLFO DAGA, EDGARDO BACLIG, GREGORIO LABAYAN, HILARIO JEREZ, and MARIA CORAZON CUANANG, petitioners, vs. NATIONAL TOBACCO ADMINISTRATION, represented by ANTONIO DE GUZMAN and PERLITA BAULA, respondents. DECISION VITUG, J.: President Joseph Estrada issued on 30 September 1998 Executive Order No. 29, entitled Mandating the Streamlining of the National Tobacco Administration (NTA), a government agency under the Department of Agriculture. The order was followed by another issuance, on 27 October 1998, by
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President Estrada of Executive Order No. 36, amending Executive Order No. 29, insofar as the new staffing pattern was concerned, by increasing from four hundred (400) to not exceeding seven hundred fifty (750) the positions affected thereby. In compliance therewith, the NTA prepared and adopted a new Organization Structure and Staffing Pattern (OSSP) which, on 29 October 1998, was submitted to the Office of the President. On 11 November 1998, the rank and file employees of NTA Batac, among whom included herein petitioners, filed a letter-appeal with the Civil Service Commission and sought its assistance in recalling the OSSP. On 04 December 1998, the OSSP was approved by the Department of Budget and Management (DBM) subject to certain revisions. On even date, the NTA created a placement committee to assist the appointing authority in the selection and placement of permanent personnel in the revised OSSP. The results of the evaluation by the committee on the individual qualifications of applicants to the positions in the new OSSP were then disseminated and posted at the central and provincial offices of the NTA. On 10 June 1996, petitioners, all occupying different positions at the NTA office in Batac, Ilocos Norte, received individual notices of termination of their employment with the NTA effective thirty (30) days from receipt thereof. Finding themselves without any immediate relief from their dismissal from the service, petitioners filed a petition for certiorari, prohibition and mandamus,with prayer for preliminary mandatory injunction and/or temporary restraining order, with the Regional Trial Court (RTC) of Batac, Ilocos Norte, and prayed 1) that a restraining order be immediately issued enjoining the respondents from enforcing the notice of termination addressed individually to the petitioners and/or from committing further acts of dispossession and/or ousting the petitioners from their respective offices; 2) that a writ of preliminary injunction be issued against the respondents, commanding them to maintain the status quo to protect the rights of the petitioners pending the determination of the validity of the implementation of their dismissal from the service; and 3) that, after trial on the merits, judgment be rendered declaring the notice of termination of the petitioners illegal and the reorganization null and void and ordering their reinstatement with backwages, if applicable, commanding the respondents to desist from further terminating their services, and making the injunction permanent.[1] The RTC, on 09 September 2000, ordered the NTA to appoint petitioners in the new OSSP to positions similar or comparable to their respective former assignments. A motion for reconsideration filed by the NTA was denied by the trial court in its order of 28 February 2001. Thereupon, the NTA filed an appeal with the Court of Appeals, raising the following issues: I. II. III. Whether or not respondents submitted evidence as proof that petitioners, individually, were not the best qualified and most deserving among the incumbent applicant-employees. Whether or not incumbent permanent employees, including herein petitioners, automatically enjoy a preferential right and the right of first refusal to appointments/reappointments in the new Organization Structure And Staffing Pattern (OSSP) of respondent NTA. Whether or not respondent NTA in implementing the mandated reorganization pursuant to E.O. No. 29, as amended by E.O. No. 36, strictly adhere to the implementing rules on reorganization, particularly RA 6656 and of the Civil Service Commission Rules on Government Reorganization.

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IV.

Whether or not the validity of E.O. Nos. 29 and 36 can be put in issue in the instant case/appeal.[2]

On 20 February 2002, the appellate court rendered a decision reversing and setting aside the assailed orders of the trial court. Petitioners went to this Court to assail the decision of the Court of Appeals, contending that I. The Court of Appeals erred in making a finding that went beyond the issues of the case and which are contrary to those of the trial court and that it overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion; The Court of Appeals erred in upholding Executive Order Nos. 29 and 36 of the Office of the President which are mere administrative issuances which do not have the force and effect of a law to warrant abolition of positions and/or effecting total reorganization; The Court of Appeals erred in holding that petitioners removal from the service is in accordance with law; The Court of Appeals erred in holding that respondent NTA was not guilty of bad faith in the termination of the services of petitioners; (and) The Court of Appeals erred in ignoring case law/jurisprudence in the abolition of an office. [3]

II. III. IV. V.

In its resolution of 10 July 2002, the Court required the NTA to file its comment on the petition. On 18 November 2002, after the NTA had filed its comment of 23 September 2002, the Court issued its resolution denying the petition for failure of petitioners to sufficiently show any reversible error on the part of the appellate court in its challenged decision so as to warrant the exercise by this Court of its discretionary appellate jurisdiction. A motion for reconsideration filed by petitioners was denied in the Courts resolution of 20 January 2002. On 21 February 2003, petitioners submitted a Motion to Admit Petition For En Banc Resolution of the case allegedly to address a basic question, i.e., the legal and constitutional issue on whether the NTA may be reorganized by an executive fiat, not by legislative action. [4] In their Petition for an En Banc Resolution petitioners would have it that 1. The Court of Appeals decision upholding the reorganization of the National Tobacco Administration sets a dangerous precedent in that:

a) A mere Executive Order issued by the Office of the President and procured by a government functionary would have the effect of a blanket authority to reorganize a bureau, office or agency attached to the various executive departments; b) The President of the Philippines would have the plenary power to reorganize the entire government Bureaucracy through the issuance of an Executive Order, an administrative issuance without the benefit of due deliberation, debate and discussion of members of both chambers of the Congress of the Philippines; c) The right to security of tenure to a career position created by law or statute would be defeated by the mere adoption of an Organizational Structure and Staffing Pattern issued pursuant to an Executive Order which is not a law and could thus not abolish an office created by law;
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2. The case law on abolition of an office would be disregarded, ignored and abandoned if the Court of Appeals decision subject matter of this Petition would remain undisturbed and untouched. In other words, previous doctrines and precedents of this Highest Court would in effect be reversed and/or modified with the Court of Appeals judgment, should it remain unchallenged. 3. Section 4 of Executive Order No. 245 dated July 24, 1987 (Annex D, Petition), issued by the Revolutionary government of former President Corazon Aquino, and the law creating NTA, which provides that the governing body of NTA is the Board of Directors, would be rendered meaningless, ineffective and a dead letter law because the challenged NTA reorganization which was erroneously upheld by the Court of Appeals was adopted and implemented by then NTA Administrator Antonio de Guzman without the corresponding authority from the Board of Directors as mandated therein. In brief, the reorganization is an ultra vires act of the NTA Administrator. 4. The challenged Executive Order No. 29 issued by former President Joseph Estrada but unsigned by then Executive Secretary Ronaldo Zamora would in effect be erroneously upheld and given legal effect as to supersede, amend and/or modify Executive Order No. 245, a law issued during the Freedom Constitution of President Corazon Aquino. In brief, a mere executive order would amend, supersede and/or render ineffective a law or statute.[5] In order to allow the parties a full opportunity to ventilate their views on the matter, the Court ultimately resolved to hear the parties in oral argument. Essentially, the core question raised by them is whether or not the President, through the issuance of an executive order, can validly carry out the reorganization of the NTA. Notwithstanding the apparent procedural lapse on the part of petitioner to implead the Office of the President as party respondent pursuant to Section 7, Rule 3, of the 1997 Revised Rules of Civil Procedure, [6] this Court resolved to rule on the merits of the petition. Buklod ng Kawaning EIIB vs. Zamora[7] ruled that the President, based on existing laws, had the authority to carry out a reorganization in any branch or agency of the executive department. In said case, Buklod ng Kawaning EIIB challenged the issuance, and sought the nullification, of Executive Order No. 191 (Deactivation of the Economic Intelligence and Investigation Bureau) and Executive Order No. 223 (Supplementary Executive Order No. 191 on the Deactivation of the Economic Intelligence and Investigation Bureau and for Other Matters) on the ground that they were issued by the President with grave abuse of discretion and in violation of their constitutional right to security of tenure. The Court explained: The general rule has always been that the power to abolish a public office is lodged with the legislature. This proceeds from the legal precept that the power to create includes the power to destroy. A public office is either created by the Constitution, by statute, or by authority of law. Thus, except where the office was created by the Constitution itself, it may be abolished by the same legislature that brought it into existence. The exception, however, is that as far as bureaus, agencies or offices in the executive department are concerned, the Presidents power of control may justify him to inactivate the functions of a particular office, or certain laws may grant him the broad authority to carry out reorganization measures. The case in point is Larin v. Executive Secretary [280 SCRA 713]. In this case, it was argued that there is no law which empowers the President to reorganize the BIR. In decreeing otherwise, this Court sustained the following legal basis, thus: `Initially, it is argued that there is no law yet which empowers the President to issue E.O. No. 132 or to reorganize the BI R. `We do not agree.
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`x x x `Section 48 of R.A. 7645 provides that:

xxx

``Sec. 48. Scaling Down and Phase Out of Activities of Agencies Within the Executive Branch. The heads of departments, bureaus and offices and agencies are hereby directed to identify their respective activities which are no longer essential in the delivery of public services and which may be scaled down, phased out or abolished, subject to civil service rules and regulations. x x x. Actual scaling down, phasing out or abolition of the activities shall be effected pursuant to Circulars or Orders issued for the purpose by the Office of the President. `Said provision clearly mentions the acts of `scaling down, phasing out and abolition of offices only and does not cover the creation of offices or transfer of functions. Nevertheless, the act of creating and decentralizing is included in the subsequent provision of Section 62 which provides that: ``Sec. 62. Unauthorized organizational changes. Unless otherwise created by law or directed by the President of the Philippines, no organizational unit or changes in key positions in any department or agency shall be authorized in their respective organization structures and be funded from appropriations by this Act. `The foregoing provision evidently shows that the President is authorized to effect organizational changes including the creation of offices in the department or agency concerned. `x x x xxx

`Another legal basis of E.O. No. 132 is Section 20, Book III of E.O. No. 292 which states: ``Sec. 20. Residual Powers. Unless Congress provides otherwise, the President shall exercise such other powers and functions vested in the President which are provided for under the laws and which are not specifically enumerated above or which are not delegated by the President in accordance with law. `This provision speaks of such other powers vested in the President under the law. What law then gives him the power to reorganize? It is Presidential Decree No. 1772 which amended Presidential Decree No. 1416. These decrees expressly grant the President of the Philippines the continuing authority to reorganize the national government, which includes the power to group, consolidate bureaus and agencies, to abolish offices, to transfer functions, to create and classify functions, services and activities and to standardize salaries and materials. The validity of these two decrees are unquestionable. The 1987 Constitution clearly provides that `all laws, decrees, executive orders, proclamations, letter of instructions and other executive issuances not inconsistent with this Constitution shall remain operative until amended, repealed or revoked. So far, there is yet no law amending or repealing said decrees. Now, let us take a look at the assailed executive order.

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In the whereas clause of E.O. No. 191, former President Estrada anchored his authority to deactivate EIIB on Section 77 of Republic Act 8745 (FY 1999 General Appropriations Act), a provision similar to Section 62 of R.A. 7645 quoted in Larin, thus: `Sec. 77. Organized Changes. Unless otherwise provided by law or directed by the President of the Philippines, no changes in key positions or organizational units in any department or agency shall be authorized in their respective organizational structures and funded from appropriations provided by this Act. We adhere to the x x x ruling in Larin that this provision recognizes the authority of the President to effect organizational changes in the department or agency under the executive structure. Such a ruling further finds support in Section 78 of Republic Act No. 8760. Under this law, the heads of departments, bureaus, offices and agencies and other entities in the Executive Branch are directed (a) to conduct a comprehensive review of this respective mandates, missions, objectives, functions, programs, projects, activities and systems and procedures; (b) identify activities which are no longer essential in the delivery of public services and which may be scaled down, phased-out or abolished; and (c) adopt measures that will result in the streamlined organization and improved overall performance of their respective agencies. Section 78 ends up with the mandate that the actual streamlining and productivity improvement in agency organization and operation shall be effected pursuant to Circulars or Orders issued for the purpose by the Office of the President. The law has spoken clearly. We are left only with the duty to sustain. But of course, the list of legal basis authorizing the President to reorganize any department or agency in the executive bra nch does not have to end here. We must not lose sight of the very source of the power that which constitutes an express grant of power. Under Section 31, Book III of Executive Order No. 292 (otherwise known as the Administrative Code of 1987), the President, subject to the policy in the Executive Of fice and in order to achieve simplicity, economy and efficiency, shall have the continuing authority to reorganize the administrative structure of the Off ice of the President. For this purpose, he may transfer the functions of other Departments or Agencies to the Office of the President. In Canonizado vs. Aguirre [323 SCRA 312], we ruled that reorganization involves the reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of functions. It takes place when there is an alteration of the existing structure of government offices or units therein, including the lines of control, authority and responsibility between them. The EIIB is a bureau attached to the Department of Finance. It falls under the Office of the President. Hence, it is subject to the Presidents continuing authority to reorganize. It having been duly established that the President has the authority to carry out reorganization in any branch or agency of the executive department, what is then left for us to resolve is whether or not the reorganization is valid. In this jurisdiction, reorganizations have been regarded as valid provided they are pursued in good faith. Reorganization is carried out in `good faith if it is for the purpose of economy or to make bureaucracy more efficient. Pertinently, Republic Act No. 6656 provides for the circumstances which may be considered as evidence of bad faith in the removal of civil service employees made as a result of reorganization, to wit: (a) where there is a significant increase in the number of positions in the new staffing pattern of the department or agency concerned; (b) where an office is abolished and another performing substantially the same functions is created;(c) where incumbents are replaced by those less qualified in terms of status of appointment, performance and merit; (d) where there is a classification of offices in the department or agency concerned and the reclassified offices perform substantially the same functions as the original offices, and (e) where the removal violates the order of separation.[8] The Court of Appeals, in its now assailed decision, has found no evidence of bad faith on the part of the NTA; thus In the case at bar, we find no evidence that the respondents committed bad faith in issuing the notices of non-appointment to the petitioners.
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Firstly, the number of positions in the new staffing pattern did not increase. Rather, it decreased from 1,125 positions to 750. It is thus natural that ones position may be lost through the removal or abolition of an office. Secondly, the petitioners failed to specifically show which offices were abolished and the new ones that were created performing substantially the same functions. Thirdly, the petitioners likewise failed to prove that less qualified employees were appointed to the positions to which they applied. x x x xxx x x x.

Fourthly, the preference stated in Section 4 of R.A. 6656, only means that old employees should be considered first, but it does not necessarily follow that they should then automatically be appointed. This is because the law does not preclude the infusion of new blood, younger dynamism, or necessary talents into the government service, provided that the acts of the appointing power are bonafide for the best interest of the public service and the person chosen has the needed qualifications.[9] These findings of the appellate court are basically factual which this Court must respect and be held bound. It is important to emphasize that the questioned Executive Orders No. 29 and No. 36 have not abolished the National Tobacco Administration but merely mandated its reorganization through the streamlining or reduction of its personnel. Article VII, Section 17,[10] of the Constitution, expressly grants the President control of all executive departments, bureaus, agencies and offices which may justify an executive action to inactivate the functions of a particular office or to carry out reorganization measures under a broad authority of law. [11]Section 78 of the General Provisions of Republic Act No. 8522 (General Appropriations Act of FY 1998) has decreed that the President may direct changes in the organization and key positions in any department, bureau or agency pursuant to Article VI, Section 25,[12] of the Constitution, which grants to the Executive Department the authority to recommend the budget necessary for its operation. Evidently, this grant of power includes the authority to evaluate each and every government agency, including the determination of the most economical and efficient staffing pattern, under the Executive Department. In the recent case of Rosa Ligaya C. Domingo, et al. vs. Hon. Ronaldo D. Zamora, in his capacity as the Executive Secretary, et al.,[13] this Court has had occasion to also delve on the Presidents power to reorganize the Office of the President under Section 31(2) and (3) of Executive Order No. 292 and the power to reorganize the Office of the President Proper. The Court has there observed: x x x. Under Section 31(1) of EO 292, the President can reorganize the Office of the President Proper by abolishing, consolidating or merging units, or by transferring functions from one unit to another. In contrast, under Section 31(2) and (3) of EO 292, the Presidents power to reorganize offices outside the Office of the President Proper but still within the Office of the President is limited to merely transferring functions or agencies from the Office of the President to Departments or Agencies, and vice versa. The provisions of Section 31, Book III, Chapter 10, of Executive Order No. 292 (Administrative Code of 1987), above-referred to, reads thusly:

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SEC. 31. Continuing Authority of the President to Reorganize his Office. The President, subject to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency, shall have continuing authority to reorganize the administrative structure of the Office of the President. For this purpose, he may take any of the following actions: (1) Restructure the internal organization of the Office of the President Proper, including the immediate Offices, the Presidential Special Assistants/Advisers System and the Common Staff Support System, by abolishing, consolidating or merging units thereof or transferring functions from one unit to another; (2) Transfer any function under the Office of the President to any other Department or Agency as well as transfer functions to the Office of the President from other Departments and Agencies; and (3) Transfer any agency under the Office of the President to any other department or agency as well as transfer agencies to the Office of the President from other departments and agencies. The first sentence of the law is an express grant to the President of a continuing authority to reorganize the administrative structure of the Office of the President. The succeeding numbered paragraphs are not in the nature of provisos that unduly limit the aim and scope of the grant to the President of the power to reorganize but are to be viewed in consonance therewith. Section 31(1) of Executive Order No. 292 specifically refers to the Presidents power to restructure the internal organization of the Office of the President Proper, by abolishing, consolidating or merging units hereof or transferring functions from one unit to another, while Section 31(2) and (3) concern executive offices outside the Office of the President Proper allowing the President to transfer any function under the Office of the President to any other Department or Agency and vice-versa, and the transfer of any agency under the Office of the President to any other department or agency and vice-versa.[14] In the present instance, involving neither an abolition nor transfer of offices, the assailed action is a mere reorganization under the general provisions of the law consisting mainly ofstreamlining the NTA in the interest of simplicity, economy and efficiency. It is an act well within the authority of President motivated and carried out, according to the findings of the appellate court, in good faith, a factual assessment that this Court could only but accept.[15] In passing, relative to petitioners Motion for an En Banc Resolution of the Case, it may be well to remind counsel, that the Court En Banc is not an appellate tribunal to which appeals from a Division of the Court may be taken. A Division of the Court is the Supreme Court as fully and veritably as the Court En Banc itself and a decision of its Division is as authoritative and final as a decision of the Court En Banc. Referrals of cases from a Division to the Court En Banc do not take place as just a matter of routine but only on such specified grounds as the Court in its discretion may allow.[16] WHEREFORE, the Motion to Admit Petition for En Banc resolution and the Petition for an En Banc Resolution are DENIED for lack of merit. Let entry of judgment be made in due course. No costs. SO ORDERED.

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G.R. No. L-27811

November 17, 1967

LACSON-MAGALLANES CO., INC., plaintiff-appellant, vs. JOSE PAO, HON. JUAN PAJO, in his capacity as Executive Secretary, and HON. JUAN DE G. RODRIGUEZ, in his capacity as Secretary of Agriculture and Natural Resources, defendants-appellees. Leopoldo M. Abellera for plaintiff-appellant. Victorio Advincula for defendant Jose Pao. Office of the Solicitor General for defendant Secretary of Agriculture and Natural Resources and Executive Secretary. SANCHEZ, J.: The question May the Executive Secretary, acting by authority of the President, reverse a decision of the Director of Lands that had been affirmed by the Executive Secretary of Agriculture and Natural Resources yielded an affirmative answer from the lower court.1 Hence, this appeal certified to this Court by the Court of Appeals upon the provisions of Sections 17 and 31 of the Judiciary Act of 1948, as amended. The undisputed controlling facts are: In 1932, Jose Magallanes was a permittee and actual occupant of a 1,103-hectare pasture land situated in Tamlangon, Municipality of Bansalan, Province of Davao. On January 9, 1953, Magallanes ceded his rights and interests to a portion (392,7569 hectares) of the above public land to plaintiff. On April 13, 1954, the portion Magallanes ceded to plaintiff was officially released from the forest zone as pasture land and declared agricultural land. On January 26, 1955, Jose Pao and nineteen other claimants2 applied for the purchase of ninety hectares of the released area. On March 29, 1955, plaintiff corporation in turn filed its own sales application covering the entire released area. This was protested by Jose Pao and his nineteen companions upon the averment that they are actual occupants of the part thereof covered by their own sales application. The Director of Lands, following an investigation of the conflict, rendered a decision on July 31, 1956 giving due course to the application of plaintiff corporation, and dismissing the claim of Jose Pao and his companions. A move to reconsider failed. On July 5, 1957, the Secretary of Agriculture and Natural Resources on appeal by Jose Pao for himself and his companions held that the appeal was without merit and dismissed the same.
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The case was elevated to the President of the Philippines. On June 25, 1958, Executive Secretary Juan Pajo, "[b]y authority of the President" decided the controversy, modified the decision of the Director of Lands as affirmed by the Secretary of Agriculture and Natural Resources, and (1) declared that "it would be for the public interest that appellants, who are mostly landless farmers who depend on the land for their existence, be allocated that portion on which they have made improvements;" and (2) directed that the controverted land (northern portion of Block I, LC Map 1749, Project No. 27, of Bansalan, Davao, with Latian River as the dividing line) "should be subdivided into lots of convenient sizes and allocated to actual occupants, without prejudice to the corporation's right to reimbursement for the cost of surveying this portion." It may be well to state, at this point, that the decision just mentioned, signed by the Executive Secretary, was planted upon the facts as found in said decision. Plaintiff corporation took the foregoing decision to the Court of First Instance praying that judgment be rendered declaring: (1) that the decision of the Secretary of Agriculture and Natural Resources has full force and effect; and (2) that the decision of the Executive Secretary is contrary to law and of no legal force and effect. And now subject of this appeal is the judgment of the court a quo dismissing plaintiff's case. 1. Plaintiff's mainstay is Section 4 of Commonwealth Act 141. The precept there is that decisions of the Director of Lands "as to questions of facts shall be conclusive when approved" by the Secretary of Agriculture and Natural Resources. Plaintiff's trenchment claim is that this statute is controlling not only upon courts but also upon the President. Plaintiff's position is incorrect. The President's duty to execute the law is of constitutional origin.3 So, too, is his control of all executive departments.4 Thus it is, that department heads are men of his confidence. His is the power to appoint them; his, too, is the privilege to dismiss them at pleasure. Naturally, he controls and directs their acts. Implicit then is his authority to go over, confirm, modify or reverse the action taken by his department secretaries. In this context, it may not be said that the President cannot rule on the correctness of a decision of a department secretary. Particularly in reference to the decisions of the Director of Lands, as affirmed by the Secretary of Agriculture and Natural Resources, the standard practice is to allow appeals from such decisions to the Office of the President.5 This Court has recognized this practice in several cases. In one, the decision of the Lands Director as approved by the Secretary was considered superseded by that of the President's appeal.6 In other cases, failure to pursue or resort to this last remedy of appeal was considered a fatal defect, warranting dismissal of the case, for non-exhaustion of all administrative remedies.7 Parenthetically, it may be stated that the right to appeal to the President reposes upon the President's power of control over the executive departments.8 And control simply means "the power of an officer to alter or modify or nullify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for that of the latter."9 This unquestionably negates the assertion that the President cannot undo an act of his department secretary.

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2. Plaintiff next submits that the decision of the Executive Secretary herein is an undue delegation of power. The Constitution, petitioner asserts, does not contain any provision whereby the presidential power of control may be delegated to the Executive Secretary. It is argued that it is the constitutional duty of the President to act personally upon the matter. It is correct to say that constitutional powers there are which the President must exercise in person.10 Not as correct, however, is it so say that the Chief Executive may not delegate to his Executive Secretary acts which the Constitution does not command that he perform in person.11 Reason is not wanting for this view. The President is not expected to perform in person all the multifarious executive and administrative functions. The Office of the Executive Secretary is an auxiliary unit which assists the President. The rule which has thus gained recognition is that "under our constitutional setup the Executive Secretary who acts for and in behalf and by authority of the President has an undisputed jurisdiction to affirm, modify, or even reverse any order" that the Secretary of Agriculture and Natural Resources, including the Director of Lands, may issue.12 3. But plaintiff underscores the fact that the Executive Secretary is equal in rank to the other department heads, no higher than anyone of them. From this, plaintiff carves the argument that one department head, on the pretext that he is an alter ego of the President, cannot intrude into the zone of action allocated to another department secretary. This argument betrays lack of appreciation of the fact that where, as in this case, the Executive Secretary acts "[b]y authority of the President," his decision is that of the President's. Such decision is to be given full faith and credit by our courts. The assumed authority of the Executive Secretary is to be accepted. For, only the President may rightfully say that the Executive Secretary is not authorized to do so. Therefore, unless the action taken is "disapproved or reprobated by the Chief Executive,"13 that remains the act of the Chief Executive, and cannot be successfully assailed.14 No such disapproval or reprobation is even intimated in the record of this case. For the reasons given, the judgment under review is hereby affirmed. Costs against plaintiff. So ordered.

EUSTAQUIO M. MEDALLA, JR., petitioner, vs. THE HONORABLE MARCELINO N. SAYO, Judge of the CFI of Rizal, Branch XXXIII and HONORATO G. MACKAY, acting Hospital Administrator of the Caloocan City General Hospital and the CITY MAYOR OF CALOOCAN, respondents.

MELENCIO-HERRERA, J.: In this Petition for "Certiorari, mandamus and Prohibition", seeking the dismissal of Civil Case No. C-7770 below, we have, as factual background, the following:
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Petitioner, Dr. Eustaquio M. Medalla, Jr., is the Chief of Clinics of the Caloocan City General Hospital, Caloocan City. Private respondent,, Dr. Honorato G. Mackay was the Resident Physician thereat. When the position of Assistant, hospital Administrator of the Caloocan City General Hospital became vacant upon the resignation of the incumbent, former Caloocan City Mayor Alejandro A. Fider designated and subsequently appointed, as Assistant Hospital Administrator private respondent Dr. Mackay, a Resident Physician in said hospital. Petitioner, Dr. Medalla, Jr., protested Dr. Mackay's designation and subsequent appointment alleging among others that, as Chief of Clinics, he (Medalla) was next-in-rank. The then Acting City Mayor Virgilio P. Robles, who succeeded former Mayor, now Assemblyman Alejandro A. Fider, in his 4th Indorsement dated September 20, 1978, sustained Mackay's appointment stating: ... as of April 18, 1978 when Dr. Honorato G. Mackay was promoted to Assistant Hospital Administrator from his previous position of Resident Physician, he was next in rank to the said higher position by reason of his having completed all academic requirements for the Certificate in Hospital Administration ... contrary to the claim of Dr. Eustaquio Medalla, Jr. in his letter of May 2, 1978. xxx xxx xxx Dissatisfied, Medalla elevated his case to the Civil Service Commission on appeal. On December 29, 1978, the Civil Service Merit Systems Board issued Resolution No. 49 sustaining Medalla's appeal and revoking Mackay's appointment as Assistant Hospital Administrator. The pertinent portion of the aforestated Resolution reads: A perusal of the records shows that appellant Medalla is the Chief of Clinics of the Caloocan City General Hospital; he is a holder of the Degree of Doctor of Medicine; he has completed the requirements in Hospital Administration and is recommended for the title of Certificate in Hospital Administration; he is also a candidate of a Masters degree in Hospital Administration He possesses the First Grade eligibility (BA 1080) and had undergone relevant training in Hospital Administration. His performance rating is 'Very Satisfactory'. On the other hand, appellee Mackay had been a Resident Physician, the position he held prior to his promotion to the contested position. He is a holder of the degree of Doctor of Medicine and is a First Grade eligible (BA 1080-Medical Board). He is a graduate student in Hospital Administration and as completed all academic requirements for a certificate in Hospital Administration. His performance rating is "Very Satisfactory". A perusal of the organizational chart of the Ospital ng Caloocan approved by the Hospital Administrator would show that the Chief of Clinics is the next lower position to the Assistant Hospital Administrator. The Resident Physician is not a next lower position to the Assistant Hospital Administrator. Therefore, Medalla and not Mackay is the person next in rank who may be promoted to the position involved. Moreover, even on the basis of competence and qualifications to perform the duties of the position, the records show that Dr. Medalla is more competent and qualified than Dr. Mackay. The qualification relied upon by the Acting City Mayor in justifying the appointment of Dr. Mackay which is his having completed the academic requirements for the Certificate in Hospital Administration does not give Dr. Mackay the advantage inasmuch as Dr. Medalla has also completed the academic requirements for a certificate in Hospital Administration and is
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recommended for a title of Certificate in Hospital Administration apart from being also a candidate for a Masters degree in Hospital Administration. 1 xxx xxx xxx Upon automatic review by the Office of the President, pursuant to section 19(6), PD No. 807, Presidential Executive Assistant Jacobo C. Clave rendered a Decision on April 24, 1979 declaring that: WHEREFORE, premises considered, and as recommended by Civil Service Commission, the appointment of Dr. Honorato G. Mackay as Assistant Hospital Administrator in the Caloocan City General Hospital is hereby revoked and the position awarded in favor of appellant Dr. Eustaquio M. Medalla. 2 The Acting City Mayor, on behalf of Mackay, moved for reconsideration. On May 7, 1979, totally disregarding the Decision of the Office of the President, the same Acting City Mayor appointed Mackay, this time as Hospital Administrator, and designated Dr. Tantoco as his Assistant, thereby again completely bypassing Medalla. Mackay took his oath of office on May 7, 1979. On June 27, 1979, however, the Civil Service Commission, acting on Medalla's protest, and besides calling attention to the penal provision of P.D. No. 807, disapproved Mackay's appointment as follows: Wherefore, premises considered and finding the protest of Dr. Medalla in order, the appointment of Dr. Mackay as hospital Administrator at P26,388 per annum effective May 7, 1979 is hereby disapproved. it is hereby ordered that Dr. Medalla be appointed to the position of Hospital Administrator of the Caloocan City General Hospital. 3 On July 20, 1979, Mackay moved for reconsideration asserting 1) denial of due process of law inasmuch as the contested Resolution/Decisions were issued ex-parte, and 2) that the Civil Service Commission can not ignore nor overrule an appointment made by a City Executive. Without awaiting the resolution of his Motion for Consideration- Mackay filed, on July 23, 1979, before tile Court of First Instance of Rizal, Caloocan City, presided by respondent, Judge, a Petition for "Certiorari, Prohibition and mandamus with Preliminary Injunction and Damages" civil Case No. C7770) against Hon. Jacobo Clave, the Civil Service Commission, the Acting City Mayor, the City Treasurer, and Medalla, praying that said respondents be restrained from implementing the Decision of Hon. Jacobo Clave of April 24, 1979, the Resolution No. 49 of the Merit Systems Board dated December 29, 1978, and the Decision of the Civil Service Commission of June 27, 1979. The Court a quo issued the Restraining Order prayed for on July 25, 1979 enjoining implementation of the aforestated Resolution/Decisions. On August 2, 1979, Medalla moved to dissolve the Restraining Order and to dismiss the Petition alleging mainly that Mackay had not exhausted his administrative remedies and that the latter's right to a Writ of Preliminary Injunction was not only dubious or debatable but was clearly non-existent. Hon. Jacobo Clave and the Civil Service Commission likewise filed a Motion to Dismiss on the same ground of failure to exhaust administrative remedies.
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On August 13, 1979, Mackay moved to suspend proceedings pending final resolution by the Civil Service Commission of his Motion for the reconsideration of the Decision of said Commission dated June 27, 1979. On September 24, 1979, the Trial Court denied both Motions to Dismiss filed by Medalla, on the one hand, and Hon. Clave and the Civil Service Commission, on the other, holding that Mackay's failure to await resolution of his Motions for Reconsideration pending before the Office of the President and the Civil Service Commission did not deprive him of a cause of action besides the fact that according to the respective Manifestations of the said Offices, the Motions for Reconsideration had already been resolved adversely against Mackay. Acting on Medalla's Motion for Reconsideration thereof as well as his Motion to Lift Restraining Order, the Court a quo, in its Order of July 15, 1980, denied reconsideration but lifted the Restraining Order "there being no showing that petitioner is entitled to the issuance of a Writ of Preliminary Injunction. " Respondent Judge then set the case for hearing. At this juncture, Medalla instituted this Petition before us praying that the Court a quo be restrained from proceeding with the hearing and that judgment be rendered as follows: 1. Ordering the Honorable Marcelino N. Sayo, Judge of the Court of First Instance of Rizal Branch XXXIII, Caloocan City, to dismiss respondent Mackay's petitions, on the ground of lack of jurisdiction and/or non- exhaustion of administrative remedies resulting to a lack of cause of action; 2. Declaring the decision of the Office of the President (Annex "C") and the Merit Systems Board (Annex "E") as valid and enforceable. 4 We issued a Restraining Order on August 27, 1980 enjoining respondents from proceeding with the case below. On November 7, 1980, we required petitioner Medalla to implead the Mayor of Caloocan City as party-respondent, and the latter to comment on the Petition and to state whether he is ready to issue an appointment to Medalla as Hospital Administrator, Medalla's rights thereto having been upheld by the Civil Service Merit Systems Board and by the Office of the President. In his Compliance, Medalla included an additional prayer that the City Mayor of Caloocan be ordered to immediately appoint him as Hospital Administrator and to pay him salary differentials. In his Comment, the City Mayor of Caloocan invoked the privilege of an appointing authority to determine who can best fulfill the functions of an office citing the case of Aguilar vs. Nieva, Jr. 5 to that effect. And as to the matter of his readiness to issue an appointment to Medalla, he manifested his preference to withhold action pending Mackay's unresolved Motion for Reconsideration of the Decision of June 27, 1979 of the Civil Service Merit Systems Board.

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Petitioner Medalla submits that the Trial Court erred in not dismissing Mackay's Petition before it, there being a clear showing of non-exhaustion of administrative remedies, and that said Court was devoid of jurisdiction in reviewing on certiorari decisions of the Office of the President and of the Civil service Commission rendered in the exercise of their quasi-judicial functions. Private respondent Mackay takes the contrary view and prays, instead, that the contested Decisions/Resolution be declared null and void and respondent Judge ordered to proceed with the hearing of the case below. Although Mackay's Motions for Reconsideration were, in fact, still pending resolution by Hon. Jacobo C. Clave and the Civil Service Commission, respectively, at the time private respondent Mackay filed the Petition below, dismissal of said Petition can no longer be anchored on the ground of nonexhaustion of administrative remedies, as Medalla prays, considering that Manifestations dated August 17 and 23, 1979 filed by the said parties before the Court a quo show that they had resolved the incidents adversely against Mackay. 6 That issue, therefore, has become moot and academic. 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 Presidential Executive Assistant 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 coequal departments, the executive, 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 judicial review of all administrative acts of all administrative officers. 7 The courts may always examine into the exercise of power by a ministerial officer to the extent of determining whether the particular power has been granted to the officer, whether it is a legal power that could have been granted to him, and whether it has been exercised in a legal manner. This jurisdiction does not depend upon an act of the legislature authorizing it, but inheres in the courts of general jurisdiction as an essential function of the judicial department (State Racing Commission v. Latonia Agri. Asso. 123 SW 68 1). 8 (emphasis supplied). For the speedy determination of the controversy, however, and considering that the position involved is infused with public interest, rather than remand the case to the Court below for further proceedings, we hold that grave abuse of discretion on the part of Hon. Jacobo C. Clave and the Civil Service Merit Systems Board is absent. To start with, under the Revised Charter of the City of Caloocan RA No. 5502), it is clear that the power of appointment by the City Mayor of heads of offices entirely paid out of city funds is subject to Civil Service law, rules and regulations (ibid., section 19). The Caloocan City General Hospital is one of the city departments provided for in the said law (ibid., sec. 17). The Hospital Administrator is appointed by the City Mayor (ibid., section 66-B). The Hospital Administrator is the head of the City General Hospital empowered to administer, direct, and coordinate all activities of the hospital to carry out its objectives as to the care of the sick and the injured (ibid.).
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Under section 19 (3) of the Civil Service Decree (PD No. 807, effective on October 6, 1975), the recruitment or selection of employees for promotions is drawn from the next-in-rank. SEC. 19. Recruitment and Selection of Employees. xxx xxx xxx (3) When a vacancy occurs in a position in the second level of the Career Service as defined in Section 7, the employees in the government service who occupy the next lower positions i the occupational group under which the vacant position is classified and in other functionally related occupational groups and who are competent, qualified and with the appropriate civil service eligibility shall be considered for promotion. Section 19 (6) of the same Decree provides for the administrative procedure by an aggrieved employee in case of non-observance by the appointing authority of the next-in-rank rule, thus: Sec. 19(6) A qualified next-in-rank employee shall have the right to appeal initially, to the department head and finally to the Office of the President an appointment made ... (2. in favor of one who is not next-in-rank, ... if the employee making the appeal is not satisfied with the written special reason or reasons given by the appointing authority for such appointment: ... Before deciding a contested appointment the Office of the President shall consult the Civil Service Commission. For purposes of this Section, .qualified next-in-rank' refers to an employee appointed on a permanent basis to a position previously determined to be next-in- rank to the vacancy proposed to be filled and who meets the requisites for appointment thereto as previously determined by the appointing authority and approved by the Commission. The prescribed procedure has been followed by petitioner Medalla He had appealed to the department head and from thence, in view of the latter's unfavorable action, to the Civil Service Commission and thereafter to the Office of the President. Resolution No. 49 of the Civil Service Merit Systems Board its Decision of June 27, 1979, and the Decision of the presidential Executive Assistant dated April 24, 1979, were all rendered in Medalla's favor. The special reason given by the Acting City Mayor for Mackay's appointment, which is, that lie had completed all academic requirements for the Certificate of Hospital Administration, is not tenable, since Medalla himself was found to be in possession of the same qualification. But while the qualifications of both petitioner Medalla and private respondent Mackay are at par, yet, it is clear that the position of Chief of Clinics is the next lower position to I hospital Administrator under the organizational line-up of the hospital. Consequently, at the time of Mackays appointment as Assistant Hospital Administrator and subsequently hospital Administrator, Medalla outranked Mackay who was only a Resident Physician and, therefore, as the next-in rank, Medalla is entitled to appointment as Hospital Administrator. Respondent Mackay's urging that he was denied due process deserves scant consideration considering that subsequent developsments in the case establish that he was heardon his Motions for Reconsideration by both the Civil Service Commission and the office of the President. It is true that, as the respondent City Mayor alleges, a local executive should be allowed the choice of men of his confidence, provided they are qualified and elligible, who in his best estimation are possesses of the requisite reputation, integrity, knowledgeability, energy and judgement. 9 However, as reproduced heretofore, the Decision of the Civil Service Merit Systems Board, upheld by the Office of the President, contains a judicious assessment of
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the qualifications of both petitioner Medalla and private respondent Mackay for the contested position, revealing a careful study of the controversy between the parties, which cannot be ignored. The revocation of Mackay's appointment reveals no arbitrariness nor grave abuse of discretion. WHEREFORE, 1) the appointment extended to private respondent, Dr. Honorato C. Mackay, as Hospital Administrator is hereby declared null and void; 2) respondent City Mayor of Caloocan City is hereby ordered to extend an appointment to petitioner, Dr. Eustaquio M. Medalla, as Hospital Administrator of the Caloocan City General Hospital immediately upon notice of this Decision; 3) petitioner, Dr. Eustaquio M. Medalla, shall receive all compensation and emoluments appertaining to said position thenceforth, but without entitlement to salary differentials; and 4) respondent Judge is hereby permanently enjoined from further proceeding with Civil Case No. 7770. This Decision is immediately executory. No costs. SO ORDERED. LIANGA BAY LOGGING, CO., INC., petitioner, vs. HON. MANUEL LOPEZ ENAGE, in his capacity as Presiding Judge of Branch II of the Court of First, Instance of Agusan, and AGO TIMBER CORPORATION, respondents. TEEHANKEE, C.J.: The Court grants the petition for certiorari and prohibition and holds that respondent judge, absent any showing of grave abuse of discretion, has no competence nor authority to review anew the decision in administrative proceedings of respondents public officials (director of forestry, secretary of agriculture and natural resources and assistant executive secretaries of the Office of the President) in determining the correct boundary line of the licensed timber areas of the contending parties. The Court reaffirms the established principle that findings of fact by an administrative board or agency or official, following a hearing, are binding upon the courts and will not be disturbed except where the board, agency and/or official(s) have gone beyond their statutory authority, exercised unconstitutional powers or clearly acted arbitrarily and without regard to their duty or with grave abuse of discretion. The parties herein are both forest concessionaries whose licensed areas are adjacent to each other. The concession of petitioner Lianga Bay Logging Corporation Co., Inc. (hereinafter referred to as petitioner Lianga) as described in its Timber License Agreement No. 49, is located in the municipalities of Tago, Cagwait, Marihatag and Lianga, all in the Province of Surigao, consisting of 110,406 hectares, more or less, while that of respondent Ago Timber Corporation (hereinafter referred to as respondent Ago) granted under Ordinary Timber License No. 1323-60 [New] is located at Los Arcos and San Salvador, Province of Agusan, with an approximate area of 4,000 hectares. It was a part of a forest area of 9,000 hectares originally licensed to one Narciso Lansang under Ordinary Timber License No. 584-'52. Since the concessions of petitioner and respondent are adjacent to each other, they have a common boundary-the Agusan-Surigao Provincial boundarywhereby the eastern boundary of respondent Ago's concession is petitioner Lianga's western boundary. The western boundary of petitioner Lianga is described as "... Corner 5, a point in the intersection of the Agusan-Surigao Provincial boundary and Los Arcos-Lianga Road; thence following AgusanSurigao Provincial boundary in a general northerly and northwesterly and northerly directions about 39,500 meters to Corner 6, a point at the intersection of the Agusan-Surigao Provincial boundary and Nalagdao Creek ..." The eastern boundary of respondent Ago's concession is described as "... point 4,
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along the Agusan-Surigao boundary; thence following Agusan-Surigao boundary in a general southeasterly and southerly directions about 12,000 meters to point 5, a point along Los Arcos-Lianga Road; ..." 1 Because of reports of encroachment by both parties on each other's concession areas, the Director of Forestry ordered a survey to establish on the ground the common boundary of their respective concession areas. Forester Cipriano Melchor undertook the survey and fixed the common boundary as "Corner 5 of Lianga Bay Logging Company at Km. 10.2 instead of Km. 9.7 on the Lianga-Arcos Road and lines N900E, 21,000 meters; N12 W, 21,150 meters; N40 W, 3,000 meters; N31 W, 2,800 meters; N50 W, 1,700 meters" which respondent Ago protested claiming that "its eastern boundary should be the provincial boundary line of Agusan-Surigao as described in Section 1 of Art. 1693 of the Philippine Commission as indicated in the green pencil in the attached sketch" of the areas as prepared by the Bureau of Forestry. 2 The Director of Forestry, after considering the evidence, found: That the claim of the Ago Timber Corporation portrays a line (green line) far different in alignment with the line (red) as indicated in the original License Control Map of this Office; That the claim of the Ago Timber Corporation (green line does not conform to the distance of 6,800 meters from point 3 to point 4 of the original description of the area of Narciso Lansang but would project said line to a distance of approximately 13,800 meters; That to follow the claim of the Ago Timber Corporation would increase the area of Narciso Lansang from 9,000 to 12,360 hectares; That to follow the claim of the Ago Timber Corporation would reduce the area of the Lianga Bay Logging, Co., Inc. to 107,046 hectares instead of the area granted which is 110,406 hectares. and ruled that "the claim of the Ago Timber Corporation runs counter to the intentions of this Office is granting the license of Mr. Narciso Lansang; and further, that it also runs counter to the intentions of this Office in granting the Timber License Agreement to the Lianga Bay Logging Co., Inc. The intentions of this Office in granting the two licenses (Lansang and Lianga Bay Logging Co., Inc.) are patently manifest in that distances and bearings are the controlling factors. If mention was ever made of the Agusan-Surigao boundary, as the common boundary line of both licensees, this Office could not have meant the Agusan-Surigao boundary as described under Section 1 of Act 1693 of the Philippine Commission for were it so it could have been so easy for this Office to mention the distance from point 3 to point 4 of Narciso Lansang as approximately 13,800 meters. This cannot be considered a mistake considering that the percentage of error which is more or less 103% is too high an error to be committed by an Office manned by competent technical men. The Agusan-Surigao boundary as mentioned in the technical descriptions of both licensees, is, therefore, patently an imaginary line based on B.F. License Control Map. Such being the case, it is reiterated that distance and bearings control the description where an imaginary line exists. 3The decision fixed the common boundary of the licensed areas of the Ago Timber Corporation and Lianga Bay Logging Co., Inc. as that indicated in red pencil of the sketch attached to the decision. In an appeal interposed by respondent Ago, docketed in the Department of Agriculture and Natural Resources as DANR Case No. 2268, the then Acting Secretary of Agriculture and Natural Resources Jose Y. Feliciano, in a decision dated August 9, 1965 set aside the appealed decision of the Director of Forestry and ruled that "(T)he common boundary line of the licensed areas of the Ago Timber Corporation and the Lianga Bay Logging Co., Inc., should be that indicated by the green line on the same sketch which had been made an integral part of the appealed decision." 4

