Administrative Bodies

G.R. No. 102976 October 25, 1995

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
(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.
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."
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:
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(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;
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; 9 Philippine 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.
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.
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
(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, and direct 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.
Romero, Melo, Vitug and Panganiban, JJ., concur.
Footnotes
1 Second paragraph, Section 1, P.D. No. 272.
2 The relevant terms of LOI No. 1277 read as follows:
"(2) In the event that NSC and MCFC fail to agree on the foregoing within sixty (60) days from the date hereof, the Iron and Steel
Authority (ISA) shall exercise its authority under Presidential Decree (PD) No. 272, as amended, to initiate the expropriation of
the aforementioned occupancy rights of MCFC on the subject lands as well as the plant, structures, equipment, machinery and
related facilities, for and on behalf of NSC, and thereafter cede the same to NSC. During the pendency of the expopriation
proceedings, NSC shall take possession of the property, subject to bonding and other requirements of P.D. No. 1533.
xxx xxx xxx
3 Section 1, Rule 3.
4 Section 16, Rule 3 of the Rules of Court reads:
"Sec. 16. Duty of attorney upon death, incapacity or incompetency of party. Whenever a party to a pending case dies becomes
incapacitated or incompetent, it shall be the duty of his attorney to inform the court promptly of such death, incapacity or
incompetency, and to give the name and residence of his executor, administrator, guardian or other legal representative."
5 RTC Order dated 22 March 1989, p. 2; CA Rollo, p. 24.
6 Section 2, Republic Act No. 6395, 10 September 1971.
7 Section 4, Presidential Decree No. 857, 23 December 1975.
8 Section 2, Presidential Decree No. 757, 31 July 1975.

9 Section 3, Presidential Decree No. 334, 9 November 1973.

10 Section 1, Republic Act No. 4156, 20 June 1964.
11 Sections 3 and 5, Presidential Decree No. 1084, 4 February 1977.
12 Sections 3 and 4(k), Republic Act No. 2265, 19 June 1959.
13 Rule 3, Section 11, Rules of Court. See, in this connection, St. Anne Medical Center v. Parel (176 SCRA 755 [1989]), where the
petition had been filed in the name of "St. Anne Medical Center" which was not a juridical person and where this Court invoked Rule
3, Section 11 and impleaded the real party-in-interest.
14 147 SCRA 276 (1987).
15 147 SCRA at 279.
16 146 SCRA at 279. In Lagazon v. Reyes (166 SCRA 386 [1988]), the Court said that
"the aim of [Rule 3, Section 11] is that all persons materially interested, legally or beneficially, in the subject matter of the suit
should be made parties to it in order that the whole matter in dispute may be determined once and for all in one litigation, thus
avoiding multiplicity of suits . . . ." (166 SCRA at 392)
17 Letter of 28 September 1988; Records, p. 1297.
G.R. No. 120319 October 6, 1995
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.

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. 1 The 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. 2 Ideally, 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
employer-employee 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.
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
quasi-judicial 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.
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.

SO ORDERED.
Padilla, Regalado, Davide, Jr., Bellosillo, Puno, Vitug, Kapunan, Mendoza, Francisco and Hermosisima, Jr., JJ., concur.
Feliciano, J., concurs in the result.
Narvasa, C.J. and Melo, J. are on leave.
Footnotes
1 Seide, A Dictionary of Arbitration (1970).
2 Ibid.
3 Art. 260, Labor Code.
4 Art. 217, Labor Code.
5 Art. 262-A, par. 4, Labor Code.
6 Art. 223, Labor Code.
7 Oceanic Bic Division (FFW), et al. v. Romero, et al., 130 SCRA 392 (1984); Sime Darby Pilipinas, Inc. v. Magsalin, et al., 180
SCRA 177 (1989).
8 98 SCRA 314 (1980).
9 Supra.
10 Art. 262-A, in relation to Art. 217 (b) and (c), Labor Code, as amended by Sec. 9, R.A. 6715.
11 Executive Order No. 1008.
12 Laurens Federal Sav. and Loan Ass'n v. South Carolina Tax Commission, 112 S.E. 2d 716, 719, 236 S.C. 2.
13 Govt. of P.I. v. Springer, et al., 50 Phil. 259, 334 (1927).
14 Ciulla v. State, 77 N.Y.S. 2d 545, 550, 191 Misc. 528.
15 In re Turncock's Estate, 300 N.W. 155, 156, 238 Wis. 438.
16 In re Brown Co., D.C. Me., 36 F. Supp. 275, 277.
17 Gagne v. Brush, D.C.N.H., 30 F. Supp. 714, 716.
18 First Lepanto Ceramics, Inc. v. CA, et al., 231 SCRA 30 (1994).
19 Section 23, R.A. No. 876.
G.R. No. 112309 July 28, 1994
NAPOLEON V. FERNANDO, ANDRES DIZON, TOMAS F. FALCONITIN and ADAP, Mediator Arbiters, National Capital
Region, Department of Labor and Employment, petitioners, vs.
HON. PATRICIA STO. TOMAS, in her capacity as Chairman, Civil Service Commission; RAMON P. ERENETA, JR. and
THELMA P. GAMINDE, in their capacities as Commissioners of the Civil Service Commission; and HON. MA. NIEVES R.
CONFESOR, in her capacity as Secretary, Department of Labor and Employment, respondents.

RESOLUTION
REGALADO, J.:
The present petition for certiorari seeks to annul: (a) Resolution No. 93-4480 1 of the Civil Service Commission, dated October 12,
1993, which declared the reassignment of petitioners valid and legal; (b) the Order, dated July 26, 1993, 2 of the Secretary of Labor,
Hon. Ma. Nieves R. Confesor, placing petitioners under preventive suspension for ninety (90) days pending investigation of the charge
against them for gross insubordination; and (c) the Order, dated October 25, 1993, 3 of the said Secretary of Labor finding petitioners
guilty of two counts of gross insubordination and accordingly suspending them for one (1) year.
Petitioners were appointed as Mediator Arbiters in the National Capital Region and, as such, were discharging their duties as hearing
officers when respondent Labor Secretary Confessor issued on May 26, 1993 Memorandum Order No. 4 4 reassigning several medarbiters, including herein petitioners, which reads as follows:
In the interest of the service and in order to expedite the resolution of inter-union and intra-union cases, the following assignment
of
Med-Arbiters is hereby being made effective immediately:
Appeals and Review Unit, OS:
Andres Dizon
Tomas Falconitin
Napoleon Fernando
Bureau of Labor Relations:
Paterno Adap
National Capital Region
Brigida Fadrigon
Angeli Tuyay
Region IV:
Anastacio Bactin
xxx xxx xxx
Med-Arbiters Brigida Fadrigon, Angeli Tuyay and Anastacio Bactin promptly complied with the memorandum order. However,
petitioners, in a letter dated June 7, 1993, 5 sought the reconsideration and recall of said memorandum order on the ground that their
reassignments were made without their consent, which was accordingly tantamount to removal without just cause.
On June 23, 1993, respondent Secretary of Labor issued another Memorandum 6 declaring and clarifying that Memorandum Order No.
4 contemplates, not a transfer as erroneously alleged, but a mere reassignment wherein the consent of petitioners is not required, and
ordering petitioners to report to their new assignments and to turn over all records of cases and other documents in their possession.
Petitioners, however, refused to comply and instead wrote another letter, dated June 28, 1993, 7 seeking the reconsideration of
Memorandum Order No. 4 and the Memorandum of June 23, 1993, on the ground that the same were issued in violation of their rights
to security of tenure and due process of law.
Acting on petitioners' letter, respondent Secretary issued another Memorandum, dated July 7, 1993, 8 denying their request and
directing them to show cause why they should not be administratively charged for gross insubordination.
On July 12, 1993, petitioners filed an appeal 9 with the Merit System and Protection Board (MSPB) of the Civil Service Commission
(CSC), and a supplemental appeal 10 dated July 19, 1993.
On July 15, 1993, petitioners submitted their explanation in compliance with the Memorandum of July 7, 1993, arguing that they
could not accept their reassignment considering that the same is unconstitutional, illegal and without valid cause; that quasi-judicial

officers may not be transferred or reassigned except on grounds provided by law; and that the law provides that pending their appeal to
the Civil Service Commission, their transfer or reassignment should be held in abeyance.
On July 26, 1993, petitioners were formally charged with gross insubordination and, pending investigation, were placed under
preventive suspension for ninety (90) days.
On October 12, 1993, the CSC issued its questioned resolution finding the reassignment of petitioners valid and legal and,
consequently, dismissed their appeal for lack of merit.
On October 25, 1993, respondent Secretary issued another Order finding petitioners guilty of two counts of gross insubordination and
accordingly suspending them from the service for one (1) year.
Hence, this petition assailing the foregoing resolution and orders.
Petitioners first contend that the CSC has no jurisdiction to review on appeal the aforestated Memorandum Order No. 4 as the same is
vested in the MSPB pursuant to Section 13, Book V of Executive Order No. 292 (Administrative Code of 1987). There is no merit in
the argument.
Resolution No. 93-2387 11 of the CSC, which took effect on July 1, 1993, declared the abolition of the MSPB in order to streamline the
operations of the CSC, so as to achieve a speedier delivery of administrative justice and economical operation without impairing due
process and the substantive rights of the parties in administrative cases. Henceforth, decisions in administrative cases involving
officials and employees of the civil service appealable to the Commission, including personnel actions, shall be appealed directly to
the Commission and not to the MSPB, and those cases which have been appealed or brought directly to the MSPB shall be elevated to
the Commission for final resolution. In the present case, petitioner's appeal was filed only on July 12, 1993 when Resolution No. 932387 was already in effect. Perforce, their appeal was considered filed before the CSC.
Petitioners claim that there was malice, bad faith, undue influence and partiality in the issuance of the order for reassignment and its
affirmance by the CSC. They aver that there was undue influence exerted by respondent Secretary and that the CSC acted with
partiality because respondent Secretary and CSC Chairman Sto. Tomas are personal friends, aside from the fact that during the
pendency of their appeal with the CSC, the latter issued legal opinions through its Director for Legal Affairs concerning the very
issues involved in the appeal even before the same could be officially resolved. Furthermore, petitioner Fernando specifically asserts
that the reassignment was actually in retaliation for the independent stance he has taken in Case No. OD-M-9301-028 (APSOTEU vs.
EEI) pending before him wherein he ordered the cancellation of the certificate of registration of APSOTEU. These allegations of
petitioners should be considered as mere speculations and conjectures, no substantial evidence having been presented in support
thereof.
The reassignment of petitioners was made "in the interest of the service and in order to expedite the resolution of inter-union and intraunion cases." That the order was issued for this purpose is even presumed under Civil Service rules where there is no proof of
harassment, coercion, intimidation, or other personal reasons therefor.
Additionally, public respondents have in their favor the presumption of regularity in the performance of official duties which
petitioners failed to rebut when they did not present evidence to prove partiality, malice and bad faith. Bad faith can never be
presumed; it must be proved by clear and convincing evidence. No such evidence exists in the case at bar. The circumstances
attending the issuance of Memorandum Order No. 4 do not in any way reveal any malicious intent on the part of respondent Secretary.
On the contrary, we consider her actions as a valid exercise of her power and authority as department head to take and enforce
personnel actions.
It is likewise argued that the reassignment of petitioners is tantamount to their constructive dismissal because it was effected without
their consent. In the case of Bentain vs. Court of Appeals, 12 we categorically held that a reassignment in good faith and in the interest
of the government service is permissible and valid even without the employee's prior consent.
The reassignment is also challenged as being illegal because it involves a reduction in rank and status, and it violates the right to
security of tenure and to due process of law. Petitioners contend that with the reassignment, their functions were changed from those
of a hearing officer to the drafting of decisions appealed to the Secretary. In their view, they were in effect demoted.
A demotion, under Section 11, Rule VII of the Omnibus Rules Implementing Book V of Executive Order No. 292, is defined as the
movement from one position to another involving the issuance of an appointment with diminution in duties, responsibilities, status or
rank which may or may not involve reduction in salary. On the other hand, Section 10 of the same rule defines a reassignment as the
movement of an employee from one organizational unit to another in the same department or agency which does not involve a