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Petitioner elevated the case to the Office of the President, where in a decision dated June 16, 1966, signed by then Assistant Executive Secretary Jose J. Leido, Jr., the ruling of the then Secretary of Agriculture and Natural Resources was affirmed. 5 On motion for reconsideration, the Office of the President issued another decision dated August 9, 1968 signed by then Assistant Executive Secretary Gilberto Duavit reversing and overturning the decision of the then Acting Secretary of Agriculture and Natural Resources and affirming in toto and reinstating the decision, dated March 20, 1961, of the Director of Forestry. 6 Respondent Ago filed a motion for reconsideration of the decision dated August 9, 1968 of the Office of the President but after written opposition of petitioner Lianga, the same was denied in an order dated October 2, 1968, signed by then Assistant Executive Secretary Jose J. Leido, Jr. 7 On October 21, 1968, a new action was commenced by Ago Timber Corporation, as plaintiff, in the Court of First Instance of Agusan, Branch II, docketed thereat as Civil Case No. 1253, against Lianga Bay Logging Co., Inc., Assistant Executive Secretaries Jose J. Leido, Jr. and Gilberto M. Duavit and Director of Forestry, as defendants, for "Determination of Correct Boundary Line of License Timber Areas and Damages with Preliminary Injunction" reiterating once more the same question raised and passed upon in DANR Case No. 2268 and insisting that "a judicial review of such divergent administrative decisions is necessary in order to determine the correct boundary fine of the licensed areas in question." 8 As prayed for, respondent judge issued a temporary restraining order on October 28, 1968, on a bond of P20,000, enjoining the defendants from carrying out the decision of the Office of the President. The corresponding writ was issued the next day, or on October 29, 1968. 9 On November 10, 1968, defendant Lianga (herein petitioner) moved for dismissal of the complaint and for dissolution of the temporary restraining order on grounds that the complaint states no cause of action and that the court has no jurisdiction over the person of respondent public officials and respondent corporation. It also submitted its opposition to plaintiff's (herein respondent prayer for the issuance of a writ of preliminary injunction.10 A supplemental motion was filed on December 6, 1968. 11 On December 19, 1968, the lower court issued an order denying petitioner Lianga's motion to dismiss and granting the writ of preliminary injunction prayed for by respondent Ago. 12 Lianga's Motion for Reconsideration of the Order was denied on May 9, 1969. 13 Hence, this petition praying of the Court (a) to declare that the Director of Forestry has the exclusive jurisdiction to determine the common boundary of the licensed areas of petitioners and respondents and that the decision of the Office of the President dated August 9, 1968 is final and executory; (b) to order the dismissal of Civil Case No. 1253 in the Court of First Instance of Agusan; (c) to declare that respondent Judge acted without jurisdiction or in excess of jurisdiction and with grave abuse of discretion, amounting to lack of jurisdiction, in issuing the temporary restraining order dated October 28, 1968 and granting the preliminary injunction per its Order dated December 19, 1968; and (d) to annul the aforementioned orders. After respondent's comments on the petition and petitioner's reply thereto, this Court on June 30, 1969 issued a restraining order enjoining in turn the enforcement of the preliminary injunction and related orders issued by the respondent court in Civil Case No. 1253. 14 The Court finds merit in the petition. Respondent Judge erred in taking cognizance of the complaint filed by respondent Ago, asking for the determination anew of the correct boundary fine of its licensed timber area, for the same issue had already been determined by the Director of Forestry, the Secretary of Agriculture and Natural Resources and the Office of the President, administrative officials under whose jurisdictions the matter properly belongs. Section 1816 of the Revised Administrative
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Code vests in the Bureau of Forestry, the jurisdiction and authority over the demarcation, protection, management, reproduction, reforestation, occupancy, and use of all public forests and forest reserves and over the granting of licenses for game and fish, and for the taking of forest products, including stone and earth therefrom. The Secretary of Agriculture and Natural Resources, as department head, may repeal or in the decision of the Director of Forestry when advisable in the public interests, 15 whose decision is in turn appealable to the Office of the President. 16 In giving due course to the complaint below, the respondent court would necessarily have to assess and evaluate anew all the evidence presented in the administrative proceedings, 17 which is beyond its competence and jurisdiction. For the respondent court to consider and weigh again the evidence already presented and passed upon by said officials would be to allow it to substitute its judgment for that of said officials who are in a better position to consider and weigh the same in the light of the authority specifically vested in them by law. Such a posture cannot be entertained, for it is a well-settled doctrine that the courts of justice will generally not interfere with purely administrative matters which are addressed to the sound discretion of government agencies and their expertise unless there is a clear showing that the latter acted arbitrarily or with grave abuse of discretion or when they have acted in a capricious and whimsical manner such that their action may amount to an excess or lack of jurisdiction. 18 A doctrine long recognized is that where the law confines in an administrative office the power to determine particular questions or matters, upon the facts to be presented, the jurisdiction of such office shall prevail over the courts. 19 The general rule, under the principles of administrative law in force in this jurisdiction, is that decisions of administrative officers shall not be disturbed by the courts, except when the former have acted without or in excess of their jurisdiction, or with grave abuse of discretion. Findings of administrative officials and agencies who have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but at times even finality of such findings are supported by substantial evidence. 20 As recently stressed by the Court, "in this era of clogged court dockets, the need for specialized administrative boards or commissions with the special knowledge, experience and capability to hear and determine promptly disputes on technical matters or essentially factual matters, subject to judicial review in case of grave abuse of discretion, has become well nigh indispensable." 21 The facts and circumstances in the instant case are similar to the earlier case of Pajo, et al. v. Ago, et al. 22(where therein respondent Pastor Ago is the president of herein respondent Ago Timber Corporation). In the said case, therein respondent Pastor Ago, after an adverse decision of the Director of Forestry, Secretary of Agriculture and Natural Resources and Executive Secretary in connection with his application for renewal of his expired timber licenses, filed with the Court of First instance of Agusan a petition for certiorari, prohibition and damages with preliminary injunction alleging that the rejection of his application for renewal by the Director of Forestry and Secretary of Agriculture and Natural Resources and its affirmance by the Executive Secretary constituted an abuse of discretion and was therefore illegal. The Court held that "there can be no question that petitioner Director of Forestry has jurisdiction over the grant or renewal of respondent Ago's timber license (Sec. 1816, Rev. Adm. Code); that petitioner Secretary of Agriculture and Natural Resources as department head, is empowered by law to affirm, modify or reject said grant or renewal of respondent Ago's timber license by petitioner Director of Forestry (Sec. 79[c], Rev. Adm. Code); and that petitioner Executive Secretary, acting for and in behalf and by authority of the President has, likewise, jurisdiction to affirm, modify or reverse the orders regarding the grant or renewal of said timber license by the two aforementioned officials." The Court went on to say that, "(I)n the case of Espinosa, et al. v. Makalintal, et al. (79 Phil. 134; 45 Off. Gaz. 712), we held that the 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 cancelling applications or deciding conflicting 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. In general, courts have no supervising power over the proceedings and actions of the administrative departments of the government. This is generally true
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with respect to acts involving the exercise of judgment or discretion, and findings of act. Findings of fact by an administrative board, agency or official, following a hearing, are binding upon the courts and will not be disturbed except where the board, agency 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. And we have repeatedly held that there is grave abuse of discretion justifying the issuance of the writ of certiorari only when there is capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. (Abad Santos v. Province of Tarlac, 67 Phil. 480; Tan vs. People, 88 Phil. 609)" Respondent Ago contends that the motion filed by petitioner Lianga for reconsideration of the decision of the Office of the President was denied in an alleged "decision" dated August 15, 1966, allegedly signed by then Assistant Executive Secretary Jose J. Leido, Jr. that, "however, for some mysterious, unknown if not anomalous reasons and/or illegal considerations, the "decision" allegedly dated August 15, 1966(Annex "D") was never released" and instead a decision was released on August 9, 1968, signed by then Assistant Executive Secretary Gilberto M. Duavit, which reversed the findings and conclusions of the Office of the President in its first decision dated June 16, 1966 and signed by then Assistant Executive Secretary Leido. It is elementary that a draft of a decision does not operate as judgment on a case until the same is duly signed and delivered to the clerk for filing and promulgation. A decision cannot be considered as binding on the parties until its promulgation. 23 Respondent should be aware of this rule. In still another case of Ago v. Court of Appeals,24 (where herein respondent Ago was the petitioner) the Court held that, "While it is to be presumed that the judgment that was dictated in open court will be the judgment of the court, the court may still modify said order as the same is being put into writing. And even if the order or judgment has already been put into writing and signed, while it has not yet been delivered to the clerk for filing, it is stin subject to amendment or change by the judge. It is only when the judgment signed by the judge is actually filed with the clerk of court that it becomes a valid and binding judgment. Prior thereto, it could still be subject to amendment and change and may not, therefore, constitute the real judgment of the court." Respondent alleges "that in view of the hopelessly conflicting decisions of the administrative bodies and/or offices of the Philippine government, and the important questions of law and fact involved therein, as well as the well-grounded fear and suspicion that some anomalous, illicit and unlawful considerations had intervened in the concealment of the decision of August 15, 1966 (Annex "D") of Assistant Executive Secretary Gilberto M. Duavit, a judicial review of such divergent administrative decisions is necessary in order to determine the correct boundary line of the licensed areas in question and restore the faith and confidence of the people in the actuations of our public officials and in our system of administration of justice." The mere suspicion of respondent that there were anomalies in the non-release of the Leido "decision" allegedly denying petitioner's motion for reconsideration and the substitution thereof by the Duavit decision granting reconsideration does not justify judicial review. Beliefs, suspicions and conjectures cannot overcome the presumption of regularity and legality of official actions. 25 It is presumed that an official of a department performs his official duties regularly. 26 It should be noted, furthermore, that as hereinabove stated with regard to the case history in the Office of the President, Ago's motion for reconsideration of the Duavit decision dated August 9, 1968 was denied in the Order dated October 2, 1968 and signed by Assistant Executive Secretary Leido himself (who thereby joined in the reversal of his own first decision dated June 16, 1966 and signed by himself). The Ordinary Timber License No. 1323-'60[New] which approved the transfer to respondent Ago of the 4,000 hectares from the forest area originally licensed to Narciso Lansang, stipulates certain conditions, terms and limitations, among which were: that the decision of the Director of Forestry as to the exact location of its licensed areas is final; that the license is subject to whatever decision that may be rendered on the boundary conflict between the Lianga Bay Logging Co. and the Ago Timber Corporation; that the terms and conditions of the license are subject to change at the discretion of the Director of Forestry and the license may be made to expire at an earlier date. Under Section 1834 of the Revised Administrative Code, the Director of Forestry, upon granting any license, may prescribe and insert therein such terms, conditions, and limitations, not inconsistent with law, as may be deemed
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by him to be in the public interest. The license operates as a contract between the government and respondent. Respondent, therefore, is estopped from questioning the terms and stipulation thereof. Clearly, the injunctive writ should not have been issued. The provisions of law explicitly provide that Courts of First Instance shall have the power to issue writ of injunction, mandamus, certiorari, prohibition, quo warranto and habeas corpus in their respective places, 27 if the petition filed relates to the acts or omissions of an inferior court, or of a corporation, board, officer or person, within their jurisdiction. 28 The jurisdiction or authority of the Court of First Instance to control or restrain acts by means of the writ of injunction is limited only to acts which are being committed within the territorial boundaries of their respective provinces or districts 29 except where the sole issue is the legality of the decision of the administrative officials. 30 In the leading case of Palanan Lumber Plywood Co., Inc. v. Arranz 31 which involved a petition for certiorari and prohibition filed in the Court of First Instance of Isabela against the same respondent public officials as here and where the administrative proceedings taken were similar to the case at bar, the Court laid down the rule that: "We agree with the petitioner that the respondent Court acted without jurisdiction in issuing a preliminary injunction against the petitioners Executive Secretary, Secretary of Agriculture and Natural Resources and the Director of Forestry, who have their official residences in Manila and Quezon City, outside of the territorial jurisdiction of the respondent Court of First Instance of Isabela. Both the statutory provisions and the settled jurisdiction of this Court unanimously affirm that the extraordinary writs issued by the Court of First Instance are limited to and operative only within their respective provinces and districts." A different rule applies only when the point in controversy relates solely to a determination of a question of law whether the decision of the respondent administrative officials was legally correct or not. 32 We thus declared inDirector of Forestry v. Ruiz. 33 "In Palanan Lumber & Plywood Co., Inc., supra, we reaffirmed the rule of non-jurisdiction of courts of first instance to issue injunctive writs in order to control acts outside of their premises or districts. We went further and said that when the petition filed with the courts of first instance not only questions the legal correctness of the decision of administrative officials but also seeks to enjoin the enforcement of the said decision, the court could not validly issue the writ of injunction when the officials sought to be restrained from enforcing the decision are not stationed within its territory.1avvphi1 "To recapitulate, insofar as injunctive or prohibitory writs are concerned, the rule still stands that courts of first instance have the power to issue writs limited to and operative only within their respective provinces or districts. " The writ of preliminary injunction issued by respondent court is furthermore void, since it appears that the forest area described in the injunctive writ includes areas not licensed to respondent Ago. The forest area referred to and described therein comprises the whole area originally licensed to Narciso Lansang under the earlier Ordinary Timber License No. 58452. Only a portion of this area was in fact transferred to respondent Ago as described in its Ordinary Timber License No. 1323-'60[New]. It is abundantly clear that respondent court has no jurisdiction over the subject matter of Civil Case No. 1253 of the Court of First Instance of Agusan nor has it jurisdiction to decide on the common boundary of the licensed areas of petitioner Lianga and respondent Ago, as determined by respondents public officials against whom no case of grave abuse of discretion has been made. Absent a cause of action and jurisdiction, respondent Judge acted with grave abuse of discretion and excess, if not lack, of jurisdiction in refusing to dismiss the case under review and in issuing the writ of preliminary injunction
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enjoining the enforcement of the final decision dated August 9, 1968 and the order affirming the same dated October 2, 1968 of the Office of the President. ACCORDINGLY, the petition for certiorari and prohibition is granted. The restraining order heretofore issued by the Court against enforcement of the preliminary injunction and related orders issued by respondent judge is the case below is made permanent and the respondent judge or whoever has taken his place is hereby ordered to dismiss Civil Case No. 1253. SO ORDERED.

EASTERN TELECOMMUNICATIONS PHILIPPINES, INC. and TELECOMMUNICATIONS TECHNOLOGIES, INC., petitioners, vs. INTERNATIONAL COMMUNICATION CORPORATION, respondent. DECISION AUSTRIA-MARTINEZ, J.: The role of the telecommunications industry in Philippine progress and development cannot be understated. Time was when the industry was dominated by a few -- an oligarchy of sorts where the elite made the decisions and serfdom had no choice but acquiesce. Sensing the need to abrogate their dominion, the government formulated policies in order to create an environment conducive to the entry of new players. Thus, in October 1990, the National Telecommunications Development Plan 1991-2010 (NTDP) was formulated and came into being. Designed by the Department of Transportation and Communications (DOTC), the NTDP provides for the framework of government policies, objectives and strategies that will guide the industrys development for the next 20 years. As expected, with it came the increase in the demand for telecommunications services, especially in the area of local exchange carrier service (LECS).[1] Concomitantly, the DOTC issued guidelines for the rationalization of local exchange telecommunications service. In particular, the DOTC issued on September 30, 1991, Department Circular No. 91-260, with the purpose of minimizing or eliminating situations wherein multiple operators provide local exchange service in a given area. Pursuant thereto, the National Telecommunications Commission (NTC) was tasked to define the boundaries of local exchange areas and authorize only one franchised local exchange carrier to provide local exchange service within such areas. Thereafter, on July 12, 1993, then President Fidel V. Ramos issued Executive Order No. 109 entitled Local Exchange Carrier Service. Section 2 thereof provides that all existing International Gateway Facility (IGF) operators[2] are required to provide local exchange carrier services in unserved and underserved areas, including Metro Manila, thereby promoting universal access to basic telecommunications service.
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The NTC promulgated Memorandum Circular No. 11-9-93 on September 17, 1993 implementing the objectives of E.O. No. 109.[3] Section 3 of the Circular mandates existing IGF operators to file a petition for the issuance of Certificate of Public Convenience and Necessity (CPCN) to install, operate and maintain local exchange carrier services within two years from effectivity thereof. Section 4 further requires IGF operators to provide a minimum of 300 local exchange lines per one international switch termination and a minimum of 300,000 local exchange lines within three years from grant of authority. To cap the governments efforts, Republic Act No. 7925, otherwise known as the Public Telecommunications Policy Act of the Philippines, was enacted on March 23, 1995. With regard to local exchange service, Section 10 thereof mandates an international carrier to comply with its obligation to provide local exchange service in unserved or underserved areas within three years from the grant of authority as required by existing regulations. On September 25, 1995, the NTC issued the Implementing Rules and Regulations for R.A. No. 7925 per its NTC MC No. 8-9-95. Taking advantage of the opportunities brought about by the passage of these laws, several IGF operators applied for CPCN to install, operate and maintain local exchange carrier services in certain areas. Respondent International Communication Corporation, now known as Bayan Telecommunications Corporation or Bayantel,[4] applied for and was given by the NTC a Provisional Authority (PA)[5] on March 3, 1995, to install, operate and provide local exchange service in Quezon City, Malabon and Valenzuela, Metro Manila, and the entire Bicol region. Meanwhile, petitioner Telecommunications Technologies Philippines, Inc. (TTPI), as an affiliate of petitioner Eastern Telecommunications Philippines, Inc. (ETPI), was granted by the NTC a PA on September 25, 1996, to install, operate and maintain a local exchange service in the Provinces of Batanes, Cagayan Valley, Isabela, Kalinga-Apayao, Nueva Vizcaya, Ifugao, Quirino, the cities of Manila and Caloocan, and the Municipality of Navotas, Metro Manila. It appears, however, that before TTPI was able to fully accomplish its rollout obligation, ICC applied for and was given a PA by the NTC on November 10, 1997, to install, operate and maintain a local exchange service in Manila and Navotas,[6] two areas which were already covered by TTPI under its PA dated September 25, 1996. Aggrieved, petitioners filed a petition for review with the Court of Appeals with application for a temporary restraining order and a writ of preliminary injunction, docketed as CA-G.R. SP No. 46047, arguing that the NTC committed grave abuse of discretion in granting a provisional authority to respondent ICC to operate in areas already assigned to TTPI. On April 30, 1998, the Court of Appeals dismissed[7] the petition for review on the ground that the NTC did not commit any grave abuse of discretion in granting the PA to TTPI. It sustained the NTCs finding that ICC is legally and financially competent and its network plan technically feasible. The Court of Appeals also ruled that there was no violation of the equal protection clause because the PA granted to ICC and TTPI were given under different situations and there is no point of comparison between the two.[8] Hence, the present petition for review on certiorari, raising the following issues: I Whether or not the Honorable Court of Appeals committed a serious error of law in upholding the Order of the NTC granting a PA to Respondent to operate LEC services in Manila and Navotas which are areas already assigned to petitioner TTPI under a prior and subsisting PA. II

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Whether or not Petitioner is entitled to a Writ of Preliminary Injunction to restrain Respondent from installing LEC services in the areas granted to it by the Order under review.[9] In support thereof, petitioners posit the following arguments: (1) The assignment to ICC of areas already allocated to TTPI violates the Service Area Scheme (SAS), which is the guidepost of the laws and issuances governing local exchange service; (2) ICC did not make any showing that an existing operator, TTPI in this case, failed to comply with the service performance and technical standards prescribed by the NTC, and that the area is underserved, as required under Section 23 of MC No. 11-9-93; (3) The facts and figures cited by the NTC, i.e., ICCs alleged remarkable performance in fulfilling its rollout obligation and the growth rate in the installation of telephone lines in Manila and Navotas, do not justify the grant of the PA in favor of ICC, nor are they supported by the evidence on record as these were not presented during the proceedings before the NTC; (4) ICC did not comply with the requirement of prior consultation with the NTC before it filed its application, in violation of Sections 3 and 3.1 of MC 11-9-93; (5) ICC did not comply with Section 27 of MC 11-9-93 requiring that an escrow deposit be made equivalent to 20% and a performance bond equivalent to 10% of the investment required for the first two years of the project; (6) ICC is not financially and technically capable of undertaking the project;

(7) The grant of a PA in favor of ICC to operate in areas covered by TTPI will render it difficult for the latter to cross-subsidize its operations in less profitable areas covered by it and will threaten its viability to continue as a local exchange operator. [10] After a review of the records of this case, the Court finds no grave abuse of discretion committed by the Court of Appeals in sustaining the NTCs grant of provisional authority to ICC. The power of the NTC to grant a provisional authority has long been settled. As the regulatory agency of the national government with jurisdiction over all telecommunications entities, it is clothed with authority and given ample discretion to grant a provisional permit or authority.[11] It also has the 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, including the authority to determine the areas of operations of applicants for telecommunications services.[12] In this regard, the NTC is clothed with sufficient discretion to act on matters solely within its competence. [13] In granting ICC the PA to operate a local exchange carrier service in the Manila and Navotas areas, the NTC took into consideration ICCs financial and technical resources and found them to be adequate. The NTC also noted ICCs performance in complying with its rollout obligations under the previous PA granted to it, thus: With the proven track record of herein applicant as one of the pacesetters in carrying out its landlines commitment in its assigned areas, applicant can best respond to public demand for faster installation of telephone lines in Manila and Navotas.

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The grant of this application is, therefore, a fitting recognition that should be accorded to any deserving applicant, such as herein applicant ICC whose remarkable performance in terms of public service as mandated by Executive Order 109 and Republic Act No. 7925 has persuaded this Commission to affix the stamp of its approval.[14] The Court will not interfere with these findings of the NTC, as these are matters that are addressed to its sound discretion, being the government agency entrusted with the regulation of activities coming under its special and technical forte.[15] Moreover, 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.[16] Petitioner insists compliance with the service area scheme (SAS) mandated by DOTC Dept. Circular No. 91-260, to wit: 1. The National Telecommunications Commission (NTC) shall define the boundaries of local exchange areas, and shall henceforth authorize only one franchised Local Exchange Carrier (LEC) to provide LEC service within such areas.

The Court is not persuaded. Said department circular was issued by the DOTC in 1991, before the advent of E.O. No. 109 and R.A. No. 7925. When E.O. No. 109 was promulgated in 1993, and R.A. No. 7925 enacted in 1995, the service area scheme was noticeably omitted therefrom. Instead, E.O. No. 109 and R.A. No. 7925 adopted a policy of healthy competition among the local exchange carrier service providers. The need to formulate new policies is dictated by evolving goals and demands in telecommunications services. Thus, E.O. No. 109 acknowledges that there is a need to promulgate new policy directives to meet the targets of Government through the National Telecommunications Development Plan (NTDP) of the Department of Transportation and Communications (DOTC), specifically: (1) to ensure the orderly development of the telecommunications sector through the provision of service to all areas of the country; (2) to satisfy the unserviced demand for telephones; and (3) to provide healthy competition among authorized service providers. Likewise, one of the national policies and objectives of R.A. No. 7925 is to foster the improvement and expansion of telecommunications services in the country through a healthy competitive environment, 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.[17] Recently, in Pilipino Telephone Corporation vs. NTC,[18] the Court had occasion to rule on a case akin to the present dispute, involving the same respondent ICC, and the Pilipino Telephone Corporation (Piltel). In the Piltel case, ICC applied for a provisional authority to operate a local exchange service in areas already covered by Piltel, which includes Misamis Occidental, Zamboanga del Sur, Davao del Sur, South Cotabato and Saranggani. Piltel opposed ICCs application but the NTC denied it, and granted ICCs application. The Court of Appeals dismissed Piltels petition for review, and on certiorari before this Court, we affirmed the dismissal. The Court found that the NTC did not commit any grave abuse of discretion when it granted the ICC a provisional authority to operate in areas covered by Piltel. We held: We will not disturb the factual findings of the NTC on the technical and financial capability of the ICC to undertake the proposed project. We generally accord great weight and even finality to factual findings of administrative bodies such as the NTC, if substantial evidence supports the findings as in this case. The exception to this rule is when the administrative agency arbitrarily disregarded evidence before it or misapprehended evidence to such an extent as to compel a contrary conclusion had it properly appreciated the evidence. PILTEL gravely failed to show that this exception applies to the instant case. Moreover, the exercise of administrative discretion, such as the issuance of a PA, is a policy decision and a matter that the NTC can best discharge, not the courts.
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PILTEL contends that the NTC violated Section 23 of NTC Memorandum Circular No. 11-9-93, otherwise known as the Implementing Guidelines on the Provisions of EO 109 which states: Section 23. No other company or entity shall be authorized to provide local exchange service in areas where the LECs comply with the relevant provisions of MTC MC No. 10-17-90 and NTC MC No. 10-16-90 and that the local exchange service area is not underserved. (Emphasis supplied) Section 23 of EO 109 does not categorically state that the issuance of a PA is exclusive to any telecommunications company. Neither Congress nor the NTC can grant an exclusive franchise, certificate, or any other form of authorization to operate a public utility. In Republic v. Express Telecommunications Co., the Court held that the Constitution is quite emphatic that the operation of a public utility shall not be exclusive. Section 11, Article XII of the Constitution provides: Sec. 11. No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations 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, alteration, or repeal by the Congress when the common good so requires. xxx (Emphasis supplied) Thus, in Radio Communications of the Philippines, Inc. v. National Telecommunications Commission, the Court ruled that the Constitution mandates that a franchise cannot be exclusive in nature. ... Among the declared national policies in Republic Act No. 7925, otherwise known as the Public Telecommunications Policy Act of the Philippines, is the healthy competition among telecommunications carriers, to wit: Obviously, 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. Furthermore, free competition in the industry may also provide the answer to a much-desired improvement in the quality and delivery of this type of public utility, to improved technology, fast and handy mobil[e] service, and reduced user dissatisfaction. PILTELs contention that the NTC Order amounts to a confiscation of property without due process of law is untenable. Confiscation means the seizure of private property by the government without compensation to the owner. A franchise to operate a public utility is not an exclusive private property of the franchisee. Under the Constitution, no franchisee can demand or acquire exclusivity in the operation of a public utility. Thus, a franchisee of a public utility cannot complain of seizure or taking of property because of the issuance of another franchise to a competitor. Every franchise, certificate or
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authority to operate a public utility is, by constitutional mandate, non-exclusive. PILTEL cannot complain of a taking of an exclusive right that it does not own and which no franchisee can ever own. Likewise, PILTELs argument that the NTC Order violates PILTELs rights as a prior operator has no merit. The Court resolved a similar question in Republic v. Republic Telephone Company, Inc. In striking down Retelcos claim that it had a right to be protected in its investment as a franchiseholder and prior operator of a telephone service in Malolos, Bulacan, the Court held: RETELCOs foremost argument is that such operations and maintenance of the telephone system and solicitation of subscribers by [petitioners] constituted an unfair and ruinous competition to the detriment of [RETELCO which] is a grantee of both municipal and legislative franchises for the purpose. In effect, RETELCO pleads for protection from the courts on the assumption that its franchises vested in it an exclusive right as prior operator. There is no clear showing by RETELCO, however, that its franchises are of an exclusive character. xxx At any rate, it may very well be pointed out as well that neither did the franchise of PLDT at the time of the controversy confer exclusive rights upon PLDT in the operation of a telephone system. In fact, we have made it a matter of judicial notice that all legislative franchises for the operation of a telephone system contain the following provision: It is expressly provided that in the event the Philippine Government should desire to maintain and operate for itself the system and enterprise herein authorized, the grantee shall surrender his franchise and will turn over to the Government said system and all serviceable equipment therein, at cost, less reasonable depreciation.[19] Similarly in this case, the grant of a PA to ICC to operate in areas covered by TTPI is not tainted with any grave abuse of discretion as it was issued by the NTC after taking into account ICCs technical and financial capabilities, and in keeping with the policy of healthy competition fostered by E.O. No. 109 and R.A. No. 7925. In addition, Section 6 of R.A. No. 7925 specifically limits the DOTC from exercising any power that will tend to influence or effect a review or a modification of the NTCs quasi-judicial functions, to wit: Section 6. Responsibilities of and Limitations to Department Powers. -- The Department of Transportation and Communications (Department) shall not exercise any power which will tend to influence or effect a review or a modification of the Commissions quasi -judicial function. The power of the NTC in granting or denying a provisional authority to operate a local exchange carrier service is a quasi-judicial function,[20] a sphere in which the DOTC cannot intrude upon. If at all, the service area scheme provided in DOTC Dept. Circular No. 91-260 is only one of the factors, but should not in any way, tie down the NTC in its determination of the propriety of a grant of a provisional authority to a qualified applicant for local exchange service. True, NTC MC No. 11-9-93 requires prior consultation with the NTC of the proposed service areas. As petitioners themselves argue, prior consultation allows the NTC to assess the impact of the proposed application on the viability of the local exchange operator in the area desired by the would-be applicant and on the viability of the entire telecommunications industry as well as rationalize the plans to minimize any adverse impact. [21] In this
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case, prior consultation was substantially complied with and its purpose accomplished, when ICC filed its application and the NTC was given the opportunity to assess ICCs viability to render local exchange service in the Manila and Navotas areas, and its impact on the telecommunications industry. It is also true that NTC MC No. 8-9-95 allows a duly enfranchised entity to maintain a local exchange network if it is shown that an existing authorized local exchange operator fails to satisfy the demand for local exchange service.[22] In this case, the NTC noted the increasing rate in the demand for local lines within the Manila and Navotas areas, and in order for these areas to catch up with its neighboring cities, installation of lines must be sped up.[23] This, in fact, is tantamount to a finding that the existing local exchange operator failed to meet the growing demand for local lines. ICCs technical and financial capabilities, as well as the growth rate in the number of lines in particular areas, are matters within NTCs competence and should be accorded respect. The NTC is given wide latitude in the evaluation of evidence and in the exercise of its adjudicative functions, and this includes the authority to take judicial notice of facts within its special competence.[24] TTPI anticipates that allowing ICC to enter its service areas will make it difficult for it to cross-subsidize its operations in the less profitable areas. Such argument, however, is futile. The cross-subsidy approach is apparently the governments response to the foreseen situation wherein given its policy of universal access, a local exchange provider will find itself operating in areas where the demand and the publics capacity to subscribe will be lesser than in other areas, making these areas more of a liability than an asset. Thus, Section 4 of E.O. No. 109 provides: SEC. 4. Cross-Subsidy. Until universal access to basic telecommunications is achieved, and such service is priced to reflect actual costs, local exchange service shall continue to be cross-subsidized by other telecommunications services within the same company.

Meanwhile, NTC MC No. 8-9-95 provides: ACCESS CHARGES GENERAL (a) Until the local exchange service is priced reflecting actual costs, the local exchange service shall be cross-subsidized by other telecommunications services. (c) The subsidy need by the LE service operator to earn a rate of return at parity with other segments of telecommunications industry shall be charged against the international and domestic toll and CMTS interconnect services.[25]

Both issuances allow a local exchange operator to cross-subsidize its operations from its other telecommunications services, and not solely on the revenues derived from the operators local exchange service. Notably, R.A. No. 7617, as amended by R.A. No. 7674, grants TTPI the legislative franchise to install, operate and maintain telecommunications systems throughout the Philippines but not limited to the operations of local exchange service or public switched network, public-calling stations, interexchange carrier or national toll transmission, value-added or enhanced services intelligent networks, mobile or personal communications services,
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international gateway facility, and paging services, among others.[26] From these services, TTPI has other sources of revenue from which it may crosssubsidize its local exchange operations. The Court, however, agrees with petitioners that the NTC erred when it failed to require ICC to make an escrow deposit and a performance bond. Section 27 of NTC MC No. 11-9-93 specifically provides: SEC. 27. Authorized public telecommunications carriers shall be required to deposit in escrow in a reputable bank 20% of the investment required for the first two years of the implementation of theproposed project. In addition to escrow, the authorized public telecommunications carriers shall be required to post a performance bond equivalent to 10% of the investment required for the first two years of theapproved project but not to exceed P500 Million. The performance bond shall be forfeited in favor of the government in the event that the authorized PTC fail to comply with the terms and conditions of the authority granted. (Emphases Ours) The escrow deposit and the posting of a performance bond are required in each proposed and approved project of a local exchange operator. Project refers to a planned undertaking.[27] ICCs project for local exchange service in the Manila and Navotas areas is separate and distinct from its projects in other areas; hence, the NTC should have directed ICC to submit such requirements. Evidently, the escrow deposit is required to ensure that there is available money on hand to defray ICCs expenditures for its project, while the performance bond will answer for the faithful compliance and performance of ICCs rollout obligation and to compensate the government for any damages incurred in case of ICCs default. Without these, the government will be left holding an empty bag in the event ICC reneges in its rollout obligation. Section 27 of NTC MC No. 11-9-93 is silent as to whether the posting of an escrow deposit and performance bond is a condition sine qua non for the grant of a provisional authority. While the provision uses the term shall, said directive pertains to the NTC, which shall require the public telecommunications carrier to make such deposit and posting. In any event, records show that as of May 20, 2004, ICC has been granted an extension of its provisional authority up to November 10, 2006.[28] Records also show that ICC has already been providing local exchange carrier service in the areas concerned, having installed 16,000 lines in the City of Manila, 12,000 of which have already been subscribed, 624 lines in Caloocan City, all of which have been subscribed, while the roll-out plan for facilities and provisioning in the City of Navotas is being finalized.[29] Hence, so as not to disrupt ICCs rollout plan compliance, it would be more judicious for theCourt to merely require ICC to comply with Section 27 of NTC MC No. 11-9-93, within such period to be determined by the NTC. Furthermore, it is well to stress that petitioner TTPI cannot claim any exclusive right to render telecommunications service in areas which the NTC considers to be in need of additional providers. R.A. No. 7925 is quite emphatic on this score, viz.: SEC. 23. Equality of Treatment in the Telecommunications Industry. Any advantage, favor, privilege, exemption, or immunity granted under existing franchises, or may hereafter be granted, shall ipso facto become part of previously granted telecommunications franchises and shall be accorded immediately and unconditionally to the grantees of such franchises: Provided, however, That the foregoing shall neither apply to nor affect provisions of telecommunications franchises concerning territory covered by the franchise, the life span of the franchise, or the type of service authorized by the franchise. (Emphasis Ours)

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More than anything else, public service should be the primordial objective of local exchange operators. The entry of another provider in areas covered by TTPI should pose as a challenge for it to improve its quality of service. Ultimately, it will be the public that will benefit. As pointed out in Republic of the Phils. vs. Rep. Telephone Co, Inc.:[30] Free competition in the industry may also provide the answer to a much-desired improvement in the quality and delivery of this type of public utility, to improved technology, fast and handy mobil service, and reduced user dissatisfaction. After all, neither PLDT nor any other public utility has a constitutional right to a monopoly position in view of the Constitutional proscription that no franchise certificate or authorization shall be exclusive in character or shall last longer than fifty (50) years (ibid., Section 11; Article XIV, Section 5, 1973 Constitution; Article XIV, Section 8, 1935 Constitution). WHEREFORE, the petition for review on certiorari is PARTIALLY GRANTED. The Order of the National Telecommunications Commission dated November 10, 1997 in NTC Case No. 96-195 is AFFIRMED with the following modifications: Respondent International Communication Corporation, in accordance with Section 27 of NTC MC No. 11-9-93, is required to: (1) Deposit in escrow in a reputable bank 20% of the investment required for the first two years of the implementation of the proposed project; and Post a performance bond equivalent to 10% of the investment required for the first two years of the approved project but not to exceed P500 Million.

(2)

within such period to be determined by the National Telecommunications Commission. No pronouncement as to costs. SO ORDERED.

PHILIPPINE NATIONAL OIL COMPANY, petitioner, vs. THE HON. COURT OF APPEALS, THE COMMISSIONER OF INTERNAL REVENUE and TIRSO SAVELLANO, respondents.

[G.R. No. 112800. April 26, 2005]


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PHILIPPINE NATIONAL BANK, petitioner, vs. THE HON. COURT OF APPEALS, COURT OF TAX APPEALS, TIRSO B. SAVELLANO and COMMISSIONER OF INTERNAL REVENUE, respondents. DECISION CHICO-NAZARIO, J.: This is a consolidation of two Petitions for Review on Certiorari filed by the Philippine National Oil Company (PNOC) [1] and the Philippine National Bank (PNB),[2] assailing the decisions of the Court of Appeals in CA-G.R. SP No. 29583[3] and CA-G.R. SP No. 29526,[4] respectively, which both affirmed the decision of the Court of Tax Appeals (CTA) in CTA Case No. 4249.[5] The Petitions before this Court originated from a sworn statement submitted by private respondent Tirso B. Savellano (Savellano) to the Bureau of Internal Revenue (BIR) on 24 June 1986. Through his sworn statement, private respondent Savellano informed the BIR that PNB had failed to withhold the 15% final tax on interest earnings and/or yields from the money placements of PNOC with the said bank, in violation of Presidential Decree (P.D.) No. 1931. P.D. No. 1931, which took effect on 11 June 1984, withdrew all tax exemptions of government-owned and controlled corporations. In a letter, dated 08 August 1986, the BIR requested PNOC to settle its liability for taxes on the interests earned by its money placements with PNB and which PNB did not withhold.[6] PNOC wrote the BIR on 25 September 1986, and made an offer to compromise its tax liability, which it estimated to be in the sum of P304,419,396.83, excluding interest and surcharges, as of 31 July 1986. PNOC proposed to set-off its tax liability against a claim for tax refund/credit of the National Power Corporation (NAPOCOR), then pending with the BIR, in the amount ofP335,259,450.21. The amount of the claim for tax refund/credit was supposedly a receivable account of PNOC from NAPOCOR.[7] On 08 October 1986, the BIR sent a demand letter to PNB, as withholding agent, for the payment of the final tax on the interest earnings and/or yields from PNOCs money placements with the bank, from 15 October 1984 to 15 October 1986, in the total amount of P376,301,133.33.[8] On the same date, the BIR also mailed a letter to PNOC informing it of the demand letter sent to PNB. [9] PNOC, in another letter, dated 14 October 1986, reiterated its proposal to settle its tax liability through the set-off of the said tax liability against NAPOCORS pending claim for tax refund/credit.[10] The BIR replied on 11 November 1986 that the proposal for set-off was premature since NAPOCORs claim was still under process. Once more, BIR requested PNOC to settle its tax liability in the total amount of P385,961,580.82, consisting of P303,343,765.32 final tax, plus P82,617,815.50 interest computed until 15 November 1986.[11] On 09 June 1987, PNOC made another offer to the BIR to settle its tax liability. This time, however, PNOC proposed a compromise by paying P91,003,129.89, representing 30% of theP303,343,766.29 basic tax, in accordance with the provisions of Executive Order (E.O.) No. 44.[12] Then BIR Commissioner Bienvenido A. Tan, in a letter, dated 22 June 1987, accepted the compromise. The BIR received a total tax payment on the interest earnings and/or yields from PNOCs money placements with PNB in the amount of P93,955,479.12, broken down as follows: Previous payment made by PNB Add: Payment made by PNOC pursuant to the compromise agreement of June 22, 1987 Total tax payment P P 2,952,349.23 91,003,129.89 93,955,479.12[13]
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Private respondent Savellano, through four installments, was paid the informers reward in the total amount of P14,093,321.89, representing 15% of the P93,955,479.12 tax collected by the BIR from PNOC and PNB. He received the last installment on 01 December 1987.[14] On 07 January 1988, private respondent Savellano, through his legal counsel, wrote the BIR to demand payment of the balance of his informers reward, computed as follows: BIR tax assessment Final tax rate Informers reward due (BIR deficiency tax assessment x Final tax rate) Less: Payment received by private respondent Savellano Outstanding balance P P 385,961,580.82 0.15 57,894,237.12

14,093,321.89

P 43,800,915.25[15]

BIR Commissioner Tan replied through a letter, dated 08 March 1988, that private respondent Savellano was already fully paid the informers reward equivalent to 15% of the amount of tax actually collected by the BIR pursuant to its compromise agreement with PNOC. BIR Commissioner Tan further explained that the compromise was in accordance with the provisions of E.O. No. 44, Revenue Memorandum Order (RMO) No. 39-86, and RMO No. 487.[16] Private respondent Savellano submitted another letter, dated 24 March 1988, to BIR Commissioner Tan, seeking reconsideration of his decision to compromise the tax liability of PNOC. In the same letter, private respondent Savellano questioned the legality of the compromise agreement entered into by the BIR and PNOC and claimed that the tax liability should have been collected in full.[17] On 08 April 1988, while the aforesaid Motion for Reconsideration was still pending with the BIR, private respondent Savellano filed a Petition for Review ad cautelam with the CTA, docketed as CTA Case No. 4249. He claimed therein that BIR Commissioner Tan acted with grave abuse of discretion and/or whimsical exercise of jurisdiction in entering into a compromise agreement that resulted in a gross and u nconscionable diminution of his reward. Private respondent Savellano prayed for the enforcement and collection of the total tax assessment against taxpayer PNOC and/or withholding agent PNB; and the payment to him by the BIR Commissioner of the 15% informers reward on the total tax collected.[18] He would later amend his Petition to implead PNOC and PNB as necessary and indispensable parties since they were parties to the compromise agreement.[19] In his Answer filed with the CTA, BIR Commissioner Tan asserted that the Petition stated no cause of action against him, and that private respondent Savellano was already paid the informers reward due him. Alleging that the Petition was baseless and malicious, BIR Commissioner Tan filed a counterclaim for exemplary damages against private respondent Savellano.[20] PNOC and PNB filed separate Motions to Dismiss, both arguing that the CTA lacked jurisdiction to decide the case. [21] In its Resolution, dated 28 November 1988, the CTA denied the Motions to Dismiss since the question of lack of jurisdiction and/or cause of action do not appear to be indubitable.[22] After their Motions to Dismiss were denied by the CTA, PNOC and PNB filed their respective Answers to the amended Petition. PNOC averred, among other things, that (1) it had no privity with private respondent Savellano; (2) the BIR Commissioners discretionary act in entering into the
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compromise agreement had legal basis under E.O. No. 44 and RMO No. 39-86 and RMO No. 4-87; and (3) the CTA had no jurisdiction to resolve the case against it.[23] On the other hand, PNB asserted that (1) the CTA lacked jurisdiction over the case; and (2) the BIR Commissioners decision t o accept the compromise was discretionary on his part and, therefore, cannot be reviewed or interfered with by the courts.[24] PNOC and PNB later filed their amended Answer invoking an opinion of the Commission on Audit (COA) disallowing the payment by the BIR of informers reward to private respondent Savellano.[25] The CTA, thereafter, ordered the parties to submit their evidence,[26] to be followed by their respective Memoranda.[27] On 23 November 1990, private respondent Savellano, filed a Manifestation with Motion for Suspension of Proceedings, claiming that his pending Motion for Reconsideration with the BIR Commissioner may soon be resolved.[28] Both PNOC and PNB opposed the said Motion.[29] Subsequently, the new BIR Commissioner, Jose U. Ong, in a letter to PNB, dated 16 January 1991, demanded that PNB pay deficiency withholding tax on the interest earnings and/or yields from PNOCs money placements, in the amount of P294,958,450.73, computed as follows: Withholding tax, plus interest under the letter of demand dated November 11, 1986 Less: Amount paid under E.O. No. 44 Amount still due and collectible P P P 385,961,580.82 91,003,129.89 294,958,450.73[30]

This BIR letter was received by PNB on 06 February 1991,[31] and was protested by it through a letter, dated 11 April 1991.[32] The BIR denied PNBs protest on the ground that it was filed out of time and, thus, the assessment had already become final.[33] Private respondent Savellano, on 22 February 1991, filed an Omnibus Motion moving to withdraw his previous Motion for Suspension of Proceeding since BIR Commissioner Ong had finally resolved his Motion for Reconsideration, and submitting by way of supplemental offer of evidence (1) the letter of BIR Commissioner Ong, dated 13 February 1991, informing private respondent Savellano of the action on his Motion for Reconsideration; and (2) the demand-letter of BIR Commissioner Ong to PNB, dated 16 January 1991.[34] Despite the oppositions of PNOC and PNB, the CTA, in a Resolution, dated 02 May 1991, resolved to allow private respondent Savellano to withdraw his previous Motion for Suspension of Proceeding and to admit the supplementary evidence being offered by the same party. [35] In its Order, dated 03 June 1991, the CTA considered the case submitted for decision as of the following day, 04 June 1991.[36] On 11 June 1991, PNB appealed to the Department of Justice (DOJ) the BIR assessment, dated 16 January 1991, for deficiency withholding tax in the sum of P294,958,450.73. PNB alleged that its appeal to the DOJ was sanctioned under P.D. No. 242, which provided for the administrative settlement of disputes between government offices, agencies, and instrumentalities, including government-owned and controlled corporations.[37] Three days later, on 14 June 1991, PNB filed a Motion to Suspend Proceedings before the CTA since it had a pending appeal before the DOJ.[38] On 04 July 1991, PNB filed with the CTA a Motion for Reconsideration of its Order, dated 03 June 1991, submitting the case for decision as of 04 June 1991, and prayed that the CTA hold its resolution of the case in view of PNBs appeal pending before the DOJ.[39] On 17 July 1991, PNB filed a Motion to Suspend the Collection of Tax by the BIR. It alleged that despite its request for reconsideration of the deficiency withholding tax assessment, dated 16 January 1991, BIR Commissioner Ong sent another letter, dated 23 April 1991, demanding payment of the P294,958,450.73 deficiency withholding tax on the interest earnings and/or yields from PNOCs money placements. The same letter informed PNB that this was the BIR Commissioners final decision on the matter and that the BIR Commissioner was set to issue a warrant of distraint and/or levy
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against PNBs deposits with the Central Bank of the Philippines. PNB further alleged that the levy and distraint of PNBs deposits, unless restrained by the CTA, would cause great and irreparable prejudice not only to PNB, a government-owned and controlled corporation, but also to the Government itself.[40] Pursuant to the Order of the CTA, during the hearing on 19 July 1991,[41] the parties submitted their respective Memoranda on PNBs Motion to Suspend Proceedings.[42] On 20 September 1991, private respondent Savellano filed another Omnibus Motion calling the attention of the CTA to the fact that the BIR already issued, on 12 August 1991, a warrant of garnishment addressed to the Central Bank Governor and against PNB. In compliance with the said warrant, the Central Bank issued, on 23 August 1991, a debit advice against the demand deposit account of PNB with the Central Bank for the amount of P294,958,450.73, with a corresponding transfer of the same amount to the demand deposit-in-trust of BIR with the Central Bank. Since the assessment had already been enforced, PNBs Motion to Suspend Proceedings became moot and academic. Private respondent Savellano, thus, moved for the denial of PNBs Motion to Suspend Proceedings and for an order requiring BIR to deposit with the CTA the amount of P44,243,767.00 as his informers reward, representing 15% of the deficiency withholding tax collected. [43] Both PNOC and PNB opposed private respondent Savellanos Omnibus Motion, dated 20 September 1991, arguing that the DOJ already ordered the suspension of the collection of the tax deficiency. There was therefore no basis for private respondent Savellanos Motion as the same was premised on the erroneous assumption that the tax deficiency had been collected. When the DOJ denied the BIR Commissioners Motion to Dismiss and required him to file his answer, the DOJ assumed jurisdiction over PNBs appeal, and the CTA should first suspend its proceedings to give the DOJ the opportunity to decide the validity and propriety of the tax assessment against PNB.[44] The CTA, on 28 May 1992, rendered its decision, wherein it upheld its jurisdiction and disposed of the case as follows: WHEREFORE, judgment is rendered declaring the COMPROMISE AGREEMENT between the Bureau of Internal Revenue, on the one hand, and the Philippine National Oil Company and Philippine National Bank, on the other, as WITHOUT FORCE AND EFFECT; The Commissioner of Internal Revenue is hereby ordered to ENFORCE the ASSESSMENT of January 16, 1991 against Philippine National Bank which has become final and unappealable by collecting from Philippine National Bank the deficiency withholding tax, plus interest totalling (sic) P294,958,450.73; Petitioner may be paid, upon collection of the deficiency withholding tax, the balance of his entitlement to informers rewar d based on fifteen percent (15%) of the deficiency withholding total tax collected in this case orP44,243.767.00 subject to existing rules and regulations governing payment of reward to informers.[45] In a Resolution, dated 16 November 1992, the CTA denied the Motions for Reconsideration filed by PNOC and PNB since they substantially raised the same issues in their previous pleadings and which had already been passed upon and resolved adversely against them.[46] PNOC and PNB filed separate appeals with the Court of Appeals seeking the reversal of the CTA decision in CTA Case No. 4249, dated 28 May 1992, and the CTA Resolution in the same case, dated 16 November 1992. PNOCs appeal was docketed as CA-G.R. SP No. 29583, while PNBs appeal was CA-G.R. SP No. 29526. In both cases, the Court of Appeals affirmed the decision of the CTA.
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In the meantime, the Central Bank again issued on 02 September 1992 a debit advice against the demand deposit account of PNB with the Central Bank for the amount of P294,958,450.73,[47] and on 15 September 1992, credited the same amount to the demand deposit account of the Treasurer of the Republic of the Philippines.[48] On 04 November 1992, the Treasurer of the Republic issued a journal voucher transferring P294,958,450.73 to the account of the BIR.[49] PNB, in turn, debited P294,958,450.73 from the deposit account of PNOC with PNB.[50] PNOC and PNB then filed separate Petitions for Review on Certiorari with this Court, praying that the decisions of the Court of Appeals in CA-G.R. SP No. 29583 and CA-G.R. SP No. 29526, respectively, both affirming the decision of the CTA in CTA Case No. 4249, be reversed and set aside. These two Petitions were consolidated since they involved identical parties and factual background, and the resolution of related, if not exactly, the same issues. In its Petition for Review, PNOC alleged the following errors committed by the Court of Appeals in CA-G.R. SP No. 29583: 1. The Court of Appeals erred in holding that the deficiency taxes of PNOC could not be the subject of a compromise under Executive Order No. 44; and 2. The Court of Appeals erred in holding that Savellano is entitled to additional informers reward.[51] PNB, in its own Petition for Review, assailed the decision of the Court of Appeals in CA-G.R. SP No. 29526, assigning the following errors: 1. Respondent Court erred in not finding that the Court of Tax Appeals lacks jurisdiction on the controversy involving BIR and PNB (both government instrumentalities) regarding the new assessment of BIR against PNB; 2. The respondent Court erred in not finding that the Court of Tax Appeals has no jurisdiction to question the compromise agreement entered into by the Commissioner of Internal Revenue; and 3. The respondent Court erred in not ruling that the Commissioner of Internal Revenue cannot unilaterally annul tax compromises validly entered into by his predecessor.[52] The decisions of the Court of Appeals in CA-GR SP No. 29583 and CA-G.R. SP No. 29526, affirmed the decision of the CTA in CTA Case No. 4249. The resolution, therefore, of the assigned errors in the Court of Appeals decisions essentially requires a review of the CTA decision itself. In consolidating the present Petitions, this Court finds that PNOC and PNB are basically questioning the (1) Jurisdiction of the CTA in CTA Case No. 4249; (2) Declaration by the CTA that the compromise agreement was without force and effect; (3) Finding of the CTA that the deficiency withholding tax assessment against PNB had already become final and unappealable and, thus, enforceable; and (4) Order of the CTA directing payment of additional informers reward to private respondent Savellano. I Jurisdiction of the CTA A. The demand letter, dated 16 January 1991 did not constitute a new assessment against PNB. The main argument of PNB in assailing the jurisdiction of the CTA in CTA Case No. 4249 is that the BIR demand letter, dated 16 January 1991,[53] should be considered as a new assessment against PNB. As a new assessment, it gave rise to a new dispute and controversy solely between the BIR and PNB that should be administratively settled or adjudicated, as provided in P.D. No. 242.
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This argument is without merit. The issuance by the BIR of the demand letter, dated 16 January 1991, was merely a development in the continuing effort of the BIR to collect the tax assessed against PNOC and PNB way back in 1986. BIRs first letter, dated 08 August 1986, was addressed to PNOC, requesting it to settle its tax liability. The BIR subsequently sent another letter, dated 08 October 1986, to PNB, as withholding agent, demanding payment of the tax it had failed to withhold on the interest earnings and/or yields from PNOCs money placements. PNOC wrote the BIR three succeeding letters offering to compromise its tax liability; PNB, on the other hand, did not act on the demand letter it received, dated 08 October 1986. The BIR and PNOC eventually reached a compromise agreement on 22 June 1987. Private respondent Savellano questioned the validity of the compromise agreement because the reduced amount of tax collected from PNOC, by virtue of the compromise agreement, also proportionately reduced his informers reward. Private respondent Savellano then requested the BIR Commissioner to review and reconsider the compromise agreement. Acting on the request of private respondent Savellano, the new BIR Commissioner declared the compromise agreement to be without basis and issued the demand letter, dated 16 January 1991, against PNB, as the withholding agent for PNOC. It is clear from the foregoing that the BIR demand letter, dated 16 January 1991, could not stand alone as a new assessment. It should always be considered in the factual context summarized above. In fact, the demand letter, dated 16 January 1991, actually referred to the withholding tax assessment first issued in 1986 and its eventual settlement through a compromise agreement. In addition, the computation of the deficiency withholding tax was based on the figures from the 1986 assessments against PNOC and PNB, and BIR no longer conducted a new audit or investigation of either PNOC and PNB before it issued the demand letter on 16 January 1991. These constant references to past events and circumstances demonstrate that the demand letter, dated 16 January 1991, was not a new assessment, but rather, the latest action taken by the BIR to collect on the tax assessments issued against PNOC and PNB in 1986. PNB argues that the demand letter, dated 16 January 1991, introduced a new controversy. We see it differently as the said demand letter presented the resolution by BIR Commissioner Ong of the previous controversy involving the compromise of the 1986 tax assessments. BIR Commissioner Ong explicitly declared therein that the compromise agreement was without legal basis, and requested PNB, as the withholding agent, to pay the amount of withholding tax still due. B. The CTA correctly retained jurisdiction over CTA Case No. 4249 by virtue of Republic Act No. 1125. Having established that the BIR demand letter, dated 16 January 1991, did not constitute a new assessment, then, there could be no basis for PNBs claim that any dispute arising from the new assessment should only be between BIR and PNB. Still proceeding from the argument that there was a new dispute between PNB and BIR, PNB sought the suspension of the proceedings in CTA Case No. 4249, after it contested the deficiency withholding tax assessment against it and the demand for payment thereof before the DOJ, pursuant to P.D. No. 242. The CTA, however, correctly sustained its jurisdiction and continued the proceedings in CTA Case No. 4249; and, in effect, rejected DOJs claim of jurisdiction to administratively settle or adjudicate BIRs assessment against PNB. The CTA assumed jurisdiction over the Petition for Review filed by private respondent Savellano based on the following provision of Rep. Act No. 1125, the Act creating the Court of Tax Appeals: SECTION 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided 143