reduction in rank, status, or salary and does not require the issuance of an appointment. A demotion, therefore, involves the issuance
of an appointment.
In the case at bar, it is clear and undisputed that no new appointments were issued to herein petitioners. Hence, it is incorrect for them
to claim that they were demoted. Moreover, petitioners failed to sufficiently establish that there was a reduction in their salary. They
would want to suggest that there was a diminution in rank in the sense that their present assignment as drafters of decisions on appeal
to the Secretary are subject to review by higher authority, whereas in their former assignment as hearing officers, they themselves
render judgment. Petitioners seem to forget that the decisions of hearing officers are also subject to review by the National Labor
Relations Commission. Thus unmasked, their argument has definitely no leg to stand on.
Petitioners were appointed as Mediator Arbiters in the National Capital Region. They were not, however, appointed to a specific
station or particular unit of the Department of Labor in the National Capital Region (DOLE-NCR). Consequently, they can always be
reassigned from one organizational unit to another of the same agency where, in the opinion of respondent Secretary, their services
may be used more effectively. As such they can neither claim a vested right to the station to which they were assigned nor to security
of tenure thereat. As correctly observed by the Solicitor General, petitioners' reassignment is not a transfer for they were not removed
from their position as med-arbiters. They were not given new appointments to new positions. It indubitably follows, therefore, that
Memorandum Order No. 4 ordering their reassignment in the interest of the service is legally in order.
Whatever alleged procedural infirmity may have rendered defective the issuance of Memorandum Order No. 4 has been cured when
petitioners filed two motions for reconsideration seeking to recall the same. The two motions were duly considered, discussed and
resolved by respondent Secretary. Petitioners were thereby afforded full opportunity to present their arguments against the issuance of
said order.
Finally, we do not deem it appropriate to rule on the merits of the order issued on July 26, 1993 by respondent Secretary preventively
suspending petitioners for ninety (90) days, as well as her subsequent order dated October 25, 1993 finding petitioners guilty of
insubordination and imposing on them the penalty of suspension of one (1) year. Evidently, herein petitioners, in asking us to resolve
the issues thereon in their present recourse, have overlooked or deliberately ignored the fact that the same are clearly dismissible for
non-exhaustion of administrative remedies.
On the first aspect, petitioners allowed the 90-day period of preventive suspension to lapse without appealing from the Order of July
26, 1993. In fact, the investigation which necessitated such suspension has long since been concluded and thereafter resulted in the
condemnatory Order of October 25, 1993. Hence, they are now clearly estopped from invoking the certiorari jurisdiction of this Court
in a belated attempt to seek redress from the first Order.
Secondly, as stated earlier, the Order dated October 25, 1993 imposing a punitive suspension of one year on herein petitioners cannot
be the proper subject of a petition for certiorari for their failure to exhaust administrative remedies. Presidential Decree No. 807 and
Executive Order No. 292 explicitly provide that administrative disciplinary cases involving the imposition of a penalty of suspension
for more than thirty (30) days are appealable to the Civil Service Commission. 13 Not having fully exhausted the remedy available to
them, petitioners cannot resort to their present judicial action which is both premature at this juncture and proscribed by Rule 65 of the
Rules of Court. Neither do we find any of the exceptions to the doctrine of exhaustion of administrative remedies which could be
applicable to the instant case, nor have petitioners essayed any submission on that score.
WHEREFORE, no jurisdictional error or any grave abuse of discretion having been shown to have flawed or tainted the impugned
resolution of respondent Chairman of the Civil Service Commission or the challenged orders of respondent Secretary of Labor, the
present petition for certiorari is hereby DISMISSED.
SO ORDERED.
Narvasa, C.J., Cruz, Feliciano, Padilla, Bidin, Davide, Jr., Romero, Melo, Quiason, Puno, Vitug, Kapunan and Mendoza, JJ., concur.
Bellosillo, J., is on leave.
# Footnotes
1 Annex A, Petition; Rollo, 47.
2 Annex S, id.; ibid., 173.
3 Annex B, id.; ibid., 49.

4 Annex I, id.; ibid., 98.

5 Annex J, id.; ibid., 99.
6 Annex L, id.; ibid., 112.
7 Annex M, id.; ibid., 115.
8 Annex O, id.; ibid., 161.
9 Annex N, id.; ibid., 125.
10 Annex N-1, id.; ibid., 152.
11 This was issued pursuant to Section 17, Book V, Administrative Code of 1987, which provides that "as an independent
Constitutional body, the Commission may effect changes in the organization as the need arises."
12 G.R. No. 89452, June 5, 1992, 209 SCRA 644.
13 Section 37, Presidential Decree No. 807 and Section 47, Executive Order No. 292
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;

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:
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:
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:
(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 servicewide scholarship programs; develop training literature and materials; coordinate and integrate all training activities and evaluate
training programs.
(11) The Office of Personnel Inspection and Audit shall develop policies, standards, rules and regulations for the effective conduct
or inspection and audit personnel and personnel management programs and the exercise of delegated authority; provide technical
and advisory services to Civil Service Regional Offices and government agencies in the implementation of their personnel
programs and evaluation systems.
(12) The Office of Personnel Relations shall provide leadership and assistance in the development and implementation of policies,
standards, rules and regulations in the accreditation of employee associations or organizations and in the adjustment and
settlement of employee grievances and management of employee disputes.
(13) The Office of Corporate Affairs shall formulate and implement policies, standards, rules and regulations governing corporate
officials and employees in the areas of recruitment, examination, placement, career development, merit and awards systems,

position classification and compensation, performing appraisal, employee welfare and benefit, discipline and other aspects of
personnel management on the basis of comparable industry practices.
(14) The Office of Retirement Administration shall be responsible for the enforcement of the constitutional and statutory
provisions, relative to retirement and the regulation for the effective implementation of the retirement of government officials and
employees.
(15) The Regional and Field Offices. The Commission shall have not less than thirteen (13) Regional offices each to be headed
by a Director, and such field offices as may be needed, each to be headed by an official with at least the rank of an Assistant
Director.
As read together, the inescapable conclusion is that respondent Commission's power to reorganize is limited to offices under its
control as enumerated in Section 16, supra. From its inception, the CESB was intended to be an autonomous entity, albeit
administratively attached to respondent Commission. As conceptualized by the Reorganization Committee "the CESB shall be
autonomous. It is expected to view the problem of building up executive manpower in the government with a broad and positive
outlook." 6 The essential autonomous character of the CESB is not negated by its attachment to respondent Commission. By said
attachment, CESB was not made to fall within the control of respondent Commission. Under the Administrative Code of 1987, the
purpose of attaching one functionally inter-related government agency to another is to attain "policy and program coordination."
This is clearly etched out in Section 38(3), Chapter 7, Book IV of the aforecited Code, to wit:
(3) Attachment. (a) This refers to the lateral relationship between the department or its equivalent and attached agency or
corporation for purposes of policy and program coordination. The coordination may be accomplished by having the department
represented in the governing board of the attached agency or corporation, either as chairman or as a member, with or without
voting rights, if this is permitted by the charter; having the attached corporation or agency comply with a system of periodic
reporting which shall reflect the progress of programs and projects; and having the department or its equivalent provide general
policies through its representative in the board, which shall serve as the framework for the internal policies of the attached
corporation or agency.
Respondent Commission also relies on the case of Datumanong, et al., vs. Civil Service Commission, G. R. No. 114380 where the
petition assailing the abolition of the CESB was dismissed for lack of cause of action. Suffice to state that the reliance is misplaced
considering that the cited case was dismissed for lack of standing of the petitioner, hence, the lack of cause of action.
IN VIEW WHEREOF, the petition is granted and Resolution No. 93-4359 of the respondent Commission is hereby annulled and set
aside. No costs.
SO ORDERED.
Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Vitug, Kapunan and Mendoza,
JJ., concur.

Footnotes
1 Together with twenty-six (26) others.
2 Patricia A. Sto. Tomas (Chairman), Ramon P. Ereneta, Jr., (member) and Thelma P. Gaminde (member).
3 On February 13, 1995, respondent CSC manifested that the President appointed petitioner to CESO rank on January 9, 1995. Her
appointment, however, has not rendered moot the broader issue of whether or not the abolition of Career Executive Service Board is
valid.
4 P. D. No. 1 was later amended by P.D. No. 336 and P.D. No. 367 on the composition of the CESB; P.D. No. 807 and E.O. No. 292
(Administrative Code of 1987) reiterated the functions of the CESB. The General Appropriations Acts from 1975 to 1993 also
uniformly appropriated funds for the CESB.
5 63 AM JUR 2d section 30.