(1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal Revenue Code or other law or part of law administered by the Bureau of Internal Revenue; . . . (Underscoring ours.) In his Petition before the CTA, private respondent Savellano requested a review of the decisions of then BIR Commissioner Tan to enter into a compromise agreement with PNOC and to reject his claim for additional informers reward. He submitted before the CTA questions of law involving the interpretation and application of (1) E.O. No. 44, and its implementing rules and regulations, which authorized the BIR Commissioner to compromise delinquent accounts and disputed assessments pending as of 31 December 1985; and (2) Section 316(1) of the National Internal Revenue Code of 1977 (NIRC of 1977), as amended, which granted to the informer a reward equivalent to 15% of the actual amount recovered or collected by the BIR.[54] These should undoubtedly be considered as matters arising from the NIRC and other laws being administered by the BIR, thus, appealable to the CTA under Section 7(1) of Rep. Act No. 1125. PNB, however, insists on the jurisdiction of the DOJ over its appeal of the deficiency withholding tax assessment by virtue of P.D. No. 242. Provisions on jurisdiction of P.D. No. 242 read: SECTION 1. Provisions of law to the contrary notwithstanding, all disputes, claims and controversies solely between or among the departments, bureaus, offices, agencies, and instrumentalities of the National Government, including government-owned or controlled corporations, but excluding constitutional offices or agencies, arising from the interpretation and application of statutes, contracts or agreements, shall henceforth be administratively settled or adjudicated as provided hereinafter; Provided, That this shall not apply to cases already pending in court at the time of the effectivity of this decree. SECTION 2. In all cases involving only questions of law, the same shall be submitted to and settled or adjudicated by the Secretary of Justice, as Attorney General and ex officio legal adviser of all government-owned or controlled corporations and entities, in consonance with Section 83 of the Revised Administrative Code. His ruling or determination of the question in each case shall be conclusive and binding upon all the parties concerned. SECTION 3. Cases involving mixed questions of law and of fact or only factual issues shall be submitted to and settled or adjudicated by: (a) The Solicitor General, with respect to disputes or claims controversies between or among the departments, bureaus, offices and other agencies of the National Government; (b) The Government Corporate Counsel, with respect to disputes or claims or controversies between or among government-owned or controlled corporations or entities being served by the Office of the Government Corporate Counsel; and (c) The Secretary of Justice, with respect to all other disputes or claims or controversies which do not fall under the categories mentioned in paragraphs (a) and (b). The PNB and DOJ are of the same position that P.D. No. 242, the more recent law, repealed Section 7(1) of Rep. Act No. 1125, [55] based on the pronouncement of this Court in Development Bank of the Philippines v. Court of Appeals, et al., [56] quoted below: The Court expresses its entire agreement with the conclusion of the Court of Appeals and the basic premises thereof that there is an "irreconcilable repugnancybetween Section 7(2) of R.A. No. 1125 and P.D. No. 242," and hence, that the later enactment (P.D. No. 242), being the latest expression of the legislative will, should prevail over the earlier.
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In the said case, it was expressly declared that P.D. No. 242 repealed Section 7(2) of Rep. Act No. 1125, which provides for the exclusive appellate jurisdiction of the CTA over decisions of the Commissioner of Customs. PNB contends that P.D. No. 242 should be deemed to have likewise repealed Section 7(1) of Rep. Act No. 1125, which provide for the exclusive appellate jurisdiction of the CTA over decisions of the BIR Commissioner.[57] After re-examining the provisions on jurisdiction of Rep. Act No. 1125 and P.D. No. 242, this Court finds itself in disagreement with the pronouncement made in Development Bank of the Philippines v. Court of Appeals, et al.,[58] and refers to the earlier case of Lichauco & Company, Inc. v. Apostol, et al.,[59] for the guidelines in determining the relation between the two statutes in question, to wit: The cases relating to the subject of repeal by implication all proceed on the assumption that if the act of later date clearly reveals an intention on the part of the law making power to abrogate the prior law, this intention must be given effect; but there must always be a sufficient revelation of this intention, and it has become an unbending rule of statutory construction that the intention to repeal a former law will not be imputed to the Legislature when it appears that the two statutes, or provisions, with reference to which the question arises bear to each other the relation of general to special. (Underscoring ours.) When there appears to be an inconsistency or conflict between two statutes and one of the statutes is a general law, while the other is a special law, then repeal by implication is not the primary rule applicable. The following rule should principally govern instead: Specific legislation upon a particular subject is not affected by a general law upon the same subject unless it clearly appears that the provisions of the two laws are so repugnant that the legislators must have intended by the later to modify or repeal the earlier legislation. The special act and the general law must stand together, the one as the law of the particular subject and the other as the general law of the land. (Ex Parte United States, 226 U. S., 420; 57 L. ed., 281; Ex Parte Crow Dog, 109 U. S., 556; 27 L. ed., 1030; Partee vs. St. Louis & S. F. R. Co., 204 Fed. Rep., 970.) Where there are two acts or provisions, one of which is special and particular, and certainly includes the matter in question, and the other general, which, if standing alone, would include the same matter and thus conflict with the special act or provision, the special must be taken as intended to constitute an exception to the general act or provision, especially when such general and special acts or provisions are contemporaneous, as the Legislature is not to be presumed to have intended a conflict. (Crane v. Reeder and Reeder, 22 Mich., 322, 334; University of Utah vs. Richards, 77 Am. St. Rep., 928.)[60] It has, thus, become an established rule of statutory construction that between a general law and a special law, the special law prevails Generalia specialibus non derogant.[61] Sustained herein is the contention of private respondent Savellano that P.D. No. 242 is a general law that deals with administrative settlement or adjudication of disputes, claims and controversies between or among government offices, agencies and instrumentalities, including government-owned or controlled corporations. Its coverage is broad and sweeping, encompassing all disputes, claims and controversies. It has been incorporated as Chapter 14, Book IV of E.O. No. 292, otherwise known as the Revised Administrative Code of the Philippines.[62] On the other hand, Rep. Act No. 1125 is a special law[63] dealing with a specific subject matter the creation of the CTA, which shall exercise exclusive appellate jurisdiction over the tax disputes and controversies enumerated therein. Following the rule on statutory construction involving a general and a special law previously discussed, then P.D. No. 242 should not affect Rep. Act No. 1125. Rep. Act No. 1125, specifically Section 7 thereof on the jurisdiction of the CTA, constitutes an exception to P.D. No. 242. Disputes, claims and controversies, falling under Section 7 of Rep. Act No. 1125, even though solely among government offices, agencies, and instrumentalities, including
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government-owned and controlled corporations, remain in the exclusive appellate jurisdiction of the CTA. Such a construction resolves the alleged inconsistency or conflict between the two statutes, and the fact that P.D. No. 242 is the more recent law is no longer significant. Even if, for the sake of argument, that P.D. No. 242 should prevail over Rep. Act No. 1125, the present dispute would still not be covered by P.D. No. 242. Section 1 of P.D. No. 242 explicitly provides that only disputes, claims and controversies solely between or among departments, bureaus, offices, agencies, and instrumentalities of the National Government, including constitutional offices or agencies, as well as government-owned and controlled corporations, shall be administratively settled or adjudicated. While the BIR is obviously a government bureau, and both PNOC and PNB are government-owned and controlled corporations, respondent Savellano is a private citizen. His standing in the controversy could not be lightly brushed aside. It was private respondent Savellano who gave the BIR the information that resulted in the investigation of PNOC and PNB; who requested the BIR Commissioner to reconsider the compromise agreement in question; and who initiated CTA Case No. 4249 by filing a Petition for Review. In Bay View Hotel, Inc. v. Manila Hotel Workers Union-PTGWO, et al.,[64] this Court upheld the jurisdiction of the Court of Industrial Relations over the ordinary courts and justified its decision in the following manner: We are unprepared to break away from the teaching in the cases just adverted to. To draw a tenuous jurisdictional line is to undermine stability in labor litigations. A piecemeal resort to one court and another gives rise to multiplicity of suits. To force the employees to shuttle from one court to another to secure full redress is a situation gravely prejudicial. The time to be lost, effort wasted, anxiety augmented, additional expense incurred these are considerations which weigh heavily against split jurisdiction. Indeed, it is more in keeping with orderly administration of justice that all the causes of action here be cognizable and heard by only one court: the Court of Industrial Relations. The same justification is used in the present case to reject DOJs jurisdiction over the BIR and PNB, to the exclusion of the other parties. The rights of all four parties in CTA Case No. 4249, namely the BIR, as the tax collector; PNOC, the taxpayer; PNB, the withholding agent; and private respondent Savellano, the informer claiming his reward; arose from the same factual background and were so closely interrelated, that a pronouncement as to one would definitely have repercussions on the others. The ends of justice were best served when the CTA continued to exercise its jurisdiction over CTA Case No. 4249. The CTA, which had assumed jurisdiction over all the parties to the controversy, could render a comprehensive resolution of the issues raised and grant complete relief to the parties. II Validity of the Compromise Agreement A. PNOC could not apply for a compromise under E.O. No. 44 because its tax liability was not a delinquent account or a disputed assessment as of 31 December 1985. PNOC and PNB, on different grounds, dispute the decision of the CTA in CTA Case No. 4249 declaring the compromise agreement between BIR and PNOC without force and effect. PNOC asserts that the compromise agreement was in accordance with E.O. No. 44, and its implementing rules and regulations, and should be binding upon the parties thereto. E.O. No. 44 granted the BIR Commissioner or his duly authorized representatives the power to compromise any disputed assessment or delinquent account pending as of 31 December 1985, upon the payment of an amount equal to 30% of the basic tax assessed; in which case, the corresponding interests and penalties shall be condoned. E.O. No. 44 took effect on 04 September 1986 and remained effective until 31 March 1987.
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The disputed assessments or delinquent accounts that the BIR Commissioner could compromise under E.O. No. 44 are defined under Revenue Regulation (RR) No. 17-86, as follows: a) Delinquent account Refers to the amount of tax due on or before December 31, 1985 from a taxpayer who failed to pay the same within the time prescribed for its payment arising from (1) a self assessed tax, whether or not a tax return was filed, or (2) a deficiency assessment issued by the BIR which has become final and executory. Where no return was filed, the taxpayer shall be considered delinquent as of the time the tax on such return was due, and in availing of the compromise, a tax return shall be filed as a basis for computing the amount of compromise to be paid. b) Disputed assessment refers to a tax assessment disputed or protested on or before December 31, 1985 under any of the following categories: 1) 2.) if the same is administratively protested within thirty (30) days from the date the taxpayer received the assessment, or if the decision of the BIR on the taxpayers administrative protest is appealed by the taxpayer before an appropriate court.

PNOCs tax liability could not be considered a delinquent account since (1) it was not self-assessed, because the BIR conducted an investigation and assessment of PNOC and PNB after obtaining information regarding the non-withholding of tax from private respondent Savellano; and (2) the demand letter, issued against it on 08 August 1986, could not have been a deficiency assessment that became final and executory by 31 December 1985. The dissenting opinion contends, however, that the tax liability of PNOC constitutes a self-assessed tax, and is, therefore, a delinquent account as of 31 December 1985, qualifying for a compromise under E.O. No. 44. It anchors its argument on the declaration made by this Court in Tupaz v. Ulep,[65] that internal revenue taxes are self-assessing. It is not denied herein that the self-assessing system governs Philippine internal revenue taxes. The dissenting opinion itself defines self-assessed tax as, a tax that the taxpayer himself assesses or computes and pays to the taxing authority. Clearly, such a system imposes upon the taxpayer the obligation to conduct an assessment of himself so he could determine and declare the amount to be used as tax basis, any deductions therefrom, and finally, the tax due. E.O. No. 44 covers self-assessed tax, whether or not a tax return was filed. The phrase whether or not a tax return was filed only refers to the compliance by the taxpayer with the obligation to file a return on the dates specified by law, but it does not do away with the requisite that the tax must be self-assessed in order for the taxpayer to avail of the compromise. The second paragraph of Section 2(a) of RR No. 17-86 expressly commands, and still imposes upon the taxpayer, who is availing of the compromise under E.O. No. 44, and who has not previously filed any return, the duty to conduct selfassessment by filing a tax return that would be used as the basis for computing the amount of compromise to be paid. Section 2(a)(1) of RR No. 17-86 thus involves a situation wherein a taxpayer, after conducting a self-assessment, discovers or becomes aware that he had failed to pay a tax due on or before 31 December 1985, regardless of whether he had previously filed a return to reflect such tax; voluntarily comes forward and admits to the BIR his tax liability; and applies for a compromise thereof. In case the taxpayer has not previously filed any return, he must fill out such a return reflecting therein his own declaration of the taxable amount and computation of the tax due. The compromise payment shall be computed based on the amount reflected in the tax return submitted by the taxpayer himself.
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Neither PNOC nor PNB, the taxpayer and the withholding agent, respectively, conducted self-assessment in this case. There is no showing that in the absence of the tax assessment issued by the BIR against them, that PNOC and/or PNB would have voluntarily admitted their tax liabilities, already amounting to P385,961,580.82, as of 15 November 1986, and would have offered to compromise the same. In fact, both PNOC and PNB were conspicuously silent about their tax liabilities until they were assessed thereon. Any attempt by PNOC and PNB to assess and declare by themselves their tax liabilities had already been overtaken by the BIRs conduct of its audit and investigation and subsequent issuance of the assessments, dated 08 August 1986 and 08 October 1986, against PNOC and PNB, respectively. The said tax assessments, uncontested and undisputed, presented the results of the BIR audit and investigation and the computation of the total amount of tax liabilities of PNOC and PNB. They should be controlling in this case, and should not be so easily and conveniently ignored and set aside. It would be a contradiction to claim that the tax liabilities of PNOC and PNB are self-assessed and, at the same time, BIR-assessed; when it is clear and simple that it had been the BIR that conducted the assessment and determined the tax liabilities of PNOC and PNB. That the BIR-assessed tax liability should be differentiated from a self-assessed one, is supported by the provisions of RR No. 17-86 on the basis for computing the amount of compromise payment. Note that where tax liabilities are self-assessed, the compromise payment shall be computed based on the tax return filed by the taxpayer.[66] On the other hand, where the BIR already issued an assessment, the compromise payment shall be computed based on the tax due on the assessment notice.[67] For instances where the BIR had already issued an assessment against the taxpayer, the tax liability could still be compromised under E.O. No. 44 only if: (1) the assessment had been final and executory on or before 31 December 1985 and, therefore, considered a delinquent account as of said date;[68] or (2) the assessment had been disputed or protested on or before 31 December 1985.[69] RMO No. 39-86, which provides the guidelines for the implementation of E.O. No. 44, does mention different types of assessments that may be compromised under said statute (i.e., jeopardy assessments, arbitrary assessments, and tax assessments of doubtful validity). RMO No. 39-86 may not have expressly stated any qualification for these particular types of assessments; nonetheless, E.O. No. 44 specifically refers only to assessments that were delinquent or disputed as of 31 December 1985. E.O. No. 44 and all BIR issuances to implement said statute should be interpreted so that they are harmonized and consistent with each other. Accordingly, this Court finds that the different types of assessments mentioned in RMO No. 39-86 would still have to qualify as delinquent accounts or disputed assessments as of 31 Dcember 1985, so that they could be compromised under E.O. No. 44. The BIR had first written to PNOC on 08 August 1986, demanding payment of the income tax on the interest earnings and/or yields from PNOCs money placements with PNB from 15 October 1984 to 15 October 1986. This demand letter could be regarded as the first assessment notice against PNOC. Such an assessment, issued only on 08 August 1986, could not have been final and executory as of 31 December 1985 so as to constitute a delinquent account. Neither was the assessment against PNOC an assessment that could have been disputed or protested on or before 31 December 1985, having been issued on a later date. Given that PNOCs tax liability did not constitute a delinquent account or a disputed assessment as of 31 December 1985, then it could not be compromised under E.O. No. 44.

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The assessment against PNOC, instead, was more appropriately covered by Revenue Memorandum Circular (RMC) No. 31-86. RMC No. 31-86 clarifies the scope of availment of the tax amnesty under E.O. No. 41[70] and compromise payments on delinquent accounts and disputed assessments under E.O. No. 44. The third paragraph of RMC No. 31-86 reads: [T]axpayers against whom assessments had been issued from January 1 to August 21, 1986 may settle their tax liabilities by way of compromise under Section 246 of the Tax Code as amended by paying 30% of the basic assessment excluding surcharge, interest, penalties and other increments thereto. The above-quoted paragraph supports the position that only assessments that were disputed or that were final and executory by 31 December 1985 could be the subject of a compromise under E.O. No. 44. Assessments issued between 01 January to 21 August 1986 could still be compromised by payment of 30% of the basic tax assessed, not anymore pursuant to E.O. No. 44, but pursuant to Section 246 of the NIRC of 1977, as amended. Section 246 of the NIRC of 1977, as amended, granted the BIR Commissioner the authority to compromise the payment of any internal revenue tax under the following circumstances: (1) there exists a reasonable doubt as to the validity of the claim against the taxpayer; or (2) the financial position of the taxpayer demonstrates a clear inability to pay the assessed tax.[71] There are substantial differences in circumstances under which compromises may be granted under Section 246 of the NIRC of 1977, as amended, and E.O. No. 44. Although PNOC and PNB have extensively argued their entitlement to compromise under E.O. No. 44, neither of them has alleged, much less, has presented any evidence to prove that it may compromise its tax liability under Section 246 of the NIRC of 1977, as amended. B. The tax liability of PNB as withholding agent also did not qualify for compromise under E.O. No. 44. Before proceeding any further, this Court reconsiders the conclusion made by BIR Commissioner Ong in his demand letter, dated 16 January 1991, that the compromise settlement executed between the BIR and PNOC was without legal basis because withholding taxes were not actually taxes that could be compromised, but a penalty for PNBs failure to withhold and for which it was made personally liable. E.O. No. 44 covers disputed or delinquency cases where the person assessed was himself the taxpayer rather than a mere agent. [72] RMO No. 3986 expressly allows a withholding agent, who failed to withhold the required tax because of neglect, ignorance of the law, or his belief that he was not required by law to withhold tax, to apply for a compromise settlement of his withholding tax liability under E.O. No. 44. A withholding agent, in such a situation, may compromise the withholding tax assessment against him precisely because he is being held directly accountable for the tax.[73] RMO No. 39-86 distinguishes between the withholding agent in the foregoing situation from the withholding agent who withheld the tax but failed to remit the amount to the Government. A withholding agent in the latter situation is the one disqualified from applying for a compromise settlement because he is being made accountable as an agent, who held funds in trust for the Government.[74] Both situations, however, involve withholding agents. The right to compromise under these provisions should have been claimed by PNB, the withholding agent for PNOC. The BIR held PNB personally accountable for its failure to withhold the tax on the interest earnings and/or yields from PNOCs money placements with PNB. The BIR sent a demand letter, dated 08 October 1986, addressed directly to PNB, for payment of the withholding tax assessed against it, but PNB failed to take any action on the said demand letter. Yet, all the offers to compromise the withholding tax assessment came from PNOC and PNOC did not claim that it made the offers to compromise on behalf of PNB. Moreover, the general requirement of E.O. No. 44 still applies to withholding agents that the withholding tax liability must either be a delinquent account or a disputed assessment as of 31 December 1985 to qualify for compromise settlement. The demand letter against PNB, which also served as its assessment notice, had been issued on 08 October 1986 or two months later than PNOCs. PNBs withholding tax liability could not be considered a
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delinquent account or a disputed assessment, as defined under RR No. 17-86, for the same reasons that PNOCs tax liability did not constitute as such. The tax liability of PNB, therefore, was also not eligible for compromise settlement under E.O. No. 44. C. Even assuming arguendo that PNOC and/or PNB qualified under E.O. No. 44, their application for compromise was filed beyond the deadline. Despite already ruling that the tax liabilities of PNOC and PNB could not be compromised under E.O. No. 44, this Court still deems it necessary to discuss the finding of the CTA that the compromise agreement had been filed beyond the effectivity of E.O. No. 44, since the CTA made a declaration in relation thereto that paragraph 2 of RMO No. 39-86 was null and void for unduly extending the effectivity of E.O. No. 44. Paragraph 2 of RMO No. 39-86 provides that: 2. Period for availment. Filing of application for compromise settlement under the said law shall be effective only until March 31, 1987. Applications filed on or before this date shall be valid even if the payment or payments of the compromise amount shall be made after the said date, subject, however, to the provisions of Executive Order No. 44 and its implementing Revenue Regulations No. 17-86. It is well-settled in this jurisdiction that administrative authorities are vested with the power to make rules and regulations because it is impracticable for the lawmakers to provide general regulations for various and varying details of management. The interpretation given to a rule or regulation by those charged with its execution is entitled to the greatest weight by the court construing such rule or regulation, and such interpretation will be followed unless it appears to be clearly unreasonable or arbitrary.[75] RMO No. 39-86, particularly paragraph 2 thereof, does not appear to be unreasonable or arbitrary. It does not unduly expand the coverage of E.O. No. 44 by merely providing that applications for compromise filed until 31 March 1987 are still valid, even if payment of the compromised amount is made on a later date. It cannot be expected that the compromise allowed under E.O. No. 44 can be automatically granted upon mere filing of the application by the taxpayer. Irrefutably, the applications would still have to be processed by the BIR to determine compliance with the requirements of E.O. No. 44. As it is uncontested that a taxpayer could still file an application for compromise on 31 March 1987, the very last day of effectivity of E.O. No. 44, it would be unreasonable to expect the BIR to process and approve the taxpayers application within the same date considering the volume of applications filed and pending approval, plus the other matters the BIR personnel would also have to attend to. Thus, RMO No. 39-86 merely assures the taxpayers that their applications would still be processed and could be approved on a later date. Payment, of course, shall be made by the taxpayer only after his application had been approved and the compromised amount had been determined. Given that paragraph 2 of RMO No. 39-86 is valid, the next question that needs to be addressed is whether PNOC had been able to submit an application for compromise on or before 31 March 1987 in compliance thereof. Although the compromise agreement was executed only on 22 June 1987, PNOC is claiming that it had already written a letter to the BIR, as early as 25 September 1986, offering to compromise its tax liability, and that the said letter should be considered as PNOCs application for compromise settlement. A perusal of PNOCs letter, dated 25 September 1986, would reveal, however, that the terms of its proposed compromise did not confo rm to those authorized by E.O. No. 44. PNOC did not offer to pay outright 30% of the basic tax assessed against it as required by E.O. No. 44; and instead, made the following offer:

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(2) That PNOC be permitted to set-off its foregoing mentioned tax liability of P304,419,396.83 against the tax refund/credit claims of the National Power Corporation (NPC) for specific taxes on fuel oil sold to NPC totaling P335,259,450.21, which tax refunds/credits are actually receivable accounts of our Company from NPC.[76] PNOC reiterated the offer in its letter to the BIR, dated 14 October 1986.[77] The BIR, in its letters to PNOC, dated 8 October 1986[78] and 11 November 1986,[79] consistently denied PNOCs offer because the claim for tax refund/credit of NAPOCOR was still under process, so that the offer to setoff such claim against PNOCs tax liability was premature. Furthermore, E.O. No. 44 does not contemplate compromise payment by set-off of a tax liability against a claim for tax refund/credit. Compromise under E.O. No. 44 may be availed of only in the following circumstances: SEC. 3. Who may avail. Any person, natural or juridical, may settle thru a compromise any delinquent account or disputed assessment which has been due as of December 31, 1985, by paying an amount equal to thirty percent (30%) of the basic tax assessed. SEC. 6. Mode of Payment. Upon acceptance of the proposed compromise, the amount offered as compromise in complete settlement of the delinquent account shall be paid immediately in cash or managers certified check. Deferred or staggered payments of compromise amounts over P50,000 may be considered on a case to case basis in accordance with the extant regulations of the Bureau upon approval of the Commissioner of Internal Revenue, his Deputy or Assistant as delineated in their respective jurisdictions. If the Compromise amount is not paid as required herein, the compromise agreement is automatically nullified and the delinquent account reverted to the original amount plus the statutory increments, which shall be collected thru the summary and/or judicial processes provided by law. E.O. No. 44 is not for the benefit of the taxpayer alone, who can extinguish his tax liability by paying the compromise amount equivalent to 30% of the basic tax. It also benefits the Government by making collection of delinquent accounts and disputed assessments simpler, easier, and faster. Payment of the compromise amount must be made immediately, in cash or in managers check. Although deferred or staggered payments may be allowed on a case-to-case basis, the mode of payment remains unchanged, and must still be made either in cash or in managers check. PNOCs offer to set-off was obviously made to avoid actual cash-out by the company. The offer defeated the purpose of E.O. No. 44 because it would not only delay collection, but more importantly, it would not guarantee collection. First of all, BIRs collection was contingent on whether the claim for tax refund/credit of NAPOCOR would be subsequently granted. Second, collection could not be made immediately and would have to wait until the resolution of the claim for tax refund/credit of NAPOCOR. Third, there is no proof, other than the bare allegation of PNOC, that NAPOCORs claim for tax refund/credit is an account receivable of PNOC. A possible dispute between NAPOCOR and PNOC as to the proceeds of the tax refund/credit would only delay collection by the BIR even further. It was only in its letter, dated 09 June 1987, that PNOC actually offered to compromise its tax liability in accordance with the terms and circumstances prescribed by E.O. No. 44 and its implementing rules and regulations, by stating that:
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Consequently, we reiterate our previous request for compromise under E.O. No. 44, and convey our preparedness to settle the subject tax assessment liability by payment of the compromise amount of P91,003,129.89, representing thirty percent (30%) of the basic tax assessment of P303,343,766.29, in accordance with E.O. No. 44 and its implementing BIR Revenue Memorandum Order No. 39-86.[80] PNOC claimed in the same letter that it had previously requested for a compromise under the terms of E.O. No. 44, but this Court could not find evidence of such previous request. There are stark and substantial differences in the terms of PNOCs offer to compromise in its earlier letters, dated 25 September 1986 and 14 October 1986 (set-off of the entire amount of its tax liability against the claim for tax refund/credit of NAPOCOR), to those in its letter, dated 09 June 1987 (payment of the compromise amount representing 30% of the basic tax assessed against it), making it difficult for this Court to accept that the letter of 09 June 1987 merely reiterated PNOCs offer to compromise in its earlier letters. This Court likewise cannot give credence to PNOCs allegation that beginning 25 September 1986, the date of its first letter to the BIR, there were continuing negotiations between PNOC and BIR that culminated in the compromise agreement on 22 June 1987. Aside from the exchange of letters recounted in the preceding paragraphs, both PNOC and PNB failed to present any other proof of the supposed negotiations. After the BIR denied the second offer of PNOC to set-off its tax liability against the claim for tax refund/credit of NAPOCOR in a letter, dated 11 November 1986, there is no other evidence of subsequent communication between PNOC and the BIR. It was only after almost seven months, or on 09 June 1987, that PNOC again wrote a letter to the BIR, this time offering to pay the compromise amount of 30% of the basic tax assessed against. This letter was already filed beyond 31 March 1987, after the lapse of the effectivity of E.O. No. 44 and the deadline for filing applications for compromise under the said statute. Evidence of meetings between PNOC and the BIR, or any other form of communication, wherein the parties presented their offer and counter-offer to the other, would have been very valuable in explaining and supporting BIR Commissioner Tans decision to accept PNOCs third offer to compr omise after denying the previous two. The absence of such evidence herein negates PNOCs claim of actual negotiations with the BIR. Therefore, even assuming arguendo that the tax liabilities of PNOC and PNB qualify as delinquent accounts or disputed assessments as of 31 December 1985, the application for compromise filed by PNOC on 09 June 1987, and accepted by then BIR Commissioner Tan on 22 June 1987, was still filed way beyond 31 March 1987, the expiration date of the effectivity of E.O. No. 44 and the deadline for filing of applications for compromise under RMO No. 39-86. D. The BIR Commissioners discretionary authority to enter into a compromise agreement is not absolute and the CTA may inquire into allegations of abuse thereof. The foregoing discussion supports the CTAs conclusion that the compromise agreement between PNOC and the BIR was indeed with out legal basis. Despite this lack of legal support for the execution of the said compromise agreement, PNB argues that the CTA still had no jurisdiction to review and set aside the compromise agreement. It contends that the authority to compromise is purely discretionary on the BIR Commissioner and the courts cannot interfere with his exercise thereof. It is generally true that purely administrative and discretionary functions may not be interfered with by the courts; but when the exercise of such functions by the administrative officer is tainted by a failure to abide by the command of the law, then it is incumbent on the courts to set matters right, with this Court having the last say on the matter.[81]

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The manner by which BIR Commissioner Tan exercised his discretionary power to enter into a compromise was brought under the scrutiny of the CTA amidst allegations of grave abuse of discretion and/or whimsical exercise of jurisdiction.[82] The discretionary power of the BIR Commissioner to enter into compromises cannot be superior over the power of judicial review by the courts. The discretionary authority to compromise granted to the BIR Commissioner is never meant to be absolute, uncontrolled and unrestrained. No such unlimited power may be validly granted to any officer of the government, except perhaps in cases of national emergency. [83] In this case, the BIR Commissioners authority to compromise, whether under E.O. No. 44 or Section 246 of the NIRC of 1977, as amended, can only be exercised under certain circumstances specifically identified in said statutes. The BIR Commissioner would have to exercise his discretion within the parameters set by the law, and in case he abuses his discretion, the CTA may correct such abuse if the matter is appealed to them.[84] Petitioners PNOC and PNB both contend that BIR Commissioner Tan merely exercised his authority to enter into a compromise specially granted by E.O. No. 44. Since this Court has already made a determination that the compromise agreement did not qualify under E.O. No. 44, BIR Commissioner Tans decision to agree to the compromise should have been reviewed in the light of the general authority granted to the BIR Commissioner to compromise taxes under Section 246 of the NIRC of 1977, as amended. Then again, petitioners PNOC and PNB failed to allege, much less present evidence, that BIR Commissioner Tan acted in accordance with Section 246 of the NIRC of 1977, as amended, when he entered into the compromise agreement with PNOC. E. The CTA may set aside a compromise agreement that is contrary to law and public policy. PNB also asserts that the CTA had no jurisdiction to set aside a compromise agreement entered into in good faith. It relies on the decision of this Court in Republic v. Sandiganbayan[85] that a compromise agreement cannot be set aside merely because it is too one-sided. A compromise agreement should be respected by the courts as the res judicata between the parties thereto. This Court, though, finds that there are substantial differences in the factual background of Republic v. Sandiganbayan and the present case. The compromise agreement executed between the Presidential Commission on Good Government (PCGG) and Roberto S. Benedicto in Republic v. Sandiganbayan was judicially approved by the Sandiganbayan. The Sandiganbayan had ample opportunity to examine the validity of the compromise agreement since two years elapsed from the time the agreement was executed up to the time it was judicially approved. This Court even stated in the said case that, We are not dealing with the usual compromise agreement perfunctorily submitted to a court and approved as a matter of course. The PCGG-Benedicto agreement was thoroughly and, at times, disputatiously discussed before the respondent court. There could be no deception or misrepresentation foisted on either the PCGG or the Sandiganbayan.[86] In addition, the new PCGG Chairman originally prayed for the re-negotiation of the compromise agreement so that it could be more just, fair, and equitable, an action considered by this Court as an implied admission that the agreement was not contrary to law, public policy or morals nor was there any circumstance which had vitiated consent.[87] The above-mentioned circumstances strongly supported the validity of the compromise agreement in Republic v. Sandiganbayan, which was why this Court refused to set it aside. Unfortunately for the petitioners in the present case, the same cannot be said herein. The Court of Appeals, in upholding the jurisdiction of the CTA to set aside the compromise agreement, ruled that: We are unable to accept petitioners submissions. Its formulation of the issues on CIR and CTAs lack of jurisdiction to disturb a compromise agreement presupposes a compromise agreement validly entered into by the CIR and not, when as in this case, it was indubitably shown that the supposed
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compromise agreement is without legal support. In case of arbitrary or capricious exercise by the Commissioner or if the proceedings were fatally defective, the compromise can be attacked and reversed through the judicial process (Meralco Securities Corporation v. Savellano, 117 SCRA 805, 812 [1982]; Sarah E. Ramsay, et. al. v. U.S. 21 Ct. C1 443, affd 120 U.S. 214, 30 L. Ed. 582; Tyson v. U.S., 39 F. Supp. 135 cited in page 18 of decision) .[88] Although the general rule is that compromises are to be favored, and that compromises entered into in good faith cannot be set aside,[89] this rule is not without qualification. A court may still reject a compromise or settlement when it is repugnant to law, morals, good customs, public order, or public policy.[90] The compromise agreement between the BIR and PNOC was contrary to law having been entered into by BIR Commissioner Tan in excess or in abuse of the authority granted to him by legislation. E.O. No. 44 and the NIRC of 1977, as amended, had identified the situations wherein the BIR Commissioner may compromise tax liabilities, and none of these situations existed in this case. The compromise, moreover, was contrary to public policy. The primary duty of the BIR is to collect taxes, since taxes are the lifeblood of the Government and their prompt and certain availability are imperious needs.[91] In the present case, however, BIR Commissioner Tan, by entering into the compromise agreement that was bereft of any legal basis, would have caused the Government to lose almost P300 million in tax revenues and would have deprived the Government of much needed monetary resources. Allegations of good faith and previous execution of the terms of the compromise agreement on the part of PNOC would not be enough for this Court to disregard the demands of law and public policy. Compromise may be the favored method to settle disputes, but when it involves taxes, it may be subject to closer scrutiny by the courts. A compromise agreement involving taxes would affect not just the taxpayer and the BIR, but also the whole nation, the ultimate beneficiary of the tax revenues collected. F. The Government cannot be estopped from collecting taxes by the mistake, negligence, or omission of its agents. The new BIR Commissioner, Commissioner Ong, had acted well within his powers when he set aside the compromise agreement, dated 22 June 1987, after finding that the said compromise agreement was without legal basis. When he took over from his predecessor, there was still a pending motion for reconsideration of the said compromise agreement, filed by private respondent Savellano on 24 March 1988. To resolve the said motion, he reviewed the compromise agreement and, thereafter, came upon the conclusion that it did not comply with E.O. No. 44 and its implementing rules and regulations. It had been declared by this Court in Hilado v. Collector of Internal Revenue, et al.,[92] that an administrative officer, such as the BIR Commissioner, may revoke, repeal or abrogate the acts or previous rulings of his predecessor in office. The construction of a statute by those administering it is not binding on their successors if, thereafter, the latter becomes satisfied that a different construction should be given. It is evident in this case that the new BIR Commissioner, Commissioner Ong, construed E.O. No. 44 and its implementing rules and regulations differently from that of his predecessor, former Commissioner Tan, which led to Commissioner Ongs revocation of the BIR appr oval of the compromise agreement, dated 22 June 1987. Such a revocation was only proper considering that the former BIR Commissioners decision to approve the said compromise agreement was based on the erroneous construction of the law (i.e., E.O. No. 44 and its implementing rules and regulations) and should not give rise to any vested right on PNOC.[93] Furthermore, approval of the compromise agreement and acceptance of the compromise payment by his predecessor cannot estop BIR Commissioner Ong from setting aside the compromise agreement, dated 22 June 1987, for lack of legal basis; and from demanding payment of the
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deficiency withholding tax from PNB. As a general rule, the Government cannot be estopped from collecting taxes by the mistake, negligence, or omission of its agents[94] because: . . . Upon taxation depends the Government ability to serve the people for whose benefit taxes are collected. To safeguard such interest, neglect or omission of government officials entrusted with the collection of taxes should not be allowed to bring harm or detriment to the people, in the same manner as private persons may be made to suffer individually on account of his own negligence, the presumption being that they take good care of their personal affairs. This should not hold true to government officials with respect to matters not of their own personal concern. This is the philosophy behind the government's exception, as a general rule, from the operation of the principle of estoppel. ( Republic vs. Caballero, L-27437, September 30, 1977, 79 SCRA 177; Manila Lodge No. 761, Benevolent and Protective Order of the Elks, Inc. vs. Court of Appeals, L-41001, September 30, 1976, 73 SCRA 162; Sy vs. Central Bank of the Philippines, L-41480, April 30, 1976, 70 SCRA 571; Balmaceda vs. Corominas & Co., Inc., 66 SCRA 553; Auyong Hian vs. Court of Tax Appeals, 59 SCRA 110; Republic vs. Philippine Rabbit Bus Lines, Inc., 66 SCRA 553; Republic vs. Philippine Long Distance Telephone Company, L-18841, January 27, 1969, 26 SCRA 620; Zamora vs. Court of Tax Appeals, L-23272, November 26, 1970, 36 SCRA 77; E. Rodriguez, Inc. vs. Collector of Internal Revenue, L-23041, July 31, 1969, 28 SCRA 119).[95] III Finality of the Tax Assessment A. The issue on whether the BIR complied with the notice requirements under RR No. 12-85 is raised for the first time on appeal and should not be given due course. PNB, in another effort to block the collection of the deficiency withholding tax, this time raises doubts as to the validity of the deficiency withholding tax assessment issued against it on 16 January 1991. It submits that the BIR failed to comply with the notice requirements set forth in RR No. 12-85.[96] Whether or not the BIR complied with the notice requirements of RR No. 12-85 is a new issue raised by PNB only before this Court. Such a question has not been ventilated before the lower courts. For an appellate tribunal to consider a legal question, it should have been raised in the court below.[97] If raised earlier, the matter would have been seriously delved into by the CTA and the Court of Appeals.[98] B. The assessment against PNB had become final and unappealable, and therefore, enforceable. The CTA and the Court of Appeals declared as final and unappealable, and thus, enforceable, the assessment against PNB, dated 16 January 1991, since PNB failed to protest said assessment within the 30-day prescribed period. This Court, though, finds that the significant BIR assessment, as far as this case is concerned, should be the one issued by the BIR against PNB on 08 October 1986. The BIR issued on 08 October 1986 an assessment against PNB for its withholding tax liability on the interest earnings and/or yields from PNOCs money placements with the bank. It had 30 days from receipt to protest the BIRs assessment. [99] PNB, however, did not take any action as to the said assessment so that upon the lapse of the period to protest, the withholding tax assessment against it, dated 8 October 1986, became final and unappealable, and could no longer be disputed.[100] The courts may therefore order the enforcement of this assessment. It is the enforcement of this BIR assessment against PNB, dated 08 October 1986, that is in issue in the instant case. If the compromise agreement is valid, it would effectively bar the BIR from enforcing the assessment and collecting the assessed tax; on the other hand, if the compromise agreement is void, then the courts can order the BIR to enforce the assessment and collect the assessed tax.
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As has been previously discussed by this Court, the BIR demand letter, dated 16 January 1991, is not a new assessment against PNB. It only demanded from PNB the payment of the balance of the withholding tax assessed against it on 08 October 1986. The same demand letter also has no substantial effect or impact on the resolution of the present case. It is already unnecessary and superfluous, having been issued by the BIR when CTA Case No. 4249 was already pending before the CTA. At best, the demand letter, dated 16 January 1991, constitute a useful reference for the courts in computing the balance of PNBs tax liability, after applying as partial payment thereon the amount previously received by the BIR from PNOC pursuant to the compromise agreement. IV Prescription A. The defense of prescription was never raised by petitioners PNOC and PNB, and should be considered waived. The dissenting opinion takes the position that the right of the BIR to assess and collect income tax on the interest earnings and/or yields from PNOCs money placements with PNB, particularly for taxable year 1985, had already prescribed, based on Section 268 of the NIRC of 1977, as amended. Section 268 of the NIRC of 1977, as amended, provides a three-year period of limitation for the assessment and collection of internal revenue taxes, which begins to run after the last day prescribed for filing of the return.[101] The dissenting opinion points out that more than four years have elapsed from 25 January 1986 (the last day prescribed by law for PNB to file its withholding tax return for the fourth quarter of 1985) to 16 January 1991 (the date when the alleged final assessment of PNBs tax liability was issued). The issue of prescription, however, was brought up only in the dissenting opinion and was never raised by PNOC and PNB in the proceedings before the BIR nor in any of their pleadings submitted to the CTA and the Court of Appeals. Section 1, Rule 9 of the Rules of Civil Procedure lays down the rule on defenses and objections not pleaded, and reads: SECTION 1. Defenses and objections not pleaded. Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has no jurisdiction over the subject matter, that there is another action pending between the parties for the same cause, or that the action is barred by prior judgment or by the statute of limitations, the court shall dismiss the claim. The general rule enunciated in the above-quoted provision governs the present case, that is, the defense of prescription, not pleaded in a motion to dismiss or in the answer, is deemed waived. The exception in same provision cannot be applied herein because the pleadings and the evidence on record do not sufficiently show that the action is barred by prescription. It has been consistently held in earlier tax cases that the defense of prescription of the period for the assessment and collection of tax liabilities shall be deemed waived when such defense was not properly pleaded and the facts alleged and evidences submitted by the parties were not sufficient to support a finding by this Court on the matter.[102] In Querol v. Collector of Internal Revenue,[103] this Court pronounced that prescription, being a matter of defense, imposes the burden on the taxpayer to prove that the full period of the limitation has expired; and this requires him to positively establish the date when the period started running and when the same was fully accomplished.
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In making its conclusion that the assessment and collection in this case had prescribed, the dissenting opinion took liberties to assume the following facts even in the absence of allegations and evidences to the effect that: (1) PNB filed returns for its withholding tax obligations for taxable year 1985; (2) PNB reported in the said returns the interest earnings of PNOCs money placements with the bank; and (3) that the returns wer e filed on or before the prescribed date, which was 25 January 1986. It is not safe to adopt the first and second assumptions in this case considering that Section 269 of the NIRC of 1977, as amended, provides for a different period of limitation for assessment and collection of taxes in case of false or fraudulent return or for failure to file a return. In such cases, the BIR is given 10 years after discovery of the falsity, fraud, or omission within which to make an assessment. [104] It is also not safe to accept the third assumption since there can be a possibility that PNB filed the withholding tax return later than the prescribed date, in which case, following the dictates of Section 268 of the NIRC of 1977, as amended, the three-year prescriptive period shall be counted from the date the return was actually filed.[105] PNBs withholding tax returns for taxable year 1985, duly received by the BIR, would have been the best evidence to prove actual filing, the date of filing and the contents thereof. These facts are relevant in determining which prescriptive period should apply, and when such prescriptive period should begin to run and when it had lapsed. Yet, the pleadings did not refer to any return, and no return was made part of the records of the present case. This Court could not make a proper ruling on the matter of prescription on the mere basis of assumptions; such an issue should have been properly raised, argued, and supported by evidences submitted by the parties themselves before the BIR and the courts below. B. Granting that this Court can take cognizance of the defense of prescription, this Court finds that the assessment of the withholding tax liability against PNOC and collection of the tax assessed were done within the prescriptive period. Assuming, for the sake of argument, that this Court can give due course to the defense of prescription, it finds that the assessment against PNB for its withholding tax liability for taxable year 1985 and the collection of the tax assessed therein were accomplished within the prescribed periods for assessment and collection under the NIRC of 1977, as amended. If this Court adopts the assumption made by the dissenting opinion that PNB filed its withholding tax return for the last quarter of 1985 on 25 January 1986, then the BIR had until 24 January 1989 to assess PNB. The original assessment against PNB was issued as early as 08 October 1986, well-within the three-year prescriptive period for making the assessment as prescribed by the following provisions of the NIRC of 1977, as amended: SEC. 268. Period of limitation upon assessment and collection. Except as provided in the succeeding section, internal revenue taxes shall be assessed within three years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period SEC. 269. Exceptions as to period of limitation of assessment and collection of taxes. (c) Any internal revenue tax which has been assessed within the period of limitation above-prescribed may be collected by distraint or levy or by a proceeding in court within three years following the assessment of the tax.
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Sections 268 and 269(c) of the NIRC of 1977, as amended, should be read in conjunction with one another. Section 268 requires that assessment be made within three years from the last day prescribed by law for the filing of the return. Section 269(c), on the other hand, provides that when an assessment is issued within the prescribed period provided in Section 268, the BIR has three years, counted from the date of the assessment, to collect the tax assessed either by distraint, levy or court action. Therefore, when an assessment is timely issued in accordance with Section 268, the BIR is given another three-year period, under Section 269(c), within which to collect the tax assessed, reckoned from the date of the assessment. In the case of PNB, an assessment was issued against it by the BIR on 08 October 1986, so that the BIR had until 07 October 1989 to enforce it and to collect the tax assessed. The filing, however, by private respondent Savellano of his Amended Petition for Review before the CTA on 02 July 1988 already constituted a judicial action for collection of the tax assessed which stops the running of the three-year prescriptive period for collection thereof. A judicial action for the collection of a tax may be initiated by the filing of a complaint with the proper regular trial court; or where the assessment is appealed to the CTA, by filing an answer to the taxpayers petition for review wherein payment of the tax is prayed for.[106] The present case is unique, however, because the Petition for Review was filed by private respondent Savellano, the informer, against the BIR, PNOC, and PNB. The BIR, the collecting government agency; PNOC, the taxpayer; and PNB, the withholding agent, initially found themselves on the same side. The prayer in the Amended Petition for Review of private respondent Savellano reads: WHEREFORE, in view of the foregoing, petitioner respectfully prays that the compromise agreement of June 22, 1987 be reviewed and declared null and void, and that this Court directs: a) respondent Commissioner to enforce and collect and respondents PNB and/or PNOC to pay in a joint and several capacity, the total tax liability of P387,987,785.73, plus interests from 31 October 1986; and b) respondent Commissioner to pay unto petitioner, as informers reward, 15% of the tax liability collected under clause (a) hereof. Other equitable reliefs under the premises are likewise prayed for.[107] (Underscoring ours.) Private respondent Savellano, in his Amended Petition for Review in CTA Case No. 4249, prayed for (1) the CTA to direct the BIR Commissioner to enforce and collect the tax, and (2) PNB and/or PNOC to pay the tax making CTA Case No. 4249 a collection case. That the Amended Petition for Review was filed by the informer and not the taxpayer; and that the prayer for the enforcement of the tax assessment and payment of the tax was also made by the informer, not the BIR, should not affect the nature of the case as a judicial action for collection. In case the CTA grants the Petition and the prayer therein, as what has happened in the present case, the ultimate result would be the collection of the tax assessed. Consequently, upon the filing of the Amended Petition for Review by private respondent Savellano, judicial action for collection of the tax had been initiated and the running of the prescriptive period for collection of the said tax was terminated. Supposing that CTA Case No. 4249 is not a collection case which stops the running of the prescriptive period for the collection of the tax, CTA Case No. 4249, at the very least, suspends the running of the said prescriptive period. Under Section 271 of the NIRC of 1977, as amended, the running of the prescriptive period to collect deficiency taxes shall be suspended for the period during which the BIR Commissioner is prohibited from beginning a distraint or levy or instituting a proceeding in court, and for 60 days thereafter.[108] Just as in the cases of Republic v. Ker & Co., Ltd.[109] and Protectors Services, Inc. v. Court of Appeals,[110] this Court declares herein that the pendency of the present case before the CTA, the Court of Appeals and this
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Court, legally prevents the BIR Commissioner from instituting an action for collection of the same tax liabilities assessed against PNOC and PNB in the CTA or the regular trial courts. To rule otherwise would be to violate the judicial policy of avoiding multiplicity of suits and the rule on lis pendens. Once again, that CTA Case No. 4249 was initiated by private respondent Savellano, the informer, instead of PNOC, the taxpayer, or PNB, the withholding agent, would not prevent the suspension of the running of the prescriptive period for collection of the tax. What is controlling herein is the fact that the BIR Commissioner cannot file a judicial action in any other court for the collection of the tax because such a case would necessarily involve the same parties and involve the same issues already being litigated before the CTA in CTA Case No. 4249. The three-year prescriptive period for collection of the tax shall commence to run only after the promulgation of the decision of this Court in which the issues of the present case are resolved with finality. Whether the filing of the Amended Petition for Review by private respondent Savellano entirely stops or merely suspends the running of the prescriptive period for collection of the tax, it had been premature for the BIR Commissioner to issue a writ of garnishment against PNB on 12 August 1991 and for the Central Bank of the Philippines to debit the account of PNB on 02 September 1992 pursuant to the said writ, because the case was by then, pending review by the Court of Appeals. However, since this Court already finds that the compromise agreement is without force and effect and hereby orders the enforcement of the assessment against PNB, then, any issue or controversy arising from the premature garnis hment of PNBs account and collection of the tax by the BIR has become moot and academic at this point. V Additional Informers Reward Private respondent Savellano is entitled to additional informers reward since the BIR had already collected the full amount of the tax assessment against PNB. PNOC insists that private respondent Savellano is not entitled to additional informers reward because there was no voluntary payment of the withholding tax liability. PNOC, however, fails to state any legal basis for its argument. Section 316(1) of the NIRC of 1977, as amended, granted a reward to an informer equivalent to 15% of the revenues, surcharges, or fees recovered, plus, any fine or penalty imposed and collected.[111] The provision was clear and uncomplicated an informer was entitled to a reward of 15% of the total amount actually recovered or collected by the BIR based on his information. The provision did not make any distinction as to the manner the tax liability was collected whether it was through voluntary payment by the taxpayer or through garnishment of the taxpayers property. Applicable herein is another well-known maxim in statutory construction Ubi lex non distinguit nec nos distinguere debemos when the law does not distinguish, we should not distinguish.[112] Pursuant to the writ of garnishment issued by the BIR, the Central Bank issued a debit advice against the demand deposit account of PNB with the Central Bank for the amount ofP294,958,450.73, and credited the same amount to the demand deposit account of the Treasurer of the Republic of the Philippines. The Treasurer of the Republic, in turn, already issued a journal voucher transferring P294,958,450.73 to the account of the BIR. Since the BIR had already collected P294,958,450.73 from PNB through the execution of the writ of garnishment over PNBs deposit with the Central Bank, then private respondent Savellano should be awarded 15% thereof as reward since the said collection could still be traced to the information he had given. WHEREFORE, in view of the foregoing, the Petitions of PNOC and PNB in G.R. No. 109976 and G.R. No. 112800, respectively, are hereby DENIED. This Court AFFIRMS the assailed Decisions of the Court of Appeals in CA-G.R. SP No. 29583 and CA-G.R. SP No. 29526, which affirmed the decision of the CTA in CTA Case No. 4249, with modifications, to wit:
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(1)

The compromise agreement between PNOC and the BIR, dated 22 June 1987, is declared void for being contrary to law and public policy, and is without force and effect;

(2)Paragraph 2 of RMO No. 39-86 remains a valid provision of the regulation; (3)The withholding tax assessment against PNB, dated 08 October 1986, had become final and unappealable. The BIR Commissioner is ordered to enforce the said assessment and collect the amount of P294,958,450.73, the balance of tax assessed after crediting the previous payment made by PNOC pursuant to the compromise agreement, dated 22 June 1987; and (4) Private respondent Savellano shall be paid the remainder of his informers reward, equivalent to 15% of the deficiency withho lding tax ordered collected herein, or P 44,243,767.61. SO ORDERED.