6 Reorganization Panel Reports, Vol. II, pp. 16 to 49 as cited in Petition, p. 17.

G.R. No. 84301. April 7, 1993.
NATIONAL LAND TITLES AND DEEDS REGISTRATION ADMINISTRATION, petitioner, vs.
CIVIL SERVICE COMMISSION and VIOLETA L. GARCIA, respondents.
The Solicitor General for petitioner.
Raul R. Estrella for private respondent.
SYLLABUS
1. ADMINISTRATIVE LAW; EXECUTIVE ORDER NO. 649; REORGANIZED LAND REGISTRATION COMMISSION TO
NALTDRA; EXPRESSLY PROVIDED THE ABOLITION OF EXISTING POSITIONS. Executive Order No. 649 authorized the
reorganization of the Land Registration Commission (LRC) into the National Land Titles and Deeds Registration Administration
(NALTDRA). It abolished all the positions in the now defunct LRC and required new appointments to be issued to all employees of
the NALTDRA. The question of whether or not a law abolishes an office is one of legislative intent about which there can be no
controversy whatsoever if there is an explicit declaration in the law itself. A closer examination of Executive Order No. 649 which
authorized the reorganization of the Land Registration Commission (LRC) into the National Land Titles and Deeds Registration
Administration (NALTDRA), reveals that said law in express terms, provided for the abolition of existing positions. Thus, without
need of any interpretation, the law mandates that from the moment an implementing order is issued, all positions in the Land
Registration Commission are deemed non-existent. This, however, does not mean removal. Abolition of a position does not involve or
mean removal for the reason that removal implies that the post subsists and that one is merely separated therefrom. (Arao vs. Luspo,
20 SCRA 722 [1967]) After abolition, there is in law no occupant. Thus, there can be no tenure to speak of. It is in this sense that from
the standpoint of strict law, the question of any impairment of security of tenure does not arise. (De la Llana vs. Alba, 112 SCRA 294
[1982])
2. ID.; ID.; ID.; REORGANIZATION, VALID WHEN PURSUED IN GOOD FAITH; CASE AT BAR. 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. Two questions therefore arise: (1) was the abolition carried out by a legitimate body?; and (2) was it done in good faith?
There is no dispute over the authority to carry out a valid reorganization in any branch or agency of the Government. Under Section 9,
Article XVII of the 1973 Constitution. The power to reorganize is, however; not absolute. We have held in Dario vs. Mison that
reorganizations in this jurisdiction have been regarded as valid provided they are pursued in good faith. This court has pronounced that
if the newly created office has substantially new, different or additional functions, duties or powers, so that it may be said in fact to
create an office different from the one abolished, even though it embraces all or some of the duties of the old office it will be
considered as an abolition of one office and the creation of a new or different one. The same is true if one office is abolished and its
duties, for reasons of economy are given to an existing officer or office. Executive Order No. 649 was enacted to improve the services
and better systematize the operation of the Land Registration Commission. A reorganization is carried out in good faith if it is for the
purpose of economy or to make bureaucracy more efficient. To this end, the requirement of Bar membership to qualify for key
positions in the NALTDRA was imposed to meet the changing circumstances and new development of the times. Private respondent
Garcia who formerly held the position of Deputy Register of Deeds II did not have such qualification. It is thus clear that she cannot
hold any key position in the NALTDRA, The additional qualification was not intended to remove her from office. Rather, it was a
criterion imposed concomitant with a valid reorganization measure.
3. ID.; ID.; ID.; THERE IS NO VESTED PROPERTY RIGHT TO BE RE-EMPLOYED IN A REORGANIZED OFFICE; CASE AT
BAR. There is no such thing as a vested interest or an estate in an office, or even an absolute right to hold it. Except constitutional
offices which provide for special immunity as regards salary and tenure, no one can be said to have any vested right in an office or its
salary. None of the exceptions to this rule are obtaining in this case. To reiterate, the position which private respondent Garcia would
like to occupy anew was abolished pursuant to Executive Order No. 649, a valid reorganization measure. There is no vested property
right to be re employed in a reorganized office. Not being a member of the Bar, the minimum requirement to qualify under the
reorganization law for permanent appointment as Deputy Register of Deeds II, she cannot be reinstated to her former position without
violating the express mandate of the law.
DECISION
CAMPOS, JR., J p:
The sole issue for our consideration in this case is whether or not membership in the bar, which is the qualification requirement
prescribed for appointment to the position of Deputy Register of Deeds under Section 4 of Executive Order No. 649 (Reorganizing the

Land Registration Commission (LRC) into the National Land Titles and Deeds Registration Administration or NALTDRA) should be
required of and/or applied only to new applicants and not to those who were already in the service of the LRC as deputy register of
deeds at the time of the issuance and implementation of the abovesaid Executive Order.
The facts, as succinctly stated in the Resolution ** of the Civil Service Commission, are as follows:
"The records show that in 1977, petitioner Garcia, a Bachelor of Laws graduate and a first grade civil service eligible was appointed
Deputy Register of Deeds VII under permanent status. Said position was later reclassified to Deputy Register of Deeds III pursuant to
PD 1529, to which position, petitioner was also appointed under permanent status up to September 1984. She was for two years, more
or less, designated as Acting Branch Register of Deeds of Meycauayan, Bulacan. By virtue of Executive Order No. 649 (which took
effect on February 9, 1981) which authorized the restructuring of the Land Registration Commission to National Land Titles and
Deeds Registration Administration and regionalizing the Offices of the Registers therein, petitioner Garcia was issued an appointment
as Deputy Register of Deeds II on October 1, 1984, under temporary status, for not being a member of the Philippine Bar. She
appealed to the Secretary of Justice but her request was denied. Petitioner Garcia moved for reconsideration but her motion remained
unacted. On October 23, 1984, petitioner Garcia was administratively charged with Conduct Prejudicial to the Best Interest of the
Service. While said case was pending decision, her temporary appointment as such was renewed in 1985. In a Memorandum dated
October 30, 1986, the then Minister, now Secretary, of Justice notified petitioner Garcia of the termination of her services as Deputy
Register of Deeds II on the ground that she was "receiving bribe money". Said Memorandum of Termination which took effect on
February 9, 1987, was the subject of an appeal to the Inter-Agency Review Committee which in turn referred the appeal to the Merit
Systems Protection Board (MSPB).
In its Order dated July 6, 1987, the MSPB dropped the appeal of petitioner Garcia on the ground that since the termination of her
services was due to the expiration of her temporary appointment, her separation is in order. Her motion for reconsideration was denied
on similar ground." 1
However, in its Resolution 2 dated June 30, 1988, the Civil Service Commission directed that private respondent Garcia be restored to
her position as Deputy Register of Deeds II or its equivalent in the NALTDRA. It held that "under the vested right theory the new
requirement of BAR membership to qualify for permanent appointment as Deputy Register of Deeds II or higher as mandated under
said Executive Order, would not apply to her (private respondent Garcia) but only to the filling up of vacant lawyer positions on or
after February 9, 1981, the date said Executive Order took effect." 3 A fortiori, since private respondent Garcia had been holding the
position of Deputy Register of Deeds II from 1977 to September 1984, she should not be affected by the operation on February 1,
1981 of Executive Order No. 649.
Petitioner NALTDRA filed the present petition to assail the validity of the above Resolution of the Civil Service Commission. It
contends that Sections 8 and 10 of Executive Order No. 649 abolished all existing positions in the LRC and transferred their functions
to the appropriate new offices created by said Executive Order, which newly created offices required the issuance of new
appointments to qualified office holders. Verily, Executive Order No. 649 applies to private respondent Garcia, and not being a
member of the Bar, she cannot be reinstated to her former position as Deputy Register of Deeds II.
We find merit in the petition.
Executive Order No. 649 authorized the reorganization of the Land Registration Commission (LRC) into the National Land Titles and
Deeds Registration Administration (NALTDRA). It abolished all the positions in the now defunct LRC and required new
appointments to be issued to all employees of the NALTDRA.
The question of whether or not a law abolishes an office is one of legislative intent about which there can be no controversy
whatsoever if there is an explicit declaration in the law itself. 4 A closer examination of Executive Order No. 649 which authorized the
reorganization of the Land Registration Commission (LRC) into the National Land Titles and Deeds Registration Administration
(NALTDRA), reveals that said law in express terms, provided for the abolition of existing positions, to wit:
Sec. 8. Abolition of Existing Positions in the Land Registration Commission . . .
All structural units in the Land Registration Commission and in the registries of deeds, and all Positions therein shall cease to exist
from the date specified in the implementing order to be issued by the President pursuant to the preceding paragraph. Their pertinent
functions, applicable appropriations, records, equipment and property shall be transferred to the appropriate staff or offices therein
created. (Emphasis Supplied.)
Thus, without need of any interpretation, the law mandates that from the moment an implementing order is issued, all positions in the
Land Registration Commission are deemed non-existent. This, however, does not mean removal. Abolition of a position does not
involve or mean removal for the reason that removal implies that the post subsists and that one is merely separated therefrom. 5 After

abolition, there is in law no occupant. Thus, there can be no tenure to speak of. It is in this sense that from the standpoint of strict law,
the question of any impairment of security of tenure does not arise. 6
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. Two questions therefore arise: (1) was the abolition carried out by a legitimate body?; and (2) was it done in
good faith?
There is no dispute over the authority to carry out a valid reorganization in any branch or agency of the Government. Under Section 9,
Article XVII of the 1973 Constitution, the applicable law at that time:
Sec. 9. All officials and employees in the existing Government of the Republic of the Philippines shall continue in office until
otherwise provided by law or decreed by the incumbent President of the Philippines, but all officials whose appointments are by this
Constitution vested in the Prime Minister shall vacate their respective offices upon the appointment and qualifications of their
successors.
The power to reorganize is, however; not absolute. We have held in Dario vs. Mison 7 that reorganizations in this jurisdiction have
been regarded as valid provided they are pursued in good faith. This court has pronounced 8 that if the newly created office has
substantially new, different or additional functions, duties or powers, so that it may be said in fact to create an office different from the
one abolished, even though it embraces all or some of the duties of the old office it will be considered as an abolition of one office and
the creation of a new or different one. The same is true if one office is abolished and its duties, for reasons of economy are given to an
existing officer or office.
Executive Order No. 649 was enacted to improve the services and better systematize the operation of the Land Registration
Commission. 9 A reorganization is carried out in good faith if it is for the purpose of economy or to make bureaucracy more efficient.
10 To this end, the requirement of Bar membership to qualify for key positions in the NALTDRA was imposed to meet the changing
circumstances and new development of the times. 11 Private respondent Garcia who formerly held the position of Deputy Register of
Deeds II did not have such qualification. It is thus clear that she cannot hold any key position in the NALTDRA, The additional
qualification was not intended to remove her from office. Rather, it was a criterion imposed concomitant with a valid reorganization
measure.
A final word, on the "vested right theory" advanced by respondent Civil Service Commission. There is no such thing as a vested
interest or an estate in an office, or even an absolute right to hold it. Except constitutional offices which provide for special immunity
as regards salary and tenure, no one can be said to have any vested right in an office or its salary. 12 None of the exceptions to this
rule are obtaining in this case.
To reiterate, the position which private respondent Garcia would like to occupy anew was abolished pursuant to Executive Order No.
649, a valid reorganization measure. There is no vested property right to be re employed in a reorganized office. Not being a member
of the Bar, the minimum requirement to qualify under the reorganization law for permanent appointment as Deputy Register of Deeds
II, she cannot be reinstated to her former position without violating the express mandate of the law.
WHEREFORE, premises considered, We hereby GRANT the petition and SET ASIDE the questioned Resolution of the Civil Service
Commission reinstating private respondent to her former position as Deputy Register of Deeds II or its equivalent in the National Land
Titles and Deeds Registration Administration.
SO ORDERED.
Narvasa, C .J ., Cruz, Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Nocon, Bellosillo, Melo and Quiason, JJ ., concur.
Grio-Aquino, J ., is on leave.
Footnotes
** Resolution No. 88-398, Garcia, Violeta L. Re: Petition/Appeal for Reinstatement, June 12, 1988.
1. Rollo, p. 26.
2. Resolution No. 88-398, penned by Patricia A. Sto. Tomas, Chairman, Samilo N. Barlongay and Mario D. Yango, Commissioners;
Rollo, pp. 39-42.