G.R. No. L-75697

June 18, 1987

VALENTIN TIO doing business under the name and style of OMI ENTERPRISES, petitioner, vs. VIDEOGRAM REGULATORY BOARD, MINISTER OF FINANCE, METRO MANILA COMMISSION, CITY MAYOR and CITY TREASURER OF MANILA, respondents. Nelson Y. Ng for petitioner. The City Legal Officer for respondents City Mayor and City Treasurer.

MELENCIO-HERRERA, J.: This petition was filed on September 1, 1986 by petitioner on his own behalf and purportedly on behalf of other videogram operators adversely affected. It assails the constitutionality of Presidential Decree No. 1987 entitled "An Act Creating the Videogram Regulatory Board" with broad powers to regulate and supervise the videogram industry (hereinafter briefly referred to as the BOARD). The Decree was promulgated on October 5, 1985 and took effect on April 10, 1986, fifteen (15) days after completion of its publication in the Official Gazette.
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On November 5, 1985, a month after the promulgation of the abovementioned decree, Presidential Decree No. 1994 amended the National Internal Revenue Code providing, inter alia: SEC. 134. Video Tapes. There shall be collected on each processed video-tape cassette, ready for playback, regardless of length, an annual tax of five pesos; Provided, That locally manufactured or imported blank video tapes shall be subject to sales tax. On October 23, 1986, the Greater Manila Theaters Association, Integrated Movie Producers, Importers and Distributors Association of the Philippines, and Philippine Motion Pictures Producers Association, hereinafter collectively referred to as the Intervenors, were permitted by the Court to intervene in the case, over petitioner's opposition, upon the allegations that intervention was necessary for the complete protection of their rights and that their "survival and very existence is threatened by the unregulated proliferation of film piracy." The Intervenors were thereafter allowed to file their Comment in Intervention. The rationale behind the enactment of the DECREE, is set out in its preambular clauses as follows: 1. WHEREAS, the proliferation and unregulated circulation of videograms including, among others, videotapes, discs, cassettes or any technical improvement or variation thereof, have greatly prejudiced the operations of moviehouses and theaters, and have caused a sharp decline in theatrical attendance by at least forty percent (40%) and a tremendous drop in the collection of sales, contractor's specific, amusement and other taxes, thereby resulting in substantial losses estimated at P450 Million annually in government revenues; WHEREAS, videogram(s) establishments collectively earn around P600 Million per annum from rentals, sales and disposition of videograms, and such earnings have not been subjected to tax, thereby depriving the Government of approximately P180 Million in taxes each year; WHEREAS, the unregulated activities of videogram establishments have also affected the viability of the movie industry, particularly the more than 1,200 movie houses and theaters throughout the country, and occasioned industry-wide displacement and unemployment due to the shutdown of numerous moviehouses and theaters; "WHEREAS, in order to ensure national economic recovery, it is imperative for the Government to create an environment conducive to growth and development of all business industries, including the movie industry which has an accumulated investment of about P3 Billion; WHEREAS, proper taxation of the activities of videogram establishments will not only alleviate the dire financial condition of the movie industry upon which more than 75,000 families and 500,000 workers depend for their livelihood, but also provide an additional source of revenue for the Government, and at the same time rationalize the heretofore uncontrolled distribution of videograms; WHEREAS, the rampant and unregulated showing of obscene videogram features constitutes a clear and present danger to the moral and spiritual well-being of the youth, and impairs the mandate of the Constitution for the State to support the rearing of the youth for civic efficiency and the development of moral character and promote their physical, intellectual, and social well-being; WHEREAS, civic-minded citizens and groups have called for remedial measures to curb these blatant malpractices which have flaunted our censorship and copyright laws;
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2.

3.

4.

5.

6.

7.

8.

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

Petitioner's attack on the constitutionality of the DECREE rests on the following grounds: 1. Section 10 thereof, which imposes a tax of 30% on the gross receipts payable to the local government is a RIDER and the same is not germane to the subject matter thereof; The tax imposed is harsh, confiscatory, oppressive and/or in unlawful restraint of trade in violation of the due process clause of the Constitution; There is no factual nor legal basis for the exercise by the President of the vast powers conferred upon him by Amendment No. 6; There is undue delegation of power and authority; The Decree is an ex-post facto law; and There is over regulation of the video industry as if it were a nuisance, which it is not.

2. 3. 4. 5. 6.

We shall consider the foregoing objections in seriatim. 1. The Constitutional requirement that "every bill shall embrace only one subject which shall be expressed in the title thereof" 1 is sufficiently complied with if the title be comprehensive enough to include the general purpose which a statute seeks to achieve. It is not necessary that the title express each and every end that the statute wishes to accomplish. The requirement is satisfied if all the parts of the statute are related, and are germane to the subject matter expressed in the title, or as long as they are not inconsistent with or foreign to the general subject and title. 2 An act having a single general subject, indicated in the title, may contain any number of provisions, no matter how diverse they may be, so long as they are not inconsistent with or foreign to the general subject, and may be considered in furtherance of such subject by providing for the method and means of carrying out the general object." 3 The rule also is that the constitutional requirement as to the title of a bill should not be so narrowly construed as to cripple or impede the power of legislation. 4 It should be given practical rather than technical construction. 5

Tested by the foregoing criteria, petitioner's contention that the tax provision of the DECREE is a rider is without merit. That section reads, inter alia: Section 10. Tax on Sale, Lease or Disposition of Videograms. Notwithstanding any provision of law to the contrary, the province shall collect a tax of thirty percent (30%) of the purchase price or rental rate, as the case may be, for every sale, lease or disposition of a videogram containing a reproduction of any motion picture or audiovisual program. Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and the other fifty percent (50%) shall acrrue to the municipality where the tax is collected; PROVIDED, That in Metropolitan Manila, the tax shall be shared equally by the City/Municipality and the Metropolitan Manila Commission. xxx xxx xxx
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The foregoing provision is allied and germane to, and is reasonably necessary for the accomplishment of, the general object of the DECREE, which is the regulation of the video industry through the Videogram Regulatory Board as expressed in its title. The tax provision is not inconsistent with, nor foreign to that general subject and title. As a tool for regulation 6 it is simply one of the regulatory and control mechanisms scattered throughout the DECREE. The express purpose of the DECREE to include taxation of the video industry in order to regulate and rationalize the heretofore uncontrolled distribution of videograms is evident from Preambles 2 and 5, supra. Those preambles explain the motives of the lawmaker in presenting the measure. The title of the DECREE, which is the creation of the Videogram Regulatory Board, is comprehensive enough to include the purposes expressed in its Preamble and reasonably covers all its provisions. It is unnecessary to express all those objectives in the title or that the latter be an index to the body of the DECREE. 7 2. Petitioner also submits that the thirty percent (30%) tax imposed is harsh and oppressive, confiscatory, and in restraint of trade. However, it is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. 8 The power to impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is subject to any restrictions whatever, except such as rest in the discretion of the authority which exercises it. 9 In imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation. 10

The tax imposed by the DECREE is not only a regulatory but also a revenue measure prompted by the realization that earnings of videogram establishments of around P600 million per annum have not been subjected to tax, thereby depriving the Government of an additional source of revenue. It is an end-user tax, imposed on retailers for every videogram they make available for public viewing. It is similar to the 30% amusement tax imposed or borne by the movie industry which the theater-owners pay to the government, but which is passed on to the entire cost of the admission ticket, thus shifting the tax burden on the buying or the viewing public. It is a tax that is imposed uniformly on all videogram operators. The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of intellectual property rights, and the proliferation of pornographic video tapes. And while it was also an objective of the DECREE to protect the movie industry, the tax remains a valid imposition. The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax was to favor one industry over another. 11 It is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that "inequities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation". 12 Taxation has been made the implement of the state's police power. 13 At bottom, the rate of tax is a matter better addressed to the taxing legislature. 3. Petitioner argues that there was no legal nor factual basis for the promulgation of the DECREE by the former President under Amendment No. 6 of the 1973 Constitution providing that "whenever in the judgment of the President ... , there exists a grave emergency or a threat or imminence thereof, or whenever the interim Batasang Pambansa or the regular National Assembly fails or is unable to act adequately on any matter for any reason that in his judgment requires immediate action, he may, in order to meet the exigency, issue the necessary decrees, orders, or letters of instructions, which shall form part of the law of the land."
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In refutation, the Intervenors and the Solicitor General's Office aver that the 8th "whereas" clause sufficiently summarizes the justification in that grave emergencies corroding the moral values of the people and betraying the national economic recovery program necessitated bold emergency measures to be adopted with dispatch. Whatever the reasons "in the judgment" of the then President, considering that the issue of the validity of the exercise of legislative power under the said Amendment still pends resolution in several other cases, we reserve resolution of the question raised at the proper time. 4. Neither can it be successfully argued that the DECREE contains an undue delegation of legislative power. The grant in Section 11 of the DECREE of authority to the BOARD to "solicit the direct assistance of other agencies and units of the government and deputize, for a fixed and limited period, the heads or personnel of such agencies and units to perform enforcement functions for the Board" is not a delegation of the power to legislate but merely a conferment of authority or discretion as to its execution, enforcement, and implementation. "The true distinction is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring authority or discretion as to its execution to be exercised under and in pursuance of the law. The first cannot be done; to the latter, no valid objection can be made." 14 Besides, in the very language of the decree, the authority of the BOARD to solicit such assistance is for a "fixed and limited period" with the deputized agencies concerned being "subject to the direction and control of the BOARD." That the grant of such authority might be the source of graft and corruption would not stigmatize the DECREE as unconstitutional. Should the eventuality occur, the aggrieved parties will not be without adequate remedy in law. The DECREE is not violative of the ex post facto principle. An ex post facto law is, among other categories, one which "alters the legal rules of evidence, and authorizes conviction upon less or different testimony than the law required at the time of the commission of the offense." It is petitioner's position that Section 15 of the DECREE in providing that:

5.

All videogram establishments in the Philippines are hereby given a period of forty-five (45) days after the effectivity of this Decree within which to register with and secure a permit from the BOARD to engage in the videogram business and to register with the BOARD all their inventories of videograms, including videotapes, discs, cassettes or other technical improvements or variations thereof, before they could be sold, leased, or otherwise disposed of. Thereafter any videogram found in the possession of any person engaged in the videogram business without the required proof of registration by the BOARD, shall be prima facie evidence of violation of the Decree, whether the possession of such videogram be for private showing and/or public exhibition. raises immediately a prima facie evidence of violation of the DECREE when the required proof of registration of any videogram cannot be presented and thus partakes of the nature of an ex post facto law. The argument is untenable. As this Court held in the recent case of Vallarta vs. Court of Appeals, et al. 15 ... it is now well settled that "there is no constitutional objection to the passage of a law providing that the presumption of innocence may be overcome by a contrary presumption founded upon the experience of human conduct, and enacting what evidence shall be sufficient to overcome such presumption of innocence" (People vs. Mingoa 92 Phil. 856 [1953] at 858-59, citing 1 COOLEY, A TREATISE ON THE CONSTITUTIONAL LIMITATIONS, 639-641). And the "legislature may enact that when certain facts have been proved that they shall be prima facie evidence of the existence of the guilt of the accused and shift the burden of proof provided there be a rational connection between the facts proved and the
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ultimate facts presumed so that the inference of the one from proof of the others is not unreasonable and arbitrary because of lack of connection between the two in common experience". 16 Applied to the challenged provision, there is no question that there is a rational connection between the fact proved, which is non-registration, and the ultimate fact presumed which is violation of the DECREE, besides the fact that the prima facie presumption of violation of the DECREE attaches only after a forty-five-day period counted from its effectivity and is, therefore, neither retrospective in character. 6. We do not share petitioner's fears that the video industry is being over-regulated and being eased out of existence as if it were a nuisance. Being a relatively new industry, the need for its regulation was apparent. While the underlying objective of the DECREE is to protect the moribund movie industry, there is no question that public welfare is at bottom of its enactment, considering "the unfair competition posed by rampant film piracy; the erosion of the moral fiber of the viewing public brought about by the availability of unclassified and unreviewed video tapes containing pornographic films and films with brutally violent sequences; and losses in government revenues due to the drop in theatrical attendance, not to mention the fact that the activities of video establishments are virtually untaxed since mere payment of Mayor's permit and municipal license fees are required to engage in business. 17

The enactment of the Decree since April 10, 1986 has not brought about the "demise" of the video industry. On the contrary, video establishments are seen to have proliferated in many places notwithstanding the 30% tax imposed. In the last analysis, what petitioner basically questions is the necessity, wisdom and expediency of the DECREE. These considerations, however, are primarily and exclusively a matter of legislative concern. 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 its wisdom cannot be sustained. 18 In fine, petitioner has not overcome the presumption of validity which attaches to a challenged statute. We find no clear violation of the Constitution which would justify us in pronouncing Presidential Decree No. 1987 as unconstitutional and void. WHEREFORE, the instant Petition is hereby dismissed. No costs. SO ORDERED.

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PHILIPPINE AIRLINES, INC., petitioner, vs. CIVIL AERONAUTICS BOARD and GRAND INTERNATIONAL AIRWAYS, INC., respondents. DECISION TORRES, JR., J.: This Special Civil Action for Certiorari and Prohibition under Rule 65 of the Rules of Court seeks to prohibit respondent Civil Aeronautics Board from exercising jurisdiction over private respondent's Application for the issuance of a Certificate of Public Convenience and Necessity, and to annul and set aside a temporary operating permit issued by the Civil Aeronautics Board in favor of Grand International Airways (GrandAir, for brevity) allowing the same to engage in scheduled domestic air transportation services, particularly the Manila-Cebu, Manila-Davao, and converse routes. The main reason submitted by petitioner Philippine Airlines, Inc. (PAL) to support its petition is the fact that GrandAir does not possess a legislative franchise authorizing it to engage in air transportation service within the Philippines or elsewhere. Such franchise is, allegedly, a requisite for the issuance of a Certificate of Public Convenience or Necessity by the respondent Board, as mandated under Section 11, Article XII of the Constitution. Respondent GrandAir, on the other hand, posits that a legislative franchise is no longer a requirement for the issuance of a Certificate of Public Convenience and Necessity or a Temporary Operating Permit, following the Court's pronouncements in the case of Albano vs. Reyes,[1] as restated by the Court of Appeals in Avia Filipinas International vs. Civil Aeronautics Board[2] and Silangan Airways, Inc. vs. Grand International Airways, Inc., and the Hon. Civil Aeronautics Board.[3] On November 24, 1994, private respondent GrandAir applied for a Certificate of Public Convenience and Necessity with the Board, which application was docketed as CAB Case No. EP-12711.[4] Accordingly, the Chief Hearing Officer of the CAB issued a Notice of Hearing setting the application for initial hearing on December 16, 1994, and directing GrandAir to serve a copy of the application and corresponding notice to all scheduled Philippine Domestic operators. On December 14, 1994, GrandAir filed its Compliance, and requested for the issuance of a Temporary Operating Permit. Petitioner, itself the holder of a legislative franchise to operate air transport services, filed an Opposition to the application for a Certificate of Public Convenience and Necessity on December 16, 1995 on the following grounds: "A. The CAB has no jurisdiction to hear the petitioner's application until the latter has first obtained a franchise to operate from Congress. B. The petitioner's application is deficient in form and substance in that: 1. The application does not indicate a route structure including a computation of trunkline, secondary and rural available seat kilometers (ASK) which shall always be maintained at a monthly level at least 5% and 20% of the ASK offered into and out of the proposed base of operations for rural and secondary, respectively.

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2. It does not contain a project/feasibility study, projected profit and loss statements, projected balance sheet, insurance coverage, list of personnel, list of spare parts inventory, tariff structure, documents supportive of financial capacity, route flight schedule, contracts on facilities (hangars, maintenance, lot) etc. C. Approval of petitioner's application would violate the equal protection clause of the constitution. D. There is no urgent need and demand for the services applied for. E. To grant petitioner's application would only result in ruinous competition contrary to Section 4(d) of R.A. 776."[5] At the initial hearing for the application, petitioner raised the issue of lack of jurisdiction of the Board to hear the application because GrandAir did not possess a legislative franchise. On December 20, 1994, the Chief Hearing Officer of CAB issued an Order denying petitioner's Opposition. Pertinent portions of the Order read: "PAL alleges that the CAB has no jurisdiction to hear the petitioner's application until the latter has first obtained a franchise to operate from Congress. The Civil Aeronautics Board has jurisdiction to hear and resolve the application. In Avia Filipina vs. CAB, CA G.R. No. 23365, it has been ruled that under Section 10 (c) (I) of R.A. 776, the Board possesses this specific power and duty. In view thereof, the opposition of PAL on this ground is hereby denied. SO ORDERED." Meantime, on December 22, 1994, petitioner this time, opposed private respondent's application for a temporary permit maintaining that: "1. The applicant does not possess the required fitness and capability of operating the services applied for under RA 776; and, 2. Applicant has failed to prove that there is clear and urgent public need for the services applied for."[6] On December 23, 1994, the Board promulgated Resolution No. 119(92) approving the issuance of a Temporary Operating Permit in favor of Grand Air[7] for a period of three months, i.e., from December 22, 1994 to March 22, 1994. Petitioner moved for the reconsideration of the issuance of the Temporary Operating Permit on January 11, 1995, but the same was denied in CAB Resolution No. 02 (95) on February 2, 1995.[8] In the said Resolution, the Board justified its assumption of jurisdiction over GrandAir's application. "WHEREAS, the CAB is specifically authorized under Section 10-C (1) of Republic Act No. 776 as follows: '(c) The Board shall have the following specific powers and duties:
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(1) In accordance with the provision of Chapter IV of this Act, to issue, deny, amend revise, alter, modify, cancel, suspend or revoke, in whole or in part, upon petitioner-complaint, or upon its own initiative, any temporary operating permit or Certificate of Public Convenience and Necessity; Provided, however; that in the case of foreign air carriers, the permit shall be issued with the approval of the President of the Republic of the Philippines." WHEREAS, such authority was affirmed in PAL vs. CAB, (23 SCRA 992), wherein the Supreme Court held that the CAB can even on its own initiative, grant a TOP even before the presentation of evidence; WHEREAS, more recently, Avia Filipinas vs. CAB, (CA-GR No. 23365), promulgated on October 30, 1991, held that in accordance with its mandate, the CAB can issue not only a TOP but also a Certificate of Public Convenience and Necessity (CPCN) to a qualified applicant therefor in the absence of a legislative franchise, citing therein as basis the decision of Albano vs. Reyes (175 SCRA 264) which provides (inter alia) that: a) Franchises by Congress are not required before each and every public utility may operate when the law has granted certain administrative agencies the power to grant licenses for or to authorize the operation of certain public utilities; b) The Constitutional provision in Article XII, Section 11 that the issuance of a franchise, certificate or other form of authorization for the operation of a public utility does not necessarily imply that only Congress has the power to grant such authorization since our statute books are replete with laws granting specified agencies in the Executive Branch the power to issue such authorization for certain classes of public utilities. WHEREAS, Executive Order No. 219 which took effect on 22 January 1995, provides in Section 2.1 that a minimum of two (2) operators in each route/link shall be encouraged and that routes/links presently serviced by only one (1) operator shall be open for entry to additional operators. RESOLVED, (T)HEREFORE, that the Motion for Reconsideration filed by Philippine Airlines on January 05, 1995 on the Grant by this Board of a Temporary Operating Permit (TOP) to Grand International Airways, Inc. alleging among others that the CAB has no such jurisdiction, is hereby DENIED, as it hereby denied, in view of the foregoing and considering that the grounds relied upon by the movant are not indubitable." On March 21, 1995, upon motion by private respondent, the temporary permit was extended for a period of six (6) months or up to September 22, 1995. Hence this petition, filed on April 3, 1995. Petitioners argue that the respondent Board acted beyond its powers and jurisdiction in taking cognizance of GrandAirs application for the issuance of a Certificate of Public Convenience and Necessity, and in issuing a temporary operating permit in the meantime, since GrandAir has not been granted and does not possess a legislative franchise to engage in scheduled domestic air transportation. A legislative franchise is necessary before anyone may engage in air transport services, and a franchise may only be granted by Congress. This is the meaning given by the petitioner upon a reading of Section 11, Article XII,[9] and Section 1, Article VI,[10] of the Constitution. To support its theory, PAL submits Opinion No. 163, S. 1989 of the Department of Justice, which reads: Dr. Arturo C. Corona Executive Director
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Civil Aeronautics Board PPL Building, 1000 U.N. Avenue Ermita, Manila Sir: This has reference to your request for opinion on the necessity of a legislative franchise before the Civil Aeronautics Board (CAB) may issue a Certificate of Public Convenience and Necessity and/or permit to engage in air commerce or air transportation to an individual or entity. You state that during the hearing on the application of Cebu Air for a congressional franchise, the House Committee on Corporations and Franchises contended that under the present Constitution, the CAB may not issue the abovestated certificate or permit, unless the individual or entity concerned possesses a legislative franchise. You believe otherwise, however, for the reason that under R.A. No. 776, as amended, the CAB is explicitly empowered to issue operating permits or certificates of public convenience and necessity and that this statutory provision is not inconsistent with the current charter. We concur with the view expressed by the House Committee on Corporations and Franchises. In an opinion rendered in favor of your predecessor-inoffice, this Department observed that,xxx it is useful to note the distinction between the franchise to operate and a permit to commence operation. The former is sovereign and legislative in nature; it can be conferred only by the lawmaking authority (17 W and P, pp. 691-697). The latter is administrative and regulatory in character (In re Application of Fort Crook-Bellevue Boulevard Line, 283 NW 223); it is granted by an administrative agency, such as the Public Service Commission [now Board of Transportation], in the case of land transportation, and the Civil Aeronautics Board, in case of air services. While a legislative franchise is a pre-requisite to a grant of a certificate of public convenience and necessity to an airline company, such franchise alone cannot constitute the authority to commence operations, inasmuch as there are still matters relevant to such operations which are not determined in the franchise, like rates, schedules and routes, and which matters are resolved in the process of issuance of permit by the administrative. (Secretary of Justice opn No. 45, s. 1981) Indeed, authorities are agreed that a certificate of public convenience and necessity is an authorization issued by the appropriate governmental agency for the operation of public services for which a franchise is required by law (Almario, Transportation and Public Service Law, 1977 Ed., p. 293; Agbayani, Commercial Law of the Phil., Vol. 4, 1979 Ed., pp. 380-381). Based on the foregoing, it is clear that a franchise is the legislative authorization to engage in a business activity or enterprise of a public nature, whereas a certificate of public convenience and necessity is a regulatory measure which constitutes the franchises authority to commence operations. It is thus logical that the grant of the former should precede the latter. Please be guided accordingly. (SGD.) SEDFREY A. ORDOEZ Secretary of Justice"
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Respondent GrandAir, on the other hand, relies on its interpretation of the provisions of Republic Act 776, which follows the pronouncements of the Court of Appeals in the cases of Avia Filipinas vs. Civil Aeronautics Board, and Silangan Airways, Inc. vs. Grand International Airways (supra). In both cases, the issue resolved was whether or not the Civil Aeronautics Board can issue the Certificate of Public Convenience and Necessity or Temporary Operating Permit to a prospective domestic air transport operator who does not possess a legislative franchise to operate as such. Relying on the Court's pronouncement in Albano vs. Reyes (supra), the Court of Appeals upheld the authority of the Board to issue such authority, even in the absence of a legislative franchise, which authority is derived from Section 10 of Republic Act 776, as amended by P.D. 1462. [11] The Civil Aeronautics Board has jurisdiction over GrandAir's Application for a Temporary Operating Permit. This rule has been established in the case of Philippine Air Lines Inc., vs. Civil Aeronautics Board, promulgated on June 13, 1968.[12] The Board is expressly authorized by Republic Act 776 to issue a temporary operating permit or Certificate of Public Convenience and Necessity, and nothing contained in the said law negates the power to issue said permit before the completion of the applicant's evidence and that of the oppositor thereto on the main petition. Indeed, the CAB's authority to grant a temporary permit "upon its own initiative" strongly suggests the power to exercise said authority, even before the presentation of said evidence has begun. Assuming arguendo that a legislative franchise is prerequisite to the issuance of a permit, the absence of the same does not affect the jurisdiction of the Board to hear the application, but tolls only upon the ultimate issuance of the requested permit. The power to authorize and control the operation of a public utility is admittedly a prerogative of the legislature, since Congress is that branch of government vested with plenary powers of legislation. "The franchise is a legislative grant, whether made directly by the legislature itself, or by any one of its properly constituted instrumentalities. The grant, when made, binds the public, and is, directly or indirectly, the act of the state."[13] The issue in this petition is whether or not Congress, in enacting Republic Act 776, has delegated the authority to authorize the operation of domestic air transport services to the respondent Board, such that Congressional mandate for the approval of such authority is no longer necessary. Congress has granted certain administrative agencies the power to grant licenses for, or to authorize the operation of certain public utilities. With the growing complexity of modern life, the multiplication of the subjects of governmental regulation, and the increased difficulty of administering the laws, there is a constantly growing tendency towards the delegation of greater powers by the legislature, and towards the approval of the practice by the courts.[14] It is generally recognized that a franchise may be derived indirectly from the state through a duly designated agency, and to this extent, the power to grant franchises has frequently been delegated, even to agencies other than those of a legislative nature. [15] In pursuance of this, it has been held that privileges conferred by grant by local authorities as agents for the state constitute as much a legislative franchise as though the grant had been made by an act of the Legislature.[16] The trend of modern legislation is to vest the Public Service Commissioner with the power to regulate and control the operation of public services under reasonable rules and regulations, and as a general rule, courts will not interfere with the exercise of that discretion when it is just and reasonable and founded upon a legal right.[17] It is this policy which was pursued by the Court in Albano vs. Reyes. Thus, a reading of the pertinent issuances governing the Philippine Ports Authority,[18] proves that the PPA is empowered to undertake by itself the operation and management of the Manila International Container Terminal, or to authorize its operation and management by another by contract or other means, at its option. The latter power having been delegated to the PPA, a franchise from Congress to authorize an entity other than the PPA to operate and manage the MICP becomes unnecessary.
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Given the foregoing postulates, we find that the Civil Aeronautics Board has the authority to issue a Certificate of Public Convenience and Necessity, or Temporary Operating Permit to a domestic air transport operator, who, though not possessing a legislative franchise, meets all the other requirements prescribed by the law. Such requirements were enumerated in Section 21 of R.A. 776. There is nothing in the law nor in the Constitution, which indicates that a legislative franchise is an indispensable requirement for an entity to operate as a domestic air transport operator. Although Section 11 of Article XII recognizes Congress' control over any franchise, certificate or authority to operate a public utility, it does not mean Congress has exclusive authority to issue the same. Franchises issued by Congress are not required before each and every public utility may operate.[19] In many instances, Congress has seen it fit to delegate this function to government agencies, specialized particularly in their respective areas of public service. A reading of Section 10 of the same reveals the clear intent of Congress to delegate the authority to regulate the issuance of a license to operate domestic air transport services: SECTION 10. Powers and Duties of the Board. (A) Except as otherwise provided herein, the Board shall have the power to regulate the economic aspect of air transportation, and shall have general supervision and regulation of, the jurisdiction and control over air carriers, general sales agents, cargo sales agents, and air freight forwarders as well as their property rights, equipment, facilities and franchise, insofar as may be necessary for the purpose of carrying out the provision of this Act. In support of the Board's authority as stated above, it is given the following specific powers and duties: (C) The Board shall have the following specific powers and duties: (1) In accordance with the provisions of Chapter IV of this Act, to issue, deny, amend, revise, alter, modify, cancel, suspend or revoke in whole or in part upon petition or complaint or upon its own initiative any Temporary Operating Permit or Certificate of Public Convenience and Necessity: Provided however, That in the case of foreign air carriers, the permit shall be issued with the approval of the President of the Republic of the Philippines. Petitioner argues that since R.A. 776 gives the Board the authority to issue "Certificates of Public Convenience and Necessity", this, according to petitioner, means that a legislative franchise is an absolute requirement. It cites a number of authorities supporting the view that a Certificate of Public Convenience and Necessity is issued to a public service for which a franchise is required by law, as distinguished from a "Certificate of Public Convenience" which is an authorization issued for the operation of public services for which no franchise, either municipal or legislative, is required by law.[20] This submission relies on the premise that the authority to issue a certificate of public convenience and necessity is a regulatory measure separate and distinct from the authority to grant a franchise for the operation of the public utility subject of this particular case, which is exclusively lodged by petitioner in Congress. We do not agree with the petitioner. Many and varied are the definitions of certificates of public convenience which courts and legal writers have drafted. Some statutes use the terms "convenience and necessity" while others use only the words "public convenience." The terms "convenience and necessity", if used together in a statute, are usually held not to be separable, but are construed together. Both words modify each other and must be construed together. The word 'necessity' is
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so connected, not as an additional requirement but to modify and qualify what might otherwise be taken as the strict significance of the word necessity. Public convenience and necessity exists when the proposed facility will meet a reasonable want of the public and supply a need which the existing facilities do not adequately afford. It does not mean or require an actual physical necessity or an indispensable thing. [21] "The terms 'convenience' and 'necessity' are to be construed together, although they are not synonymous, and effect must be given both. The convenience of the public must not be circumscribed by according to the word 'necessity' its strict meaning or an essential requisites." [22] The use of the word "necessity", in conjunction with "public convenience" in a certificate of authorization to a public service entity to operate, does not in any way modify the nature of such certification, or the requirements for the issuance of the same. It is the law which determines the requisites for the issuance of such certification, and not the title indicating the certificate. Congress, by giving the respondent Board the power to issue permits for the operation of domestic transport services, has delegated to the said body the authority to determine the capability and competence of a prospective domestic air transport operator to engage in such venture. This is not an instance of transforming the respondent Board into a mini-legislative body, with unbridled authority to choose who should be given authority to operate domestic air transport services. "To be valid, the delegation itself must be circumscribed by legislative restrictions, not a "roving commission" that will give the delegate unlimited legislative authority. It must not be a delegation "running riot" and "not canalized with banks that keep it from overflowing." Otherwise, the delegation is in legal effect an abdication of legislative authority, a total surrender by the legislature of its prerogatives in favor of the delegate."[23] Congress, in this instance, has set specific limitations on how such authority should be exercised. Firstly, Section 4 of R.A. No. 776, as amended, sets out the following guidelines or policies: "SECTION 4. Declaration of policies. In the exercise and performance of its powers and duties under this Act, the Civil Aeronautics Board and the Civil Aeronautics Administrator shall consider the following, among other things, as being in the public interest, and in accordance with the public convenience and necessity: (a) The development and utilization of the air potential of the Philippines; (b) The encouragement and development of an air transportation system properly adapted to the present and future of foreign and domestic commerce of the Philippines, of the Postal Service and of the National Defense; (c) The regulation of air transportation in such manner as to recognize and preserve the inherent advantages of, assure the highest degree of safety in, and foster sound economic condition in, such transportation, and to improve the relations between, and coordinate transportation by, air carriers; (d) The promotion of adequate, economical and efficient service by air carriers at reasonable charges, without unjust discriminations, undue preferences or advantages, or unfair or destructive competitive practices;
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(e) Competition between air carriers to the extent necessary to assure the sound development of an air transportation system properly adapted to the need of the foreign and domestic commerce of the Philippines, of the Postal Service, and of the National Defense; (f) To promote safety of flight in air commerce in the Philippines; and, (g) The encouragement and development of civil aeronautics. More importantly, the said law has enumerated the requirements to determine the competency of a prospective operator to engage in the public service of air transportation. SECTION 12. Citizenship requirement. Except as otherwise provided in the Constitution and existing treaty or treaties, a permit authorizing a person to engage in domestic air commerce and/or air transportation shall be issued only to citizens of the Philippines. [24] SECTION 21. Issuance of permit. The Board shall issue a permit authorizing the whole or any part of the service covered by the application, if it finds: (1) that the applicant is fit, willing and able to perform such service properly in conformity with the provisions of this Act and the rules, regulations, and requirements issued thereunder; and (2) that such service is required by the public convenience and necessity; otherwise the application shall be denied. Furthermore, the procedure for the processing of the application of a Certificate of Public Convenience and Necessity had been established to ensure the weeding out of those entities that are not deserving of public service.[25] In sum, respondent Board should now be allowed to continue hearing the application of GrandAir for the issuance of a Certificate of Public Convenience and Necessity, there being no legal obstacle to the exercise of its jurisdiction. ACCORDINGLY, in view of the foregoing considerations, the Court RESOLVED to DISMISS the instant petition for lack of merit. The respondent Civil Aeronautics Board is hereby DIRECTED to CONTINUE hearing the application of respondent Grand International Airways, Inc. for the issuance of a Certificate of Public Convenience and Necessity. SO ORDERED.

G.R. No. 74457 March 20, 1987

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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.
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(SGD.) FERDINAND E. MARCOS President 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.

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Judicial power authorizes this; and when the exercise is demanded, there should be no shirking of the task for fear of retaliation, or loss of favor, or popular censure, or any other similar inhibition unworthy of the bench, especially this Court. The challenged measure is denominated an executive order but it is really presidential decree, promulgating a new rule instead of merely implementing an existing law. It was issued by President Marcos not for the purpose of taking care that the laws were faithfully executed but in the exercise of his legislative authority under Amendment No. 6. It was provided thereunder that whenever in his judgment there existed a grave emergency or a threat or imminence thereof or whenever the legislature failed or was unable to act adequately on any matter that in his judgment required immediate action, he could, in order to meet the exigency, issue decrees, orders or letters of instruction that were to have the force and effect of law. As there is no showing of any exigency to justify the exercise of that extraordinary power then, the petitioner has reason, indeed, to question the validity of the executive order. Nevertheless, since the determination of the grounds was supposed to have been made by the President "in his judgment, " a phrase that will lead to protracted discussion not really necessary at this time, we reserve resolution of this matter until a more appropriate occasion. For the nonce, we confine ourselves to the more fundamental question of due process. It is part of the art of constitution-making that the provisions of the charter be cast in precise and unmistakable language to avoid controversies that might arise on their correct interpretation. That is the Ideal. In the case of the due process clause, however, this rule was deliberately not followed and the wording was purposely kept ambiguous. In fact, a proposal to delineate it more clearly was submitted in the Constitutional Convention of 1934, but it was rejected by Delegate Jose P. Laurel, Chairman of the Committee on the Bill of Rights, who forcefully argued against it. He was sustained by the body. 10 The due process clause was kept intentionally vague so it would remain also conveniently resilient. This was felt necessary because due process is not, like some provisions of the fundamental law, an "iron rule" laying down an implacable and immutable command for all seasons and all persons. Flexibility must be the best virtue of the guaranty. The very elasticity of the due process clause was meant to make it adapt easily to every situation, enlarging or constricting its protection as the changing times and circumstances may require. Aware of this, the courts have also hesitated to adopt their own specific description of due process lest they confine themselves in a legal straitjacket that will deprive them of the elbow room they may need to vary the meaning of the clause whenever indicated. Instead, they have preferred to leave the import of the protection open-ended, as it were, to be "gradually ascertained by the process of inclusion and exclusion in the course of the decision of cases as they arise." 11 Thus, Justice Felix Frankfurter of the U.S. Supreme Court, for example, would go no farther than to define due process and in so doing sums it all up as nothing more and nothing less than "the embodiment of the sporting Idea of fair play." 12 When the barons of England extracted from their sovereign liege the reluctant promise that that Crown would thenceforth not proceed against the life liberty or property of any of its subjects except by the lawful judgment of his peers or the law of the land, they thereby won for themselves and their progeny that splendid guaranty of fairness that is now the hallmark of the free society. The solemn vow that King John made at Runnymede in 1215 has since then resounded through the ages, as a ringing reminder to all rulers, benevolent or base, that every person, when confronted by the stern visage of the law, is entitled to have his say in a fair and open hearing of his cause. The closed mind has no place in the open society. It is part of the sporting Idea of fair play to hear "the other side" before an opinion is formed or a decision is made by those who sit in judgment. Obviously, one side is only one-half of the question; the other half must also be considered if an impartial verdict is to be reached based on an informed appreciation of the issues in contention. It is indispensable that the two sides complement each other, as unto the bow the arrow, in leading to the correct ruling after examination of the problem not from one or the other perspective only but in its totality. A
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judgment based on less that this full appraisal, on the pretext that a hearing is unnecessary or useless, is tainted with the vice of bias or intolerance or ignorance, or worst of all, in repressive regimes, the insolence of power. The minimum requirements of due process are notice and hearing 13 which, generally speaking, may not be dispensed with because they are intended as a safeguard against official arbitrariness. It is a gratifying commentary on our judicial system that the jurisprudence of this country is rich with applications of this guaranty as proof of our fealty to the rule of law and the ancient rudiments of fair play. We have consistently declared that every person, faced by the awesome power of the State, is entitled to "the law of the land," which Daniel Webster described almost two hundred years ago in the famous Dartmouth College Case, 14 as "the law which hears before it condemns, which proceeds upon inquiry and renders judgment only after trial." It has to be so if the rights of every person are to be secured beyond the reach of officials who, out of mistaken zeal or plain arrogance, would degrade the due process clause into a worn and empty catchword. This is not to say that notice and hearing are imperative in every case for, to be sure, there are a number of admitted exceptions. The conclusive presumption, for example, bars the admission of contrary evidence as long as such presumption is based on human experience or there is a rational connection between the fact proved and the fact ultimately presumed therefrom. 15 There are instances when the need for expeditions action will justify omission of these requisites, as in the summary abatement of a nuisance per se, like a mad dog on the loose, which may be killed on sight because of the immediate danger it poses to the safety and lives of the people. Pornographic materials, contaminated meat and narcotic drugs are inherently pernicious and may be summarily destroyed. The passport of a person sought for a criminal offense may be cancelled without hearing, to compel his return to the country he has fled. 16 Filthy restaurants may be summarily padlocked in the interest of the public health and bawdy houses to protect the public morals. 17 In such instances, previous judicial hearing may be omitted without violation of due process in view of the nature of the property involved or the urgency of the need to protect the general welfare from a clear and present danger. The protection of the general welfare is the particular function of the police power which both restraints and is restrained by due process. The police power is simply defined as the power inherent in the State to regulate liberty and property for the promotion of the general welfare. 18 By reason of its function, it extends to all the great public needs and is described as the most pervasive, the least limitable and the most demanding of the three inherent powers of the State, far outpacing taxation and eminent domain. The individual, as a member of society, is hemmed in by the police power, which affects him even before he is born and follows him still after he is dead from the womb to beyond the tomb in practically everything he does or owns. Its reach is virtually limitless. It is a ubiquitous and often unwelcome intrusion. Even so, as long as the activity or the property has some relevance to the public welfare, its regulation under the police power is not only proper but necessary. And the justification is found in the venerable Latin maxims, Salus populi est suprema lex and Sic utere tuo ut alienum non laedas, which call for the subordination of individual interests to the benefit of the greater number. It is this power that is now invoked by the government to justify Executive Order No. 626-A, amending the basic rule in Executive Order No. 626, prohibiting the slaughter of carabaos except under certain conditions. The original measure was issued for the reason, as expressed in one of its Whereases, that "present conditions demand that the carabaos and the buffaloes be conserved for the benefit of the small farmers who rely on them for energy needs." We affirm at the outset the need for such a measure. In the face of the worsening energy crisis and the increased dependence of our farms on these traditional beasts of burden, the government would have been remiss, indeed, if it had not taken steps to protect and preserve them. A similar prohibition was challenged in United States v. Toribio, 19 where a law regulating the registration, branding and slaughter of large cattle was claimed to be a deprivation of property without due process of law. The defendant had been convicted thereunder for having slaughtered his own carabao without the required permit, and he appealed to the Supreme Court. The conviction was affirmed. The law was sustained as a valid police measure to
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prevent the indiscriminate killing of carabaos, which were then badly needed by farmers. An epidemic had stricken many of these animals and the reduction of their number had resulted in an acute decline in agricultural output, which in turn had caused an incipient famine. Furthermore, because of the scarcity of the animals and the consequent increase in their price, cattle-rustling had spread alarmingly, necessitating more effective measures for the registration and branding of these animals. The Court held that the questioned statute was a valid exercise of the police power and declared in part as follows: To justify the State in thus interposing its authority in behalf of the public, it must appear, first, that the interests of the public generally, as distinguished from those of a particular class, require such interference; and second, that the means are reasonably necessary for the accomplishment of the purpose, and not unduly oppressive upon individuals. ... From what has been said, we think it is clear that the enactment of the provisions of the statute under consideration was required by "the interests of the public generally, as distinguished from those of a particular class" and that the prohibition of the slaughter of carabaos for human consumption, so long as these animals are fit for agricultural work or draft purposes was a "reasonably necessary" limitation on private ownership, to protect the community from the loss of the services of such animals by their slaughter by improvident owners, tempted either by greed of momentary gain, or by a desire to enjoy the luxury of animal food, even when by so doing the productive power of the community may be measurably and dangerously affected. In the light of the tests mentioned above, we hold with the Toribio Case that the carabao, as the poor man's tractor, so to speak, has a direct relevance to the public welfare and so is a lawful subject of Executive Order No. 626. The method chosen in the basic measure is also reasonably necessary for the purpose sought to be achieved and not unduly oppressive upon individuals, again following the above-cited doctrine. There is no doubt that by banning the slaughter of these animals except where they are at least seven years old if male and eleven years old if female upon issuance of the necessary permit, the executive order will be conserving those still fit for farm work or breeding and preventing their improvident depletion. But while conceding that the amendatory measure has the same lawful subject as the original executive order, we cannot say with equal certainty that it complies with the second requirement, viz., that there be a lawful method. We note that to strengthen the original measure, Executive Order No. 626-A imposes an absolute ban not on 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
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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. 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.

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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.

G.R. No. 168056 September 1, 2005 ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S. ALCANTARA and ED VINCENT S. ALBANO, Petitioners, vs. THE HONORABLE EXECUTIVE SECRETARY EDUARDO ERMITA; HONORABLE SECRETARY OF THE DEPARTMENT OF FINANCE CESAR PURISIMA; and HONORABLE COMMISSIONER OF INTERNAL REVENUE GUILLERMO PARAYNO, JR., Respondent. x-------------------------x G.R. No. 168207
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AQUILINO Q. PIMENTEL, JR., LUISA P. EJERCITO-ESTRADA, JINGGOY E. ESTRADA, PANFILO M. LACSON, ALFREDO S. LIM, JAMBY A.S. MADRIGAL, AND SERGIO R. OSMEA III, Petitioners, vs. EXECUTIVE SECRETARY EDUARDO R. ERMITA, CESAR V. PURISIMA, SECRETARY OF FINANCE, GUILLERMO L. PARAYNO, JR., COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE, Respondent. x-------------------------x G.R. No. 168461 ASSOCIATION OF PILIPINAS SHELL DEALERS, INC. represented by its President, ROSARIO ANTONIO; PETRON DEALERS ASSOCIATION represented by its President, RUTH E. BARBIBI; ASSOCIATION OF CALTEX DEALERS OF THE PHILIPPINES represented by its President, MERCEDITAS A. GARCIA; ROSARIO ANTONIO doing business under the name and style of "ANB NORTH SHELL SERVICE STATION"; LOURDES MARTINEZ doing business under the name and style of "SHELL GATE N. DOMINGO"; BETHZAIDA TAN doing business under the name and style of "ADVANCE SHELL STATION"; REYNALDO P. MONTOYA doing business under the name and style of "NEW LAMUAN SHELL SERVICE STATION"; EFREN SOTTO doing business under the name and style of "RED FIELD SHELL SERVICE STATION"; DONICA CORPORATION represented by its President, DESI TOMACRUZ; RUTH E. MARBIBI doing business under the name and style of "R&R PETRON STATION"; PETER M. UNGSON doing business under the name and style of "CLASSIC STAR GASOLINE SERVICE STATION"; MARIAN SHEILA A. LEE doing business under the name and style of "NTE GASOLINE & SERVICE STATION"; JULIAN CESAR P. POSADAS doing business under the name and style of "STARCARGA ENTERPRISES"; ADORACION MAEBO doing business under the name and style of "CMA MOTORISTS CENTER"; SUSAN M. ENTRATA doing business under the name and style of "LEONAS GASOLINE STATION and SERVICE CENTER"; CARMELITA BALDONADO doing business under the name and style of "FIRST CHOICE SERVICE CENTER"; MERCEDITAS A. GARCIA doing business under the name and style of "LORPED SERVICE CENTER"; RHEAMAR A. RAMOS doing business under the name and style of "RJRAM PTT GAS STATION"; MA. ISABEL VIOLAGO doing business under the name and style of "VIOLAGO-PTT SERVICE CENTER"; MOTORISTS HEART CORPORATION represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA; MOTORISTS HARVARD CORPORATION represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA; MOTORISTS HERITAGE CORPORATION represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA; PHILIPPINE STANDARD OIL CORPORATION represented by its Vice-President for Operations, JOSELITO F. FLORDELIZA; ROMEO MANUEL doing business under the name and style of "ROMMAN GASOLINE STATION"; ANTHONY ALBERT CRUZ III doing business under the name and style of "TRUE SERVICE STATION", Petitioners, vs. CESAR V. PURISIMA, in his capacity as Secretary of the Department of Finance and GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of Internal Revenue, Respondent. x-------------------------x G.R. No. 168463

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FRANCIS JOSEPH G. ESCUDERO, VINCENT CRISOLOGO, EMMANUEL JOEL J. VILLANUEVA, RODOLFO G. PLAZA, DARLENE ANTONINOCUSTODIO, OSCAR G. MALAPITAN, BENJAMIN C. AGARAO, JR. JUAN EDGARDO M. ANGARA, JUSTIN MARC SB. CHIPECO, FLORENCIO G. NOEL, MUJIV S. HATAMAN, RENATO B. MAGTUBO, JOSEPH A. SANTIAGO, TEOFISTO DL. GUINGONA III, RUY ELIAS C. LOPEZ, RODOLFO Q. AGBAYANI and TEODORO A. CASIO, Petitioners, vs. CESAR V. PURISIMA, in his capacity as Secretary of Finance, GUILLERMO L. PARAYNO, JR., in his capacity as Commissioner of Internal Revenue, and EDUARDO R. ERMITA, in his capacity as Executive Secretary, Respondent. x-------------------------x G.R. No. 168730 BATAAN GOVERNOR ENRIQUE T. GARCIA, JR. Petitioner, vs. HON. EDUARDO R. ERMITA, in his capacity as the Executive Secretary; HON. MARGARITO TEVES, in his capacity as Secretary of Finance; HON. JOSE MARIO BUNAG, in his capacity as the OIC Commissioner of the Bureau of Internal Revenue; and HON. ALEXANDER AREVALO, in his capacity as the OIC Commissioner of the Bureau of Customs, Respondent. DECISION AUSTRIA-MARTINEZ, J.: The expenses of government, having for their object the interest of all, should be borne by everyone, and the more man enjoys the advantages of society, the more he ought to hold himself honored in contributing to those expenses. -Anne Robert Jacques Turgot (1727-1781) French statesman and economist Mounting budget deficit, revenue generation, inadequate fiscal allocation for education, increased emoluments for health workers, and wider coverage for full value-added tax benefits these are the reasons why Republic Act No. 9337 (R.A. No. 9337)1 was enacted. Reasons, the wisdom of which, the Court even with its extensive constitutional power of review, cannot probe. The petitioners in these cases, however, question not only the wisdom of the law, but also perceived constitutional infirmities in its passage. Every law enjoys in its favor the presumption of constitutionality. Their arguments notwithstanding, petitioners failed to justify their call for the invalidity of the law. Hence, R.A. No. 9337 is not unconstitutional. LEGISLATIVE HISTORY
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R.A. No. 9337 is a consolidation of three legislative bills namely, House Bill Nos. 3555 and 3705, and Senate Bill No. 1950. House Bill No. 35552 was introduced on first reading on January 7, 2005. The House Committee on Ways and Means approved the bill, in substitution of House Bill No. 1468, which Representative (Rep.) Eric D. Singson introduced on August 8, 2004. The President certified the bill on January 7, 2005 for immediate enactment. On January 27, 2005, the House of Representatives approved the bill on second and third reading. House Bill No. 37053 on the other hand, substituted House Bill No. 3105 introduced by Rep. Salacnib F. Baterina, and House Bill No. 3381 introduced by Rep. Jacinto V. Paras. Its "mother bill" is House Bill No. 3555. The House Committee on Ways and Means approved the bill on February 2, 2005. The President also certified it as urgent on February 8, 2005. The House of Representatives approved the bill on second and third reading on February 28, 2005. Meanwhile, the Senate Committee on Ways and Means approved Senate Bill No. 19504 on March 7, 2005, "in substitution of Senate Bill Nos. 1337, 1838 and 1873, taking into consideration House Bill Nos. 3555 and 3705." Senator Ralph G. Recto sponsored Senate Bill No. 1337, while Senate Bill Nos. 1838 and 1873 were both sponsored by Sens. Franklin M. Drilon, Juan M. Flavier and Francis N. Pangilinan. The President certified the bill on March 11, 2005, and was approved by the Senate on second and third reading on April 13, 2005. On the same date, April 13, 2005, the Senate agreed to the request of the House of Representatives for a committee conference on the disagreeing provisions of the proposed bills. Before long, the Conference Committee on the Disagreeing Provisions of House Bill No. 3555, House Bill No. 3705, and Senate Bill No. 1950, "after having met and discussed in full free and conference," recommended the approval of its report, which the Senate did on May 10, 2005, and with the House of Representatives agreeing thereto the next day, May 11, 2005. On May 23, 2005, the enrolled copy of the consolidated House and Senate version was transmitted to the President, who signed the same into law on May 24, 2005. Thus, came R.A. No. 9337. July 1, 2005 is the effectivity date of R.A. No. 9337.5 When said date came, the Court issued a temporary restraining order, effective immediately and continuing until further orders, enjoining respondents from enforcing and implementing the law. Oral arguments were held on July 14, 2005. Significantly, during the hearing, the Court speaking through Mr. Justice Artemio V. Panganiban, voiced the rationale for its issuance of the temporary restraining order on July 1, 2005, to wit: J. PANGANIBAN : . . . But before I go into the details of your presentation, let me just tell you a little background. You know when the law took effect on July 1, 2005, the Court issued a TRO at about 5 oclock in the afternoon. But before that, there was a lot of complaints aired on television and on radio. Some people in a gas station were complaining that the gas prices went up by 10%. Some people were complaining that their electric bill will go up by 10%. Other times people riding in domestic air carrier were complaining that the prices that theyll have to pay would have t o go up by 10%. While all that was being aired, per your presentation and per our own understanding of the law, thats not true. Its not true that the e-vat law necessarily increased prices by 10% uniformly isnt it?
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ATTY. BANIQUED : No, Your Honor. J. PANGANIBAN : It is not? ATTY. BANIQUED : Its not, because, Your Honor, there is an Executive Order that granted the Petroleum companies some subsidy . . . interrupted J. PANGANIBAN : Thats correct . . . ATTY. BANIQUED : . . . and therefore that was meant to temper the impact . . . interrupted J. PANGANIBAN : . . . mitigating measures . . . ATTY. BANIQUED : Yes, Your Honor. J. PANGANIBAN : As a matter of fact a part of the mitigating measures would be the elimination of the Excise Tax and the import duties. That is why, it is not correct to say that the VAT as to petroleum dealers increased prices by 10%. ATTY. BANIQUED : Yes, Your Honor. J. PANGANIBAN : And therefore, there is no justification for increasing the retail price by 10% to cover the E-Vat tax. If you consider the excise tax and the import duties, the Net Tax would probably be in the neighborhood of 7%? We are not going into exact figures I am just trying to deliver a point that different industries, different products, different services are hit differently. So its not correct to say that all prices must go up by 10%. ATTY. BANIQUED : Youre right, Your Honor. J. PANGANIBAN : Now. For instance, Domestic Airline companies, Mr. Counsel, are at present imposed a Sales Tax of 3%. When this E-Vat law took effect the Sales Tax was also removed as a mitigating measure. So, therefore, there is no justification to increase the fares by 10% at best 7%, correct? ATTY. BANIQUED : I guess so, Your Honor, yes. J. PANGANIBAN : There are other products that the people were complaining on that first day, were being increased arbitrarily by 10%. And thats one reason among many others this Court had to issue TRO because of the confusion in the implementation. Thats why we added as an is sue in this case, even if its tangentially taken up by the pleadings of the parties, the confusion in the implementation of the E-vat. Our people were subjected to the mercy of that confusion of an across the board increase of 10%, which you yourself now admit and I think even the Government will admit is incorrect. In some cases, it should be 3% only, in some cases it should be 6% depending on these mitigating measures and the location and situation of each product, of each service, of each company, isnt it? ATTY. BANIQUED : Yes, Your Honor.
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J. PANGANIBAN : Alright. So thats one reason why we had to issue a TRO pending the clarif ication of all these and we wish the government will take time to clarify all these by means of a more detailed implementing rules, in case the law is upheld by this Court. . . .6 The Court also directed the parties to file their respective Memoranda. G.R. No. 168056 Before R.A. No. 9337 took effect, petitioners ABAKADA GURO Party List, et al., filed a petition for prohibition on May 27, 2005. They question the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the National Internal Revenue Code (NIRC). Section 4 imposes a 10% VAT on sale of goods and properties, Section 5 imposes a 10% VAT on importation of goods, and Section 6 imposes a 10% VAT on sale of services and use or lease of properties. These questioned provisions contain a uniform proviso authorizing the President, upon recommendation of the Secretary of Finance, to raise the VAT rate to 12%, effective January 1, 2006, after any of the following conditions have been satisfied, to wit: . . . That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the following conditions has been satisfied: (i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or (ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 %). Petitioners argue that the law is unconstitutional, as it constitutes abandonment by Congress of its exclusive authority to fix the rate of taxes under Article VI, Section 28(2) of the 1987 Philippine Constitution. G.R. No. 168207 On June 9, 2005, Sen. Aquilino Q. Pimentel, Jr., et al., filed a petition for certiorari likewise assailing the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337. Aside from questioning the so-called stand-by authority of the President to increase the VAT rate to 12%, on the ground that it amounts to an undue delegation of legislative power, petitioners also contend that the increase in the VAT rate to 12% contingent on any of the two conditions being satisfied violates the due process clause embodied in Article III, Section 1 of the Constitution, as it imposes an unfair and additional tax burden on the people, in that: (1) the 12% increase is ambiguous because it does not state if the rate would be returned to the original 10% if the conditions are no longer satisfied; (2) the rate is unfair and unreasonable, as the people are unsure of the applicable VAT rate from year to year; and (3) the increase in the VAT rate, which is supposed to be an incentive to the President to raise the VAT collection to at least 2 4/5 of the GDP of the previous year, should only be based on fiscal adequacy. Petitioners further claim that the inclusion of a stand-by authority granted to the President by the Bicameral Conference Committee is a violation of the "no-amendment rule" upon last reading of a bill laid down in Article VI, Section 26(2) of the Constitution.
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G.R. No. 168461 Thereafter, a petition for prohibition was filed on June 29, 2005, by the Association of Pilipinas Shell Dealers, Inc., et al., assailing the following provisions of R.A. No. 9337: 1) Section 8, amending Section 110 (A)(2) of the NIRC, requiring that the input tax on depreciable goods shall be amortized over a 60-month period, if the acquisition, excluding the VAT components, exceeds One Million Pesos (P1, 000,000.00); 2) Section 8, amending Section 110 (B) of the NIRC, imposing a 70% limit on the amount of input tax to be credited against the output tax; and 3) Section 12, amending Section 114 (c) of the NIRC, authorizing the Government or any of its political subdivisions, instrumentalities or agencies, including GOCCs, to deduct a 5% final withholding tax on gross payments of goods and services, which are subject to 10% VAT under Sections 106 (sale of goods and properties) and 108 (sale of services and use or lease of properties) of the NIRC. Petitioners contend that these provisions are unconstitutional for being arbitrary, oppressive, excessive, and confiscatory. Petitioners argument is premised on the constitutional right of non-deprivation of life, liberty or property without due process of law under Article III, Section 1 of the Constitution. According to petitioners, the contested sections impose limitations on the amount of input tax that may be claimed. Petitioners also argue that the input tax partakes the nature of a property that may not be confiscated, appropriated, or limited without due process of law. Petitioners further contend that like any other property or property right, the input tax credit may be transferred or disposed of, and that by limiting the same, the government gets to tax a profit or value-added even if there is no profit or value-added. Petitioners also believe that these provisions violate the constitutional guarantee of equal protection of the law under Article III, Section 1 of the Constitution, as the limitation on the creditable input tax if: (1) the entity has a high ratio of input tax; or (2) invests in capital equipment; or (3) has several transactions with the government, is not based on real and substantial differences to meet a valid classification. Lastly, petitioners contend that the 70% limit is anything but progressive, violative of Article VI, Section 28(1) of the Constitution, and that it is the smaller businesses with higher input tax to output tax ratio that will suffer the consequences thereof for it wipes out whatever meager margins the petitioners make. G.R. No. 168463 Several members of the House of Representatives led by Rep. Francis Joseph G. Escudero filed this petition for certiorari on June 30, 2005. They question the constitutionality of R.A. No. 9337 on the following grounds: 1) Sections 4, 5, and 6 of R.A. No. 9337 constitute an undue delegation of legislative power, in violation of Article VI, Section 28(2) of the Constitution;

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2) The Bicameral Conference Committee acted without jurisdiction in deleting the no pass on provisions present in Senate Bill No. 1950 and House Bill No. 3705; and 3) Insertion by the Bicameral Conference Committee of Sections 27, 28, 34, 116, 117, 119, 121, 125,7 148, 151, 236, 237 and 288, which were present in Senate Bill No. 1950, violates Article VI, Section 24(1) of the Constitution, which provides that all appropriation, revenue or tariff bills shall originate exclusively in the House of Representatives G.R. No. 168730 On the eleventh hour, Governor Enrique T. Garcia filed a petition for certiorari and prohibition on July 20, 2005, alleging unconstitutionality of the law on the ground that the limitation on the creditable input tax in effect allows VAT-registered establishments to retain a portion of the taxes they collect, thus violating the principle that tax collection and revenue should be solely allocated for public purposes and expenditures. Petitioner Garcia further claims that allowing these establishments to pass on the tax to the consumers is inequitable, in violation of Article VI, Section 28(1) of the Constitution. RESPONDENTS COMMENT The Office of the Solicitor General (OSG) filed a Comment in behalf of respondents. Preliminarily, respondents contend that R.A. No. 9337 enjoys the presumption of constitutionality and petitioners failed to cast doubt on its validity. Relying on the case of Tolentino vs. Secretary of Finance, 235 SCRA 630 (1994), respondents argue that the procedural issues raised by petitioners, i.e., legality of the bicameral proceedings, exclusive origination of revenue measures and the power of the Senate concomitant thereto, have already been settled. With regard to the issue of undue delegation of legislative power to the President, respondents contend that the law is complete and leaves no discretion to the President but to increase the rate to 12% once any of the two conditions provided therein arise. Respondents also refute petitioners argument that the increase to 12%, as well as the 70% limitation on the creditable input tax, the 60-month amortization on the purchase or importation of capital goods exceeding P1,000,000.00, and the 5% final withholding tax by government agencies, is arbitrary, oppressive, and confiscatory, and that it violates the constitutional principle on progressive taxation, among others. Finally, respondents manifest that R.A. No. 9337 is the anchor of the governments fiscal reform agenda. A reform in the valu e-added system of taxation is the core revenue measure that will tilt the balance towards a sustainable macroeconomic environment necessary for economic growth. ISSUES The Court defined the issues, as follows: PROCEDURAL ISSUE
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Whether R.A. No. 9337 violates the following provisions of the Constitution: a. Article VI, Section 24, and b. Article VI, Section 26(2) SUBSTANTIVE ISSUES 1. Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108 of the NIRC, violate the following provisions of the Constitution: a. Article VI, Section 28(1), and b. Article VI, Section 28(2) 2. Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the NIRC; and Section 12 of R.A. No. 9337, amending Section 114(C) of the NIRC, violate the following provisions of the Constitution: a. Article VI, Section 28(1), and b. Article III, Section 1 RULING OF THE COURT As a prelude, the Court deems it apt to restate the general principles and concepts of value-added tax (VAT), as the confusion and inevitably, litigation, breeds from a fallacious notion of its nature. The VAT is a tax on spending or consumption. It is levied on the sale, barter, exchange or lease of goods or properties and services.8 Being an indirect tax on expenditure, the seller of goods or services may pass on the amount of tax paid to the buyer,9 with the seller acting merely as a tax collector.10 The burden of VAT is intended to fall on the immediate buyers and ultimately, the end-consumers. In contrast, a direct tax is a tax for which a taxpayer is directly liable on the transaction or business it engages in, without transferring the burden to someone else.11 Examples are individual and corporate income taxes, transfer taxes, and residence taxes.12 In the Philippines, the value-added system of sales taxation has long been in existence, albeit in a different mode. Prior to 1978, the system was a singlestage tax computed under the "cost deduction method" and was payable only by the original sellers. The single-stage system was subsequently modified, and a mixture of the "cost deduction method" and "tax credit method" was used to determine the value-added tax payable.13 Under the "tax credit method," an entity can credit against or subtract from the VAT charged on its sales or outputs the VAT paid on its purchases, inputs and imports.14

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It was only in 1987, when President Corazon C. Aquino issued Executive Order No. 273, that the VAT system was rationalized by imposing a multi-stage tax rate of 0% or 10% on all sales using the "tax credit method."15 E.O. No. 273 was followed by R.A. No. 7716 or the Expanded VAT Law,16 R.A. No. 8241 or the Improved VAT Law,17 R.A. No. 8424 or the Tax Reform Act of 1997,18 and finally, the presently beleaguered R.A. No. 9337, also referred to by respondents as the VAT Reform Act. The Court will now discuss the issues in logical sequence. PROCEDURAL ISSUE I. Whether R.A. No. 9337 violates the following provisions of the Constitution: a. Article VI, Section 24, and b. Article VI, Section 26(2) A. The Bicameral Conference Committee Petitioners Escudero, et al., and Pimentel, et al., allege that the Bicameral Conference Committee exceeded its authority by: 1) Inserting the stand-by authority in favor of the President in Sections 4, 5, and 6 of R.A. No. 9337; 2) Deleting entirely the no pass-on provisions found in both the House and Senate bills; 3) Inserting the provision imposing a 70% limit on the amount of input tax to be credited against the output tax; and 4) Including the amendments introduced only by Senate Bill No. 1950 regarding other kinds of taxes in addition to the value-added tax. Petitioners now beseech the Court to define the powers of the Bicameral Conference Committee. It should be borne in mind that the power of internal regulation and discipline are intrinsic in any legislative body for, as unerringly elucidated by Justice Story, "[i]f the power did not exist, it would be utterly impracticable to transact the business of the nation, either at all, or at least with decency, deliberation, and order."19 Thus, Article VI, Section 16 (3) of the Constitution provides that "each House may determine the rules of its proceedings." Pursuant to this inherent constitutional power to promulgate and implement its own rules of procedure, the respective rules of each house of Congress provided for the creation of a Bicameral Conference Committee. Thus, Rule XIV, Sections 88 and 89 of the Rules of House of Representatives provides as follows:
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Sec. 88. Conference Committee. In the event that the House does not agree with the Senate on the amendment to any bill or joint resolution, the differences may be settled by the conference committees of both chambers. In resolving the differences with the Senate, the House panel shall, as much as possible, adhere to and support the House Bill. If the differences with the Senate are so substantial that they materially impair the House Bill, the panel shall report such fact to the House for the latters appropriate action. Sec. 89. Conference Committee Reports. . . . Each report shall contain a detailed, sufficiently explicit statement of the changes in or amendments to the subject measure. ... The Chairman of the House panel may be interpellated on the Conference Committee Report prior to the voting thereon. The House shall vote on the Conference Committee Report in the same manner and procedure as it votes on a bill on third and final reading.

Rule XII, Section 35 of the Rules of the Senate states: Sec. 35. In the event that the Senate does not agree with the House of Representatives on the provision of any bill or joint resolution, the differences shall be settled by a conference committee of both Houses which shall meet within ten (10) days after their composition. The President shall designate the members of the Senate Panel in the conference committee with the approval of the Senate. Each Conference Committee Report shall contain a detailed and sufficiently explicit statement of the changes in, or amendments to the subject measure, and shall be signed by a majority of the members of each House panel, voting separately. A comparative presentation of the conflicting House and Senate provisions and a reconciled version thereof with the explanatory statement of the conference committee shall be attached to the report. ... The creation of such conference committee was apparently in response to a problem, not addressed by any constitutional provision, where the two houses of Congress find themselves in disagreement over changes or amendments introduced by the other house in a legislative bill. Given that one of the most basic powers of the legislative branch is to formulate and implement its own rules of proceedings and to discipline its members, may the Court then delve into the details of how Congress complies with its internal rules or how it conducts its business of passing legislation? Note that in the present petitions, the issue is not whether provisions of the rules of both houses creating the bicameral conference committee are unconstitutional, but whether the bicameral conference committee has strictly complied with the rules of both houses, thereby remaining within the jurisdiction conferred upon it by Congress.

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In the recent case of Farias vs. The Executive Secretary,20 the Court En Banc, unanimously reiterated and emphasized its adherence to the "enrolled bill doctrine," thus, declining therein petitioners plea for the Court to go behind the enrolled copy of the bill. Assailed in said case was Congresss creation of two sets of bicameral conference committees, the lack of records of said committees proceedings, the alleged violation of said committees of the rules of both houses, and the disappearance or deletion of one of the provisions in the compromise bill submitted by the bicameral conference committee. It was argued that such irregularities in the passage of the law nullified R.A. No. 9006, or the Fair Election Act. Striking down such argument, the Court held thus: Under the "enrolled bill doctrine," the signing of a bill by the Speaker of the House and the Senate President and the certification of the Secretaries of both Houses of Congress that it was passed are conclusive of its due enactment. A review of cases reveals the Courts consistent a dherence to the rule. The Court finds no reason to deviate from the salutary rule in this case where the irregularities alleged by the petitioners mostly involved the internal rules of Congress, e.g., creation of the 2nd or 3rd Bicameral Conference Committee by the House. This Court is not the proper forum for the enforcement of these internal rules of Congress, whether House or Senate. Parliamentary rules are merely procedural and with their observance the courts have no concern. Whatever doubts there may be as to the formal validity of Rep. Act No. 9006 must be resolved in its favor. The Court reiterates its ruling in Arroyo vs. De Venecia, viz.: But the cases, both here and abroad, in varying forms of expression, all deny to the courts the power to inquire into allegations that, in enacting a law, a House of Congress failed to comply with its own rules, in the absence of showing that there was a violation of a constitutional provision or the rights of private individuals. In Osmea v. Pendatun, it was held: "At any rate, courts have declared that the rules adopted by deliberative bodies are subject to revocation, modification or waiver at the pleasure of the body adopting them. And it has been said that "Parliamentary rules are merely procedural, and with their observance, the courts have no concern. They may be waived or disregarded by the legislative body." Consequently, "mere failure to conform to parliamentary usage will not invalidate the action (taken by a deliberative body) when the requisite number of members have agreed to a particular measure."21 (Emphasis supplied) The foregoing declaration is exactly in point with the present cases, where petitioners allege irregularities committed by the conference committee in introducing changes or deleting provisions in the House and Senate bills. Akin to the Farias case,22 the present petitions also raise an issue regarding the actions taken by the conference committee on matters regarding Congress compliance with its own internal rules. As state d earlier, one of the most basic and inherent power of the legislature is the power to formulate rules for its proceedings and the discipline of its members. Congress is the best judge of how it should conduct its own business expeditiously and in the most orderly manner. It is also the sole concern of Congress to instill discipline among the members of its conference committee if it believes that said members violated any of its rules of proceedings. Even the expanded jurisdiction of this Court cannot apply to questions regarding only the internal operation of Congress, thus, the Court is wont to deny a review of the internal proceedings of a co-equal branch of government. Moreover, as far back as 1994 or more than ten years ago, in the case of Tolentino vs. Secretary of Finance,23 the Court already made the pronouncement that "[i]f a change is desired in the practice [of the Bicameral Conference Committee] it must be sought in Congress since this question is not covered by any constitutional provision but is only an internal rule of each house." 24 To date, Congress has not seen it fit to make such changes adverted to by the Court. It seems, therefore, that Congress finds the practices of the bicameral conference committee to be very useful for purposes of prompt and efficient legislative action.
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Nevertheless, just to put minds at ease that no blatant irregularities tainted the proceedings of the bicameral conference committees, the Court deems it necessary to dwell on the issue. The Court observes that there was a necessity for a conference committee because a comparison of the provisions of House Bill Nos. 3555 and 3705 on one hand, and Senate Bill No. 1950 on the other, reveals that there were indeed disagreements. As pointed out in the petitions, said disagreements were as follows: House Bill No. 3555

House Bill No.3705

Senate Bill No. 1950 With regard to "Stand-By Authority" in favor of President Provides for 12% VAT on every sale of goods or properties (amending Sec. 106 of NIRC); 12% VAT on importation of goods (amending Sec. 107 of NIRC); and 12% VAT on sale of services and use or lease of properties (amending Sec. 108 of NIRC)

Provides for 12% VAT in general on sales of goods or properties and reduced rates for sale of certain locally manufactured goods and petroleum products and raw materials to be used in the manufacture thereof (amending Sec. 106 of NIRC); 12% VAT on importation of goods and reduced rates for certain imported products including petroleum products (amending Sec. 107 of NIRC); and 12% VAT on sale of services and use or lease of properties and a reduced rate for certain services including power generation (amending Sec. 108 of NIRC)

Provides for a single rate of 10% VAT on sale of goods or properties (amending Sec. 106 of NIRC), 10% VAT on sale of services including sale of electricity by generation companies, transmission and distribution companies, and use or lease of properties (amending Sec. 108 of NIRC) With regard to the "no pass-on" provision No similar provision

Provides that the VAT imposed on power generation and on the sale of petroleum products shall be absorbed by generation companies or sellers, respectively, and shall not be passed on to consumers

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Provides that the VAT imposed on sales of electricity by generation companies and services of transmission companies and distribution companies, as well as those of franchise grantees of electric utilities shall not apply to residential end-users. VAT shall be absorbed by generation, transmission, and distribution companies. With regard to 70% limit on input tax credit Provides that the input tax credit for capital goods on which a VAT has been paid shall be equally distributed over 5 years or the depreciable life of such capital goods; the input tax credit for goods and services other than capital goods shall not exceed 5% of the total amount of such goods and services; and for persons engaged in retail trading of goods, the allowable input tax credit shall not exceed 11% of the total amount of goods purchased.

No similar provision

Provides that the input tax credit for capital goods on which a VAT has been paid shall be equally distributed over 5 years or the depreciable life of such capital goods; the input tax credit for goods and services other than capital goods shall not exceed 90% of the output VAT. With regard to amendments to be made to NIRC provisions regarding income and excise taxes No similar provision

No similar provision

Provided for amendments to several NIRC provisions regarding corporate income, percentage, franchise and excise taxes The disagreements between the provisions in the House bills and the Senate bill were with regard to (1) what rate of VAT is to be imposed; (2) whether only the VAT imposed on electricity generation, transmission and distribution companies should not be passed on to consumers, as proposed in the Senate bill, or both the VAT imposed on electricity generation, transmission and distribution companies and the VAT imposed on sale of petroleum products should not be passed on to consumers, as proposed in the House bill; (3) in what manner input tax credits should be limited; (4) and whether the NIRC provisions on corporate income taxes, percentage, franchise and excise taxes should be amended. There being differences and/or disagreements on the foregoing provisions of the House and Senate bills, the Bicameral Conference Committee was mandated by the rules of both houses of Congress to act on the same by settling said differences and/or disagreements. The Bicameral Conference Committee acted on the disagreeing provisions by making the following changes:

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1. With regard to the disagreement on the rate of VAT to be imposed, it would appear from the Conference Committee Report that the Bicameral Conference Committee tried to bridge the gap in the difference between the 10% VAT rate proposed by the Senate, and the various rates with 12% as the highest VAT rate proposed by the House, by striking a compromise whereby the present 10% VAT rate would be retained until certain conditions arise, i.e., the value-added tax collection as a percentage of gross domestic product (GDP) of the previous year exceeds 2 4/5%, or National Government deficit as a percentage of GDP of the previous year exceeds 1%, when the President, upon recommendation of the Secretary of Finance shall raise the rate of VAT to 12% effective January 1, 2006. 2. With regard to the disagreement on whether only the VAT imposed on electricity generation, transmission and distribution companies should not be passed on to consumers or whether both the VAT imposed on electricity generation, transmission and distribution companies and the VAT imposed on sale of petroleum products may be passed on to consumers, the Bicameral Conference Committee chose to settle such disagreement by altogether deleting from its Report any no pass-on provision. 3. With regard to the disagreement on whether input tax credits should be limited or not, the Bicameral Conference Committee decided to adopt the position of the House by putting a limitation on the amount of input tax that may be credited against the output tax, although it crafted its own language as to the amount of the limitation on input tax credits and the manner of computing the same by providing thus: (A) Creditable Input Tax. . . . ... Provided, The input tax on goods purchased or imported in a calendar month for use in trade or business for which deduction for depreciation is allowed under this Code, shall be spread evenly over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition cost for such goods, excluding the VAT component thereof, exceeds one million Pesos (P1,000,000.00): PROVIDED, however, that if the estimated useful life of the capital good is less than five (5) years, as used for depreciation purposes, then the input VAT shall be spread over such shorter period: . . . (B) Excess Output or Input Tax. If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters: PROVIDED that the input tax inclusive of input VAT carried over from the previous quarter that may be credited in every quarter shall not exceed seventy percent (70%) of the output VAT: PROVIDED, HOWEVER, THAT any input tax attributable to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, . . . 4. With regard to the amendments to other provisions of the NIRC on corporate income tax, franchise, percentage and excise taxes, the conference committee decided to include such amendments and basically adopted the provisions found in Senate Bill No. 1950, with some changes as to the rate of the tax to be imposed. Under the provisions of both the Rules of the House of Representatives and Senate Rules, the Bicameral Conference Committee is mandated to settle the differences between the disagreeing provisions in the House bill and the Senate bill. The term "settle" is synonymous to "reconcile" and "harmonize."25 To reconcile or harmonize disagreeing provisions, the Bicameral Conference Committee may then (a) adopt the specific provisions of either the House bill or Senate bill, (b) decide that neither provisions in the House bill or the provisions in the Senate bill would
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be carried into the final form of the bill, and/or (c) try to arrive at a compromise between the disagreeing provisions. In the present case, the changes introduced by the Bicameral Conference Committee on disagreeing provisions were meant only to reconcile and harmonize the disagreeing provisions for it did not inject any idea or intent that is wholly foreign to the subject embraced by the original provisions. The so-called stand-by authority in favor of the President, whereby the rate of 10% VAT wanted by the Senate is retained until such time that certain conditions arise when the 12% VAT wanted by the House shall be imposed, appears to be a compromise to try to bridge the difference in the rate of VAT proposed by the two houses of Congress. Nevertheless, such compromise is still totally within the subject of what rate of VAT should be imposed on taxpayers. The no pass-on provision was deleted altogether. In the transcripts of the proceedings of the Bicameral Conference Committee held on May 10, 2005, Sen. Ralph Recto, Chairman of the Senate Panel, explained the reason for deleting the no pass-on provision in this wise: . . . the thinking was just to keep the VAT law or the VAT bill simple. And we were thinking that no sector should be a beneficiary of legislative grace, neither should any sector be discriminated on. The VAT is an indirect tax. It is a pass on-tax. And lets keep it plain and simple. Lets not confuse the bill and put a no pass-on provision. Two-thirds of the world have a VAT system and in this two-thirds of the globe, I have yet to see a VAT with a no passthough provision. So, the thinking of the Senate is basically simple, lets keep the VAT simple.26 (Emphasis supplied) Rep. Teodoro Locsin further made the manifestation that the no pass-on provision "never really enjoyed the support of either House."27 With regard to the amount of input tax to be credited against output tax, the Bicameral Conference Committee came to a compromise on the percentage rate of the limitation or cap on such input tax credit, but again, the change introduced by the Bicameral Conference Committee was totally within the intent of both houses to put a cap on input tax that may be credited against the output tax. From the inception of the subject revenue bill in the House of Representatives, one of the major objectives was to "plug a glaring loophole in the tax policy and administration by creating vital restrictions on the claiming of input VAT tax credits . . ." and "[b]y introducing limitations on the claiming of tax credit, we are capping a major leakage that has placed our collection efforts at an apparent disadvantage."28 As to the amendments to NIRC provisions on taxes other than the value-added tax proposed in Senate Bill No. 1950, since said provisions were among those referred to it, the conference committee had to act on the same and it basically adopted the version of the Senate. Thus, all the changes or modifications made by the Bicameral Conference Committee were germane to subjects of the provisions referred to it for reconciliation. Such being the case, the Court does not see any grave abuse of discretion amounting to lack or excess of jurisdiction committed by the Bicameral Conference Committee. In the earlier cases of Philippine Judges Association vs. Prado29 and Tolentino vs. Secretary of Finance,30 the Court recognized the long-standing legislative practice of giving said conference committee ample latitude for compromising differences between the Senate and the House. Thus, in the Tolentino case, it was held that:
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. . . it is within the power of a conference committee to include in its report an entirely new provision that is not found either in the House bill or in the Senate bill. If the committee can propose an amendment consisting of one or two provisions, there is no reason why it cannot propose several provisions, collectively considered as an "amendment in the nature of a substitute," so long as such amendment is germane to the subject of the bills before the committee. After all, its report was not final but needed the approval of both houses of Congress to become valid as an act of the legislative department. The charge that in this case the Conference Committee acted as a third legislative chamber is thus without any basis.31 (Emphasis supplied) B. R.A. No. 9337 Does Not Violate Article VI, Section 26(2) of the Constitution on the "No-Amendment Rule" Article VI, Sec. 26 (2) of the Constitution, states: No bill passed by either House shall become a law unless it has passed three readings on separate days, and printed copies thereof in its final form have been distributed to its Members three days before its passage, except when the President certifies to the necessity of its immediate enactment to meet a public calamity or emergency. Upon the last reading of a bill, no amendment thereto shall be allowed, and the vote thereon shall be taken immediately thereafter, and the yeas and nays entered in the Journal. Petitioners argument that the practice where a bicameral conference committee is allowed to add or delete provisions in the House bill and the Senate bill after these had passed three readings is in effect a circumvention of the "no amendment rule" (Sec. 26 (2), Art. VI of the 1987 Constitution), fails to convince the Court to deviate from its ruling in the Tolentino case that: Nor is there any reason for requiring that the Committees Report in these cases must have undergone three readings in each of the two houses. If that be the case, there would be no end to negotiation since each house may seek modification of the compromise bill. . . . Art. VI. 26 (2) must, therefore, be construed as referring only to bills introduced for the first time in either house of Congress, not to the conference committee report.32 (Emphasis supplied) The Court reiterates here that the "no-amendment rule" refers only to the procedure to be followed by each house of Congress with regard to bills initiated in each of said respective houses, before said bill is transmitted to the other house for its concurrence or amendment. Verily, to construe said provision in a way as to proscribe any further changes to a bill after one house has voted on it would lead to absurdity as this would mean that the other house of Congress would be deprived of its constitutional power to amend or introduce changes to said bill. Thus, Art. VI, Sec. 26 (2) of the Constitution cannot be taken to mean that the introduction by the Bicameral Conference Committee of amendments and modifications to disagreeing provisions in bills that have been acted upon by both houses of Congress is prohibited. C. R.A. No. 9337 Does Not Violate Article VI, Section 24 of the Constitution on Exclusive Origination of Revenue Bills Coming to the issue of the validity of the amendments made regarding the NIRC provisions on corporate income taxes and percentage, excise taxes. Petitioners refer to the following provisions, to wit: Section 27
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Rates of Income Tax on Domestic Corporation 28(A)(1) Tax on Resident Foreign Corporation 28(B)(1) Inter-corporate Dividends 34(B)(1) Inter-corporate Dividends 116 Tax on Persons Exempt from VAT 117 Percentage Tax on domestic carriers and keepers of Garage 119 Tax on franchises 121 Tax on banks and Non-Bank Financial Intermediaries 148 Excise Tax on manufactured oils and other fuels 151 Excise Tax on mineral products 236
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Registration requirements 237 Issuance of receipts or sales or commercial invoices 288 Disposition of Incremental Revenue Petitioners claim that the amendments to these provisions of the NIRC did not at all originate from the House. They aver that House Bill No. 3555 proposed amendments only regarding Sections 106, 107, 108, 110 and 114 of the NIRC, while House Bill No. 3705 proposed amendments only to Sections 106, 107,108, 109, 110 and 111 of the NIRC; thus, the other sections of the NIRC which the Senate amended but which amendments were not found in the House bills are not intended to be amended by the House of Representatives. Hence, they argue that since the proposed amendments did not originate from the House, such amendments are a violation of Article VI, Section 24 of the Constitution. The argument does not hold water. Article VI, Section 24 of the Constitution reads: Sec. 24. All appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills shall originate exclusively in the House of Representatives but the Senate may propose or concur with amendments. In the present cases, petitioners admit that it was indeed House Bill Nos. 3555 and 3705 that initiated the move for amending provisions of the NIRC dealing mainly with the value-added tax. Upon transmittal of said House bills to the Senate, the Senate came out with Senate Bill No. 1950 proposing amendments not only to NIRC provisions on the value-added tax but also amendments to NIRC provisions on other kinds of taxes. Is the introduction by the Senate of provisions not dealing directly with the value- added tax, which is the only kind of tax being amended in the House bills, still within the purview of the constitutional provision authorizing the Senate to propose or concur with amendments to a revenue bill that originated from the House? The foregoing question had been squarely answered in the Tolentino case, wherein the Court held, thus: . . . To begin with, it is not the law but the revenue bill which is required by the Constitution to "originate exclusively" in the House of Representatives. It is important to emphasize this, because a bill originating in the House may undergo such extensive changes in the Senate that the result may be a rewriting of the whole. . . . At this point, what is important to note is that, as a result of the Senate action, a distinct bill may be produced. To insist that a revenue statute and not only the bill which initiated the legislative process culminating in the enactment of the law must substantially be the same as the House bill would be to deny the Senates power not only to "concur with amendments" but also to "propose amendments." It would be to violate the coequality of legislative power of the two houses of Congress and in fact make the House superior to the Senate.
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Given, then, the power of the Senate to propose amendments, the Senate can propose its own version even with respect to bills which are required by the Constitution to originate in the House. ... Indeed, what the Constitution simply means is that the initiative for filing revenue, tariff or tax bills, bills authorizing an increase of the public debt, private bills and bills of local application must come from the House of Representatives on the theory that, elected as they are from the districts, the members of the House can be expected to be more sensitive to the local needs and problems. On the other hand, the senators, who are elected at large, are expected to approach the same problems from the national perspective. Both views are thereby made to bear on the enactment of such laws.33 (Emphasis supplied) Since there is no question that the revenue bill exclusively originated in the House of Representatives, the Senate was acting within its constitutional power to introduce amendments to the House bill when it included provisions in Senate Bill No. 1950 amending corporate income taxes, percentage, excise and franchise taxes. Verily, Article VI, Section 24 of the Constitution does not contain any prohibition or limitation on the extent of the amendments that may be introduced by the Senate to the House revenue bill. Furthermore, the amendments introduced by the Senate to the NIRC provisions that had not been touched in the House bills are still in furtherance of the intent of the House in initiating the subject revenue bills. The Explanatory Note of House Bill No. 1468, the very first House bill introduced on the floor, which was later substituted by House Bill No. 3555, stated: One of the challenges faced by the present administration is the urgent and daunting task of solving the countrys serious financial problems. To do this, government expenditures must be strictly monitored and controlled and revenues must be significantly increased. This may be easier said than done, but our fiscal authorities are still optimistic the government will be operating on a balanced budget by the year 2009. In fact, several measures that will result to significant expenditure savings have been identified by the administration. It is supported with a credible package of revenue measures that include measures to improve tax administration and control the leakages in revenues from income taxes and the value-added tax (VAT). (Emphasis supplied) Rep. Eric D. Singson, in his sponsorship speech for House Bill No. 3555, declared that: In the budget message of our President in the year 2005, she reiterated that we all acknowledged that on top of our agenda must be the restoration of the health of our fiscal system. In order to considerably lower the consolidated public sector deficit and eventually achieve a balanced budget by the year 2009, we need to seize windows of opportunities which might seem poignant in the beginning, but in the long run prove effective and beneficial to the overall status of our economy. One such opportunity is a review of existing tax rates, evaluating the relevance given our present conditions.34 (Emphasis supplied) Notably therefore, the main purpose of the bills emanating from the House of Representatives is to bring in sizeable revenues for the government
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to supplement our countrys serious financial problems, and improve tax administration and control of the leakages in revenues from income taxes and value-added taxes. As these house bills were transmitted to the Senate, the latter, approaching the measures from the point of national perspective, can introduce amendments within the purposes of those bills. It can provide for ways that would soften the impact of the VAT measure on the consumer, i.e., by distributing the burden across all sectors instead of putting it entirely on the shoulders of the consumers. The sponsorship speech of Sen. Ralph Recto on why the provisions on income tax on corporation were included is worth quoting: All in all, the proposal of the Senate Committee on Ways and Means will raise P64.3 billion in additional revenues annually even while by mitigating prices of power, services and petroleum products. However, not all of this will be wrung out of VAT. In fact, only P48.7 billion amount is from the VAT on twelve goods and services. The rest of the tab P10.5 billion- will be picked by corporations. What we therefore prescribe is a burden sharing between corporate Philippines and the consumer. Why should the latter bear all the pain? Why should the fiscal salvation be only on the burden of the consumer? The corporate worlds equity is in form of the increase in the corporate income tax from 32 to 35 percent, but up to 2008 only. This will raise P10.5 billion a year. After that, the rate will slide back, not to its old rate of 32 percent, but two notches lower, to 30 percent. Clearly, we are telling those with the capacity to pay, corporations, to bear with this emergency provision that will be in effect for 1,200 days, while we put our fiscal house in order. This fiscal medicine will have an expiry date. For their assistance, a reward of tax reduction awaits them. We intend to keep the length of their sacrifice brief. We would like to assure them that not because there is a light at the end of the tunnel, this government will keep on making the tunnel long. The responsibility will not rest solely on the weary shoulders of the small man. Big business will be there to share the burden.35 As the Court has said, the Senate can propose amendments and in fact, the amendments made on provisions in the tax on income of corporations are germane to the purpose of the house bills which is to raise revenues for the government. Likewise, the Court finds the sections referring to other percentage and excise taxes germane to the reforms to the VAT system, as these sections would cushion the effects of VAT on consumers. Considering that certain goods and services which were subject to percentage tax and excise tax would no longer be VAT-exempt, the consumer would be burdened more as they would be paying the VAT in addition to these taxes. Thus, there is a need to amend these sections to soften the impact of VAT. Again, in his sponsorship speech, Sen. Recto said: However, for power plants that run on oil, we will reduce to zero the present excise tax on bunker fuel, to lessen the effect of a VAT on this product. For electric utilities like Meralco, we will wipe out the franchise tax in exchange for a VAT.
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And in the case of petroleum, while we will levy the VAT on oil products, so as not to destroy the VAT chain, we will however bring down the excise tax on socially sensitive products such as diesel, bunker, fuel and kerosene. ... What do all these exercises point to? These are not contortions of giving to the left hand what was taken from the right. Rather, these sprang from our concern of softening the impact of VAT, so that the people can cushion the blow of higher prices they will have to pay as a result of VAT.36 The other sections amended by the Senate pertained to matters of tax administration which are necessary for the implementation of the changes in the VAT system. To reiterate, the sections introduced by the Senate are germane to the subject matter and purposes of the house bills, which is to supplement our countrys fiscal deficit, among others. Thus, the Senate acted within its power to propose those amendments. SUBSTANTIVE ISSUES I. Whether Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108 of the NIRC, violate the following provisions of the Constitution: a. Article VI, Section 28(1), and b. Article VI, Section 28(2) A. No Undue Delegation of Legislative Power Petitioners ABAKADA GURO Party List, et al., Pimentel, Jr., et al., and Escudero, et al. contend in common that Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the NIRC giving the President the stand-by authority to raise the VAT rate from 10% to 12% when a certain condition is met, constitutes undue delegation of the legislative power to tax. The assailed provisions read as follows: SEC. 4. Sec. 106 of the same Code, as amended, is hereby further amended to read as follows: SEC. 106. Value-Added Tax on Sale of Goods or Properties. (A) Rate and Base of Tax. There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties, a value-added tax equivalent to ten percent (10%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be
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paid by the seller or transferor: provided, that the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the following conditions has been satisfied. (i) value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%) or (ii) national government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 %). SEC. 5. Section 107 of the same Code, as amended, is hereby further amended to read as follows: SEC. 107. Value-Added Tax on Importation of Goods. (A) In General. There shall be levied, assessed and collected on every importation of goods a value-added tax equivalent to ten percent (10%) based on the total value used by the Bureau of Customs in determining tariff and customs duties, plus customs duties, excise taxes, if any, and other charges, such tax to be paid by the importer prior to the release of such goods from customs custody: Provided, That where the customs duties are determined on the basis of the quantity or volume of the goods, the value-added tax shall be based on the landed cost plus excise taxes, if any: provided, further, that the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%) after any of the following conditions has been satisfied. (i) value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%) or (ii) national government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 %). SEC. 6. Section 108 of the same Code, as amended, is hereby further amended to read as follows: SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties (A) Rate and Base of Tax. There shall be levied, assessed and collected, a value-added tax equivalent to ten percent (10%) of gross receipts derived from the sale or exchange of services: provided, that the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the following conditions has been satisfied. (i) value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%) or (ii) national government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 %). (Emphasis supplied) Petitioners allege that the grant of the stand-by authority to the President to increase the VAT rate is a virtual abdication by Congress of its exclusive power to tax because such delegation is not within the purview of Section 28 (2), Article VI of the Constitution, which provides: The Congress may, by law, authorize the President to fix within specified limits, and may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the government.
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They argue that the VAT is a tax levied on the sale, barter or exchange of goods and properties as well as on the sale or exchange of services, which cannot be included within the purview of tariffs under the exempted delegation as the latter refers to customs duties, tolls or tribute payable upon merchandise to the government and usually imposed on goods or merchandise imported or exported. Petitioners ABAKADA GURO Party List, et al., further contend that delegating to the President the legislative power to tax is contrary to republicanism. They insist that accountability, responsibility and transparency should dictate the actions of Congress and they should not pass to the President the decision to impose taxes. They also argue that the law also effectively nullified the Presidents power of control, which includes the authority to set aside and nullify the acts of her subordinates like the Secretary of Finance, by mandating the fixing of the tax rate by the President upon the recommendation of the Secretary of Finance. Petitioners Pimentel, et al. aver that the President has ample powers to cause, influence or create the conditions provided by the law to bring about either or both the conditions precedent. On the other hand, petitioners Escudero, et al. find bizarre and revolting the situation that the imposition of the 12% rate would be subject to the whim of the Secretary of Finance, an unelected bureaucrat, contrary to the principle of no taxation without representation. They submit that the Secretary of Finance is not mandated to give a favorable recommendation and he may not even give his recommendation. Moreover, they allege that no guiding standards are provided in the law on what basis and as to how he will make his recommendation. They claim, nonetheless, that any recommendation of the Secretary of Finance can easily be brushed aside by the President since the former is a mere alter ego of the latter, such that, ultimately, it is the President who decides whether to impose the increased tax rate or not. A brief discourse on the principle of non-delegation of powers is instructive. The principle of separation of powers ordains that each of the three great branches of government has exclusive cognizance of and is supreme in matters falling within its own constitutionally allocated sphere.37 A logical corollary to the doctrine of separation of powers is the principle of non-delegation of powers, as expressed in the Latin maxim: potestas delegata non delegari potest which means "what has been delegated, cannot be delegated."38 This doctrine is based on the ethical principle that such as delegated power constitutes not only a right but a duty to be performed by the delegate through the instrumentality of his own judgment and not through the intervening mind of another.39 With respect to the Legislature, Section 1 of Article VI of the Constitution provides that "the Legislative power shall be vested in the Congress of the Philippines which shall consist of a Senate and a House of Representatives." The powers which Congress is prohibited from delegating are those which are strictly, or inherently and exclusively, legislative. Purely legislative power, which can never be delegated, has been described as the authority to make a complete law complete as to the time when it shall take effect and as to whom it shall be applicable and to determine the expediency of its enactment.40 Thus, the rule is that in order that a court may be justified in holding a statute unconstitutional as a delegation of legislative power, it must appear that the power involved is purely legislative in nature that is, one appertaining exclusively to the legislative department. It is the nature of the power, and not the liability of its use or the manner of its exercise, which determines the validity of its delegation.
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Nonetheless, the general rule barring delegation of legislative powers is subject to the following recognized limitations or exceptions: (1) Delegation of tariff powers to the President under Section 28 (2) of Article VI of the Constitution; (2) Delegation of emergency powers to the President under Section 23 (2) of Article VI of the Constitution; (3) Delegation to the people at large; (4) Delegation to local governments; and (5) Delegation to administrative bodies. In every case of permissible delegation, there must be a showing that the delegation itself is valid. It is valid only if the law (a) is complete in itself, setting forth therein the policy to be executed, carried out, or implemented by the delegate;41 and (b) fixes a standard the limits of which are sufficiently determinate and determinable to which the delegate must conform in the performance of his functions.42 A sufficient standard is one which defines legislative policy, marks its limits, 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.43 Both tests are intended to prevent a total transference of legislative authority to the delegate, who is not allowed to step into the shoes of the legislature and exercise a power essentially legislative.44 In People vs. Vera,45 the Court, through eminent Justice Jose P. Laurel, expounded on the concept and extent of delegation of power in this wise: In testing whether a statute constitutes an undue delegation of legislative power or not, it is usual to inquire whether the statute was complete in all its terms and provisions when it left the hands of the legislature so that nothing was left to the judgment of any other appointee or delegate of the legislature. ... The true distinction, says Judge Ranney, is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring an authority or discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can be made. ... It is contended, however, that a legislative act may be made to the effect as law after it leaves the hands of the legislature. It is true that laws may be made effective on certain contingencies, as by proclamation of the executive or the adoption by the people of a particular community. In Wayman vs. Southard, the Supreme Court of the United States ruled that the legislature may delegate a power not legislative which it may itself rightfully exercise. The power to ascertain facts is such a power which may be delegated. There is nothing essentially legislative in ascertaining the existence of facts or conditions as the basis of the taking into effect of a law. That is a mental process common to all branches of the government. Notwithstanding the apparent tendency, however, to relax the rule prohibiting delegation of legislative authority on account of the complexity arising from social and economic forces at work in this modern industrial age, the orthodox pronouncement of Judge Cooley in his work on Constitutional Limitations finds restatement in
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Prof. Willoughby's treatise on the Constitution of the United States in the following language speaking of declaration of legislative power to administrative agencies: The principle which permits the legislature to provide that the administrative agent may determine when the circumstances are such as require the application of a law is defended upon the ground that at the time this authority is granted, the rule of public policy, which is the essence of the legislative act, is determined by the legislature. In other words, the legislature, as it is its duty to do, determines that, under given circumstances, certain executive or administrative action is to be taken, and that, under other circumstances, different or no action at all is to be taken. What is thus left to the administrative official is not the legislative determination of what public policy demands, but simply the ascertainment of what the facts of the case require to be done according to the terms of the law by which he is governed. The efficiency of an Act as a declaration of legislative will must, of course, come from Congress, but the ascertainment of the contingency upon which the Act shall take effect may be left to such agencies as it may designate. The legislature, then, may provide that a law shall take effect upon the happening of future specified contingencies leaving to some other person or body the power to determine when the specified contingency has arisen. (Emphasis supplied).46 In Edu vs. Ericta,47 the Court reiterated: What cannot be delegated is the authority under the Constitution to make laws and to alter and repeal them; the test is the completeness of the statute in all its terms and provisions when it leaves the hands of the legislature. To determine whether or not there is an undue delegation of legislative power, the inquiry must be directed to the scope and definiteness of the measure enacted. The legislative does not abdicate its functions when it describes what job must be done, who is to do it, and what is the scope of his authority. For a complex economy, that may be the only way in which the legislative process can go forward. A distinction has rightfully been made between delegation of power to make the laws which necessarily involves a discretion as to what it shall be, which constitutionally may not be done, and delegation of authority or discretion as to its execution to be exercised under and in pursuance of the law, to which no valid objection can be made. The Constitution is thus not to be regarded as denying the legislature the necessary resources of flexibility and practicability. (Emphasis supplied).48 Clearly, the legislature may delegate to executive officers or bodies the power to determine certain facts or conditions, or the happening of contingencies, on which the operation of a statute is, by its terms, made to depend, but the legislature must prescribe sufficient standards, policies or limitations on their authority.49 While the power to tax cannot be delegated to executive agencies, details as to the enforcement and administration of an exercise of such power may be left to them, including the power to determine the existence of facts on which its operation depends.50 The rationale for this is that the preliminary ascertainment of facts as basis for the enactment of legislation is not of itself a legislative function, but is simply ancillary to legislation. Thus, the duty of correlating information and making recommendations is the kind of subsidiary activity which the legislature may perform through its members, or which it may delegate to others to perform. Intelligent legislation on the complicated problems of modern society is impossible in the absence of accurate information on the part of the legislators, and any reasonable method of securing such information is proper.51 The Constitution as a continuously operative charter of government does not require that Congress find for itself every fact upon which it desires to base legislative action or that it make for itself detailed determinations which it has declared to be prerequisite to application of legislative policy to particular facts and circumstances impossible for Congress itself properly to investigate.52 In the present case, the challenged section of R.A. No. 9337 is the common proviso in Sections 4, 5 and 6 which reads as follows:

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That the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the following conditions has been satisfied: (i) Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or (ii) National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 %). The case before the Court is not a delegation of legislative power. It is simply a delegation of ascertainment of facts upon which enforcement and administration of the increase rate under the law is contingent. The legislature has made the operation of the 12% rate effective January 1, 2006, contingent upon a specified fact or condition. It leaves the entire operation or non-operation of the 12% rate upon factual matters outside of the control of the executive. No discretion would be exercised by the President. Highlighting the absence of discretion is the fact that the word shall is used in the common proviso. The use of the word shall connotes a mandatory order. Its use in a statute denotes an imperative obligation and is inconsistent with the idea of discretion.53 Where the law is clear and unambiguous, it must be taken to mean exactly what it says, and courts have no choice but to see to it that the mandate is obeyed.54 Thus, it is the ministerial duty of the President to immediately impose the 12% rate upon the existence of any of the conditions specified by Congress. This is a duty which cannot be evaded by the President. Inasmuch as the law specifically uses the word shall, the exercise of discretion by the President does not come into play. It is a clear directive to impose the 12% VAT rate when the specified conditions are present. The time of taking into effect of the 12% VAT rate is based on the happening of a certain specified contingency, or upon the ascertainment of certain facts or conditions by a person or body other than the legislature itself. The Court finds no merit to the contention of petitioners ABAKADA GURO Party List, et al. that the law effectively nullified the Presidents power of control over the Secretary of Finance by mandating the fixing of the tax rate by the President upon the recommendation of the Secretary of Finance. The Court cannot also subscribe to the position of petitioners Pimentel, et al. that the word shall should be interpreted to mean may in view of the phrase "upon the recommendation of the Secretary of Finance." Neither does the Court find persuasive the submission of petitioners Escudero, et al. that any recommendation by the Secretary of Finance can easily be brushed aside by the President since the former is a mere alter ego of the latter. When one speaks of the Secretary of Finance as the alter ego of the President, it simply means that as head of the Department of Finance he is the assistant and agent of the Chief Executive. The multifarious executive and administrative functions of the Chief Executive are performed by and through the executive departments, and the acts of the secretaries of such departments, such as the Department of Finance, performed and promulgated in the regular course of business, are, unless disapproved or reprobated by the Chief Executive, presumptively the acts of the Chief Executive. The Secretary of Finance, as such, occupies a political position and holds office in an advisory capacity, and, in the language of Thomas Jefferson, "should be of the President's bosom confidence" and, in the language of Attorney-General Cushing, is "subject to the direction of the President."55

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In the present case, in making his recommendation to the President on the existence of either of the two conditions, the Secretary of Finance is not acting as the alter ego of the President or even her subordinate. In such instance, he is not subject to the power of control and direction of the President. He is acting as the agent of the legislative department, to determine and declare the event upon which its expressed will is to take effect.56 The Secretary of Finance becomes the means or tool by which legislative policy is determined and implemented, considering that he possesses all the facilities to gather data and information and has a much broader perspective to properly evaluate them. His function is to gather and collate statistical data and other pertinent information and verify if any of the two conditions laid out by Congress is present. His personality in such instance is in reality but a projection of that of Congress. Thus, being the agent of Congress and not of the President, the President cannot alter or modify or nullify, or set aside the findings of the Secretary of Finance and to substitute the judgment of the former for that of the latter. Congress simply granted the Secretary of Finance the authority to ascertain the existence of a fact, namely, whether by December 31, 2005, the valueadded tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (24/5%) or the national government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1%). If either of these two instances has occurred, the Secretary of Finance, by legislative mandate, must submit such information to the President. Then the 12% VAT rate must be imposed by the President effective January 1, 2006. There is no undue delegation of legislative power but only of the discretion as to the execution of a law. This is constitutionally permissible.57 Congress does not abdicate its functions or unduly delegate power when it describes what job must be done, who must do it, and what is the scope of his authority; in our complex economy that is frequently the only way in which the legislative process can go forward.58 As to the argument of petitioners ABAKADA GURO Party List, et al. that delegating to the President the legislative power to tax is contrary to the principle of republicanism, the same deserves scant consideration. Congress did not delegate the power to tax but the mere implementation of the law. The intent and will to increase the VAT rate to 12% came from Congress and the task of the President is to simply execute the legislative policy. That Congress chose to do so in such a manner is not within the province of the Court to inquire into, its task being to interpret the law.59 The insinuation by petitioners Pimentel, et al. that the President has ample powers to cause, influence or create the conditions to bring about either or both the conditions precedent does not deserve any merit as this argument is highly speculative. The Court does not rule on allegations which are manifestly conjectural, as these may not exist at all. The Court deals with facts, not fancies; on realities, not appearances. When the Court acts on appearances instead of realities, justice and law will be short-lived. B. The 12% Increase VAT Rate Does Not Impose an Unfair and Unnecessary Additional Tax Burden Petitioners Pimentel, et al. argue that the 12% increase in the VAT rate imposes an unfair and additional tax burden on the people. Petitioners also argue that the 12% increase, dependent on any of the 2 conditions set forth in the contested provisions, is ambiguous because it does not state if the VAT rate would be returned to the original 10% if the rates are no longer satisfied. Petitioners also argue that such rate is unfair and unreasonable, as the people are unsure of the applicable VAT rate from year to year. Under the common provisos of Sections 4, 5 and 6 of R.A. No. 9337, if any of the two conditions set forth therein are satisfied, the President shall increase the VAT rate to 12%. The provisions of the law are clear. It does not provide for a return to the 10% rate nor does it empower the President to so revert if, after the rate is increased to 12%, the VAT collection goes below the 24/5 of the GDP of the previous year or that the national government deficit as a percentage of GDP of the previous year does not exceed 1%.
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Therefore, no statutory construction or interpretation is needed. Neither can conditions or limitations be introduced where none is provided for. Rewriting the law is a forbidden ground that only Congress may tread upon.60 Thus, in the absence of any provision providing for a return to the 10% rate, which in this case the Court finds none, petitioners argument is, at best, purely speculative. There is no basis for petitioners fear of a fluctuating VAT rate because the law itself does not provide that the rate should go back to 10% if the conditions provided in Sections 4, 5 and 6 are no longer present. The rule is that where the provision of the law is clear and unambiguous, so that there is no occasion for the court's seeking the legislative intent, the law must be taken as it is, devoid of judicial addition or subtraction.61 Petitioners also contend that the increase in the VAT rate, which was allegedly an incentive to the President to raise the VAT collection to at least 2 4/5 of the GDP of the previous year, should be based on fiscal adequacy. Petitioners obviously overlooked that increase in VAT collection is not the only condition. There is another condition, i.e., the national government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 %). Respondents explained the philosophy behind these alternative conditions: 1. VAT/GDP Ratio > 2.8% The condition set for increasing VAT rate to 12% have economic or fiscal meaning. If VAT/GDP is less than 2.8%, it means that government has weak or no capability of implementing the VAT or that VAT is not effective in the function of the tax collection. Therefore, there is no value to increase it to 12% because such action will also be ineffectual. 2. Natl Govt Deficit/GDP >1.5% The condition set for increasing VAT when deficit/GDP is 1.5% or less means the fiscal condition of government has reached a relatively sound position or is towards the direction of a balanced budget position. Therefore, there is no need to increase the VAT rate since the fiscal house is in a relatively healthy position. Otherwise stated, if the ratio is more than 1.5%, there is indeed a need to increase the VAT rate.62 That the first condition amounts to an incentive to the President to increase the VAT collection does not render it unconstitutional so long as there is a public purpose for which the law was passed, which in this case, is mainly to raise revenue. In fact, fiscal adequacy dictated the need for a raise in revenue. The principle of fiscal adequacy as a characteristic of a sound tax system was originally stated by Adam Smith in his Canons of Taxation (1776), as: IV. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state.63 It simply means that sources of revenues must be adequate to meet government expenditures and their variations.64
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The dire need for revenue cannot be ignored. Our country is in a quagmire of financial woe. During the Bicameral Conference Committee hearing, then Finance Secretary Purisima bluntly depicted the countrys gloomy state of economic affairs, thus: First, let me explain the position that the Philippines finds itself in right now. We are in a position where 90 percent of our revenue is used for debt service. So, for every peso of revenue that we currently raise, 90 goes to debt service. Thats interest plus amortization of our debt. So clearly, this is not a sustainable situation. Thats the first fact. The second fact is that our debt to GDP level is way out of line compared to other peer countries that borrow money from that international financial markets. Our debt to GDP is approximately equal to our GDP. Again, that shows you that this is not a sustainable situation. The third thing that Id like to point out is the environment that we are presently operating in is not as benign as what it used to be the past five years. What do I mean by that? In the past five years, weve been lucky because we were operating in a period of basically global growth and low interest rates. The past few months, we have seen an inching up, in fact, a rapid increase in the interest rates in the leading economies of the world. And, therefore, our ability to borrow at reasonable prices is going to be challenged. In fact, ultimately, the question is our ability to access the financial markets. When the President made her speech in July last year, the environment was not as bad as it is now, at least based on the forecast of most financial institutions. So, we were assuming that raising 80 billion would put us in a position where we can then convince them to improve our ability to borrow at lower rates. But conditions have changed on us because the interest rates have gone up. In fact, just within this room, we tried to access the market for a billion dollars because for this year alone, the Philippines will have to borrow 4 billion dollars. Of that amount, we have borrowed 1.5 billion. We issued last January a 25-year bond at 9.7 percent cost. We were trying to access last week and the market was not as favorable and up to now we have not accessed and we might pull back because the conditions are not very good. So given this situation, we at the Department of Finance believe that we really need to front-end our deficit reduction. Because it is deficit that is causing the increase of the debt and we are in what we call a debt spiral. The more debt you have, the more deficit you have because interest and debt service eats and eats more of your revenue. We need to get out of this debt spiral. And the only way, I think, we can get out of this debt spiral is really have a front-end adjustment in our revenue base.65 The image portrayed is chilling. Congress passed the law hoping for rescue from an inevitable catastrophe. Whether the law is indeed sufficient to answer the states economic dilemma is not for the Court to judge. In the Farias case, the Court refused to consider the various arguments raised therein that dwelt on the wisdom of Section 14 of R.A. No. 9006 (The Fair Election Act), pronouncing that: . . . policy matters are not the concern of the Court. Government policy is within the exclusive dominion of the political branches of the government. It is not for this Court to look into the wisdom or propriety of legislative determination. Indeed, whether an enactment is wise or unwise, whether it is based on sound economic theory, whether it is the best means to achieve the desired results, whether, in short, the legislative discretion within its prescribed limits should be exercised in a particular manner are matters for the judgment of the legislature, and the serious conflict of opinions does not suffice to bring them within the range of judicial cognizance.66
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In the same vein, the Court in this case will not dawdle on the purpose of Congress or the executive policy, given that it is not for the judiciary to "pass upon questions of wisdom, justice or expediency of legislation."67 II. Whether Section 8 of R.A. No. 9337, amending Sections 110(A)(2) and 110(B) of the NIRC; and Section 12 of R.A. No. 9337, amending Section 114(C) of the NIRC, violate the following provisions of the Constitution: a. Article VI, Section 28(1), and b. Article III, Section 1 A. Due Process and Equal Protection Clauses Petitioners Association of Pilipinas Shell Dealers, Inc., et al. argue that Section 8 of R.A. No. 9337, amending Sections 110 (A)(2), 110 (B), and Section 12 of R.A. No. 9337, amending Section 114 (C) of the NIRC are arbitrary, oppressive, excessive and confiscatory. Their argument is premised on the constitutional right against deprivation of life, liberty of property without due process of law, as embodied in Article III, Section 1 of the Constitution. Petitioners also contend that these provisions violate the constitutional guarantee of equal protection of the law. The doctrine is that where the due process and equal protection clauses are invoked, considering that they are not fixed rules but rather broad standards, there is a need for proof of such persuasive character as would lead to such a conclusion. Absent such a showing, the presumption of validity must prevail.68 Section 8 of R.A. No. 9337, amending Section 110(B) of the NIRC imposes a limitation on the amount of input tax that may be credited against the output tax. It states, in part: "[P]rovided, that the input tax inclusive of the input VAT carried over from the previous quarter that may be credited in every quarter shall not exceed seventy percent (70%) of the output VAT: " Input Tax is defined under Section 110(A) of the NIRC, as amended, as the value-added tax due from or paid by a VAT-registered person on the importation of goods or local purchase of good and services, including lease or use of property, in the course of trade or business, from a VAT-registered person, and Output Tax is the value-added tax due on the sale or lease of taxable goods or properties or services by any person registered or required to register under the law. Petitioners claim that the contested sections impose limitations on the amount of input tax that may be claimed. In effect, a portion of the input tax that has already been paid cannot now be credited against the output tax. Petitioners argument is not absolute. It assumes that the input tax exceeds 70% of the output tax, and therefore, the input tax in excess of 70% remains uncredited. However, to the extent that the input tax is less than 70% of the output tax, then 100% of such input tax is still creditable.
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More importantly, the excess input tax, if any, is retained in a businesss books of accounts and remains creditable in the succeeding quarter/s. This is explicitly allowed by Section 110(B), which provides that "if the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters." In addition, Section 112(B) allows a VAT-registered person to apply for the issuance of a tax credit certificate or refund for any unused input taxes, to the extent that such input taxes have not been applied against the output taxes. Such unused input tax may be used in payment of his other internal revenue taxes. The non-application of the unutilized input tax in a given quarter is not ad infinitum, as petitioners exaggeratedly contend. Their analysis of the effect of the 70% limitation is incomplete and one-sided. It ends at the net effect that there will be unapplied/unutilized inputs VAT for a given quarter. It does not proceed further to the fact that such unapplied/unutilized input tax may be credited in the subsequent periods as allowed by the carry-over provision of Section 110(B) or that it may later on be refunded through a tax credit certificate under Section 112(B). Therefore, petitioners argument must be rejected. On the other hand, it appears that petitioner Garcia failed to comprehend the operation of the 70% limitation on the input tax. According to petitioner, the limitation on the creditable input tax in effect allows VAT-registered establishments to retain a portion of the taxes they collect, which violates the principle that tax collection and revenue should be for public purposes and expenditures As earlier stated, the input tax is the tax paid by a person, passed on to him by the seller, when he buys goods. Output tax meanwhile is the tax due to the person when he sells goods. In computing the VAT payable, three possible scenarios may arise: First, if at the end of a taxable quarter the output taxes charged by the seller are equal to the input taxes that he paid and passed on by the suppliers, then no payment is required; Second, when the output taxes exceed the input taxes, the person shall be liable for the excess, which has to be paid to the Bureau of Internal Revenue (BIR);69 and Third, if the input taxes exceed the output taxes, the excess shall be carried over to the succeeding quarter or quarters. Should the input taxes result from zero-rated or effectively zero-rated transactions, any excess over the output taxes shall instead be refunded to the taxpayer or credited against other internal revenue taxes, at the taxpayers option.70 Section 8 of R.A. No. 9337 however, imposed a 70% limitation on the input tax. Thus, a person can credit his input tax only up to the extent of 70% of the output tax. In laymans term, the value-added taxes that a person/taxpayer paid and passed on to him by a seller can only be credited up to 70% of the value-added taxes that is due to him on a taxable transaction. There is no retention of any tax collection because the person/taxpayer has already previously paid the input tax to a seller, and the seller will subsequently remit such input tax to the BIR. The party directly liable for the payment of the tax is the seller.71 What only needs to be done is for the person/taxpayer to apply or credit these input taxes, as evidenced by receipts, against his output taxes.

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Petitioners Association of Pilipinas Shell Dealers, Inc., et al. also argue that the input tax partakes the nature of a property that may not be confiscated, appropriated, or limited without due process of law. The input tax is not a property or a property right within the constitutional purview of the due process clause. A VAT-registered persons entitlement to the creditable input tax is a mere statutory privilege. The distinction between statutory privileges and vested rights must be borne in mind for persons have no vested rights in statutory privileges. The state may change or take away rights, which were created by the law of the state, although it may not take away property, which was vested by virtue of such rights.72 Under the previous system of single-stage taxation, taxes paid at every level of distribution are not recoverable from the taxes payable, although it becomes part of the cost, which is deductible from the gross revenue. When Pres. Aquino issued E.O. No. 273 imposing a 10% multi-stage tax on all sales, it was then that the crediting of the input tax paid on purchase or importation of goods and services by VAT-registered persons against the output tax was introduced.73 This was adopted by the Expanded VAT Law (R.A. No. 7716),74 and The Tax Reform Act of 1997 (R.A. No. 8424).75 The right to credit input tax as against the output tax is clearly a privilege created by law, a privilege that also the law can remove, or in this case, limit. Petitioners also contest as arbitrary, oppressive, excessive and confiscatory, Section 8 of R.A. No. 9337, amending Section 110(A) of the NIRC, which provides: SEC. 110. Tax Credits. (A) Creditable Input Tax. Provided, That the input tax on goods purchased or imported in a calendar month for use in trade or business for which deduction for depreciation is allowed under this Code, shall be spread evenly over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition cost for such goods, excluding the VAT component thereof, exceeds One million pesos (P1,000,000.00): Provided, however, That if the estimated useful life of the capital goods is less than five (5) years, as used for depreciation purposes, then the input VAT shall be spread over such a shorter period: Provided, finally, That in the case of purchase of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or license upon payment of the compensation, rental, royalty or fee. The foregoing section imposes a 60-month period within which to amortize the creditable input tax on purchase or importation of capital goods with acquisition cost of P1 Million pesos, exclusive of the VAT component. Such spread out only poses a delay in the crediting of the input tax. Petitioners argument is without basis because the taxpayer is not permanently deprived of his privilege to credit the input tax. It is worth mentioning that Congress admitted that the spread-out of the creditable input tax in this case amounts to a 4-year interest-free loan to the government.76 In the same breath, Congress also justified its move by saying that the provision was designed to raise an annual revenue of 22.6 billion.77 The legislature also dispelled the fear that the provision will fend off foreign investments, saying that foreign investors have other tax incentives provided by law, and citing the case of China, where despite a 17.5% non-creditable VAT, foreign investments were not deterred.78 Again, for whatever is the purpose of the 60-month amortization, this involves executive economic policy and legislative wisdom in which the Court cannot intervene.
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With regard to the 5% creditable withholding tax imposed on payments made by the government for taxable transactions, Section 12 of R.A. No. 9337, which amended Section 114 of the NIRC, reads: SEC. 114. Return and Payment of Value-added Tax. (C) Withholding of Value-added Tax. The Government or any of its political subdivisions, instrumentalities or agencies, including government-owned or controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods and services which are subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold a final value-added tax at the rate of five percent (5%) of the gross payment thereof: Provided, That the payment for lease or use of properties or property rights to nonresident owners shall be subject to ten percent (10%) withholding tax at the time of payment. For purposes of this Section, the payor or person in control of the payment shall be considered as the withholding agent. The value-added tax withheld under this Section shall be remitted within ten (10) days following the end of the month the withholding was made. Section 114(C) merely provides a method of collection, or as stated by respondents, a more simplified VAT withholding system. The government in this case is constituted as a withholding agent with respect to their payments for goods and services. Prior to its amendment, Section 114(C) provided for different rates of value-added taxes to be withheld -- 3% on gross payments for purchases of goods; 6% on gross payments for services supplied by contractors other than by public works contractors; 8.5% on gross payments for services supplied by public work contractors; or 10% on payment for the lease or use of properties or property rights to nonresident owners. Under the present Section 114(C), these different rates, except for the 10% on lease or property rights payment to nonresidents, were deleted, and a uniform rate of 5% is applied. The Court observes, however, that the law the used the word final. In tax usage, final, as opposed to creditable, means full. Thus, it is provided in Section 114(C): "final value-added tax at the rate of five percent (5%)." In Revenue Regulations No. 02-98, implementing R.A. No. 8424 (The Tax Reform Act of 1997), the concept of final withholding tax on income was explained, to wit: SECTION 2.57. Withholding of Tax at Source (A) Final Withholding Tax. Under the final withholding tax system the amount of income tax withheld by the withholding agent is constituted as full and final payment of the income tax due from the payee on the said income. The liability for payment of the tax rests primarily on the payor as a withholding agent. Thus, in case of his failure to withhold the tax or in case of underwithholding, the deficiency tax shall be collected from the payor/withholding agent. (B) Creditable Withholding Tax. Under the creditable withholding tax system, taxes withheld on certain income payments are intended to equal or at least approximate the tax due of the payee on said income. Taxes withheld on income payments covered by the expanded withholding tax (referred to in Sec. 2.57.2 of these regulations) and compensation income (referred to in Sec. 2.78 also of these regulations) are creditable in nature.
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As applied to value-added tax, this means that taxable transactions with the government are subject to a 5% rate, which constitutes as full payment of the tax payable on the transaction. This represents the net VAT payable of the seller. The other 5% effectively accounts for the standard input VAT (deemed input VAT), in lieu of the actual input VAT directly or attributable to the taxable transaction.79 The Court need not explore the rationale behind the provision. It is clear that Congress intended to treat differently taxable transactions with the government.80 This is supported by the fact that under the old provision, the 5% tax withheld by the government remains creditable against the tax liability of the seller or contractor, to wit: SEC. 114. Return and Payment of Value-added Tax. (C) Withholding of Creditable Value-added Tax. The Government or any of its political subdivisions, instrumentalities or agencies, including governmentowned or controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods from sellers and services rendered by contractors which are subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold the value-added tax due at the rate of three percent (3%) of the gross payment for the purchase of goods and six percent (6%) on gross receipts for services rendered by contractors on every sale or installment payment which shall be creditable against the value-added tax liability of the seller or contractor: Provided, however, That in the case of government public works contractors, the withholding rate shall be eight and one-half percent (8.5%): Provided, further, That the payment for lease or use of properties or property rights to nonresident owners shall be subject to ten percent (10%) withholding tax at the time of payment. For this purpose, the payor or person in control of the payment shall be considered as the withholding agent. The valued-added tax withheld under this Section shall be remitted within ten (10) days following the end of the month the withholding was made. (Emphasis supplied) As amended, the use of the word final and the deletion of the word creditable exhibits Congresss intention to treat transactions with the government differently. Since it has not been shown that the class subject to the 5% final withholding tax has been unreasonably narrowed, there is no reason to invalidate the provision. Petitioners, as petroleum dealers, are not the only ones subjected to the 5% final withholding tax. It applies to all those who deal with the government. Moreover, the actual input tax is not totally lost or uncreditable, as petitioners believe. Revenue Regulations No. 14-2005 or the Consolidated ValueAdded Tax Regulations 2005 issued by the BIR, provides that should the actual input tax exceed 5% of gross payments, the excess may form part of the cost. Equally, should the actual input tax be less than 5%, the difference is treated as income.81 Petitioners also argue that by imposing a limitation on the creditable input tax, the government gets to tax a profit or value-added even if there is no profit or value-added. Petitioners stance is purely hypothetical, argumentative, and again, one-sided. The Court will not engage in a legal joust where premises are what ifs, arguments, theoretical and facts, uncertain. Any disquisition by the Court on this point will only be, as Shakespeare describes life in Macbeth,82 "full of sound and fury, signifying nothing."
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Whats more, petitioners contention assumes the proposition that there is no profit or value-added. It need not take an astute businessman to know that it is a matter of exception that a business will sell goods or services without profit or value-added. It cannot be overstressed that a business is created precisely for profit. The equal protection clause under the Constitution means that "no person or class of persons shall be deprived of the same protection of laws which is enjoyed by other persons or other classes in the same place and in like circumstances."83 The power of the State to make reasonable and natural classifications for the purposes of taxation has long been established. Whether it relates to the subject of taxation, the kind of property, the rates to be levied, or the amounts to be raised, the methods of assessment, valuation and collection, the States power is entitled to presumption of validity. As a rule, the judiciary will not interfere with such power absent a clear showing of unreasonableness, discrimination, or arbitrariness.84 Petitioners point out that the limitation on the creditable input tax if the entity has a high ratio of input tax, or invests in capital equipment, or has several transactions with the government, is not based on real and substantial differences to meet a valid classification. The argument is pedantic, if not outright baseless. The law does not make any classification in the subject of taxation, the kind of property, the rates to be levied or the amounts to be raised, the methods of assessment, valuation and collection. Petitioners alleged distinctions are based on variables that bear different consequences. While the implementation of the law may yield varying end results depending on ones profit margin and value-added, the Court cannot go beyond what the legislature has laid down and interfere with the affairs of business. The equal protection clause does not require the universal application of the laws on all persons or things without distinction. This might in fact sometimes result in unequal protection. What the clause requires is equality among equals as determined according to a valid classification. By classification is meant the grouping of persons or things similar to each other in certain particulars and different from all others in these same particulars.85 Petitioners brought to the Courts attention the introduction of Senate Bill No. 2038 by Sens. S.R. Osmea III and Ma. Ana Consuelo A.S. Madrigal on June 6, 2005, and House Bill No. 4493 by Rep. Eric D. Singson. The proposed legislation seeks to amend the 70% limitation by increasing the same to 90%. This, according to petitioners, supports their stance that the 70% limitation is arbitrary and confiscatory. On this score, suffice it to say that these are still proposed legislations. Until Congress amends the law, and absent any unequivocal basis for its unconstitutionality, the 70% limitation stays. B. Uniformity and Equitability of Taxation Article VI, Section 28(1) of the Constitution reads: The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation. Uniformity in taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same rate. Different articles may be taxed at different amounts provided that the rate is uniform on the same class everywhere with all people at all times.86

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In this case, the tax law is uniform as it provides a standard rate of 0% or 10% (or 12%) on all goods and services. Sections 4, 5 and 6 of R.A. No. 9337, amending Sections 106, 107 and 108, respectively, of the NIRC, provide for a rate of 10% (or 12%) on sale of goods and properties, importation of goods, and sale of services and use or lease of properties. These same sections also provide for a 0% rate on certain sales and transaction. Neither does the law make any distinction as to the type of industry or trade that will bear the 70% limitation on the creditable input tax, 5-year amortization of input tax paid on purchase of capital goods or the 5% final withholding tax by the government. It must be stressed that the rule of uniform taxation does not deprive Congress of the power to classify subjects of taxation, and only demands uniformity within the particular class.87 R.A. No. 9337 is also equitable. The law is equipped with a threshold margin. The VAT rate of 0% or 10% (or 12%) does not apply to sales of goods or services with gross annual sales or receipts not exceeding P1,500,000.00.88 Also, basic marine and agricultural food products in their original state are still not subject to the tax,89 thus ensuring that prices at the grassroots level will remain accessible. As was stated in Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. vs. Tan:90 The disputed sales tax is also equitable. It is imposed only on sales of goods or services by persons engaged in business with an aggregate gross annual sales exceeding P200,000.00. Small corner sari-sari stores are consequently exempt from its application. Likewise exempt from the tax are sales of farm and marine products, so that the costs of basic food and other necessities, spared as they are from the incidence of the VAT, are expected to be relatively lower and within the reach of the general public. It is admitted that R.A. No. 9337 puts a premium on businesses with low profit margins, and unduly favors those with high profit margins. Congress was not oblivious to this. Thus, to equalize the weighty burden the law entails, the law, under Section 116, imposed a 3% percentage tax on VAT-exempt persons under Section 109(v), i.e., transactions with gross annual sales and/or receipts not exceeding P1.5 Million. This acts as a equalizer because in effect, bigger businesses that qualify for VAT coverage and VAT-exempt taxpayers stand on equal-footing. Moreover, Congress provided mitigating measures to cushion the impact of the imposition of the tax on those previously exempt. Excise taxes on petroleum products91 and natural gas92 were reduced. Percentage tax on domestic carriers was removed.93 Power producers are now exempt from paying franchise tax.94 Aside from these, Congress also increased the income tax rates of corporations, in order to distribute the burden of taxation. Domestic, foreign, and nonresident corporations are now subject to a 35% income tax rate, from a previous 32%.95 Intercorporate dividends of non-resident foreign corporations are still subject to 15% final withholding tax but the tax credit allowed on the corporations domicile was increased to 20%.96 The Philippine Amusement and Gaming Corporation (PAGCOR) is not exempt from income taxes anymore.97 Even the sale by an artist of his works or services performed for the production of such works was not spared. All these were designed to ease, as well as spread out, the burden of taxation, which would otherwise rest largely on the consumers. It cannot therefore be gainsaid that R.A. No. 9337 is equitable. C. Progressivity of Taxation

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Lastly, petitioners contend that the limitation on the creditable input tax is anything but regressive. It is the smaller business with higher input tax-output tax ratio that will suffer the consequences. Progressive taxation is built on the principle of the taxpayers ability to pay. This principle was also lifted from Adam Smiths Canons of Taxation, and it states: I. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state. Taxation is progressive when its rate goes up depending on the resources of the person affected.98 The VAT is an antithesis of progressive taxation. By its very nature, it is regressive. The principle of progressive taxation has no relation with the VAT system inasmuch as the VAT paid by the consumer or business for every goods bought or services enjoyed is the same regardless of income. In other words, the VAT paid eats the same portion of an income, whether big or small. The disparity lies in the income earned by a person or profit margin marked by a business, such that the higher the income or profit margin, the smaller the portion of the income or profit that is eaten by VAT. A converso, the lower the income or profit margin, the bigger the part that the VAT eats away. At the end of the day, it is really the lower income group or businesses with low-profit margins that is always hardest hit. Nevertheless, the Constitution does not really prohibit the imposition of indirect taxes, like the VAT. What it simply provides is that Congress shall "evolve a progressive system of taxation." The Court stated in the Tolentino case, thus: The Constitution does not really prohibit the imposition of indirect taxes which, like the VAT, are regressive. What it simply provides is that Congress shall evolve a progressive system of taxation. The constitutional provision has been interpreted to mean simply that direct taxes are . . . to be preferred [and] as much as possible, indirect taxes should be minimized. (E. FERNANDO, THE CONSTITUTION OF THE PHILIPPINES 221 (Second ed. 1 977)) Indeed, the mandate to Congress is not to prescribe, but to evolve, a progressive tax system. Otherwise, sales taxes, which perhaps are the oldest form of indirect taxes, would have been prohibited with the proclamation of Art. VIII, 17 (1) of the 1973 Constitution from which the present Art. VI, 28 (1) was taken. Sales taxes are also regressive. Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not impossible, to avoid them by imposing such taxes according to the taxpayers' ability to pay. In the case of the VAT, the law minimizes the regressive effects of this imposition by providing for zero rating of certain transactions (R.A. No. 7716, 3, amending 102 (b) of the NIRC), while granting exemptions to other transactions. (R.A. No. 7716, 4 amending 103 of the NIRC)99 CONCLUSION It has been said that taxes are the lifeblood of the government. In this case, it is just an enema, a first-aid measure to resuscitate an economy in distress. The Court is neither blind nor is it turning a deaf ear on the plight of the masses. But it does not have the panacea for the malady that the law seeks to remedy. As in other cases, the Court cannot strike down a law as unconstitutional simply because of its yokes.
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Let us not be overly influenced by the plea that for every wrong there is a remedy, and that the judiciary should stand ready to afford relief. There are undoubtedly many wrongs the judicature may not correct, for instance, those involving political questions. . . . Let us likewise disabuse our minds from the notion that the judiciary is the repository of remedies for all political or social ills; We should not forget that the Constitution has judiciously allocated the powers of government to three distinct and separate compartments; and that judicial interpretation has tended to the preservation of the independence of the three, and a zealous regard of the prerogatives of each, knowing full well that one is not the guardian of the others and that, for official wrong-doing, each may be brought to account, either by impeachment, trial or by the ballot box.100 The words of the Court in Vera vs. Avelino101 holds true then, as it still holds true now. All things considered, there is no raison d'tre for the unconstitutionality of R.A. No. 9337. WHEREFORE, Republic Act No. 9337 not being unconstitutional, the petitions in G.R. Nos. 168056, 168207, 168461, 168463, and 168730, are hereby DISMISSED. There being no constitutional impediment to the full enforcement and implementation of R.A. No. 9337, the temporary restraining order issued by the Court on July 1, 2005 is LIFTED upon finality of herein decision. SO ORDERED.

G.R. No. 116033

February 26, 1997

ALFREDO L. AZARCON, petitioner, vs. SANDIGANBAYAN, PEOPLE OF THE PHILIPPINES and JOSE C. BATAUSA, respondents.

PANGANIBAN, J.:

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Does the Sandiganbayan have jurisdiction over a private individual who is charged with malversation of public funds as a principal after the said individual had been designated by the Bureau of Internal Revenue as a custodian of distrained property? Did such accused become a public officer and therefore subject to the graft court's jurisdiction as a consequence of such designation by the BIR? These are the main questions in the instant petition for review of Respondent Sandiganbayan's Decision 1 in Criminal Case No. 14260 promulgated on March 8, 1994, convicting petitioner of malversation of public funds and property, and Resolution 2 dated June 20, 1994, denying his motion for new trial or reconsideration thereof. The Facts Petitioner Alfredo Azarcon owned and operated an earth-moving business, hauling "dirt and ore." 3 His services were contracted by the Paper Industries Corporation of the Philippines (PICOP) at its concession in Mangagoy, Surigao del Sur. Occasionally, he engaged the services of sub-contractors like Jaime Ancla whose trucks were left at the former's premises. 4 From this set of circumstances arose the present controversy. . . . It appears that on May 25, 1983, a Warrant of Distraint of Personal Property was issued by the Main Office of the Bureau of Internal Revenue (BIR) addressed to the Regional Director (Jose Batausa) or his authorized representative of Revenue Region 10, Butuan City commanding the latter to distraint the goods, chattels or effects and other personal property of Jaime Ancla, a sub-contractor of accused Azarcon and, a delinquent taxpayer. The Warrant of Garnishment was issued to accused Alfredo Azarcon ordering him to transfer, surrender, transmit and/or remit to BIR the property in his possession owned by taxpayer Ancla. The Warrant of Garnishment was received by accused Azarcon on June 17, 1985. 5 Petitioner Azarcon, in signing the "Receipt for Goods, Articles, and Things Seized Under Authority of the National Internal Revenue," assumed the undertakings specified in the receipt the contents of which are reproduced as follows: (I), the undersigned, hereby acknowledge to have received from Amadeo V. San Diego, an Internal Revenue Officer, Bureau of Internal Revenue of the Philippines, the following described goods, articles, and things: Kind of property Motor number Chassis No. Number of CXL Color Blue Owned By Isuzu dump truck E120-229598 SPZU50-1772440 6 Mr. Jaime Ancla

the same having been this day seized and left in (my) possession pending investigation by the Commissioner of Internal Revenue or his duly authorized representative. (I) further promise that (I) will faithfully keep, preserve, and, to the best of (my) ability, protect said goods, articles, and things seized from defacement, demarcation, leakage, loss, or destruction in any manner; that (I) will neither alter nor remove, nor permit others to alter or remove or dispose of the same in any manner without the express authority of the Commissioner of Internal Revenue; and that (I) will produce and deliver all of said goods, articles, and things upon the order of any court of the Philippines, or upon demand of the Commissioner of Internal Revenue or any authorized officer or agent of the Bureau of Internal Revenue. 6
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Subsequently, Alfredo Azarcon wrote a letter dated November 21, 1985 to the BIR's Regional Director for Revenue Region 10 B, Butuan City stating that . . . while I have made representations to retain possession of the property and signed a receipt of the same, it appears now that Mr. Jaime Ancla intends to cease his operations with us. This is evidenced by the fact that sometime in August, 1985 he surreptitiously withdrew his equipment from my custody. . . . In this connection, may I therefore formally inform you that it is my desire to immediately relinquish whatever responsibilities I have over the abovementioned property by virtue of the receipt I have signed. This cancellation shall take effect immediately. . . . 7 Incidentally, the petitioner reported the taking of the truck to the security manager of PICOP, Mr. Delfin Panelo, and requested him to prevent this truck from being taken out of the PICOP concession. By the time the order to bar the truck's exit was given, however, it was too late. 8 Regional Director Batausa responded in a letter dated May 27, 1986, to wit: An analysis of the documents executed by you reveals that while you are (sic) in possession of the dump truck owned by JAIME ANCLA, you voluntarily assumed the liabilities of safekeeping and preserving the unit in behalf of the Bureau of Internal Revenue. This is clearly indicated in the provisions of the Warrant of Garnishment which you have signed, obliged and committed to surrender and transfer to this office. Your failure therefore, to observe said provisions does not relieve you of your responsibility. 9 Thereafter, the Sandiganbayan found that On 11 June 1986, Mrs. Marilyn T. Calo, Revenue Document Processor of Revenue Region 10 B, Butuan City, sent a progress report to the Chief of the Collection Branch of the surreptitious taking of the dump truck and that Ancla was renting out the truck to a certain contractor by the name of Oscar Cueva at PICOP (Paper Industries Corporation of the Philippines, the same company which engaged petitioner's earth moving services), Mangagoy, Surigao del Sur. She also suggested that if the report were true, a warrant of garnishment be reissued against Mr. Cueva for whatever amount of rental is due from Ancla until such time as the latter's tax liabilities shall be deemed satisfied. . . However, instead of doing so, Director Batausa filed a lettercomplaint against the (herein Petitioner) and Ancla on 22 January 1988, or after more than one year had elapsed from the time of Mrs. Calo's report. 10 Provincial Fiscal Pretextato Montenegro "forwarded the records of the complaint . . . to the Office of the Tanodbayan" on May 18, 1988. He was deputized Tanodbayan prosecutor and granted authority to conduct preliminary investigation on August 22, 1988, in a letter by Special Prosecutor Raul Gonzales approved by Ombudsman (Tanodbayan) Conrado Vasquez. 11 Along with his co-accused Jaime Ancla, Petitioner Azarcon was charged before the Sandiganbayan with the crime of malversation of public funds or property under Article 217 in relation to Article 222 of the Revised Penal Code (RPC) in the following Information 12 filed on January 12, 1990, by Special Prosecution Officer Victor Pascual: That on or about June 17, 1985, in the Municipality of Bislig, Province of Surigao del Sur, Philippines, and within the jurisdiction of this Honorable Court, accused Alfredo L. Azarcon, a private individual but who, in his capacity as depository/administrator of property seized or deposited by the Bureau of Internal Revenue, having voluntarily offered himself to act as custodian of one Isuzu Dumptruck (sic) with Motor No. E120-22958, Chasis No. SPZU 501772440, and number CXL-6 and was authorized to be such under the authority of the Bureau of Internal Revenue, has become a responsible and
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accountable officer and said motor vehicle having been seized from Jaime C. Ancla in satisfaction of his tax liability in the total sum of EIGHTY THOUSAND EIGHT HUNDRED THIRTY ONE PESOS and 59/100 (P80,831.59) became a public property and the value thereof as public fund, with grave abuse of confidence and conspiring and confederating with said Jaime C. Ancla, likewise, a private individual, did then and there wilfully, (sic) unlawfully and feloniously misappropriate, misapply and convert to his personal use and benefit the aforementioned motor vehicle or the value thereof in the aforestated amount, by then and there allowing accused Jaime C. Ancla to remove, retrieve, withdraw and tow away the said Isuzu Dumptruck (sic) with the authority, consent and knowledge of the Bureau of Internal Revenue, Butuan City, to the damage and prejudice of the government in the amount of P80,831.59 in a form of unsatisfied tax liability. CONTRARY TO LAW. The petitioner filed a motion for reinvestigation before the Sandiganbayan on May 14, 1991, alleging that: (1) the petitioner never appeared in the preliminary investigation; and (2) the petitioner was not a public officer, hence a doubt exists as to why he was being charged with malversation under Article 217 of the Revised Penal Code. 13 The Sandiganbayan granted the motion for reinvestigation on May 22, 1991. 14 After the reinvestigation, Special Prosecution Officer Roger Berbano, Sr., recommended the "withdrawal of the information" 15 but was "overruled by the Ombudsman." 16 A motion to dismiss was filed by petitioner on March 25, 1992 on the ground that the Sandiganbayan did not have jurisdiction over the person of the petitioner since he was not a public officer. 17 On May 18, 1992; the Sandiganbayan denied the motion. 18 When the prosecution finished presenting its evidence, the petitioner then filed a motion for leave to file demurrer to evidence which was denied on November 16, 1992, "for being without merit." 19 The petitioner then commenced and finished presenting his evidence on February 15, 1993. The Respondent Court's Decision On March 8, 1994, Respondent Sandiganbayan 20 rendered a Decision, 21 the dispositive portion of which reads: WHEREFORE, the Court finds accused Alfredo Azarcon y Leva GUILTY beyond reasonable doubt as principal of Malversation of Public Funds defined and penalized under Article 217 in relation to Article 222 of the Revised Penal Code and, applying the Indeterminate Sentence Law, and in view of the mitigating circumstance of voluntary surrender, the Court hereby sentences the accused to suffer the penalty of imprisonment ranging from TEN (10) YEARS and ONE (1) DAY of prision mayor in its maximum period to SEVENTEEN (17) YEARS, FOUR (4) MONTHS and ONE (1) DAY of Reclusion Temporal. To indemnify the Bureau of Internal Revenue the amount of P80,831.59; to pay a fine in the same amount without subsidiary imprisonment in case of insolvency; to suffer special perpetual disqualification; and, to pay the costs. Considering that accused Jaime Ancla has not yet been brought within the jurisdiction of this Court up to this date, let this case be archived as against him without prejudice to its revival in the event of his arrest or voluntary submission to the jurisdiction of this Court. SO ORDERED. Petitioner, through new counsel, 22 filed a motion for new trial or reconsideration on March 23, 1994, which was denied by the Sandiganbayan in its Resolution 23 dated December 2, 1994.
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Hence, this petition. The Issues The petitioner submits the following reasons for the reversal of the Sandiganbayan's assailed Decision and Resolution: I. The Sandiganbayan does not have jurisdiction over crimes committed solely by private individuals.