3. Ibid, p. 41.
4. Annot., 23 SCRA 1007 (1968).
5. Arao vs. Luspo, 20 SCRA 722 (1967); Facundo vs. Pabalan, et al., 4 SCRA 375 (1962); Castillo vs. Pajo, et al., 103 Phil. 515
(1958).
6. De La Llana vs. Alba, 112 SCRA 294 (1982).
7. G.R. No. 81954; Feria vs. Mison, G.R. No. 81967; Amasa vs. Sto. Tomas, G.R. No. 83737; Mison vs. Civil Service Commission,
G.R. No. 85310; Littaua vs. Mison, G.R. No. 85335; Mison vs. Civil Service Commission, G.R. No. 86241, 176 SCRA 84 (1989).
8. Urgello, et. al. vs. Osmea, Jr., et. al., 118 Phil. 1155 (1963).
9. WHEREAS clause of Executive Order No. 649.
10. Supra, note 8.
11. Sec. 4. Appointment, Qualification Rank and Salary of Officials, and Subordinate Personnel . . .The Regional Registrars of Land
Title and Deeds and the Assistant Registrars of Land Titles and Deeds shall be members of the Bar and shall, at the time of their
appointments, have engaged in the practice of law for at least five (5) years, or for the same period, shall have held a position in the
government requiring as a requisite therefor membership in the Bar. (Emphasis Supplied).
12. 22 R.C.L. 285, cited in MARTIN AND MARTIN, ADMINISTRATIVE LAW, LAW OF PUBLIC OFFICERS AND ELECTION
LAW, 187 (1978).
Powers of Administrative Agencies
G.R. No. 76633 October 18, 1988
EASTERN SHIPPING LINES, INC., petitioner, vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION (POEA), MINISTER OF LABOR AND EMPLOYMENT,
HEARING OFFICER ABDUL BASAR and KATHLEEN D. SACO, respondents.
CRUZ, J.:
The private respondent in this case was awarded the sum of P192,000.00 by the Philippine Overseas Employment Administration
(POEA) for the death of her husband. The decision is challenged by the petitioner on the principal ground that the POEA had no
jurisdiction over the case as the husband was not an overseas worker.
Vitaliano Saco was Chief Officer of the M/V Eastern Polaris when he was killed in an accident in Tokyo, Japan, March 15, 1985. His
widow sued for damages under Executive Order No. 797 and Memorandum Circular No. 2 of the POEA. The petitioner, as owner of
the vessel, argued that the complaint was cognizable not by the POEA but by the Social Security System and should have been filed
against the State Insurance Fund. The POEA nevertheless assumed jurisdiction and after considering the position papers of the parties
ruled in favor of the complainant. The award consisted of P180,000.00 as death benefits and P12,000.00 for burial expenses.
The petitioner immediately came to this Court, prompting the Solicitor General to move for dismissal on the ground of non-exhaustion
of administrative remedies.
Ordinarily, the decisions of the POEA should first be appealed to the National Labor Relations Commission, on the theory inter alia
that the agency should be given an opportunity to correct the errors, if any, of its subordinates. This case comes under one of the
exceptions, however, as the questions the petitioner is raising are essentially questions of law. 1 Moreover, the private respondent
himself has not objected to the petitioner's direct resort to this Court, observing that the usual procedure would delay the disposition of
the case to her prejudice.
The Philippine Overseas Employment Administration was created under Executive Order No. 797, promulgated on May 1, 1982, to
promote and monitor the overseas employment of Filipinos and to protect their rights. It replaced the National Seamen Board created
earlier under Article 20 of the Labor Code in 1974. Under Section 4(a) of the said executive order, the POEA is vested with "original

and exclusive jurisdiction over all cases, including money claims, involving employee-employer relations arising out of or by virtue of
any law or contract involving Filipino contract workers, including seamen." These cases, according to the 1985 Rules and Regulations
on Overseas Employment issued by the POEA, include "claims for death, disability and other benefits" arising out of such
employment. 2
The petitioner does not contend that Saco was not its employee or that the claim of his widow is not compensable. What it does urge is
that he was not an overseas worker but a 'domestic employee and consequently his widow's claim should have been filed with Social
Security System, subject to appeal to the Employees Compensation Commission.
We see no reason to disturb the factual finding of the POEA that Vitaliano Saco was an overseas employee of the petitioner at the time
he met with the fatal accident in Japan in 1985.
Under the 1985 Rules and Regulations on Overseas Employment, overseas employment is defined as "employment of a worker
outside the Philippines, including employment on board vessels plying international waters, covered by a valid contract. 3 A contract
worker is described as "any person working or who has worked overseas under a valid employment contract and shall include seamen"
4
or "any person working overseas or who has been employed by another which may be a local employer, foreign employer, principal
or partner under a valid employment contract and shall include seamen." 5 These definitions clearly apply to Vitaliano Saco for it is
not disputed that he died while under a contract of employment with the petitioner and alongside the petitioner's vessel, the M/V
Eastern Polaris, while berthed in a foreign country. 6
It is worth observing that the petitioner performed at least two acts which constitute implied or tacit recognition of the nature of Saco's
employment at the time of his death in 1985. The first is its submission of its shipping articles to the POEA for processing,
formalization and approval in the exercise of its regulatory power over overseas employment under Executive Order NO. 797. 7 The
second is its payment 8 of the contributions mandated by law and regulations to the Welfare Fund for Overseas Workers, which was
created by P.D. No. 1694 "for the purpose of providing social and welfare services to Filipino overseas workers."
Significantly, the office administering this fund, in the receipt it prepared for the private respondent's signature, described the subject
of the burial benefits as "overseas contract worker Vitaliano Saco." 9 While this receipt is certainly not controlling, it does indicate, in
the light of the petitioner's own previous acts, that the petitioner and the Fund to which it had made contributions considered Saco to
be an overseas employee.
The petitioner argues that the deceased employee should be likened to the employees of the Philippine Air Lines who, although
working abroad in its international flights, are not considered overseas workers. If this be so, the petitioner should not have found it
necessary to submit its shipping articles to the POEA for processing, formalization and approval or to contribute to the Welfare Fund
which is available only to overseas workers. Moreover, the analogy is hardly appropriate as the employees of the PAL cannot under
the definitions given be considered seamen nor are their appointments coursed through the POEA.
The award of P180,000.00 for death benefits and P12,000.00 for burial expenses was made by the POEA pursuant to its Memorandum
Circular No. 2, which became effective on February 1, 1984. This circular prescribed a standard contract to be adopted by both foreign
and domestic shipping companies in the hiring of Filipino seamen for overseas employment. A similar contract had earlier been
required by the National Seamen Board and had been sustained in a number of cases by this Court. 10 The petitioner claims that it had
never entered into such a contract with the deceased Saco, but that is hardly a serious argument. In the first place, it should have done
so as required by the circular, which specifically declared that "all parties to the employment of any Filipino seamen on board any
ocean-going vessel are advised to adopt and use this employment contract effective 01 February 1984 and to desist from using any
other format of employment contract effective that date." In the second place, even if it had not done so, the provisions of the said
circular are nevertheless deemed written into the contract with Saco as a postulate of the police power of the State. 11
But the petitioner questions the validity of Memorandum Circular No. 2 itself as violative of the principle of non-delegation of
legislative power. It contends that no authority had been given the POEA to promulgate the said regulation; and even with such
authorization, the regulation represents an exercise of legislative discretion which, under the principle, is not subject to delegation.
The authority to issue the said regulation is clearly provided in Section 4(a) of Executive Order No. 797, reading as follows:
... The governing Board of the Administration (POEA), as hereunder provided shall promulgate the necessary rules and
regulations to govern the exercise of the adjudicatory functions of the Administration (POEA).
Similar authorization had been granted the National Seamen Board, which, as earlier observed, had itself prescribed a standard
shipping contract substantially the same as the format adopted by the POEA.

The second challenge is more serious as it is true that legislative discretion as to the substantive contents of the law cannot be
delegated. What can be delegated is the discretion to determine how the law may be enforced, not what the law shall be. The
ascertainment of the latter subject is a prerogative of the legislature. This prerogative cannot be abdicated or surrendered by the
legislature to the delegate. Thus, in Ynot v. Intermediate Apellate Court 12 which annulled Executive Order No. 626, this Court
held:
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 Commission may see fit, in the case of carabaos.' (Italics
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 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.
There are two accepted tests to determine whether or not there is a valid delegation of legislative power, viz, the completeness test
and the sufficient standard test. Under the first test, the law must be complete in all its terms and conditions when it leaves the
legislature such that when it reaches the delegate the only thing he will have to do is enforce it. 13 Under the sufficient standard
test, there must be adequate guidelines or stations in the law to map out the boundaries of the delegate's authority and prevent the
delegation from running riot. 14
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.
The principle of non-delegation of powers is applicable to all the three major powers of the Government but is especially
important in the case of the legislative power because of the many instances when its delegation is permitted. The occasions are
rare when executive or judicial powers have to be delegated by the authorities to which they legally certain. In the case of the
legislative power, however, such occasions have become more and more frequent, if not necessary. This had led to the
observation that the delegation of legislative power has become the rule and its non-delegation the exception.
The reason is the increasing complexity of the task of government and the growing inability of the legislature to cope directly
with the myriad problems demanding its attention. The growth of society has ramified its activities and created peculiar and
sophisticated problems that the legislature cannot be expected reasonably to comprehend. Specialization even in legislation has
become necessary. To many of the problems attendant upon present-day undertakings, the legislature may not have the
competence to provide the required direct and efficacious, not to say, specific solutions. These solutions may, however, be
expected from its delegates, who are supposed to be experts in the particular fields assigned to them.
The reasons given above for the delegation of legislative powers in general are particularly applicable to administrative bodies.
With the proliferation of specialized activities and their attendant peculiar problems, the national legislature has found it more and
more necessary to entrust to administrative agencies the authority to issue rules to carry out the general provisions of the statute.
This is called the "power of subordinate legislation."
With this power, administrative bodies may implement the broad policies laid down in a statute by "filling in' the details which
the Congress may not have the opportunity or competence to provide. This is effected by their promulgation of what are known as
supplementary regulations, such as the implementing rules issued by the Department of Labor on the new Labor Code. These
regulations have the force and effect of law.
Memorandum Circular No. 2 is one such administrative regulation. The model contract prescribed thereby has been applied in a
significant number of the cases without challenge by the employer. The power of the POEA (and before it the National Seamen
Board) in requiring the model contract is not unlimited as there is a sufficient standard guiding the delegate in the exercise of the
said authority. That standard is discoverable in the executive order itself which, in creating the Philippine Overseas Employment
Administration, mandated it to protect the rights of overseas Filipino workers to "fair and equitable employment practices."
Parenthetically, it is recalled that this Court has accepted as sufficient standards "Public interest" in People v. Rosenthal 15 "justice
and equity" in Antamok Gold Fields v. CIR 16 "public convenience and welfare" in Calalang v. Williams 17 and "simplicity,
economy and efficiency" in Cervantes v. Auditor General, 18 to mention only a few cases. In the United States, the "sense and
experience of men" was accepted in Mutual Film Corp. v. Industrial Commission, 19 and "national security" in Hirabayashi v.
United States. 20