II. In any event, even assuming arguendo that the appointment of a private individual as a custodian or a depositary of distrained property is sufficient to convert such individual into a public officer, the petitioner cannot still be considered a public officer because: [A] There is no provision in the National Internal Revenue Code which authorizes the Bureau of Internal Revenue to constitute private individuals as depositaries of distrained properties. [B] His appointment as a depositary was not by virtue of a direct provision of law, or by election or by appointment by a competent authority. III. No proof was presented during trial to prove that the distrained vehicle was actually owned by the accused Jaime Ancla; consequently, the government's right to the subject property has not been established. IV. The procedure provided for in the National Internal Revenue Code concerning the disposition of distrained property was not followed by the B.I.R., hence the distraint of personal property belonging to Jaime C. Ancla and found allegedly to be in the possession of the petitioner is therefore invalid. V. The B.I.R. has only itself to blame for not promptly selling the distrained property of accused Jaime C. Ancla in order to realize the amount of back taxes owed by Jaime C. Ancla to the Bureau. 24 In fine, the fundamental issue is whether the Sandiganbayan had jurisdiction over the subject matter of the controversy. Corollary to this is the question of whether petitioner can be considered a public officer by reason of his being designated by the Bureau of Internal Revenue as a depositary of distrained property. The Court's Ruling The petition is meritorious. Jurisdiction of the Sandiganbayan
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It is hornbook doctrine that in order "(to) ascertain whether a court has jurisdiction or not, the provisions of the law should be inquired into." 25 Furthermore, "the jurisdiction of the court must appear clearly from the statute law or it will not be held to exist. It cannot be presumed or implied." 26 And for this purpose in criminal cases, "the jurisdiction of a court is determined by the law at the time of commencement of the action." 27 In this case, the action was instituted with the filing of this information on January 12, 1990; hence, the applicable statutory provisions are those of P.D. No. 1606, as amended by P.D. No. 1861 on March 23, 1983, but prior to their amendment by R.A. No. 7975 on May 16, 1995. At that time, Section 4 of P.D. No. 1606 provided that: Sec. 4. Jurisdiction. The Sandiganbayan shall exercise: (a) Exclusive original jurisdiction in all cases involving:

(1) Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2, Title VII of the Revised Penal Code; (2) Other offenses or felonies committed by public officers and employees in relation to their office, including those employed in government-owned or controlled corporations, whether simple or complexed with other crimes, where the penalty prescribed by law is higher than prision correccional or imprisonment for six (6) years, or a fine of P6,000.00: PROVIDED, HOWEVER, that offenses or felonies mentioned in this paragraph where the penalty prescribed by law does not exceed prision correccional or imprisonment for six (6) years or a fine of P6,000.00 shall be tried by the proper Regional Trial Court, Metropolitan Trial Court, Municipal Trial Court and Municipal Circuit Trial Court. xxx xxx xxx

In case private individuals are charged as co-principals, accomplices or accessories with the public officers or employees, including those employed in government-owned or controlled corporations, they shall be tried jointly with said public officers and employees. xxx xxx xxx

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

The Information does not charge petitioner Azarcon of being a co-principal, accomplice or accessory to a public officer committing an offense under the Sandiganbayan's jurisdiction. Thus, unless petitioner be proven a public officer, the Sandiganbayan will have no jurisdiction over the crime charged. Article 203 of the RPC determines who are public officers:
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Who are public officers. For the purpose of applying the provisions of this and the preceding titles of the book, any person who, by direct provision of the law, popular election, popular election or appointment by competent authority, shall take part in the performance of public functions in the Government of the Philippine Islands, or shall perform in said Government or in any of its branches public duties as an employee, agent, or subordinate official, of any rank or classes, shall be deemed to be a public officer. Thus, (to) be a public officer, one must be (1) Taking part in the performance of public functions in the government, or

Performing in said Government or any of its branches public duties as an employee, agent, or subordinate official, of any rank or class; and (2) a. b. c. That his authority to take part in the performance of public functions or to perform public duties must be by direct provision of the law, or by popular election, or by appointment by competent authority. 28

Granting arguendo that the petitioner, in signing the receipt for the truck constructively distrained by the BIR, commenced to take part in an activity constituting public functions, he obviously may not be deemed authorized by popular election. The next logical query is whether petitioner's designation by the BIR as a custodian of distrained property qualifies as appointment by direct provision of law, or by competent authority. 29 We answer in the negative. The Solicitor General contends that the BIR, in effecting constructive distraint over the truck allegedly owned by Jaime Ancla, and in requiring Petitioner Alfredo Azarcon who was in possession thereof to sign a pro forma receipt for it, effectively "designated" petitioner a depositary and, hence, citing U.S. vs. Rastrollo, 30 a public officer. 31 This is based on the theory that (t)he power to designate a private person who has actual possession of a distrained property as a depository of distrained property is necessarily implied in the BIR's power to place the property of a delinquent tax payer (sic) in distraint as provided for under Sections 206, 207 and 208 (formerly Sections 303, 304 and 305) of the National Internal Revenue Code, (NIRC) . . . . 32 We disagree. The case of U.S. vs. Rastrollo is not applicable to the case before us simply because the facts therein are not identical, similar or analogous to those obtaining here. While the cited case involved a judicial deposit of the proceeds of the sale of attached property in the hands of the debtor, the case at bench dealt with the BIR's administrative act of effecting constructive distraint over alleged property of taxpayer Ancla in relation to his back taxes, property which was received by Petitioner Azarcon. In the cited case, it was clearly within the scope of that court's jurisdiction and judicial power to constitute the judicial deposit and give "the depositary a character equivalent to that of a public official." 33 However, in the instant case, while the BIR had authority to require Petitioner Azarcon to sign a receipt for the distrained truck, the NIRC did not grant it power to appoint Azarcon a public officer.
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It is axiomatic in our constitutional framework, which mandates a limited government, that its branches and administrative agencies exercise only that power delegated to them as "defined either in the Constitution or in legislation or in both." 34 Thus, although the "appointing power is the exclusive prerogative of the President, . . ." 35 the quantum of powers possessed by an administrative agency forming part of the executive branch will still be limited to that "conferred expressly or by necessary or fair implication" in its enabling act. Hence, "(a)n administrative officer, it has been held, has only such powers as are expressly granted to him and those necessarily implied in the exercise thereof." 36 Corollarily, implied powers "are those which are necessarily included in, and are therefore of lesser degree than the power granted. It cannot extend to other matters not embraced therein, nor are not incidental thereto." 37 For to so extend the statutory grant of power "would be an encroachment on powers expressly lodged in Congress by our Constitution." 38 It is true that Sec. 206 of the NIRC, as pointed out by the prosecution, authorizes the BIR to effect a constructive distraint by requiring "any person" to preserve a distrained property, thus: xxx xxx xxx

The constructive distraint of personal property shall be effected by requiring the taxpayer or any person having possession or control of such property to sign a receipt covering the property distrained and obligate himself to preserve the same intact and unaltered and not to dispose of the same in any manner whatever without the express authority of the Commissioner. xxx xxx xxx

However, we find no provision in the NIRC constituting such person a public officer by reason of such requirement. The BIR's power authorizing a private individual to act as a depositary cannot be stretched to include the power to appoint him as a public officer. The prosecution argues that "Article 222 of the Revised Penal Code . . . defines the individuals covered by the term 'officers' under Article 217 39 . . ." of the same Code. 40 And accordingly, since Azarcon became "a depository of the truck seized by the BIR" he also became a public officer who can be prosecuted under Article 217 . . . ." 41 The Court is not persuaded. Article 222 of the RPC reads: Officers included in the preceding provisions. The provisions of this chapter shall apply to private individuals who, in any capacity whatever, have charge of any insular, provincial or municipal funds, revenues, or property and to any administrator or depository of funds or property attached, seized or deposited by public authority, even if such property belongs to a private individual. "Legislative intent is determined principally from the language of a statute. Where the language of a statute is clear and unambiguous, the law is applied according to its express terms, and interpretation would be resorted to only where a literal interpretation would be either impossible or absurd or would lead to an injustice." 42 This is particularly observed in the interpretation of penal statutes which "must be construed with such strictness as to carefully safeguard the rights of the defendant . . . ." 43 The language of the foregoing provision is clear. A private individual who has in his charge any of the public funds or property enumerated therein and commits any of the acts defined in any of the provisions of Chapter Four, Title Seven of the RPC, should likewise be penalized with the same penalty meted to erring public officers. Nowhere in this provision is it expressed or implied that a private individual falling under said Article 222 is to be deemed a public officer.

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After a thorough review of the case at bench, the Court thus finds Petitioner Alfredo Azarcon and his co-accused Jaime Ancla to be both private individuals erroneously charged before and convicted by Respondent Sandiganbayan which had no jurisdiction over them. The Sandiganbayan's taking cognizance of this case is of no moment since "(j)urisdiction cannot be conferred by . . . erroneous belief of the court that it had jurisdiction." 44 As aptly and correctly stated by the petitioner in his memorandum: From the foregoing discussion, it is evident that the petitioner did not cease to be a private individual when he agreed to act as depositary of the garnished dump truck. Therefore, when the information charged him and Jaime Ancla before the Sandiganbayan for malversation of public funds or property, the prosecution was in fact charging two private individuals without any public officer being similarly charged as a co-conspirator. Consequently, the Sandiganbayan had no jurisdiction over the controversy and therefore all the proceedings taken below as well as the Decision rendered by Respondent Sandiganbayan, are null and void for lack of jurisdiction. 45 WHEREFORE, the questioned Resolution and Decision of the Sandiganbayan are hereby SET ASIDE and declared NULL and VOID for lack of jurisdiction. No costs. SO ORDERED.

ELISEO A. SINON, petitioner, vs. CIVIL SERVICE COMMISSION, DEPARTMENT OF AGRICULTURE-REORGANIZATION APPEALS BOARD AND JUANA BANAN, respondents.

CAMPOS, JR., J.: This petition for certiorari seeks to annul the following Resolutions of the public respondents Civil Service Commission (the "CSC") * and Department of Agriculture Reorganization Appeals Board (the "DARAB"), ** to wit: 1. Resolution No. 97 dated August 23, 1989, issued by respondent DARAB which revoked petitioner's permanent appointment as Municipal Agriculture Officer (MAO) and appointed, in his stead, private respondent Juana Banan (Rollo 17); 2. Resolution dated February 8, 1991 issued by the respondent CSC affirming the aforementioned Resolution of respondent DARAB (Rollo 22);
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3. Resolution dated July 11, 1991 issued by the respondent CSC which denied petitioner's motion for the reconsideration of the respondent Commission's Resolution dated February 8, 1991. 1 The antecedent facts are as follows: Prior to the reorganization of the then Minister of Agriculture and Food (the "MAF"), the private respondent Juana Banan was the incumbent Municipal Agricultural Officer (MAO) of the aforesaid Minister in Region II, Cagayan, while the petitioner Eliseo Sinon occupied the position of Fisheries Extension Specialist (FES) II in the Bureau of Fisheries and Aquatic Resources (BFAR) in the same region. However, the reorganization of the MAF into the Department of Agriculture (the "DA"), with the issuance of Executive Order No. 116 dated 30 January 1987, called for the evaluation of the following employees for twenty nine position of MAO in Region II, Cagayan. The list as prepared by the Placement Committee included the herein petitioner Sinon but excluded the respondent Banan: 1. Binoya, Vicente 76.20% 2. Cabana, Isidro 75.01% 3. Sebastian, Alice 74.18% 4. Zingapan, Benjamin 70.73% 5. Guzman, Wilhemina de la P. 70.50% 6. Gervacio, Agnes 69.86% 7. Somera, Hilario S. 68.13% 8. Tolentino, Julian R. 67.64% 9. Guillermo, Pedro 67.22% 10. Tambio, Rodolfo 67.00% 11. Aquino, Martina 66.94% 12. Bassig, Pio P. 66.84% 13. Rumpon, Danilo P. 65.61%
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14. Zareno, Bernardo 65.57% 15. Madrid, Angel S. 65.57% 16. Callangan, Napoleon 65.45% 17. Fiesta, Felicisimo 65.29% 18. Alvarez, Benefranco 64.99% 19. Baggayan, Samuel O. 64.42% 20. Umbay, Pedro T. 64.01% 21. De la Cruz, Florencio M. 62.07% 22. Leonador, Ernesto T. 61.88% 23. Miguel, Jose 61.86% 24. Berlan, Herminia C. 61.76% 25. Soliman, Clemente 61.52% 26. Llopis, Lino 61.47% 27. Baliuag, Felicidad 61.39% 28. Aresta, Leticia 60.67% 29. Sinon, Eliseo A. 60.66% 2 (Emphasis supplied) Thus, respondents Banan filed an appeal with the DARAB for re-evaluation of the qualification of all those included in the aforementioned list made by the Placement Committee.

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On August 23, 1989, the DARAB released Resolution No. 97 in which the ranking for 29 MAO prepared by the Placement Committee was re-evaluated as follows: 1. Binoya, Vicente 76.20% 2. Cabana, Isidro 75.01% 3. Sebastian, Alice 72.18% 4. Zingapan, Benjamin 70.73% 5. Guzman, Wilhemina de la P. 70.50% 6. Gervacio, Agnes 70.04% 7. Somera, Hilario S. 68.13% 8. Tolentino, Julian Jr. 67.22% 9. Guillermo, Pedro 67.22% 10. Tambio, Rodolfo 67.00% 11. Aquino, Martina D. 66.94% 12. Bassig, Pio P. 66.84% 13. Rumpon, Danilo P. 65.61% 14. Madrid, Angel 65.57% 15. Callangan, Napoleon 65.45% 16. Fiesta, Felicisimo 65.29% 17. Alvarez, Benefranco 64.99% 18. Baggayan, Samuel O. 64.42%
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19. Umbay, Pedro T. 64.01% 20. De la Cruz, Florencio M. 62.07% 21. Leonador, Ernesto T. 61.88% 22. Miguel, Jose L. 61.86% 23. Berlan, Herminia C. 61.76% 24. Soliman, Clemente 61.52% 25. Zareno, Bernardo 61.50% 26. Llopis, Lino 61.47% 27. Baliuag, Felicidad 61.39% 28. Aresta, Leticia 60.67% 29. Banan, Juana 59.32% 2 (Emphasis supplied) In this re-evaluation, petitioner Sinon was displaced by the respondent Banan and this same resolution was duly approved by the Secretary of the Department of Agriculture, Carlos G. Dominguez, who also affixed his signature on the same date. However, on August 30, 1988, Sinon received an appointment as MAO for Region II in Cagayan as approved by Regional Director Gumersindo D. Lasam on the basis of the first evaluation made by the Placement Committee. Thus, Sinon filed an appeal docketed as Civil Service Case No. 573 on November 22, 1989 to the CSC. This appeal was granted mainly for two reasons: first, the respondent DARAB failed to file its Comment within the period required; and second, the evaluation of the qualification of the employees is a question of fact which the appointing authority or the Placement Committee assisting him is in a better position to determine. Hence, the Resolution dated 28 February 1989 of the DARAB was set aside. 4 On March 19, 1990, Banan filed a Motion for Reconsideration in which she pitted her qualifications against Sinon for the last slot in the 29 available MAO positions. At the same time, she pointed out that to allow the findings of the Placement Committee to supersede the DARAB resolution which the Secretary of Agriculture had approved would be tantamount to giving precedence to the Placement Committee over the head of the agency.
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Finally, on February 8, 1991, CSC, after reviewing the Comment filed by the DARAB which had not been considered earlier in the Civil Service Case No. 573, the CSC granted respondent Banan's Motion for Reconsideration and gave due course to her appointment by the DARAB. On March 21, 1991, Sinon filed a Motion for Reconsideration of the February 8, 1991 Resolution which however was denied by the CSC in its assailed Resolution dated July 11, 1991. According to the respondent CSC: Mr. Sinon strongly argued that the findings of the Placement Committee on the qualifications of the parties should be accorded deference and greater weight over that of the RAB. Under the Placement Committee's evaluation, Mr. Sinon garnered 60.66 while Ms. Juana Banan earned 57.32 after assessing the contending parties qualification in education, relevant experience, eligibility and other factors. Following the request of several parties for reevaluation, the RAB in their decision gave Mr. Sinon 57.66 while Ms. Banan obtained 59.32. Seemingly the findings of the two bodies are in conflict. Mr. Sinon argues that the findings of the Placement Committee should prevail since it is specially mandated by RA 6656. We disagree. The Placement Committee's function is recommendatory in nature. The agency's Reorganization Appeals Board was specially created by the Circular of the Office of the President dated October 2, 1987 and conferred with authority to review appeals and complaints of officials and employees affected by the reorganization. the decision of the agency RAB has the imprimatur of the Secretary of that agency and is therefore controlling in matters of and is therefore controlling in matters of appointment. Under this principle, the decision of the DARAB in this case enjoys precedence over the Placement Committee. 5 Hence, this petition was filed with a prayer for a writ of preliminary injunction and/or restraining order to enjoin the execution of the assailed resolutions. Without giving due course to the petition for a writ of preliminary injunction, the court required the parties to file their respective Comments. 6 On 12 November 1991, the Court gave due course to the petition and required the parties to submit their respective Memoranda. 7 The main issue for Our consideration is this: whether or not the CSC committed grave abuse discretion in reviewing and re-evaluating the ring or qualification of the petitioner Sinon. The arguments of the petitioner can be summed up as follows: 1). In issuing the Resolution of 8 February 1991, the CSC in effect revoked the appointment that the petitioner received as early as 30 August 1989 and which was deemed permanent by virtue of the approval of the Regional Director of the Department of Agriculture: 2). In giving petitioner a rating of only 57.66%, 8 from his previous rating of 60.66% and at the same time according a rating of 59.32% to private respondent from a rating of only 57.32%, the CSC departed from its power which is limited only to that of "review", and hence encroached upon the power of appointment exclusively lodged in the appointment authority;
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3) In giving due course to the appointment of respondent Banan in its Resolution of 8 February 1991, CSC was directing the appointment of a substitute of their own choice when the power to appoint was exclusively lodged in the appointing authority. We rule as follows. By grave abuse of discretion is meant such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. The abuse of discretion must be patent and gross as to amount to an evasion of positive duty or a virtual refusal to perform a duty enjoined by law, or to act at all in contemplation of law, as where the power is exercised in an arbitrary and despotic manner by reason of passion or hostility. 9 Contrary to the allegations of the petitioner, We do not find any evidence of grave abuse of discretion on the part of the CSC when it issued Resolution dated 8 February 1991 which in effect approved the appointment of respondent Banan over petitioner Sinon. With the reorganization of the MAF into the DA with Executive order No. 116, it became imperative to "protect the security of tenure of Civil Service Officers and employees in the implementation of government reorganization". Thus, Congress passed Republic Act No. 6656. 10 It was under the same law of R.A. 6656 that the Placement Committee was created: Section 6. In order that the best qualified and mot deserving persons shall be appointed in any reorganization, there shall be created a Placement Committee in each department or agency to assist the appointing authority in the judicious selection and placement of personnel. The Committee shall consist of two (2) members appointed by the head of the department or agency, a representative of the appointing authority, and two (2) members duly elected by the employees holding positions in the first and second levels of the career service: Provided, that if there is a registered employee association with a majority of the employees as members, that employee association shall also have a representative in the Committee: Provided, Further, that immediately upon the approval of the staffing pattern of the department or agency concerned, such staffing pattern shall be made known to all officers and employees of the agency who shall be invited to apply for any of the positions authorized therein. Such application shall be considered by the committee in the placement and selection of personnel. (Emphasis supplied). To "assist" mean to lend an aid to, 11 or to contribute effort in the complete accomplishment of an ultimate purpose intended to be effected by those engaged. 12 In contrast, to "recommend" 13 is to present one's advice or choice as having one's approval or to represent or urge as advisable or expedient. It involves the Idea that another has the final decision. Clearly, the Placement Committee was charged with the duty of exercising the same discretionary functions as the appointing authority in the judicious selection and placement of personnel when the law empowered it to "assist" the appointment authority.

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The same law also allows any officer or employee aggrieved by the appointments to file an appeal with the appointing authority who shall made a decision within thirty (30) days from the filing thereof. If the same employee is still not satisfied with the decision of the appointing authority, he may further appeal within ten (10) days from the receipt thereof the CSC. 14 In the case at bar, the Circular dated October 2, 1987 of the Office of the President created the agency Reorganization Appeals Board to address the problem of the employees affected by the reorganizations. The foregoing legal measures spell out the remedies of aggrieved parties which make it impossible to give the status of finality to any appointment until all protests or oppositions are duly heard. Thus, while it is true that the appointment paper received by petitioner Sinon on 30 August 1989 for the position of MAO had not conferred any permanent status and was still subject to the following conditions attached to any appointment in the civil service: Provided that there is no pending administrative case against the appointee, no pending protest against the appointment, nor any decision by competent authority that will adversely affect the approval of the appointment . 15 Hence, for as long as the re-evaluation of the qualification filed by Banan was pending, the petitioner cannot claim that he had been issued with a "complete" appointment. Neither is there any point in asserting that his appointment had "cured" whatever changes was subsequently recommended by the DARAB. 16 The fact that the DARAB is capable of re-evaluating the findings of the Placement Committed only to find that Sinon is not qualified should no be taken as a grave abuse of discretion. We cannot subscribe to petitioner Sinon's insistence that the public respondent CSC had disregarded the findings of the Placement Committee. The truth is, these findings of the Placement Committee. The truth is, these findings were re-evaluated and the report after such re-evaluation was submitted to and approved by the Secretary of Agriculture. The CSC affirmed the findings of the DARAB. Because of all the foregoing circumstances, the jurisprudence cited by the petitioner Sinon appears to be incorrect.
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Neither do we find in the Resolution of 8 February 1991, any statement by the CSC directing the appointment of the respondent Banan. Hence, there was no directive from the CSC that may be misinterpreted as a usurpation of any appointing power. 18 Besides, in affirming the appointment of Banan as recommended by the DARAB and approved by the Secretary of Agriculture, the CSC is only being consistent with the law. Section 4 or R.A. 6656 mandates that officers and employees holding permanent appointments shall be given preference for appointment to the new positions in the approved staffing pattern comparable to their former positions. Also, the term incumbent officer and the privileges generally accorded to them would more aptly refer to Banan and not to petitioner Sinon whose appointment was never confirmed completely. 19 There is no dispute that the position of MAO in the old staffing pattern is most comparable to the MAO in the new staffing pattern.
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Finally, the Solicitor General in behalf of the CSC correctly noted that the petitioner Sinon had conveniently omitted the then Secretary of Agriculture who had affixed his approval on the findings of the DARAB. Petitioner Sinon knew fully well that as head of the agency, the Secretary of Agriculture was the appointing authority. It must be recalled that the whole purpose of reorganization is that is it is a "process of restructuring the bureaucracy's organizational and functional setup, to make it more viable in terms of the economy, efficiency, effectiveness and make it more responsive to the needs of its public clientele as authorized by law." 20 For as long as the CSC confines itself within the limits set out by law and does not encroach upon the prerogatives endowed to other authorities, this Court must sustain the Commission. WHEREFORE, the petition is DENIED with costs against the petitioner. SO ORDERED.

AQUILINO T. LARIN, petitioner, vs. THE EXECUTIVE SECRETARY, SECRETARY OF FINANCE, COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE AND THE COMMITTEE CREATED TO INVESTIGATE THE ADMINISTRATIVE COMPLAINT AGAINST AQUILINO T. LARIN, COMPOSED OF FRUMENCIO A. LAGUSTAN, JOSE B. ALEJANDRINO AND JAIME M. MAZA, respondents.

TORRES, JR., J.: Challenged in this petition is the validity of petitioner's removal from service as Assistant Commissioner of the Excise Tax Service of the Bureau of Internal Revenue. Incidentally, he questions Memorandum Order No. 164 issued by the Office of the President, which provides for the creation of "A Committee to Investigate the Administrative Complaint Against Aquilino T. Larin, Assistant Commissioner, Bureau of Internal Revenue" as well as the investigation made in pursuance thereto, and Administrative Order No. 101 dated December 2, 1993 which found him guilty of grave misconduct in the administrative charge and imposed upon him the penalty of dismissal from office.

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Likewise, petitioner seeks to assail the legality of Executive Order No. 132, issued by President Ramos on October 26, 1993, which provides for the "Streamlining of the Bureau of Internal Revenue," and of its implementing rules issued by the Bureau of Internal Revenue, namely: a) Administrative Order No. 4-93, which provides for the "Organizational Structure and Statement of General Functions of Offices in the National Office" and b) Administrative Order No. 5-93, which provides for "Redefining the Areas of Jurisdiction and Renumbering of Regional And District Offices." The antecedent facts of the instant case as succinctly related by the Solicitor General are as follows: On September 18, 1992, 1 a decision was rendered by the Sandiganbayan convicting herein petitioner Aquilino T. Larin, Revenue Specific Tax Officer, then Assistant Commissioner of the Bureau of Internal Revenue and his co-accused (except Justino E. Galban, Jr.) of the crimes of violation of Section 268 (4) of the National Internal Revenue Code and Section 3 (e) of R.A. 3019 in Criminal Cases Nos. 14208-14209, entitled "People of the Philippines, Plaintiff vs. Aquilino T. Larin, Teodoro T. Pareno, Justino E. Galban, Jr. and Potenciana N. Evangelista, Accused," the dispositive portion of the judgment reads: WHEREFORE, judgment is now rendered in Criminal Cases Nos. 14208 and 14209 convicting accused Assistant Commissioner for Specific Tax AQUILINO T. LARIN, Chief of the Alcohol Tax Division TEODORO P. PARENO, and Chief of the Revenue Accounting Division POTENCIANA M. EVANGELISTA: xxx xxx xxx SO ORDERED. The fact of petitioner's conviction was reported to the President of the Philippines by the then Acting Finance Secretary Leong through a memorandum dated June 4, 1993. The memorandum states, inter alia: This is a report in the case of Assistant Commissioner AQUILINO T. LARIN of the Excise Tax Service, Bureau of Internal Revenue, a presidential appointee, one of those convicted in Criminal Case Nos. 14208-14209, entitled "People of the Philippines vs. Aquilino T. Larin, et. al." referred to the Department of Finance by the Commissioner of Internal Revenue. The cases against Pareno and Evangelista are being acted upon by the Bureau of Internal Revenue as they are non-presidential appointees. xxx xxx xxx It is clear from the foregoing that Mr. Larin has been found beyond reasonable doubt to have committed acts constituting grave misconduct. Under the Civil Service Laws and Rules which require only preponderance of evidence, grave misconduct is punishable by dismissal.

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Acting by authority of the President, Sr. Deputy Executive Secretary Leonardo A. Quisumbing issued Memorandum Order No. 164 dated August 25, 1993 which provides for the creation of an Executive Committee to investigate the administrative charge against herein petitioner Aquilino T. Larin. It states thus: A Committee is hereby created to investigate the administrative complaint filed against Aquilino T. Larin, Assistant Commissioner, Bureau of Internal Revenue, to be composed of: Atty. Frumencio A. Lagustan Chairman Assistant Executive Secretary for Legislation Mr. Jose B. Alejandro Member Presidential Assistant Atty. Jaime M. Maza Member Assistant Commissioner for Inspector Services Bureau of Internal Revenue The Committee shall have all the powers and prerogatives of (an) investigating committee under the Administrative Code of 1987 including the power to summon witnesses, administer oath or take testimony or evidence relevant to the investigation by subpoena ad testificandum and subpoenaduces tecum. xxx xxx xxx The Committee shall convene immediately, conduct the investigation in the most expeditious manner, and terminate the same as soon as practicable from its first scheduled date of hearing. xxx xxx xxx Consequently, the Committee directed the petitioner to respond to the administrative charge leveled against him through a letter dated September 17, 1993, thus: Presidential Memorandum Order No. 164 dated August 25, 1993, a xerox copy of which is hereto attached for your ready reference, created an Investigation Committee to look into the charges against you which are also the subject of the Criminal Cases No. 14208 and 14209 entitled People of the Philippines vs. Aquilino T . Larin, et. al. The Committee has in its possession a certified true copy of the Decision of the Sandiganbayan in the above-mentioned cases.

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Pursuant to Presidential Memorandum Order No. 164, you are hereby directed to file your position paper on the aforementioned charges within seven (7) days from receipt hereof . . . . Failure to file the required position paper shall be considered as a waiver on your part to submit such paper or to be heard, in which case, the Committee shall deem the case submitted on the basis of the documents and records at hand. In compliance, petitioner submitted a letter dated September 30, 1993 which was addressed to Atty. Frumencio A. Lagustan, the Chairman of the Investigating Committee. In said latter, he asserts that, The case being sub-judice, I may not, therefore, comment on the merits of the issues involved for fear of being cited in contempt of Court. This position paper is thus limited to furnishing the Committee pertinent documents submitted with the Supreme Court and other tribunal which took cognizance of the case in the past, as follows: xxx xxx xxx The foregoing documents readily show that am not administratively liable or criminally culpable of the charges leveled against me, and that the aforesaid cases are mere persecutions caused to be filed and are being orchestrated by taxpayers who were prejudiced by multimillion peso assessments I caused to be issued against them in my official capacity as Assistant Commissioner, Excise Tax Office of the Bureau of Internal Revenue. In the same letter, petitioner claims that the administrative complaint against him is already barred: a) on jurisdictional ground as the Office of the Ombudsman had already taken cognizance of the case and had caused the filing only of the criminal charges against him, b) by res judicata, c) by double jeopardy, and d) because to proceed with the case would be redundant, oppressive and a plain persecution against him. Meanwhile, the President issued the challenged Executive Order No. 132 dated October 26, 1993 which mandates for the streamlining of the Bureau of Internal Revenue. Under said order, some positions and functions are either abolished, renamed, decentralized or transferred to other offices, while other offices are also created. The Excise Tax Service or the Specific Tax Service, of which petitioner was the Assistant Commissioner, was one of those offices that was abolished by said executive order. The corresponding implementing rules of Executive Order No. 132, namely, Revenue Administrative Orders Nos. 4-93 and 5-93, were subsequently issued by the Bureau of Internal Revenue. On October 27, 1993, or one day after the promulgation of Executive Order No. 132, the President appointed the following as BIR Assistant Commissioners: 1. Bernardo A. Frianeza 2. Dominador L. Galura
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3. Jaime D. Gonzales 4. Lilia C. Guillermo 5. Rizalina S. Magalona 6. Victorino C. Mamalateo 7. Jaime M. Maza 8. Antonio N. Pangilinan 9. Melchor S. Ramos 10. Joel L. Tan-Torres Consequently, the President, in the assailed Administrative Order No. 101 dated December 2, 1993, found petitioner guilty of grave misconduct in the administrative charge and imposed upon him the penalty of dismissal with forfeiture of his leave credits and retirement benefits including disqualification for reappointment in the government service. Aggrieved, petitioner filed directly with this Court the instant petition on December 13, 1993 to question basically his alleged unlawful removal from office. On April 17, 1996 and while the instant petition is pending, this Court set aside the conviction of petitioner in Criminal Case Nos. 14208 and 14209. In his petition, petitioner challenged the authority of the President to dismiss him from office. He argued that in so far as presidential appointees who are Career Executive Service Officers are concerned, the President exercises only the power of control not the power to remove. He also averred that the administrative investigation conducted under Memorandum Order No. 164 is void as it violated his right to due process. According to him, the letter of the Committee dated September 17, 1993 and his position paper dated September 30, 1993 are not sufficient for purposes of complying with the requirements of due process. He alleged that he was not informed of the administrative charges leveled against him nor was he given official notice of his dismissal. Petitioner likewise claimed that he was removed as a result of the reorganization made by the Executive Department in the BIR pursuant to Executive Order No. 132. Thus, he assailed said Executive Order No. 132 and its implementing rules, namely, Revenue Administrative Orders 4-93 and 5-93 for being ultra vires. He claimed that there is yet no law enacted by Congress which authorizes the reorganization by the Executive Department of executive agencies, particularly the Bureau of Internal Revenue. He said that the reorganization sought to be effected by the Executive Department on the basis of E.O. No. 132 is tainted with bad faith in apparent violation of Section 2 of R.A. 6656, otherwise known as the Act Protecting the Security of Tenure of Civil Service Officers and Employees in the Implementation of Government Reorganization.
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On the other hand. respondents contended that since petitioner is a presidential appointee, he falls under the disciplining authority of the President. They also contended that E.O. No. 132 and its implementing rules were validly issued pursuant to Sections 48 and 62 of Republic Act No. 7645. Apart from this, the other legal bases of E.O. No. 132 as stated in its preamble are Section 63 of E.O. No. 127 (Reorganizing the Ministry of Finance), and Section 20, Book III of E.O. No. 292, otherwise known as the Administrative Code of 1987. In addition, it is clear that in Section 11 of R.A. No. 6656 future reorganization is expressly contemplated and nothing in said law that prohibits subsequent reorganization through an executive order. Significantly, respondents clarified that petitioner was not dismissed by virtue of EO 132. Respondents claimed that he was removed from office because he was found guilty of grave misconduct in the administrative cases filed against him. The ultimate issue to be resolved in the instant case falls on the determination of the validity of petitioner's dismissal from office. Incidentally, in order to resolve this matter, it is imperative that We consider these questions: a) Who has the power to discipline the petitioner?, b) Were the proceedings taken pursuant to Memorandum Order No. 164 in accord with due process?, c) What is the effect of petitioner's acquittal in the criminal case to his administrative charge?, d) Does the President have the power to reorganize the BIR or to issue the questioned E.O. NO. 132?, and e) Is the reorganization of BIR pursuant to E.O. No. 132 tainted with bad faith? At the outset, it is worthy to note that the position of Assistant Commissioner of the BIR is part of the Career Executive Service. 2 Under the law, 3 Career Executive Service officers, namely, Undersecretary, Assistant Secretary, Bureau Director, Assistant Bureau Director, Regional Director, Assistant Regional Director, Chief of Department Service and other officers of equivalent rank as may be identified by the Career Executive Service Board, are all appointed by the President. Concededly, petitioner was appointed as Assistant Commissioner in January, 1987 by then President Aquino. Thus, petitioner is a presidential appointee who belongs to career service of the Civil Service. Being a presidential appointee, he comes under the direct disciplining authority of the President. This is in line with the well settled principle that the "power to remove is inherent in the power to appoint" conferred to the President by Section 16, Article VII of the Constitution. Thus, it is ineluctably clear that Memorandum Order No. 164, which created a committee to investigate the administrative charge against petitioner, was issued pursuant to the power of removal of the President. This power of removal, however, is not an absolute one which accepts no reservation. It must be pointed out that petitioner is a career service officer. Under the Administrative Code of 1987, career service is characterized by the existence of security of tenure, as contra-distinguished from non-career service whose tenure is co-terminus with that of the appointing authority or subject to his pleasure, or limited to a period specified by law or to the duration of a particular project for which purpose the employment was made. As a career service officer, petitioner enjoys the right to security of tenure. No less than the 1987 Constitution guarantees the right of security of tenure of the employees of the civil service. Specifically, Section 36 of P.D. No. 807, as amended, otherwise known as Civil Service Decree of the Philippines, is emphatic that career service officers and employees who enjoy security of tenure may be removed only for any of the causes enumerated in said law. In other words, the fact that petitioner is a presidential appointee does not give the appointing authority the license to remove him at will or at his pleasure for it is an admitted fact that he is likewise a career service officer who under the law is the recipient of tenurial protection, thus, may only be removed for a cause and in accordance with procedural due process. Was petitioner then removed from office for a legal cause under a valid proceeding? Although the proceedings taken complied with the requirements of procedural due process, this Court, however, considers that petitioner was not dismissed for a valid cause. It should be noted that what precipitated the creation of the investigative committee to look into the administrative charge against petitioner is his conviction by the Sandiganbayan in Criminal Case Nos. 14208 and 14209. As admitted by the respondents, the administrative case against petitioner is
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based on the Sandiganbayan Decision of September 18, 1992. Thus, in the Administrative Order No. 101 issued by Senior Deputy Executive Secretary Quisumbing which found petitioner guilty of grave misconduct, it clearly states that: This pertains to the administrative charge against Assistant Commissioner Aquilino T. Larin of the Bureau of Internal Revenue, for grave misconduct by virtue of a Memorandum signed by Acting Secretary Leong of the Department of Finance, on the basis of a decision handed down by the Hon. Sandiganbayan convicting Larin, et. al. in Criminal Case Nos. 14208 and 14209. 4 In a nutshell, the criminal cases against petitioner refer to his alleged violation of Section 268 (4) of the National Internal Revenue Code and of Section 3 (e) of R.A. No. 3019 as a consequence of his act of favorably recommending the grant of tax credit to Tanduay Distillery, Inc.. The pertinent portion of the judgment of the Sandiganbayan reads: As above pointed out, the accused had conspired in knowingly preparing false memoranda and certification in order to effect a fraud upon taxes due to the government. By their separate acts which had resulted in an appropriate tax credit of P180,701,682.00 in favor of Tanduay. The government had been defrauded of a tax revenue for the full amount, if one is to look at the availments or utilization thereof (Exhibits "AA" to "AA- 31-a"), or for a substantial portion thereof (P73,000,000.00) if we are to rely on the letter of Deputy Commissioner Eufracio D. Santos (Exhibits "21" for all the accused). As pointed out above, the confluence of acts and omissions committed by accused Larin, Pareno and Evangelista adequately prove conspiracy among them for no other purpose than to bring about a tax credit which Tanduay did not deserve. These misrepresentations as to how much Tanduay had paid in ad valorem taxes obviously constituted a fraud of tax revenue of the government . . . . 5 However, it must be stressed at this juncture that the conviction of petitioner by the Sandiganbayan was set asideby this Court in our decision promulgated on April 17, 1996 in G.R. Nos. 108037-38 and 107119-20. We specifically ruled in no uncertain terms that: a) petitioner can not be held negligent in relying on the certification of a co-equal unit in the BIR, b) it is not incumbent upon Larin to go beyond the certification made by the Revenue Accounting Division that Tanduay Distillery, Inc. had paid the ad valorem taxes, c) there is nothing irregular or anything false in Larin's marginal note on the memorandum addressed to Pareno, the Chief of Alcohol Tax Division who was also one of the accused, but eventually acquitted, in the said criminal cases, and d) there is no proof of actual agreement between the accused, including petitioner, to commit the illegal acts charged. We are emphatic in our resolution in said cases that there is nothing "illegal with the acts committed by the petitioner(s)." We also declare that "there is no showing that petitioner(s) had acted irregularly, or performed acts outside of his (their) official functions." Significantly, these acts which. We categorically declare to be not unlawful and improper in G.R. Nos. 108037-38 and G.R. Nos. 107119-20 are the very same acts for which petitioner is held to be administratively responsible. Any charge of malfeasance or misfeasance on the part of the petitioner is clearly belied by our conclusion in said cases. In the light of this decisive pronouncement, We see no reason for the administrative charge to continue it must, thus, be dismissed. We are not unaware of the rule that since administrative cases are independent from criminal actions for the same act or omission, the dismissal or acquittal of the criminal charge does not foreclose the institution of administrative action nor carry with it the relief from administrative liability. 6 However, the circumstantial setting of the instant case sets it miles apart from the foregoing rule and placed it well within the exception. Corollarily, where the very basis of the administrative case against petitioner is his conviction in the criminal action which was later on set aside by this Court upon a categorical and clear finding that the acts for which he was administratively held liable are not unlawful and irregular, the acquittal of the petitioner in the criminal case
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necessarily entails the dismissal of the administrative action against him, because in such a case, there is no more basis nor justifiable reason to maintain the administrative suit. On the aspect of procedural due process, suffice it to say that petitioner was given every chance to present his side. The rule is well settled that the essence of due process in administrative proceedings is that a party be afforded a reasonable opportunity to be heard and to submit any evidence he may have in support of his defense.7 The records clearly show that on October 1, 1993 petitioner submitted his letter-response dated September 30, 1993 to the administrative charge filed against him. Aside from his letter, he also submitted various documents attached as annexes to his letter, all of which are evidences supporting his defense. Prior to this, he received a letter dated September 17, 1993 from the Investigation Committee requiring him to explain his side concerning the charge. It can not therefore be argued that petitioner was denied of due process. Let us now examine Executive Order No. 132. As stated earlier, with the issuance of Executive Order No. 132, some of the positions and offices, including the office of Excise Tax Services of which petitioner was the Assistant Commissioner, were abolished or otherwise decentralized. Consequently, the President released the list of appointed Assistant Commissioners of the BIR. Apparently, petitioner was not included. We do not agree. Under its preamble, E.O. No. 132 lays down the legal bases of its issuance, namely: a) Section 48 and 62 of R.A. No. 7645, b) Section 63 of E.O. No. 127, and c) Section 20, Book III of E.O. No. 292. Section 48 of R.A. 7645 provides that: Sec. 48. Scaling Down and Phase Out of Activities of Agencies Within the Executive Branch. The heads of departments, bureaus and offices and agencies are hereby directed to identify their respective activities which are no longer essential in the delivery of public services and which may bescaled down, phased out or abolished, subject to civil service rules and regulations. . . . Actual scaling down, phasing out or abolition of the activities shall be effected pursuant to Circulars or Orders issued for the purpose by the Office of the President. (emphasis ours) Said provision clearly mentions the acts of "scaling down, phasing out and abolition" of offices only and does not cover the creation of offices or transfer of functions. Nevertheless, the act of creating and decentralizing is included in the subsequent provision of Section 62, which provides that: Sec. 62. Unauthorized organizational charges. Unless otherwise created by law or directed by the President of the Philippines, no organizational unit of charges in key positions in any department or agency shall be authorized in their respective organization structures and be funded from appropriations by this Act. (emphasis ours) The foregoing provision evidently shows that the President is authorized to effect organizational charges including the creation of offices in the department or agency concerned.
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The contention of petitioner that the two provisions are riders deserves scant consideration. Well settled is the rule that every law has in its favor the presumption of constitutionality. 8 Unless and until a specific provision of the law is declared invalid and unconstitutional, the same is valid and biding for all intents and purposes. Another legal basis of E.O. No. 132 is Section 20, Book III of E.O. No. 292 which states: Sec. 20. Residual Powers. Unless Congress provides otherwise, the President shall exercise such other powers and functions vested in the President which are provided for under the laws and which are not specifically enumerated above or which are not delegated by the President in accordance with law. (emphasis ours) This provision speaks of such other powers vested in the President under the law. What law then which gives him the power to reorganize? It is Presidential Decree No. 1772 9 which amended Presidential Decree No. 1416. These decrees expressly grant the President of the Philippines the continuing authority to reorganize the national government, which includes the power to group, consolidate bureaus and agencies, to abolish offices, to transfer functions, to create and classify functions, services and activities and to standardize salaries and materials. The validity of these two decrees are unquestionable. The 1987 Constitution clearly provides that "all laws, decrees, executive orders, proclamations, letters of instructions and other executive issuances not inconsistent with this Constitution shall remain operative until amended, repealed or revoked." 10 So far, there is yet no law amending or repealing said decrees. Significantly, the Constitution itself recognizes future reorganizations in the government as what is revealed in Section 16 of Article XVIII, thus: Sec. 16. Career civil service employees separated from service not for cause but as a result of the . . . reorganization following the ratification of this Constitution shall be entitled to appropriate separation pay . . . However, We can not consider E.O. No. 127 signed on January 30, 1987 as a legal basis for the reorganization of the BIR. E.O. No. 127 should be related to the second paragraph of Section 11 of Republic Act No. 6656. Section 11 provides inter alia: xxx xxx xxx In the case of the 1987 reorganization of the executive branch, all departments and agencies which are authorized by executive orders promulgated by the President to reorganize shall have ninety daysfrom the approval of this act within which to implement their respective reorganization plans in accordance with the provisions of this Act. (emphasis ours) Executive Order No. 127 was part of the 1987 reorganization contemplated under said provision. Obviously, it had become stale by virtue of the expiration of the ninety day deadline period. It can not thus be used as a proper basis for the reorganization of the BIR. Nevertheless, as shown earlier, there are other legal bases to sustain the authority of the President to issue the questioned E.O. NO. 132.

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While the President's power to reorganize can not be denied, this does not mean however that the reorganization itself is properly made in accordance with law. Well-settled is the rule that reorganization is regarded as valid provided it is pursued in good faith. Thus, in Dario vs. Mison, this Court has had the occasion to clarify that: As a general rule, a reorganization is carried out in "good faith" if it is for the purpose of economy or to make bureaucracy more efficient. In that event no dismissal or separation actually occurs because the position itself ceases to exist. And in that case the security of tenure would not be a Chinese wall. Be that as it may, if the abolition which is nothing else but a separation or removal, is done for political reasons or purposely to defeat security of tenure, or otherwise not in good faith, no valid abolition takes place and whatever abolition is done is void ab initio. There is an invalid abolition as where there is merely a change of nomenclature of positions or where claims of economy are belied by the existence of ample funds. 11 In this regard, it is worth mentioning that Section 2 of R. A. No. 6656 lists down the circumstances evidencing bad faith in the removal of employees as a result of the reorganization, thus: Sec. 2. No officer or employee in the career service shall be removed except for a valid cause and after due notice and hearing. A valid cause for removal exists when, pursuant to a bona fide reorganization, a position has been abolished or rendered redundant or there is a need to merge, divide, or consolidate positions in order to meet the exigencies of the service, or other lawful causes allowed by the Civil Service Law. The existence of any or some of the following circumstances may be considered as evidence of bad faith in the removals made as a result of the reorganization, giving rise to a claim for reinstatement or reappointment by an aggrieved party: a) Where there is a significant increase in the number of positions in the new staffing pattern of the department or agency concerned; b) Where an office is abolished and another performing substantially the same functions is created; c) Where incumbents are replaced by those less qualified in terms of status of appointment, performance and merit; d) Where there is a reclassification of offices in the department or agency concerned and the reclassified offices perform substantially the same functions as the original offices; e) Where the removal violates the order of separation provided in Section 3 hereof. A reading of some of the provisions of the questioned E.O. No. 132 clearly leads us to an inescapable conclusion that there are circumstances considered as evidences of bad faith in the reorganization of the BIR. Section 1.1.2 of said executive order provides that: 1.1.2 The Intelligence and Investigation Office and the Inspection Service are abolished. An Intelligence and Investigation Service is hereby created to absorb the same functions of the abolished office and service. . . . (emphasis ours)
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This provision is a clear illustration of the circumstance mentioned in Section 2 (b) of R.A. No. 6656 that an office is abolished and another one performing substantially the same function is created. Another circumstance is the creation of services and divisions in the BIR resulting to a significant increase in the number of positions in the said bureau as contemplated in paragraph (a) of Section 2 of R.A. No. 6656. Under Section 1.3 of E.O. No. 132, the Information Systems Group has two newly created Systems Services. Aside from this, six new divisions are also created. Under Section 1.2.1, three more divisions of the Assessment Service are formed. With these newly created offices, there is no doubt that a significant increase of positions will correspondingly follow. Furthermore, it is perceivable that the non-reappointment of the petitioner as Assistant Commissioner violates Section 4 of R.A. No. 6656. Under said provision, officers holding permanent appointments are given preference for appointment to the new positions in the approved staffing pattern comparable to their former positions or in case there are not enough comparable positions to positions next lower in rank. It is undeniable that petitioner is a career executive officer who is holding a permanent position. Hence, he should have been given preference for appointment in the position of Assistant Commissioner. As claimed by petitioner, Antonio Pangilinan who was one of those appointed as Assistant Commissioner, "is an outsider of sorts to the Bureau, not having been an incumbent officer of the Bureau at the time of the reorganization." We should not lose sight of the second paragraph of Section 4 of R.A. No. 6656 which explicitly states that no new employees shall be taken in until all permanent officers shall have been appointed for permanent position. IN VIEW OF THE FOREGOING, the petition is granted, and petitioner is hereby reinstated to his position as Assistant Commissioner without loss of seniority rights and shall be entitled to full backwages from the time of his separation from service until actual reinstatement unless, in the meanwhile, he would have reached the compulsory retirement age of sixty-five years in which case, he shall be deemed to have retired at such age and entitled thereafter to the corresponding retirement benefits. SO ORDERED.