It is not denied that the private respondent has been receiving a monthly death benefit pension of P514.42 since March 1985 and
that she was also paid a P1,000.00 funeral benefit by the Social Security System. In addition, as already observed, she also
received a P5,000.00 burial gratuity from the Welfare Fund for Overseas Workers. These payments will not preclude allowance of
the private respondent's claim against the petitioner because it is specifically reserved in the standard contract of employment for
Filipino seamen under Memorandum Circular No. 2, Series of 1984, that
Section C. Compensation and Benefits.
1. In case of death of the seamen during the term of his Contract, the employer shall pay his beneficiaries the amount of:
a. P220,000.00 for master and chief engineers
b. P180,000.00 for other officers, including radio operators and master electrician
c. P 130,000.00 for ratings.
2. It is understood and agreed that the benefits mentioned above shall be separate and distinct from, and will be in addition to
whatever benefits which the seaman is entitled to under Philippine laws. ...
3. ...
c. If the remains of the seaman is buried in the Philippines, the owners shall pay the beneficiaries of the seaman an amount
not exceeding P18,000.00 for burial expenses.
The underscored portion is merely a reiteration of Memorandum Circular No. 22, issued by the National Seamen Board on July
12,1976, providing an follows:
Income Benefits under this Rule Shall be Considered Additional Benefits.
All compensation benefits under Title II, Book Four of the Labor Code of the Philippines (Employees Compensation and
State Insurance Fund) shall be granted, in addition to whatever benefits, gratuities or allowances that the seaman or his
beneficiaries may be entitled to under the employment contract approved by the NSB. If applicable, all benefits under the
Social Security Law and the Philippine Medicare Law shall be enjoyed by the seaman or his beneficiaries in accordance with
such laws.
The above provisions are manifestations of the concern of the State for the working class, consistently with the social justice policy
and the specific provisions in the Constitution for the protection of the working class and the promotion of its interest.
One last challenge of the petitioner must be dealt with to close t case. Its argument that it has been denied due process because the
same POEA that issued Memorandum Circular No. 2 has also sustained and applied it is an uninformed criticism of administrative law
itself. Administrative agencies are vested with two basic powers, the quasi-legislative and the quasi-judicial. The first enables them to
promulgate implementing rules and regulations, and the second enables them to interpret and apply such regulations. Examples
abound: the Bureau of Internal Revenue adjudicates on its own revenue regulations, the Central Bank on its own circulars, the
Securities and Exchange Commission on its own rules, as so too do the Philippine Patent Office and the Videogram Regulatory Board
and the Civil Aeronautics Administration and the Department of Natural Resources and so on ad infinitum on their respective
administrative regulations. Such an arrangement has been accepted as a fact of life of modern governments and cannot be considered
violative of due process as long as the cardinal rights laid down by Justice Laurel in the landmark case of Ang Tibay v. Court of
Industrial Relations 21 are observed.
Whatever doubts may still remain regarding the rights of the parties in this case are resolved in favor of the private respondent, in line
with the express mandate of the Labor Code and the principle that those with less in life should have more in law.
When the conflicting interests of labor and capital are weighed on the scales of social justice, the heavier influence of the latter must
be counter-balanced by the sympathy and compassion the law must accord the underprivileged worker. This is only fair if he is to be
given the opportunity and the right to assert and defend his cause not as a subordinate but as a peer of management, with which he can
negotiate on even plane. Labor is not a mere employee of capital but its active and equal partner.
WHEREFORE, the petition is DISMISSED, with costs against the petitioner. The temporary restraining order dated December 10,
1986 is hereby LIFTED. It is so ordered.

Narvasa, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

Footnotes
1 Bagatsing v. Ramirez, 74 SCRA 306; Del Mar v. Phil. Veterans Administration, 51 SCRA 340; Aguilar v. Valencia, 40 SCRA 210;
Begosa v. PVA 32 SCRA 446; Tapales v. President and Board of Regents, 7 SCRA 553; Pascual v. Nueva Ecija Provincial Board,
106 Phil. 466; Mondano v. Silvosa 97 Phil. 143.
2 Sec. I (d), Rule I, Book VI (1985 Rules).
3 Sec. 1 x Rule 11, Book I (1985 Rules).
4 Sec. l(g), Rule II, Book I (1985 Rules).
5 Sec. 1 (g), Rule 11, Book I (1984 Rules).
6 Rollo, p. 171 (POEA Decision, p. 8).
7 Ibid., pp. 169-170 (POEA Decision, pp. 6-7).
8 Rollo, pp. 213-217.
9 Annex "A" of Private Respondent's Comment (Rollo, p. 230).
10 Bagong Filipinas Overseas Corp. v. NLRC, 135 SCRA 278; Virgen v. NLRC, 125 SCRA 577; orse Management v. NSB, et al.,
117 SCRA 486; Virgen v. NLRC, 115 SCRA 347.
11 Stone v. Mississippi, 101 US 814,
12 148 SCRA 669.
13 People v. Vera 65 Phil. 56.
14 Cervantes v. Auditor General, 91 Phil. 359; People v. Rosen that 68 Phil. 328.
15 Supra.
16 70 Phil. 340.
17 70 Phil. 726.
18. Supra.
19 236 U.S. 247.
20 320 U.S. 99.
21 69 Phil. 635.
G.R. No. 84811 August 29, 1989
SOLID HOMES, INC., petitioner, vs.
TERESITA PAYAWAL and COURT OF APPEALS, respondents.
CRUZ, J.:

We are asked to reverse a decision of the Court of Appeals sustaining the jurisdiction of the Regional Trial Court of Quezon City over
a complaint filed by a buyer, the herein private respondent, against the petitioner, for delivery of title to a subdivision lot. The position
of the petitioner, the defendant in that action, is that the decision of the trial court is null and void ab initio because the case should
have been heard and decided by what is now called the Housing and Land Use Regulatory Board.
The complaint was filed on August 31, 1982, by Teresita Payawal against Solid Homes, Inc. before the Regional Trial Court of
Quezon City and docketed as Civil Case No. Q-36119. The plaintiff alleged that the defendant contracted to sell to her a subdivision
lot in Marikina on June 9, 1975, for the agreed price of P 28,080.00, and that by September 10, 1981, she had already paid the
defendant the total amount of P 38,949.87 in monthly installments and interests. Solid Homes subsequently executed a deed of sale
over the land but failed to deliver the corresponding certificate of title despite her repeated demands because, as it appeared later, the
defendant had mortgaged the property in bad faith to a financing company. The plaintiff asked for delivery of the title to the lot or,
alternatively, the return of all the amounts paid by her plus interest. She also claimed moral and exemplary damages, attorney's fees
and the costs of the suit.
Solid Homes moved to dismiss the complaint on the ground that the court had no jurisdiction, this being vested in the National
Housing Authority under PD No. 957. The motion was denied. The defendant repleaded the objection in its answer, citing Section 3 of
the said decree providing that "the National Housing Authority shall have exclusive jurisdiction to regulate the real estate trade and
business in accordance with the provisions of this Decree." After trial, judgment was rendered in favor of the plaintiff and the
defendant was ordered to deliver to her the title to the land or, failing this, to refund to her the sum of P 38,949.87 plus interest from
1975 and until the full amount was paid. She was also awarded P 5,000.00 moral damages, P 5,000.00 exemplary damages, P
10,000.00 attorney's fees, and the costs of the suit. 1
Solid Homes appealed but the decision was affirmed by the respondent court, 2 which also berated the appellant for its obvious efforts
to evade a legitimate obligation, including its dilatory tactics during the trial. The petitioner was also reproved for its "gall" in
collecting the further amount of P 1,238.47 from the plaintiff purportedly for realty taxes and registration expenses despite its inability
to deliver the title to the land.
In holding that the trial court had jurisdiction, the respondent court referred to Section 41 of PD No. 957 itself providing that:
SEC. 41. Other remedies.-The rights and remedies provided in this Decree shall be in addition to any and all other rights and
remedies that may be available under existing laws.
and declared that "its clear and unambiguous tenor undermine(d) the (petitioner's) pretension that the court a quo was bereft of
jurisdiction." The decision also dismissed the contrary opinion of the Secretary of Justice as impinging on the authority of the courts
of justice. While we are disturbed by the findings of fact of the trial court and the respondent court on the dubious conduct of the
petitioner, we nevertheless must sustain it on the jurisdictional issue.
The applicable law is PD No. 957, as amended by PD No. 1344, entitled "Empowering the National Housing Authority to Issue Writs
of Execution in the Enforcement of Its Decisions Under Presidential Decree No. 957." Section 1 of the latter decree provides as
follows:
SECTION 1. In the exercise of its function to regulate the real estate trade and business and in addition to its powers
provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and
decide cases of the following nature:
A. Unsound real estate business practices;
B. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project
owner, developer, dealer, broker or salesman; and
C. Cases involving specific performance of contractuala statutory obligations filed by buyers of subdivision lot or
condominium unit against the owner, developer, dealer, broker or salesman. (Emphasis supplied.)
The language of this section, especially the italicized portions, leaves no room for doubt that "exclusive jurisdiction" over the case
between the petitioner and the private respondent is vested not in the Regional Trial Court but in the National Housing Authority. 3
The private respondent contends that the applicable law is BP No. 129, which confers on regional trial courts jurisdiction to hear and
decide cases mentioned in its Section 19, reading in part as follows:

SEC. 19. Jurisdiction in civil cases.-Regional Trial Courts shall exercise exclusive original jurisdiction:
(1) In all civil actions in which the subject of the litigation is incapable of pecuniary estimation;
(2) In all civil actions which involve the title to, or possession of, real property, or any interest therein, except actions for
forcible entry into and unlawful detainer of lands or buildings, original jurisdiction over which is conferred upon
Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts;
xxx xxx xxx

(8) In all other cases in which the demand, exclusive of interest and cost or the value of the property in controversy, amounts
to more than twenty thousand pesos (P 20,000.00).
It stresses, additionally, that BP No. 129 should control as the later enactment, having been promulgated in 1981, after PD No. 957
was issued in 1975 and PD No. 1344 in 1978.
This construction must yield to the familiar canon that in case of conflict between a general law and a special law, the latter must
prevail regardless of the dates of their enactment. Thus, it has been held thatThe fact that one law is special and the other general creates a presumption that the special act is to be considered as
remaining an exception of the general act, one as a general law of the land and the other as the law of the particular case. 4
xxx xxx xxx
The circumstance that the special law is passed before or after the general act does not change the principle. Where the
special law is later, it will be regarded as an exception to, or a qualification of, the prior general act; and where the general act
is later, the special statute will be construed as remaining an exception to its terms, unless repealed expressly or by necessary
implication. 5
It is obvious that the general law in this case is BP No. 129 and PD No. 1344 the special law.
The argument that the trial court could also assume jurisdiction because of Section 41 of PD No. 957, earlier quoted, is also
unacceptable. We do not read that provision as vesting concurrent jurisdiction on the Regional Trial Court and the Board over the
complaint mentioned in PD No. 1344 if only because grants of power are not to be lightly inferred or merely implied. The only
purpose of this section, as we see it, is to reserve. to the aggrieved party such other remedies as may be provided by existing law, like
a prosecution for the act complained of under the Revised Penal Code. 6
On the competence of the Board to award damages, we find that this is part of the exclusive power conferred upon it by PD No. 1344
to hear and decide "claims involving refund and any other claims filed by subdivision lot or condominium unit buyers against the
project owner, developer, dealer, broker or salesman." It was therefore erroneous for the respondent to brush aside the well-taken
opinion of the Secretary of Justice thatSuch claim for damages which the subdivision/condominium buyer may have against the owner, developer, dealer or
salesman, being a necessary consequence of an adjudication of liability for non-performance of contractual or statutory
obligation, may be deemed necessarily included in the phrase "claims involving refund and any other claims" used in the
aforequoted subparagraph C of Section 1 of PD No. 1344. The phrase "any other claims" is, we believe, sufficiently broad to
include any and all claims which are incidental to or a necessary consequence of the claims/cases specifically included in the
grant of jurisdiction to the National Housing Authority under the subject provisions.
The same may be said with respect to claims for attorney's fees which are recoverable either by agreement of the parties or
pursuant to Art. 2208 of the Civil Code (1) when exemplary damages are awarded and (2) where the defendant acted in gross
and evident bad faith in refusing to satisfy the plaintiff 's plainly valid, just and demandable claim.
xxx xxx xxx

Besides, a strict construction of the subject provisions of PD No. 1344 which would deny the HSRC the authority to
adjudicate claims for damages and for damages and for attorney's fees would result in multiplicity of suits in that the
subdivision condominium buyer who wins a case in the HSRC and who is thereby deemed entitled to claim damages and
attorney's fees would be forced to litigate in the regular courts for the purpose, a situation which is obviously not in the
contemplation of the law. (Emphasis supplied.) 7
As a result of the growing complexity of the modern society, it has become necessary to create more and more administrative bodies
to help in the regulation of its ramified activities. Specialized in the particular fields assigned to them, they can deal with the problems
thereof with more expertise and dispatch than can be expected from the legislature or the courts of justice. This is the reason for the
increasing vesture of quasi-legislative and quasi-judicial powers in what is now not unreasonably called the fourth department of the
government.
Statutes conferring powers on their administrative agencies must be liberally construed to enable them to discharge their assigned
duties in accordance with the legislative purpose. 8 Following this policy in Antipolo Realty Corporation v. National Housing
Authority, 9 the Court sustained the competence of the respondent administrative body, in the exercise of the exclusive jurisdiction
vested in it by PD No. 957 and PD No. 1344, to determine the rights of the parties under a contract to sell a subdivision lot.
It remains to state that, contrary to the contention of the petitioner, the case of Tropical Homes v. National Housing Authority 10 is not
in point. We upheld in that case the constitutionality of the procedure for appeal provided for in PD No. 1344, but we did not rule
there that the National Housing Authority and not the Regional Trial Court had exclusive jurisdiction over the cases enumerated in
Section I of the said decree. That is what we are doing now.
It is settled that any decision rendered without jurisdiction is a total nullity and may be struck down at any time, even on appeal before
this Court. 11 The only exception is where the party raising the issue is barred by estoppel, 12 which does not appear in the case before
us. On the contrary, the issue was raised as early as in the motion to dismiss filed in the trial court by the petitioner, which continued
to plead it in its answer and, later, on appeal to the respondent court. We have no choice, therefore, notwithstanding the delay this
decision will entail, to nullify the proceedings in the trial court for lack of jurisdiction.
WHEREFORE, the challenged decision of the respondent court is REVERSED and the decision of the Regional Trial Court of
Quezon City in Civil Case No. Q-36119 is SET ASIDE, without prejudice to the filing of the appropriate complaint before the
Housing and Land Use Regulatory Board. No costs.
SO ORDERED.
Narvasa, Gancayco, Gri;o-Aquino and Medialdea, JJ., concur.
Footnotes
1 Rollo, pp. 6 & 14.
2 Tensuan, J., ponente, with Nocon and Kalalo, JJ., concurring.
3 Under E.O. No. 648 dated Feb. 7, 1981, the regulatory functions conferred on the National Housing Authority under P.D. Nos. 957,
1216, 1344 and other related laws were transferred to the Human Settlements Regulatory Commission, which was renamed Housing
and Land Use Regulatory Board by E.O. No. 90 dated Dec. 17, 1986.
4 Manila Railroad Co. v. Rafferty, 40 Phil. 224 (1919); Butuan Sawmill, Inc. v. City of Butuan, 16 SCRA 758-1 Bagatsing v.
Ramirez, 74 SCRA 306.
5 59 C.J., 1056-1058.
6 Article 316.
7 Min. of Justice Op. No. 271, s. 1982.
8 Cooper River Convalescent Ctr., Inc. v. Dougherty, 356 A. 2d 55, 1975.
9 153 SCRA 399.

10 152 SCRA 54.

11 Trinidad v. Yatco, 1 SCRA 866; Corominas, Jr. v. Labor Standards Commission, 2 SCRA 721; Sebastian v. Gerardo, 2 SCRA 763;
Buena v. Sapnay, 6 SCRA 706.
12 Tijam v. Sibonghanoy, 23 SCRA 29; Philippine National Bank v. IAC, 143 SCRA 299; Tan Boon Bee & Company, Inc. v. Judge
Jarencio, G.R. No. 41337, June 30, 1988.
G.R. No. L-44485 June 27, 1988
HEIRS OF SANTIAGO PASTORAL and AGUSTIN BATO, petitioners-appellants, vs.
THE SECRETARY OF PUBLIC WORKS and COMMUNICATIONS, THE CITY ENGINEER OF DAGUPAN CITY and
LEONARDO ESPANOL, respondents-appellees.
GUTIERREZ, JR., J.:
This case was certified to us by the Court of Appeals pursuant to Sections 17 and 21 of the Judiciary Act, as amended in relation to
Section 3, Rule 50 of the Rules of Court on the ground that the issues raised are pure questions of law. The main issue centers on the
authority of the Secretary of Public Works and Communications under Republic Act 2056 to declare the construction of dikes
encroaching into public navigable waters as a public nuisance and to order their removal.
Sometime in October 1958, residents of Bacayao Norte, Caranglaan, and Mayombo Districts of Dagupan City led by Leonardo
Espanol filed complaints with the Secretary of Public Works and Communications (hereinafter referred to as Secretary) denouncing
the heirs of Santiago Pastoral and Agustin Bato for "alleged encroachments into the Tulao River ... to the prejudice of public interest."
The complaints were docketed as Cases Nos. RA-2056-26 and RA-2056-37 respectively.
The Secretary designated the City Engineer of Dagupan City to conduct hearings in the two cases. All the parties were notified of the
hearings set for both cases.
Based on the evidence submitted by the parties, the Secretary rendered two separate decisions ordering the removal of the
encroachments complained of within thirty (30) days from receipt of notice. Thus, in Case No. RA-2056-26, the heirs of Santiago
Pastoral were ordered to remove the fishpond dikes indicated as Encroachments Nos. 1, 2, 3 and 4 in Exhibit "A" while in Case No.
RA-2056-37, Agustin Bato was ordered to remove the fishpond dikes indicated as Encroachment No. 5 in Exhibit "A." The Secretary
ruled that encroachments Nos. 1, 2, 3, 4 and 5 in Exhibit "A" had been illegally constructed within the channel of Tulao River. The
Secretary declared the encouragement croachments as public nuisances under Republic Act 2056.
Their motion for reconsideration having been denied by the Secretary, the respondents filed in the Court of First Instance of
Pangasinan a petition for certiorari and prohibition with a prayer for a writ of preliminary injunction against the Secretary, the City
Engineer of Dagupan City and Leonardo Espanol. The case was docketed as Civil Case No. D-833.
The petitioners (respondents in the administrative cases) alleged "... that respondent City Engineer informed petitioners that the 30-day
period given them to remove the fishpond dikes has expired and that his office will proceed to demolish the dikes on orders from the
Secretary of Public Works and Communications; that they have title over the alleged encroachments and a fishpond permit issued by
the Department of Agriculture and Natural Resources, through the Bureau of Fisheries, authorizing them to construct a fishpond on an
adjoining parcel of their property not covered by title." The petitioners sought the annulment of the decision of the Secretary of Public
Works and Communications on the ground of lack of jurisdiction and the issuance of a writ of prohibition commanding the
respondents to desist absolutely and perpetually from further molesting in any manner the petitioners and interfering with the exercise
of their rights over the lands in question.
In his answer, the Secretary invoked his authority to remove the encroachments under Republic Act No. 2056 and stated that he had
acted lawfully and justly and within the sound limits of his authority and jurisdiction thereunder.
The parties agreed to submit the case for judgment on the pleadings and were allowed by the lower court to submit their respective
memoranda.
The trial court then rendered a decision in favor of the petitioners-appellants prompting the Secretary to interpose an appeal to the
Court of Appeals.
The Secretary assigned a single assignment of error, to wit:

THE TRIAL COURT COMMITTED ERROR IN HAVING ANNULLED THE DECISIONS RENDERED BY THE
SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, IN CASES JURISDICTION, AND IN
PERMANENTLY ENJOINING SAID SECRETARY FROM IMPLEMENTING THE ORDER TO REMOVE THE
ENCROACMENTS PLACED BY THE APPEALLEES ON THE TULAO RIVER. (At p. 17, Rollo)
In support of this lone assignment of error, the petitioner raised the following arguments:
1) The Secretary was duly vested with jurisdiction both over the parties and subject matter of the controversy.
2) The Secretary duly conformed to the requirements of due process in the exercise of his authority under Republic Act No.
2056.
3) The Secretary did not, as concluded by the court a quo, rule on the validity of appellees' titles over the lots in question.
4) The issuance of fishpond permits by the Bureau of Fisheries did not preclude the Secretary from conducting due
investigation and in ruling upon the same.
5) The Secretary's findings of fact are entitled to respect from the courts. (At pp. 17-18, Rollo)
As stated earlier, the main issue hinges on the authority of the Secretary of Public Works and Communications under Republic Act
2056 to declare that the construction or building of dams, dikes or any other works which encroach into any public navigable river,
stream, coastal waters and any other navigable public waters or waterways as well as the construction or building of dams, dikes or
any other works in areas declared as communal fishing grounds is prohibited and to order their removal as "public nuisances or as
prohibited constructions."
The lower court concluded that the Secretary abused his authority under Republic Act No. 2056 on the following points: (1) The
Secretary passed judgment on the validity of the titles of the petitioners over Encroachments 3, 4 and 5 when he declared such titles as
null and void; and (2) the dikes denominated as Encroachments Nos. 1 and 2 were constructed by virtue of a permit legally issued in
favor of the late Santiago Pastoral by the Bureau of Fisheries on July 19, 1948 because the area was deemed fit by said Office of
fishpond purposes, and the construction of such dikes would not impede the flow of the river. The lower court opined that in
constructing the dikes, the petitioners were only exercising a right legally granted to them and that "they shall remain to enjoy the
privilege until such time that their permit shall have been cancelled."
The petition is impressed with merit.
The records belie the lower court's finding that the Secretary passed judgment on the titles of the lots in question.
In connection with Encroachments Nos. 3 and 4, the Heirs of Santiago Pastoral presented a certified true copy of Original Certificate
of Title No. 9 issued by the Register of Deeds of Dagupan City to show that the encroachments are within their titled lands. The
Secretary, however, stated in his decision:
As regards the last two encroachments, the evidence shows that the southern boundary thereof is the original bank of the
Tulao River. The properties in question, titled as they are, are clearly within the bed of the river. Even the testimony of
Aniceto Luis, a representative of the Bureau of Lands in the investigation, shows without doubt, that the encroachments are
within the river bed as may be gleaned from the following:
Q As it appears in the record, title was granted to Santiago Pastoral on this alleged encroachment No. 3 and 4 which
falls squarely on the Tulao River and during the ocular inspection by the undersigned, the fact became evident that
the river is highly navigable. Now, what explanation can you make as to why title was issued over a portion of a
river, public river at that, which is highly navigable?
A So far, our record does not show that it is a navigable river, but it is just stated that "the area applied for is a part
of the Tulao River and therefore it is covered by water." (From the report of the Deputy Public Land Inspector E.
Ventura dated March, 1954 in connection with the Sales application of Santiago Pastoral.)
Q So in the report, it was stated that the land applied for by Santiago Pastoral is entirely covered by water and part
of the river?
A Yes, sir,