G.R. No. 81954

August 8, 1989

CESAR Z. DARIO, petitioner, vs. HON. SALVADOR M. MISON, HON. VICENTE JAYME and HON. CATALINO MACARAIG, JR., in their respective capacities as Commissioner of Customs, Secretary of Finance, and Executive Secretary, respondents. G.R. No. 81967 August 8, 1989
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VICENTE A. FERIA JR., petitioner, vs. HON. SALVADOR M. MISON, HON. VICENTE JAYME, and HON. CATALINO MACARAIG, JR., in their respective capacities as Commissioner of Customs, Secretary of Finance, and Executive Secretary, respondents. G.R. No. 82023 August 8, 1989

ADOLFO CASARENO, PACIFICO LAGLEVA, JULIAN C. ESPIRITU, DENNIS A. AZARRAGA, RENATO DE JESUS, NICASIO C. GAMBOA, CORAZON RALLOS NIEVES, FELICITACION R. GELUZ, LEODEGARIO H. FLORESCA, SUBAER PACASUM, ZENAIDA LANARIA, JOSE B. ORTIZ, GLICERIO R. DOLAR, CORNELIO NAPA, PABLO B. SANTOS, FERMIN RODRIGUEZ, DALISAY BAUTISTA, LEONARDO JOSE, ALBERTO LONTOK, PORFIRIO TABINO, JOSE BARREDO, ROBERTO ARNALDO, ESTER TAN, PEDRO BAKAL, ROSARIO DAVID, RODOLFO AFUANG, LORENZO CATRE, LEONCIA CATRE, ROBERTO ABADA, petitioners, vs. COMMISSIONER SALVADOR M. MISON, COMMISSIONER, BUREAU OF CUSTOMS, respondent. G.R. No. 83737 August 8, 1989

BENEDICTO L. AMASA and WILLIAM S. DIONISIO, petitioners, vs. PATRICIA A. STO. TOMAS, in her capacity as Chairman of the Civil Service Commission and SALVADOR MISON, in his capacity as Commissioner of the Bureau of Customs, respondents. G.R. No. 85310 August 8, 1989

SALVADOR M. MISON, in his capacity as Commissioner of Customs, petitioner, vs. CIVIL SERVICE COMMISSION, ABACA, SISINIO T., ABAD, ROGELIO C., ABADIANO, JOSE P., ABCEDE, NEMECIO C., ABIOG, ELY F., ABLAZA, AURORA M., AGBAYANI, NELSON I., AGRES ANICETO, AGUILAR, FLOR, AGUILUCHO MA. TERESA R., AGUSTIN, BONIFACIO T., ALANO, ALEX P., ALBA, MAXIMO F. JR., ALBANO, ROBERT B., ALCANTARA, JOSE G., ALMARIO, RODOLFO F., ALVEZ, ROMUALDO R., AMISTAD RUDY M., AMOS, FRANCIS F., ANDRES, RODRIGO V., ANGELES, RICARDO S., ANOLIN, MILAGROS H., AQUINO, PASCASIO E., ARABE, MELINDA M., ARCANGEL, AGUSTIN S., JR., ARPON, ULPLIANO U., JR., ARREZA, ARTEMIO M., JR., ARROJO, ANTONIO P., ARVISU, ALEXANDER S., ASCA;O, ANTONIO T., ASLAHON, JULAHON P., ASUNCION, VICTOR R., ATANGAN, LORNA S., ATIENZA, ALEXANDER R., BACAL, URSULINO C., BA;AGA, MARLOWE, Z., BANTA, ALBERTO T., BARREDO, JOSE B., BARROS, VICTOR C., BARTOLOME, FELIPE A., BAYSAC, REYNALDO S., BELENO, ANTONIO B., BERNARDO, ROMEO D., BERNAS, MARCIANO S., BOHOL, AUXILIADOR G., BRAVO, VICTOR M., BULEG, BALILIS R., CALNEA, MERCEDES M., CALVO, HONESTO G., CAMACHO, CARLOS V., CAMPOS, RODOLFO C., CAPULONG, RODRIGO G., CARINGAL, GRACIA Z., CARLOS, LORENZO B., CARRANTO, FIDEL U., CARUNGCONG, ALFREDO M., CASTRO, PATRICIA J., CATELO, ROGELIO B., CATURLA, MANUEL B., CENIZAL, JOSEFINA F., CINCO, LUISITO, CONDE0, JOSE C., JR., CORCUERA, FIDEL S., CORNETA, VICENTE S., CORONADO, RICARDO S., CRUZ, EDUARDO S., CRUZ, EDILBERTO A., CRUZ, EFIGENIA B., CRUZADO, MARCIAL C., CUSTODIO, RODOLFO M., DABON, NORMA M., DALINDIN, EDNA MAE D., DANDAL, EDEN F., DATUHARON, SATA A., DAZO, GODOFREDO L., DE CASTRO, LEOPAPA, DE
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GUZMAN, ANTONIO A., DE GUZMAN, RENATO E., DE LA CRUZ, AMADO A., JR., DE LA CRUZ, FRANCISCO C., DE LA PE;A, LEONARDO, DEL CAMPO, ORLANDO, DEL RIO, MAMERTO P., JR., DEMESA, WILHELMINA T., DIMAKUTA, SALIC L., DIZON, FELICITAS A., DOCTOR, HEIDY M., DOLAR, GLICERIO R., DOMINGO, NICANOR J., DOMINGO, PERFECTO V., JR., DUAY, JUANA G., DYSANGCO, RENATO F., EDILLOR, ALFREDO P., ELEVAZO, LEONARDO A., ESCUYOS, MANUEL M., JR., ESMERIA, ANTONIO E., ESPALDON, MA. LOURDES H., ESPINA, FRANCO A., ESTURCO, RODOLFO C., EVANGELINO, FERMIN I., FELIX, ERNESTO G., FERNANDEZ, ANDREW M., FERRAREN, ANTONIO C., FERRERA, WENCESLAO A., FRANCISCO, PELAGIO S., JR., FUENTES, RUDY L., GAGALANG, RENATO V., GALANG, EDGARDO R., GAMBOA, ANTONIO C., GAN, ALBERTO R., GARCIA, GILBERT M., GARCIA, EDNA V., GARCIA, JUAN L., GAVIOLA, LILIAN V., GEMPARO, SEGUNDINA G., GOBENCIONG, FLORDELIZ B., GRATE, FREDERICK R., GREGORIO, LAURO P., GUARTICO, AMMON H., GUIANG, MYRNA N., GUINTO, DELFIN C., HERNANDEZ, LUCAS A., HONRALES, LORETO N., HUERTO, LEOPOLDO H., HULAR , LANNYROSS E., IBA;EZ, ESTER C., ILAGAN, HONORATO C., INFANTE, REYNALDO C., ISAIS, RAY C., ISMAEL, HADJI AKRAM B., JANOLO, VIRGILIO M., JAVIER, AMADOR L., JAVIER, ROBERTO S., JAVIER, WILLIAM R., JOVEN, MEMIA A., JULIAN, REYNALDO V., JUMAMOY, ABUNDIO A., JUMAQUIAO, DOMINGO F., KAINDOY, PASCUAL B., JR., KOH, NANIE G., LABILLES, ERNESTO S., LABRADOR, WILFREDO M., LAGA, BIENVENIDO M., LAGLEVA, PACIFICO Z., LAGMAN, EVANGELINE G., LAMPONG, WILFREDO G., LANDICHO, RESTITUTO A., LAPITAN, CAMILO M., LAURENTE, REYNALDO A., LICARTE, EVARISTO R., LIPIO, VICTOR O., LITTAUA, FRANKLIN Z., LOPEZ, MELENCIO L., LUMBA, OLIVIA., MACAISA, BENITO T., MACAISA, ERLINDA C., MAGAT, ELPIDIO, MAGLAYA, FERNANDO P., MALABANAN, ALFREDO C., MALIBIRAN, ROSITA D., MALIJAN, LAZARO V., MALLI, JAVIER M., MANAHAN, RAMON S., MANUEL, ELPIDIO R., MARAVILLA, GIL B., MARCELO, GIL C., MARI;AS, RODOLFO V., MAROKET, JESUS C., MARTIN, NEMENCIO A., MARTINEZ, ROMEO M., MARTINEZ, ROSELINA M., MATIBAG, ANGELINA G., MATUGAS, ERNESTO T., MATUGAS, FRANCISCO T., MAYUGA, PORTIA E., MEDINA, NESTOR M., MEDINA, ROLANDO S., MENDAVIA, AVELINO I., MENDOZA, POTENCIANO G., MIL, RAY M., MIRAVALLES, ANASTACIA L., MONFORTE, EUGENIO, JR., G., MONTANO, ERNESTO F., MONTERO, JUAN M. III., MORALDE, ESMERALDO B., JR., MORALES, CONCHITA D.L., MORALES, NESTOR P., MORALES, SHIRLEY S., MUNAR, JUANITA L., MU;OZ, VICENTE R., MURILLO, MANUEL M., NACION, PEDRO R., NAGAL, HENRY N., NAPA, CORNELIO B., NAVARRO, HENRY L., NEJAL, FREDRICK E., NICOLAS, REYNALDO S., NIEVES, RUFINO A., OLAIVAR, SEBASTIAN T., OLEGARIO, LEO Q., ORTEGA, ARLENE R., ORTEGA, JESUS R., OSORIO, ABNER S., PAPIO, FLORENTINO T. II, PASCUA, ARNULFO A., PASTOR, ROSARIO, PELAYO, ROSARIO L., PE;A, AIDA C., PEREZ, ESPERIDION B., PEREZ, JESUS BAYANI M., PRE, ISIDRO A., PRUDENCIADO, EULOGIA S., PUNZALAN, LAMBERTO N., PURA, ARNOLD T., QUINONES, EDGARDO I., QUINTOS, AMADEO C., JR., QUIRAY, NICOLAS C., RAMIREZ, ROBERTO P., RA;ADA, RODRIGO C., RARAS, ANTONIO A., RAVAL, VIOLETA V., RAZAL, BETTY R., REGALA, PONCE F., REYES, LIBERATO R., REYES, MANUEL E., REYES, NORMA Z., REYES, TELESFORO F., RIVERA, ROSITA L., ROCES, ROBERTO V., ROQUE, TERESITA S., ROSANES, MARILOU M., ROSETE, ADAN I., RUANTO, REY, CRISTO C., JR., SABLADA, PASCASIO G., SALAZAR, SILVERIA S., SALAZAR, VICTORIA A., SALIMBACOD, PERLITA C., SALMINGO, LOURDES M., SANTIAGO, EMELITA B., SATINA, PORFIRIO C., SEKITO, COSME B., JR., SIMON, RAMON P., SINGSON, MELECIO C., SORIANO, ANGELO L., SORIANO, MAGDALENA R., SUMULONG, ISIDRO L., JR., SUNICO, ABELARDO T., TABIJE, EMMA B., TAN, RUDY, GOROSPE, TAN, ESTER S., TAN, JULITA S., TECSON, BEATRIZ B., TOLENTINO, BENIGNO A., TURINGAN, ENRICO T., JR., UMPA, ALI A., VALIC, LUCIO E., VASQUEZ, NICANOR B., VELARDE, EDGARDO C., VERA, AVELINO A., VERAME, OSCAR E., VIADO, LILIAN T., VIERNES, NAPOLEON K., VILLALON, DENNIS A., VILLAR, LUZ L., VILLALUZ, EMELITO V., ZATA, ANGEL A., JR., ACHARON, CRISTETO, ALBA, RENATO B., AMON, JULITA C., AUSTRIA, ERNESTO C., CALO, RAYMUNDO M., CENTENO, BENJAMIN R., DE CASTRO, LEOPAPA C ., DONATO, ESTELITA P., DONATO, FELIPE S., FLORES, PEDRITO S., GALAROSA, RENATO, MALAWI, MAUYAG, MONTENEGRO, FRANCISCO M., OMEGA, PETRONILO T., SANTOS, GUILLERMO F., TEMPLO, CELSO, VALDERAMA, JAIME B., and VALDEZ, NORA M., respondents. G.R. No. 85335 August 8, 1989
246

FRANKLIN Z. LITTAUA, ADAN I. ROSETE, FRANCISCO T. MATUGAS, MA. J. ANGELINA G. MATIBAG, LEODEGARDIO H. FLORESCA, LEONARDO A. DELA PE;A, ABELARDO T. SUNICO, MELENCIO L. LOPEZ, NEMENCIO A. MARTIN, RUDY M. AMISTAD, ERNESTO T. MATUGAS, SILVERIA S. SALAZAR, LILLIAN V. GAVIOLA, MILAGROS ANOLIN, JOSE B. ORTIZ, ARTEMIO ARREZA, JR., GILVERTO M. GARCIA, ANTONIO A. RARAS, FLORDELINA B. GOBENCIONG, ANICETO AGRES, EDGAR Y. QUINONES, MANUEL B. CATURLA, ELY F. ABIOG, RODRIGO C. RANADA, LAURO GREGORIO, ALBERTO I. GAN, EDGARDO GALANG, RAY C. ISAIS, NICANOR B. VASQUEZ, MANUEL ESCUYOS, JR., ANTONIO B. BELENO, ELPIO R. MANUEL, AUXILIADOR C. BOHOL, LEONARDO ELEVAZO, VICENTE S. CORNETA, petitioners, vs. COM. SALVADOR M. MISON/BUREAU OF CUSTOMS and the CIVIL SERVICE COMMISSION, respondents. G.R. No. 86241 August 8, 1989

SALVADOR M. MISON, in his capacity as Commissioner of Customs, petitioner, vs. CIVIL SERVICE COMMISSION, SENEN S. DIMAGUILA, ROMEO P. ARABE BERNARDO S. QUINTONG, GREGORIO P. REYES, and ROMULO C. BADILLO respondents

SARMIENTO, J.:

The Court writes finis to this contreversy that has raged bitterly for the several months. It does so out of ligitimate presentement of more suits reaching it as a consequence of the government reorganization and the instability it has wrought on the performance and efficiency of the bureaucracy. The Court is apprehensive that unless the final word is given and the ground rules are settled, the issue will fester, and likely foment on the constitutional crisis for the nation, itself biset with grave and serious problems. The facts are not in dispute. On March 25, 1986, President Corazon Aquino promulgated Proclamation No. 3, "DECLARING A NATIONAL POLICY TO IMPLEMENT THE REFORMS MANDATED BY THE PEOPLE, PROTECTING THEIR BASIC RIGHTS, ADOPTING A PROVISIONAL CONSTITUTION, AND PROVIDING FOR AN ORDERLY TRANSITION TO A GOVERNMENT UNDER A NEW CONSTITUTION." Among other things, Proclamation No. 3 provided: SECTION 1. ... The President shall give priority to measures to achieve the mandate of the people to: (a) ...
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Completely reorganize the government, eradicate unjust and oppressive structures, and all iniquitous vestiges of the previous regime; 1

Pursuant thereto, it was also provided: SECTION 1. In the reorganization of the government, priority shall be given to measures to promote economy, efficiency, and the eradication of graft and corruption. SECTION 2. All elective and appointive officials and employees under the 1973 Constitution shall continue in office until otherwise provided by proclamation or executive order or upon the appointment and qualification of their successors, if such is made within a period of one year from February 25, 1986. SECTION 3. Any public officer or employee separated from the service as a result of the organization effected under this Proclamation shall, if entitled under the laws then in force, receive the retirement and other benefits accruing thereunder. SECTION 4. The records, equipment, buildings, facilities and other properties of all government offices shall be carefully preserved. In case any office or body is abolished or reorganized pursuant to this Proclamation, its FUNDS and properties shall be transferred to the office or body to which its powers, functions and responsibilities substantially pertain. 2 Actually, the reorganization process started as early as February 25, 1986, when the President, in her first act in office, called upon "all appointive public officials to submit their courtesy resignation(s) beginning with the members of the Supreme Court."3 Later on, she abolished the Batasang Pambansa4 and the positions of Prime Minister and Cabinet 5 under the 1973 Constitution. Since then, the President has issued a number of executive orders and directives reorganizing various other government offices, a number of which, with respect to elected local officials, has been challenged in this Court, 6 and two of which, with respect to appointed functionaries, have likewise been questioned herein. 7 On May 28, 1986, the President enacted Executive Order No. 17, "PRESCRIBING RULES AND REGULATIONS FOR THE IMPLEMENTATION OF SECTION 2, ARTICLE III OF THE FREEDOM CONSTITUTION." Executive Order No. 17 recognized the "unnecessary anxiety and demoralization among the deserving officials and employees" the ongoing government reorganization had generated, and prescribed as "grounds for the separation/replacement of personnel," the following: SECTION 3. The following shall be the grounds for separation replacement of personnel: 1) 2) 3) 4) Existence of a case for summary dismissal pursuant to Section 40 of the Civil Service Law; Existence of a probable cause for violation of the Anti-Graft and Corrupt Practices Act as determined by the Mnistry Head concerned; Gross incompetence or inefficiency in the discharge of functions; Misuse of public office for partisan political purposes;
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5) Any other analogous ground showing that the incumbent is unfit to remain in the service or his separation/replacement is in the interest of the service.8 On January 30, 1987, the President promulgated Executive Order No. 127, "REORGANIZING THE MINISTRY OF FINANCE." 9 Among other offices, Executive Order No. 127 provided for the reorganization of the Bureau of Customs 10 and prescribed a new staffing pattern therefor. Three days later, on February 2, 1987, 11 the Filipino people adopted the new Constitution. On January 6, 1988, incumbent Commissioner of Customs Salvador Mison issued a Memorandum, in the nature of "Guidelines on the Implementation of Reorganization Executive Orders," 12 prescribing the procedure in personnel placement. It also provided: 1. By February 28, 1988, the employees covered by Executive Order 127 and the grace period extended to the Bureau of Customs by the President of the Philippines on reorganization shall be: a) b) c) informed of their re-appointment, or offered another position in the same department or agency or informed of their termination. 13

On the same date, Commissioner Mison constituted a Reorganization Appeals Board charged with adjudicating appeals from removals under the above Memorandum. 14 On January 26, 1988, Commissioner Mison addressed several notices to various Customs officials, in the tenor as follows: Sir: Please be informed that the Bureau is now in the process of implementing the Reorganization Program under Executive Order No. 127. Pursuant to Section 59 of the same Executive Order, all officers and employees of the Department of Finance, or the Bureau of Customs in particular, shall continue to perform their respective duties and responsibilities in a hold-over capacity, and that those incumbents whose positions are not carried in the new reorganization pattern, or who are not re- appointed, shall be deemed separated from the service. In this connection, we regret to inform you that your services are hereby terminated as of February 28, 1988. Subject to the normal clearances, you may receive the retirement benefits to which you may be entitled under existing laws, rules and regulations. In the meantime, your name will be included in the consolidated list compiled by the Civil Service Commission so that you may be given priority for future employment with the Government as the need arises. Sincerely yours, (Sgd) SALVADOR M. MISON
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Commissioner15 As far as the records will yield, the following were recipients of these notices: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. CESAR DARIO VICENTE FERIA, JR. ADOLFO CASARENO PACIFICO LAGLEVA JULIAN C. ESPIRITU DENNIS A. AZARRAGA RENATO DE JESUS NICASIO C. GAMBOA CORAZON RALLOS NIEVES FELICITACION R. GELUZ LEODEGARIO H. FLORESCA SUBAER PACASUM ZENAIDA LANARIA JOSE B. ORTIZ GLICERIO R. DOLAR CORNELIO NAPA PABLO B. SANTOS FERMIN RODRIGUEZ
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19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37.

DALISAY BAUTISTA LEONARDO JOSE ALBERTO LONTOK PORFIRIO TABINO JOSE BARREDO ROBERTO ARNALDO ESTER TAN PEDRO BAKAL ROSARIO DAVID RODOLFO AFUANG LORENZO CATRE LEONCIA CATRE ROBERTO ABADA ABACA, SISINIO T. ABAD, ROGELIO C. ABADIANO, JOSE P ABCEDE, NEMECIO C. ABIOG, ELY F. ABLAZA, AURORA M.
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38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57.

AGBAYANI, NELSON I. AGRES, ANICETO AGUILAR, FLOR AGUILUCHO, MA. TERESA R. AGUSTIN, BONIFACIO T. ALANO, ALEX P. ALBA, MAXIMO F. JR. ALBANO, ROBERT B. ALCANTARA, JOSE G. ALMARIO, RODOLFO F. ALVEZ, ROMUALDO R. AMISTAD, RUDY M. AMOS, FRANCIS F. ANDRES, RODRIGO V. ANGELES, RICARDO S. ANOLIN, MILAGROS H. AQUINO, PASCASIO E. L. ARABE, MELINDA M. ARCANGEL, AGUSTIN S, JR. ARPON, ULPIANO U., JR.
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58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76.

ARREZA, ARTEMIO M, JR. ARROJO, ANTONIO P. ARVISU, ALEXANDER S. ASCA;O, ANTONIO T. ASLAHON, JULAHON P. ASUNCION, VICTOR R. ATANGAN, LORNA S. ANTIENZA, ALEXANDER R. BACAL URSULINO C. BA;AGA, MARLOWE Z. BANTA, ALBERTO T. BARROS, VICTOR C. BARTOLOME, FELIPE A. BAYSAC, REYNALDO S. BELENO, ANTONIO B. BERNARDO, ROMEO D. BERNAS, MARCIANO S. BOHOL, AUXILIADOR G. BRAVO, VICTOR M.
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77. 78. 79. 80. 81. 82. 83. 84. 85. 86. 87. 88. 89. 90. 91. 92. 93. 94. 95. 96.

BULEG, BALILIS R. CALNEA, MERCEDES M. CALVO, HONESTO G. CAMACHO, CARLOS V. CAMPOS, RODOLFO C. CAPULONG, RODRIGO G. CARINGAL, GRACIA Z. CARLOS, LORENZO B. CARRANTO, FIDEL U. CARUNGCONG, ALFREDO M. CASTRO, PATRICIA J. CATELO, ROGELIO B. CATURLA, MANUEL B. CENIZAL, JOSEFINA F. CINCO, LUISITO CONDE, JOSE C., JR. CORCUERA, FIDEL S. CORNETA, VICENTE S. CORONADO, RICARDO S. CRUZ, EDUARDO S.
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97. 98. 99. 100. 101. 102. 103. 104. 105. 106. 107. 108. 109. 110. 111. 112. 113. 114. 115.

CRUZ, EDILBERTO A, CRUZ, EFIGENIA B. CRUZADO,NORMA M. CUSTODIO, RODOLFO M. DABON, NORMA M. DALINDIN, EDNA MAE D. DANDAL, EDEN F. DATUHARON, SATA A. DAZO, GODOFREDO L. DE CASTRO, LEOPAPA DE GUZMAN, ANTONIO A. DE GUZMAN, RENATO E. DE LA CRUZ, AMADO A., JR. DE LA CRUZ, FRANCISCO C. DE LA PE;A, LEONARDO DEL CAMPO, ORLANDO DEL RIO, MAMERTO P., JR. DEMESA, WILHELMINA T. DIMAKUTA, SALIC L.
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116. 117. 118. 119. 120. 121. 122. 123. 124. 125. 126. 127. 128. 129. 130. 131. 132. 133. 134. 135.

DIZON, FELICITAS A. DOCTOR, HEIDY M. DOMINGO, NICANOR J. DOMINGO, PERFECTO V., JR. DUAY, JUANA G. DYSANGCO, RENATO F. EDILLOR, ALFREDO P. ELEVAZO, LEONARDO A ESCUYOS, MANUEL M., JR. ESMERIA, ANTONIO E. ESPALDON, MA. LOURDES H. ESPINA, FRANCO A. ESTURCO, RODOLFO C. EVANGELINO, FERMIN I. FELIX, ERNESTO G. FERNANDEZ, ANDREW M. FERRAREN, ANTONIO C. FERRERA, WENCESLAO A. FRANCISCO, PELAGIO S, JR. FUENTES, RUDY L.
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136. 137. 138. 139. 140. 141. 142. 143. 144. 145. 146. 147. 148. 149. 150. 151. 152. 153. 154.

GAGALANG, RENATO V. GALANG, EDGARDO R. GAMBOA, ANTONIO C. GAN, ALBERTO P GARCIA, GILBERT M. GARCIA, EDNA V. GARCIA, JUAN L. GAVIOIA, LILIAN V. GEMPARO, SEGUNDINA G. GOBENCIONG, FLORDELIZ B. GRATE, FREDERICK R. GREGORIO, LAURO P. GUARTICO, AMMON H. GUIANG, MYRNA N. GUINTO, DELFIN C. HERNANDEZ, LUCAS A. HONRALES, LORETO N. HUERTO, LEOPOLDO H. HULAR, LANNYROSS E.
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155. 156. 157. 158. 159. 160. 161. 162. 163. 164. 165. 166. 167. 168. 169. 170. 171. 172. 173. 174.

IBA;EZ, ESTER C. ILAGAN, HONORATO C. INFANTE, REYNALDO C. ISAIS, RAY C. ISMAEL, HADJI AKRAM B. JANOLO, VIRGILIO M. JAVIER, AMADOR L. JAVIER, ROBERTO S. JAVIER, WILLIAM R. JOVEN, MEMIA A. JULIAN, REYNALDO V. JUMAMOY, ABUNDIO A. JUMAQUIAO, DOMINGO F. KAINDOY, PASCUAL B., JR. KOH, NANIE G. LABILLES, ERNESTO S. LABRADOR, WILFREDO M. LAGA, BIENVENIDO M. LAGMAN, EVANGELINE G. LAMPONG, WILFREDO G.
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175. 176. 177. 178. 179. 180. 181. 182. 183. 184. 185. 186. 187. 188. 189. 190. 191. 192. 193.

LANDICHO, RESTITUTO A. LAPITAN, CAMILO M. LAURENTE, REYNALDO A. LICARTE, EVARISTO R. LIPIO, VICTOR O. LITTAUA, FRANKLIN Z. LOPEZ, MELENCIO L. LUMBA, OLIVIA R. MACAISA, BENITO T. MACAISA, ERLINDA C. MAGAT, ELPIDIO MAGLAYA, FERNANDO P. MALABANAN, ALFREDO C. MALIBIRAN, ROSITA D. MALIJAN, LAZARO V. MALLI, JAVIER M. MANAHAN, RAMON S. MANUEL, ELPIDIO R. MARAVILLA, GIL B.
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194. 195. 196. 197. 198. 199. 200. 201. 202. 203. 204. 205. 206. 207. 208. 209. 210. 211. 212. 213.

MARCELO, GIL C. MARI;AS, RODOLFO V. MAROKET ,JESUS C. MARTIN, NEMENCIO A. MARTINEZ, ROMEO M. MARTINEZ, ROSELINA M. MATIBAG, ANGELINA G. MATUGAS, ERNESTO T. MATUGAS, FRANCISCO T. MAYUGA, PORTIA E. MEDINA, NESTOR M. MEDINA, ROLANDO S. MENDAVIA, AVELINO MENDOZA, POTENCIANO G. MIL, RAY M. MIRAVALLES, ANASTACIA L. MONFORTE, EUGENIO, JR. G. MONTANO, ERNESTO F. MONTERO, JUAN M. III MORALDE, ESMERALDO B., JR.
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214. 215. 216. 217. 218. 219. 220. 221. 222. 223. 224. 225. 226. 227. 228. 229. 230. 231. 232.

MORALES, CONCHITA D. L MORALES, NESTOR P. MORALES, SHIRLEY S. MUNAR, JUANITA L. MU;OZ, VICENTE R. MURILLO, MANUEL M. NACION, PEDRO R. NAGAL, HENRY N. NAVARRO, HENRY L. NEJAL FREDRICK E. NICOLAS, REYNALDO S. NIEVES, RUFINO A. OLAIVAR, SEBASTIAN T. OLEGARIO, LEO Q. ORTEGA, ARLENE R. ORTEGA, JESUS R. OSORIO, ABNER S. PAPIO FLORENTINO T. II PASCUA, ARNULFO A.
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233. 234. 235. 236. 237. 238. 239. 240. 241. 242. 243. 244. 245. 246. 247. 248. 249. 250. 251. 252.

PASTOR, ROSARIO PELAYO, ROSARIO L. PE;A, AIDA C. PEREZ, ESPERIDION B. PEREZ, JESUS BAYANI M. PRE, ISIDRO A. PRUDENCIADO, EULOGIA S. PUNZALAN, LAMBERTO N. PURA, ARNOLD T. QUINONES, EDGARDO I. QUINTOS, AMADEO C., JR. QUIRAY, NICOLAS C. RAMIREZ, ROBERTO P. RANADA, RODRIGO C. RARAS, ANTONIO A. RAVAL, VIOLETA V. RAZAL, BETTY R. REGALA, PONCE F. REYES, LIBERATO R. REYES, MANUEL E.
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253. 254. 255. 256. 257. 258. 259. 260. 261. 262. 263. 264. 265. 266. 267. 268. 269. 270. 271.

REYES, NORMA Z. REYES, TELESPORO F. RIVERA, ROSITA L. ROCES, ROBERTO V. ROQUE, TERESITA S. ROSANES, MARILOU M. ROSETE, ADAN I. RUANTO, REY CRISTO C., JR. SABLADA, PASCASIO G. SALAZAR, SILVERIA S. SALAZAR, VICTORIA A. SALIMBACOD, PERLITA C. SALMINGO, LOURDES M. SANTIAGO, EMELITA B. SATINA, PORFIRIO C. SEKITO, COSME B JR. SIMON, RAMON P. SINGSON, MELENCIO C. SORIANO, ANGELO L.
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272. 273. 274. 275. 276. 277. 278. 279. 280. 281. 282. 283. 284. 285. 286. 287. 288. 289. 290. 291.

SORIANO, MAGDALENA R. SUNICO, ABELARDO T TABIJE, EMMA B. TAN, RUDY GOROSPE TAN, ESTER S. TAN, JULITA S. TECSON, BEATRIZ B. TOLENTINO, BENIGNO A. TURINGAN, ENRICO T JR. UMPA, ALI A. VALIC, LUCIO E. VASQUEZ, NICANOR B. VELARDE, EDGARDO C. VERA, AVELINO A. VERAME, OSCAR E. VIADO, LILIAN T. VIERNES, NAPOLEON K VILLALON, DENNIS A. VILLAR, LUZ L. VILLALUZ, EMELITO V.
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292. 293. 294. 295. 296. 297. 298. 299. 300. 301. 302. 303. 304. 305. 306. 307. 308. 309. 310.

VILLAR, LUZ L. ZATA, ANGELA JR. ACHARON, CRISTETO ALBA, RENATO B. AMON, JULITA C. AUSTRIA, ERNESTO C. CALO, RAYMUNDO M. CENTENO, BENJAMIN R. DONATO, ESTELITA P. DONATO, FELIPE S FLORES, PEDRITO S. GALAROSA, RENATO MALAWI, MAUYAG MONTENEGRO, FRANSISCO M. OMEGA, PETRONILO T. SANTOS, GUILLERMO P. TEMPLO, CELSO VALDERAMA, JAIME B. VALDEZ, NORA M.
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Cesar Dario is the petitioner in G.R. No. 81954; Vicente Feria, Jr., is the petitioner in G.R. No. 81967; Messrs. Adolfo Caserano Pacifico Lagleva Julian C. Espiritu, Dennis A. Azarraga Renato de Jesus, Nicasio C. Gamboa, Mesdames Corazon Rallos Nieves and Felicitacion R. Geluz Messrs. Leodegario H. Floresca, Subaer Pacasum Ms. Zenaida Lanaria Mr. Jose B. Ortiz, Ms. Gliceria R. Dolar, Ms. Cornelia Napa, Pablo B. Santos, Fermin Rodriguez, Ms. Daligay Bautista, Messrs. Leonardo Jose, Alberto Lontok, Porfirio Tabino Jose Barredo, Roberto Arnaldo, Ms. Ester Tan, Messrs. Pedro Bakal, Rosario David, Rodolfo Afuang, Lorenzo Catre,, Ms. Leoncia Catre, and Roberto Abaca, are the petitioners in G.R. No. 82023; the last 279 16 individuals mentioned are the private respondents in G.R. No. 85310. As far as the records will likewise reveal, 17 a total of 394 officials and employees of the Bureau of Customs were given individual notices of separation. A number supposedly sought reinstatement with the Reorganization Appeals Board while others went to the Civil Service Commission. The first thirty-one mentioned above came directly to this Court. On June 30, 1988, the Civil Service Commission promulgated its ruling ordering the reinstatement of the 279 employees, the 279 private respondents in G.R. No. 85310, the dispositive portion of which reads as follows: WHEREFORE, it is hereby ordered that: 1. Appellants be immediately reappointed to positions of comparable or equivalent rank in the Bureau of Customs without loss of seniority rights;

2. Appellants be paid their back salaries reckoned from the dates of their illegal termination based on the rates under the approved new staffing pattern but not lower than their former salaries. This action of the Commission should not, however, be interpreted as an exoneration of the appellants from any accusation of wrongdoing and, therefore, their reappointments are without prejudice to: 1. Proceeding with investigation of appellants with pending administrative cases, and where investigations have been finished, to promptly, render the appropriate decisions; 2. The filing of appropriate administrative complaints against appellants with derogatory reports or information if evidence so warrants.

SO ORDERED. 18 On July 15, 1988, Commissioner Mison, represented by the Solicitor General, filed a motion for reconsideration Acting on the motion, the Civil Service Commission, on September 20, 1988, denied reconsideration. 19 On October 20, 1988, Commissioner Mison instituted certiorari proceedings with this Court, docketed, as above-stated, as G.R. No. 85310 of this Court. On November 16,1988, the Civil Service Commission further disposed the appeal (from the resolution of the Reorganization Appeals Board) of five more employees, holding as follows:
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WHEREFORE, it is hereby ordered that: 1. Appellants be immediately reappointed to positions of comparable or equivalent rank in the Bureau of Customs without loss of seniority rights; and

2. Appellants be paid their back salaries to be reckoned from the date of their illegal termination based on the rates under the approved new staffing pattern but not lower than their former salaries. This action of the Commission should not, however, be interpreted as an exoneration of the herein appellants from any accusation of any wrongdoing and therefore, their reappointments are without prejudice to: 1. Proceeding with investigation of appellants with pending administrative cases, if any, and where investigations have been finished, to promptly, render the appropriate decisions; and 2. The filing of appropriate administrative complaints against appellant with derogatory reports or information, if any, and if evidence so warrants.

SO ORDERED. 20 On January 6, 1989, Commissioner Mison challenged the Civil Service Commission's Resolution in this Court; his petitioner has been docketed herein as G.R. No. 86241. The employees ordered to be reinstated are Senen Dimaguila, Romeo Arabe, Bemardo Quintong,Gregorio Reyes, and Romulo Badillo. 21 On June 10, 1988, Republic Act No. 6656, "AN ACT TO PROTECT THE SECURITY OF TENURE OF CIVIL SERVICE OFFICERS AND EMPLOYEES IN THE IMPLEMENTATION OF GOVERNMENT REORGANIZATION," 22 was signed into law. Under Section 7, thereof: Sec. 9. All officers and employees who are found by the Civil Service Commission to have been separated in violation of the provisions of this Act, shall be ordered reinstated or reappointed as the case may be without loss of seniority and shall be entitled to full pay for the period of separation. Unless also separated for cause, all officers and employees, including casuals and temporary employees, who have been separated pursuant to reorganization shall, if entitled thereto, be paid the appropriate separation pay and retirement and other benefits under existing laws within ninety (90) days from the date of the effectivity of their separation or from the date of the receipt of the resolution of their appeals as the case may be: Provided, That application for clearance has been filed and no action thereon has been made by the corresponding department or agency. Those who are not entitled to said benefits shall be paid a separation gratuity in the amount equivalent to one (1) month salary for every year of service. Such separation pay and retirement benefits shall have priority of payment out of the savings of the department or agency concerned. 23 On June 23, 1988, Benedicto Amasa and William Dionisio, customs examiners appointed by Commissioner Mison pursuant to the ostensible reorganization subject of this controversy, petitioned the Court to contest the validity of the statute. The petition is docketed as G.R. No. 83737. On October 21, 1988, thirty-five more Customs officials whom the Civil Service Commission had ordered reinstated by its June 30,1988 Resolution filed their own petition to compel the Commissioner of Customs to comply with the said Resolution. The petition is docketed as G.R. No. 85335.
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On November 29, 1988, we resolved to consolidate all seven petitions. On the same date, we resolved to set the matter for hearing on January 12, 1989. At the said hearing, the parties, represented by their counsels (a) retired Justice Ruperto Martin; (b) retired Justice Lino Patajo. (c) former Dean Froilan Bacungan (d) Atty. Lester Escobar (e) Atty. Faustino Tugade and (f) Atty. Alexander Padilla, presented their arguments. Solicitor General Francisco Chavez argued on behalf of the Commissioner of Customs (except in G.R. 85335, in which he represented the Bureau of Customs and the Civil Service Commission).lwph1.t Former Senator Ambrosio Padilla also appeared and argued as amicus curiae Thereafter, we resolved to require the parties to submit their respective memoranda which they did in due time. There is no question that the administration may validly carry out a government reorganization insofar as these cases are concerned, the reorganization of the Bureau of Customs by mandate not only of the Provisional Constitution, supra, but also of the various Executive Orders decreed by the Chief Executive in her capacity as sole lawmaking authority under the 1986-1987 revolutionary government. It should also be noted that under the present Constitution, there is a recognition, albeit implied, that a government reorganization may be legitimately undertaken, subject to certain conditions. 24 The Court understands that the parties are agreed on the validity of a reorganization per se the only question being, as shall be later seen: What is the nature and extent of this government reorganization? The Court disregards the questions raised as to procedure, failure to exhaust administrative remedies, the standing of certain parties to sue, 25 and other technical objections, for two reasons, "[b]ecause of the demands of public interest, including the need for stability in the public service,"26 and because of the serious implications of these cases on the administration of the Philippine civil service and the rights of public servants. The urgings in G.R. Nos. 85335 and 85310, that the Civil Service Commission's Resolution dated June 30, 1988 had attained a character of finality for failure of Commissioner Mison to apply for judicial review or ask for reconsideration seasonalbly under Presidential Decree No. 807, 27 or under Republic Act No. 6656, 28 or under the Constitution, 29 are likewise rejected. The records show that the Bureau of Customs had until July 15, 1988 to ask for reconsideration or come to this Court pursuant to Section 39 of Presidential Decree No. 807. The records likewise show that the Solicitor General filed a motion for reconsideration on July 15, 1988.30 The Civil Service Commission issued its Resolution denying reconsideration on September 20, 1988; a copy of this Resolution was received by the Bureau on September 23, 1988.31 Hence the Bureau had until October 23, 1988 to elevate the matter on certiorari to this Court.32 Since the Bureau's petition was filed on October 20, 1988, it was filed on time. We reject, finally, contentions that the Bureau's petition (in G.R. 85310) raises no jurisdictional questions, and is therefore bereft of any basis as a petition for certiorari under Rule 65 of the Rules of Court. 33 We find that the questions raised in Commissioner Mison's petition (in G.R. 85310) are, indeed, proper for certiorari, if by "jurisdictional questions" we mean questions having to do with "an indifferent disregard of the law, arbitrariness and caprice, or omission to weigh pertinent considerations, a decision arrived at without rational deliberation, 34 as distinguished from questions that require "digging into the merits and unearthing errors of judgment 35 which is the office, on the other hand, of review under Rule 45 of the said Rules. What cannot be denied is the fact that the act of the Civil Service Commission of reinstating hundreds of Customs employees Commissioner Mison had separated, has implications not only on the entire reorganization process decreed no less than by the Provisional Constitution, but on the Philippine bureaucracy in general; these implications are of such a magnitude that it cannot be said that assuming that the Civil Service Commission erred the Commission committed a plain "error of judgment" that Aratuc says cannot be corrected by the extraordinary remedy of certiorari or any special civil action. We reaffirm
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the teaching of Aratuc as regards recourse to this Court with respect to rulings of the Civil Service Commission which is that judgments of the Commission may be brought to the Supreme Court through certiorari alone, under Rule 65 of the Rules of Court. In Aratuc we declared: It is once evident from these constitutional and statutory modifications that there is a definite tendency to enhance and invigorate the role of the Commission on Elections as the independent constitutional body charged with the safeguarding of free, peaceful and honest elections. The framers of the new Constitution must be presumed to have definite knowledge of what it means to make the decisions, orders and rulings of the Commission "subject to review by the Supreme Court'. And since instead of maintaining that provision intact, it ordained that the Commission's actuations be instead 'brought to the Supreme Court on certiorari", We cannot insist that there was no intent to change the nature of the remedy, considering that the limited scope of certiorari, compared to a review, is well known in remedial law.36 We observe no fundamental difference between the Commission on Elections and the Civil Service Commission (or the Commission on Audit for that matter) in terms of the constitutional intent to leave the constitutional bodies alone in the enforcement of laws relative to elections, with respect to the former, and the civil service, with respect to the latter (or the audit of government accounts, with respect to the Commission on Audit). As the poll body is the "sole judge" 37 of all election cases, so is the Civil Service Commission the single arbiter of all controversies pertaining to the civil service. It should also be noted that under the new Constitution, as under the 1973 Charter, "any decision, order, or ruling of each Commission may be brought to the Supreme Court on certiorari," 38 which, as Aratuc tells us, "technically connotes something less than saying that the same 'shall be subject to review by the Supreme Court,' " 39 which in turn suggests an appeal by petition for review under Rule 45. Therefore, our jurisdiction over cases emanating from the Civil Service Commission is limited to complaints of lack or excess of jurisdiction or grave abuse of discretion tantamount to lack or excess of jurisdiction, complaints that justify certiorari under Rule 65. While Republic Act No. 6656 states that judgments of the Commission are "final and executory"40 and hence, unappealable, under Rule 65, certiorari precisely lies in the absence of an appeal. 41 Accordingly, we accept Commissioner Mison petition (G.R. No. 85310) which clearly charges the Civil Service Commission with grave abuse of discretion, a proper subject of certiorari, although it may not have so stated in explicit terms. As to charges that the said petition has been filed out of time, we reiterate that it has been filed seasonably. It is to be stressed that the Solicitor General had thirty days from September 23, 1988 (the date the Resolution, dated September 20,1988, of the Civil Service Commission, denying reconsideration, was received) to commence the instant certiorari proceedings. As we stated, under the Constitution, an aggrieved party has thirty days within which to challenge "any decision, order, or ruling" 42 of the Commission. To say that the period should be counted from the Solicitor's receipt of the main Resolution, dated June 30, 1988, is to say that he should not have asked for reconsideration But to say that is to deny him the right to contest (by a motion for reconsideration) any ruling, other than the main decision, when, precisely, the Constitution gives him such a right. That is also to place him at a "no-win" situation because if he did not move for a reconsideration, he would have been faulted for demanding certiorari too early, under the general rule that a motion for reconsideration should preface a resort to a special civil action. 43 Hence, we must reckon the thirty-day period from receipt of the order of denial.
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We come to the merits of these cases. G.R. Nos. 81954, 81967, 82023, and 85335: The Case for the Employees The petitioner in G.R. No. 81954, Cesar Dario was one of the Deputy Commissioners of the Bureau of Customs until his relief on orders of Commissioner Mison on January 26, 1988. In essence, he questions the legality of his dismiss, which he alleges was upon the authority of Section 59 of Executive Order No. 127, supra, hereinbelow reproduced as follows: SEC. 59. New Structure and Pattern. Upon approval of this Executive Order, the officers and employees of the Ministry shall, in a holdover capacity, continue to perform their respective duties and responsibilities and receive the corresponding salaries and benefits unless in the meantime they are separated from government service pursuant to Executive Order No. 17 (1986) or Article III of the Freedom Constitution. The new position structure and staffing pattern of the Ministry shall be approved and prescribed by the Minister within one hundred twenty (120) days from the approval of this Executive Order and the authorized positions created hereunder shall be filled with regular appointments by him or by the President, as the case may be. Those incumbents whose positions are not included therein or who are not reappointed shall be deemed separated from the service. Those separated from the service shall receive the retirement benefits to which they may be entitled under existing laws, rules and regulations. Otherwise, they shall be paid the equivalent of one month basic salary for every year of service, or the equivalent nearest fraction thereof favorable to them on the basis of highest salary received but in no case shall such payment exceed the equivalent of 12 months salary. No court or administrative body shall issue any writ of preliminary injunction or restraining order to enjoin the separation/replacement of any officer or employee effected under this Executive Order.44 a provision he claims the Commissioner could not have legally invoked. He avers that he could not have been legally deemed to be an "[incumbent] whose [position] [is] not included therein or who [is] not reappointed"45 to justify his separation from the service. He contends that neither the Executive Order (under the second paragraph of the section) nor the staffing pattern proposed by the Secretary of Finance 46 abolished the office of Deputy Commissioner of Customs, but, rather, increased it to three. 47 Nor can it be said, so he further maintains, that he had not been "reappointed" 48 (under the second paragraph of the section) because "[[r]eappointment therein presupposes that the position to which it refers is a new one in lieu of that which has been abolished or although an existing one, has absorbed that which has been abolished." 49 He claims, finally, that under the Provisional Constitution, the power to dismiss public officials without cause ended on February 25, 1987,50 and that thereafter, public officials enjoyed security of tenure under the provisions of the 1987 Constitution.51 Like Dario Vicente Feria, the petitioner in G.R. No. 81967, was a Deputy Commissioner at the Bureau until his separation directed by Commissioner Mison. And like Dario he claims that under the 1987 Constitution, he has acquired security of tenure and that he cannot be said to be covered by Section 59 of Executive Order No. 127, having been appointed on April 22, 1986 during the effectivity of the Provisional Constitution. He adds that under Executive Order No. 39, "ENLARGING THE POWERS AND FUNCTIONS OF THE COMMISSIONER OF CUSTOMS,"52 the Commissioner of Customs has the power "[t]o appoint all Bureau personnel, except those appointed by the President," 53 and that his position, which is that of a Presidential appointee, is beyond the control of Commissioner Mison for purposes of reorganization.
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The petitioners in G.R. No. 82023, collectors and examiners in venous ports of the Philippines, say, on the other hand, that the purpose of reorganization is to end corruption at the Bureau of Customs and that since there is no finding that they are guilty of corruption, they cannot be validly dismissed from the service. The Case for Commissioner Mison In his comments, the Commissioner relies on this Court's resolution in Jose v. Arroyo54 in which the following statement appears in the last paragraph thereof: The contention of petitioner that Executive Order No. 127 is violative of the provision of the 1987 Constitution guaranteeing career civil service employees security of tenure overlooks the provisions of Section 16, Article XVIII (Transitory Provisions) which explicitly authorize the removal of career civil service employees "not for cause but as a result of the reorganization pursuant to Proclamation No. 3 dated March 25, 1986 and the reorganization following the ratification of this Constitution." By virtue of said provision, the reorganization of the Bureau of Customs under Executive Order No. 127 may continue even after the ratification of the Constitution, and career civil service employees may be separated from the service without cause as a result of such reorganization.55 For this reason, Mison posits, claims of violation of security of tenure are allegedly no defense. He further states that the deadline prescribed by the Provisional Constitution (February 25, 1987) has been superseded by the 1987 Constitution, specifically, the transitory provisions thereof, 56 which allows a reorganization thereafter (after February 25, 1987) as this very Court has so declared in Jose v. Arroyo. Mison submits that contrary to the employees' argument, Section 59 of Executive Order No. 127 is applicable (in particular, to Dario and Feria in the sense that retention in the Bureau, under the Executive Order, depends on either retention of the position in the new staffing pattern or reappointment of the incumbent, and since the dismissed employees had not been reappointed, they had been considered legally separated. Moreover, Mison proffers that under Section 59 incumbents are considered on holdover status, "which means that all those positions were considered vacant." 57 The Solicitor General denies the applicability of PalmaFernandez v. De la Paz 58 because that case supposedly involved a mere transfer and not a separation. He rejects, finally, the force and effect of Executive Order Nos. 17 and 39 for the reason that Executive Order No. 17, which was meant to implement the Provisional Constitution, 59 had ceased to have force and effect upon the ratification of the 1987 Constitution, and that, under Executive Order No. 39, the dis