The propriety of the title over the last two encroachments is beyond the jurisdiction of this Office to inquire into, much less
question, although it seems worth looking into by the proper authorities. Be that as it may, the fact remains that the dikes and
other works therein are encroachments into the Tulao River and, as such, are public nuisances within the contemplation of
Republic Act No. 2056. (pp. 1-2, Decision in RA-2056-26)
Petitioner Agustin Bato also submitted a verified copy of the Original Certificate of Title No. 2 to show that encroachment No. 5 was
privately owned.
Anent this argument, the Secretary said:
xxx xxx xxx
... It has been found, however, that the land in question, although titled, is within the bed of the Tulao River. Even the
representative of the Bureau of Lands bolstered such finding as may be gleaned from the following portion of his testimony:
Q But you stated that the technical description falls squarely to the Tulao River. What I am after is the condition of
the land when the application was made. Do you have that in your records? "
A Yes sir.
Q Now, if I show the certificate of title that covered the portion of this land, will you agree with me that the
technical description is the same as that appearing in your record?
A Yes, they are the same.
Q Mr. Luis, we have the technical description appearing in the certificate of title which you admitted to be the same
as appearing in your record plotted, and it appears that the same land covered by the description falls squarely on the
river? Is it still on the side of the river or in the river itself? I am referring to the encroachment No. 5 by Agustin
Bato.
A No, if this encroachment made by Agustin Bato is the same land as described in the technical description from the
title, then it is within the river."
Moreover, Section 39 of Act No. 496, in defining the scope and efficacy of a certificate of title under the Torrens System, established
some exceptions which the force of said title does not reach or affect. Among them are properties of the public domain. Since the
portion appropriated is of public dominion, registration under Act No. 496 did not make the possessor a true owner thereof. (Celso
Ledesma v. The Municipality of Iloilo, Concepcion Lopez, Maximo M. Kalaw and wife, and Julia Ledesma, defendants, 49 Phil. 769).
(pp. 1-2, Decision in RA-2056-37)
In effect, the Secretary passed judgment only to the extent that, although the encroachments were inside titled properties, they are
within the bed of a river. With this factual finding, he declared the encroachments, converted into fishponds within the Tulao River, as
prohibited and ordered their removal pursuant to his authority under Republic Act 2056. He never declared that the titles of the
petitioners over the lots in question were null and void.
The Secretary's authority to determine questions of fact such as the existence of a river even inside titled properties was recognized in
the cases of Lovina v. Moreno, (9 SCRA 557) and Taleon vs. Secretary of Public Works and Communications (20 SCRA 69). We
stated that the fact-finding power of the Secretary of Public Works and Communications is merely "incidental to his duty to clear all
navigable streams of unauthorized constructions and, hence its grant did not constitute an unlawful delegation of judicial power. ...
that although the titles were silent as to the existence of any stream inside the property, that did not confer a right to the stream, it
being of a public nature and not subject to private appropriation, even by prescription." In the instant cases, the residents along the
Tulao River complained about obstructions on the river. From a width of 70 to 105 meters, the river had been reduced to a width of
only 10 to 15 meters. The river was navigable and even at low-tide was two to three meters deep.
As regards the lower court's finding that the dikes designated as Encroachments Nos. 1 and 2 were constructed under the petitioners'
Fishpond Permit issued by the Bureau of Fisheries in 1948 and, therefore, must be respected, the Secretary counters that such issuance
of fishpond permit did not preclude him from conducting due investigation pursuant to his authority under Republic Act 2056.
We agree.

Section 1 of Republic Act 2056 is explicit in that "Any provision or provisions of law to the contrary notwithstanding, the construction
or building of dams, dikes ... which encroaches into any public navigable river, stream, coastal waters and any other navigable public
waters or waterways ... shall be ordered removed as public nuisance or as prohibited construction as herein provided ... The record
shows that the petitioners' fishpond permit was issued in 1948 while the Act took effect on June 3, 1958. Therefore, the Secretary's
more specific authority to remove dikes constructed in fishponds whenever they obstruct or impede the free passage of any navigable
river or stream or would cause inundation of agricultural areas (Section 2, Republic Act 2056) takes precedence. Moreover, the power
of the Secretary of Public Works to investigate and clear public streams from unauthorized encroachments and obstructions was
granted as early as Act 3708 of the old Philippine Legislature and has been upheld by this Court in the cases of Palanca v.
Commonwealth (69 Phil. 449) and Meneses v. Commonwealth (69 Phil. 647). The same rule was applied in Lovina v. Moreno, (supra)
Santos etc., et al. v. Secretary of Public Works and Communications (19 SCRA 637).
All in all, we find no grave abuse of discretion or an illegal exercise of authority on the part of the Secretary of Public Works and
Communications in ordering the removal of the encroachments designated as Nos. 1, 2, 3, 4 and 5 of Exhibit "A".
The rules of due process were observed in the conduct of investigation in the two cases. The parties concerned were all notified and
hearings of the two cases were conducted by the Secretary through the City Engineer of Dagupan City. All parties were given
opportunity to present evidence to prove their claims after which the Secretary rendered separate decisions pursuant to Republic Act
2056.
The factual findings of the Secretary are substantiated by evidence in the administrative records. In the absence of any illegality, error
of law, fraud or imposition, none of which were proved by the petitioners in the instant case, said findings should be respected.
(Lovina v. Moreno, supra; Santos, etc., et al. v. Secretary of Public Works and Communications, supra; See also Borja v. Moreno, 11
SCRA 568; Taleon v. Secretary of Public Works and Communications, 20 SCRA 69).
WHEREFORE, the instant appeal is GRANTED. The questioned decision of the Court of First Instance of Pangasinan is REVERSED
and SET ASIDE. The decisions of the then Secretary of Public Works and Communications in Cases No. RA 2056-26 and No. RA2056-37 are REINSTATED.
SO ORDERED.
Fernan (Chairman), Feliciano, Bidin and Cortes, JJ., concur.
G.R. No. 71837 July 26, 1988
CHUNG KA BIO, WELLINGTON CHUNG, CHUNG SIONG PEK, VICTORIANO CHUNG, and MANUEL CHUNG
TONG OH, petitioners,
vs.
INTERMEDIATE APPELLATE COURT (2nd Special Cases Division), SECURITIES and EXCHANGE COMMISSION EN
BANC, HON. ANTONIO R. MANABAT, HON. JAMES K. ABUGAN, HON. ANTERO F.L. VILLAFLOR, JR., HON.
SIXTO T.J. DE GUZMAN, JR., ALFREDO CHING, CHING TAN, CHIONG TIONG TAY, CHUNG KIAT HUA, CHENG
LU KUN, EMILIO TAEDO, ROBERTO G. CENON and PHILIPPINE BLOOMING MILLS COMPANY, INC.,
respondents.
CRUZ, J.:
The Philippine Blooming Mills Company, Inc. was incorporated on January 19, 1952, for a term of 25 years which expired on January
19,1977. 1 On May 14, 1977, the members of its board of directors executed a deed of assignment of all of the accounts receivables,
properties, obligations and liabilities of the old PBM in favor of Chung Siong Pek in his capacity as treasurer of the new PBM, then in
the process of reincorporation. 2 On June 14, 1977, the new PMB was issued a certificate of incorporation by the Securities and
Exchange Commission. 3
On May 5, 1981, Chung Ka Bio and the other petitioners herein, all stockholders of the old PBM, filed with the SEC a petition for
liquidation (but not for dissolution) of both the old PBM and the new PBM. The allegation was that the former had become legally
non-existent for failure to extend its corporate life and that the latter had likewise been ipso facto dissolved for non-use of the charter
and continuous failure to operate within 2 years from incorporation. 4
Dismissed for lack of a cause of action, the case, docketed as AC No. 055, was reinstated on appeal to the SEC en banc and remanded
to a new panel of hearing officers for further proceedings, including the proper accounting of the assets and liabilities of the old PBM.
This order was appealed to the Intermediate Appellate Court in a petition for partial review, docketed as AC GR SP No. 00843,

questioning the authority of the SEC in Case No. 055 to adjudicate a matter not properly raised on appeal or resolved in the order
appealed from. 5
In a related development, Alfredo Ching, one of the members of the board of directors of the old PBM who executed the deed of
assignment, filed with the Intermediate Appellate Court a separate petition for certiorari, docketed as AC GR No. 01099, in which he
questioned the same order and the decision of the SEC in AC Case No. 055. He alleged that the SEC had gravely erred in not
dismissing the petition for liquidation since the action amounted to a quo warranto proceeding which only the state could institute
through the Solicitor General. 6
Earlier, on April 1, 1982, the new PBM and Alfredo Ching had filed with the SEC a petition for suspension of payment, which was
opposed by Chung Ka Bio, et al., on the ground that the SEC had no jurisdiction over a petition for suspension of payments initiated
by a mere individual. The opposition was rejected and the case was set for hearing. Chung Ka Bio elevated the matter to the SEC en
banc on certiorari with preliminary injunction and receivership, docketed as SEC EB No. 018, praying for the annulment and setting
aside of the proceedings. On May 10, 1983, the case was remanded to the hearing officers for further proceedings. 7
Chung Ka Bio came to this Court but we referred his case to the Intermediate Appellate Court where it was docketed as GR SP No.
01007. The three cases, viz., PBM Co., Inc. v. SEC, AC GR SP 00843; Chung Ka Bio, et al. v. SEC, AC GR SP No. 01007; and
Alfredo Ching, et al. v. SEC, AC GR SP No. 01099 were then consolidated in the respondent court which, on February 28, 1985,
issued the decision now challenged on certiorari by the petitioners in the case at bar. The decision affirmed the orders issued by the
SEC in the said cases except the requirement for the accounting of the assets of the old PBM, which was set aside. 8
The petitioners now contend as follows:
1. The board of directors of an already dissolved corporation does not have the inherent power, without the express consent of the
stockholders, to convey all its assets to a new corporation.
2. The new corporation is accountable for the said assets to the stockholders of the dissolved corporation who had not consented to the
conveyance of the same to the new corporation.
3. The new corporation has not substantially complied with the two-year requirement of Section 22 of the new Corporation Code on
non-user because its stockholders never adopted a set of by-laws.
4. A quo warranto proceeding is no longer necessary to dissolve a corporation which is already "deemed dissolved" under Section 22
of the new Corporation Code.
5. The Securities and Exchange Commission has no jurisdiction over a petition for suspension of payments filed by an individual only.
9

On the first contention, the petitioners insist that they have never given their consent to the creation of the new corporation nor have
they indicated their agreement to transfer their respective stocks in the old PBM to the new PBM. The creation of the new corporation
with the transfer thereto of the assets of the old corporation was not within the powers of the board of directors of the latter as it was
authorized only to wind up the affairs of such company and not in any case to continue its business. Moreover, no stockholders'
meeting had been convened to discuss the deed of assignment and the 2/3 vote required by the Corporation Law to authorize such
conveyance had not been obtained. 10
The pertinent provisions of the Corporation Law, which was the law then in force, are the following:
SEC. 77. Every corporation whose charter expired by its own limitation or is annulled by forfeiture or otherwise, or whose
corporate existence for other purposes is terminated in any other manner, shall nevertheless be continued as a body corporate
for three years after the time when it would have been dissolved, for the purpose of prosecuting and defending suits by or
against it and of enabling it gradually to settle and close its affairs, to dispose of and convey its property and to divide its
capital stock, but not for the purpose of continuing the business for which it was established."
SEC. 28-1/2. A corporation may, by action taken at any meeting of its board of directors, sell, lease, exchange, or otherwise
dispose of all or substantially all of its property and assets, including its goodwill, upon such terms and conditions and for
such considerations, which may be money, stocks bonds, or other instruments for the payment of money or other property or
other considerations, as its board of directors deem expedient, when and as authorized by the affirmative vote of shareholders
holding shares in the corporation entitling them to exercise at least two-thirds of the voting power on such a proposal at a
shareholders' meeting called for that purpose. Notice of such meeting shall be given to all of the shareholders of record of the

corporation whether or not they shall be entitled to vote thereat: Provided, however, That any stockholder who did not vote to
authorize the action of the board of directors, may, within forty days after the date upon which such action was authorized,
object thereto in writing and demand payment for his shares. If, after such a demand by a stockholder, the corporation and the
stockholder can not agree upon the value of his share or shares at the time such corporate action was authorized, such value
shall be ascertained by three disinterested persons, one of whom shall be named by the stockholder, another by the
corporation, and the third by the two thus chosen. The finding of the appraisers shall be final and if their award is not paid by
the corporation within thirty days after it is made, it may be recovered in an action by the stockholder against the corporation.
Upon payment by the corporation to the stockholder of the agreed or awarded price of his shares, the stockholder shall
forthwith transfer and assign the share or shares held by him as directed by the corporation.
Unless and until such sale, lease, or exchange shall be abandoned, the stockholder making such demand in writing ceases to
be a stockholder and shall have no rights with respect to such shares except the right to receive payment therefor as aforesaid.
A stockholder shall not be entitled to payment for his shares under the provisions of this section unless the value of the
corporate assets which would remain after such payment would be at least equal to the aggregate amount of its debts and
liabilities exclusive of capital stock.
Nothing in this section is intended to restrict the power of any corporation, without the authorization thereof by the
shareholders, to sell, lease, exchange, or otherwise dispose of, any of its property if thereby the corporate business be not
substantially limited, or if the proceeds of such property be appropriated to the conduct or development of its remaining
business.
These are now Sections 122 and 40, respectively, with modifications, of the Corporation Code.
As the first contention is based on the negative averment that no stockholders' meeting was held and the 2/3 consent vote was not
obtained, there is no need for affirmative proof. Even so, there is the presumption of regularity which must operate in favor of the
private respondents, who insist that the proper authorization as required by the Corporation Law was duly obtained at a meeting called
for the purpose. (That authorization was embodied in a unanimous resolution dated March 19, 1977, which was reproduced verbatim
in the deed of assignment.) 11 Otherwise, the new PBM would not have been issued a certificate of incorporation, which should also be
presumed to have been done regularly. It must also be noted that under Section 28-1/2, "any stockholder who did not vote to authorize
the action of the board of directors may, within forty days after the date upon which such action was authorized, object thereto in
writing and demand payment for his shares." The record does not show, nor have the petitioners alleged or proven, that they filed a
written objection and demanded payment of their shares during the reglementary forty-day period. This circumstance should bolster
the private respondents' claim that the authorization was unanimous.
While we agree that the board of directors is not normally permitted to undertake any activity outside of the usual liquidation of the
business of the dissolved corporation, there is nothing to prevent the stockholders from conveying their respective shareholdings
toward the creation of a new corporation to continue the business of the old. Winding up is the sole activity of a dissolved corporation
that does not intend to incorporate anew. If it does, however, it is not unlawful for the old board of directors to negotiate and transfer
the assets of the dissolved corporation to the new corporation intended to be created as long as the stockholders have given their
consent. This was not prohibited by the Corporation Act. In fact, it was expressly allowed by Section 28-1/2.
What the Court finds especially intriguing in this case is the fact that although the deed of assignment was executed in 1977, it was
only in 1981 that it occurred to the petitioners to question its validity. All of four years had elapsed before the petitioners filed their
action for liquidation of both the old and the new corporations, and during this period, the new PBM was in full operation, openly and
quite visibly conducting the same business undertaken earlier by the old dissolved PBM. The petitioners and the private respondents
are not strangers but relatives and close business associates. 12 The PBM office is in the heart of Metro Manila. 13 The new
corporation, like the old, employs as many as 2,000 persons, the same personnel who worked for the old PBM. 14 Additionally, one of
the petitioners, Chung Siong Pek was one of the directors who executed the deed of assignment in favor of the old PBM and it was he
also who received the deeded assets on behalf and as treasurer of the new PBM. 15 Surely, these circumstances must operate to bar the
petitioners now from questioning the deed of assignment after this long period of inaction in the protection of the rights they are now
belatedly asserting. Laches has operated against them.
We have said in a number of cases that laches, in a general sense, means the failure or neglect, for an unreasonable and unexplained
length of time, to do that which, by exercising due diligence, could or should have been done earlier. 16 It is negligence or omission to
assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned or declined to
assert it. 17 Public policy requires, for the peace of society, the discouragement of claims grown stale for non-assertion. 18 Unlike the
statute of limitations, laches does not involve mere lapse or passage of time but is principally an impediment to the assertion or
enforcement of a right which has become under the circumstances inequitable or unfair to permit. 19

The essential elements of laches are: (1) conduct on the part of the defendant, or of one under whom he claims, giving rise to the
sitution complained of; (2) delay in asserting complainant's right after he had knowledge of the defendant's conduct and after he has an
opportunity to sue; (3) lack of knowledge or notice on the part of the defendant that the complainant would assert the right on which
he bases his suit; (4) injury or prejudice to the defendant in the event relief is accorded to the complainant. 20
All the requisites are present in the case at bar. To begin with, what gave rise to the situation now complained of by the petitioners was
the adoption of the deed of assignment by the directors of the old PBM allegedly without the consent of its stockholders and the
acceptance of the deeded assets by the new PBM. Secondly, there was delay on the petitioners' part since it took them nearly four
years, i.e., from May 14, 1977 to May 5,1981, before they made their move to assail the transfer despite complete knowledge of the
transaction. It is also evident that the new PBM could not have had the slightest suspicion that the petitioners would assert the right on
which they now base their suit, especially Chung Siong Pek, who in fact acted not only as director of the old PBM but also as treasurer
of the new PBM in the transaction. Finally, the injury or prejudice in the event relief is granted is obvious as all the transactions of the
new PBM will have to be undone, including credits extended and commitments made to third parties in good faith.
The second contention must also fall with the first, and for the same reasons.
The third contention is likewise rejected for, as already shown, it is undeniable that the new PBM has in fact been operating all these
years. The petitioners' argument that Alfredo Ching was merely continuing the business of the old PBM is self-defeating for they
themselves argue that the old PBM had already been dissolved. As for the contention that the election of Wellington Chung and J.R.
Blanco as directors was subject to the outcome of the petition for liquidation, this is clearly self-serving and completely without proof.
Moreover, failure to file the by-laws does not automatically operate to dissolve a corporation but is now considered only a ground for
such dissolution.
Section 19 of the Corporation Law, part of which is now Section 22 of the Corporation Code, provided that the powers of the
corporation would cease if it did not formally organize and commence the transaction of its business or the continuation of its works
within two years from date of its incorporation. Section 20, which has been reproduced with some modifications in Section 46 of the
Corporation Code, expressly declared that "every corporation formed under this Act, must within one month after the filing of the
articles of incorporation with the Securities and Exchange Commission, adopt a code of by-laws." Whether this provision should be
given mandatory or only directory effect remained a controversial question until it became academic with the adoption of PD 902-A.
Under this decree, it is now clear that the failure to file by-laws within the required period is only a ground for suspension or
revocation of the certificate of registration of corporations.
Non-filing of the by-laws will not result in automatic dissolution of the corporation. Under Section 6(i) of PD 902-A, the SEC is
empowered to "suspend or revoked, after proper notice and hearing, the franchise or certificate of registration of a corporation" on the
ground inter alia of "failure to file by-laws within the required period." It is clear from this provision that there must first of all be a
hearing to determine the existence of the ground, and secondly, assuming such finding, the penalty is not necessarily revocation but
may be only suspension of the charter. In fact, under the rules and regulations of the SEC, failure to file the by-laws on time may be
penalized merely with the imposition of an administrative fine without affecting the corporate existence of the erring firm. 21
It should be stressed in this connection that substantial compliance with conditions subsequent will suffice to perfect corporate
personality. Organization and commencement of transaction of corporate business are but conditions subsequent and not prerequisites
for acquisition of corporate personality. The adoption and filing of by-laws is also a condition subsequent. Under Section 19 of the
Corporation Code, a corporation commences its corporate existence and juridical personality and is deemed incorporated from the date
the Securities and Exchange Commission issues certificate of incorporation under its official seal. This may be done even before the
filing of the by-laws, which under Section 46 of the Corporation Code, must be adopted "within one month after receipt of official
notice of the issuance of its certificate of incorporation."
Distinguishing creation from defects in organization, Fletcher has the following to say:
Ordinarily, want of, or defects in, the organization of a corporation, as distinguished from its creation, do not preclude the
existence of a de facto corporation; and requirements in special charters or general incorporation laws relating to organization
are often construed to be merely directory, or to conditions subsequent rather than conditions precedent, so that compliance
therewith is not necessary to create even a dejure corporation. It has been held that there may be a de facto corporation
notwithstanding a failure to give the notice required by the statute of the meeting for the of or organization; or though there
would failure to fix and limit the amount of the capital stock of the company at the first meeting; or a failure to issue stock; or
that there were informalities in the proceedings of such meeting, or that no certificate of organization was executed or filed.
And the same has been held to be true though no board of directors has been elected, and though there were irregularities
with respect to the number, term, place of residence and of meeting of the board of directors, or some of the persons chosen
as directors are not qualified, even though the taking of these various steps is necessary to the proper use of the franchise. ....

In any case, the deficiency claimed by the petitioners was corrected when the new PBM adopted and filed its by-laws on September 6,
1981, 22 thus rendering the third issue also moot and academic.
It is needless as well to dwell on the fourth contention, in view of the findings that the new PBM has not been ipso facto dissolved.
On the fifth and final issue, the respondent court justifies assumption by the SEC of jurisdiction over the petition for suspension of
payment filed by the individual on the general principle against multiplicity of suits.
Under Section 5(d), PD 902-A, as amended by PD 1758, however, it is clearly provided that such jurisdiction may be exercised only
in:
d) Petitions of corporations, partnerships or associations to be declared in the state of suspension of payments in cases where
the corporation, partnership or association possess sufficient property to cover all its debts but foresees the impossibility of
meeting them when they respectively fall due or in cases where the corporation, partnership or association has no sufficient
assets to cover its liabilities but is under the management of a Rehabilitation Receiver or Management Committee created
pursuant to this Decree.
This section clearly does not allow a mere individual to file the petition which is limited to "corporations, partnerships or
associations." Administrative agencies like the SEC are tribunals of limited jurisdiction and, as such, can exercise only those powers
which are specifically granted to them by their enabling statutes. 23 Consequently, where no authority is granted to hear petitions of
individuals for suspension of payments, such petitions are beyond the competence of the SEC. The analogy offered by the respondent
court is clearly inappropriate for while it is true that the Sandiganbayan may assume jurisdiction over private individuals, it is because
its charter expressly allows this in specified cases. No similar permission is found in PD 902-A.
The circumstance that Ching is a co-signer in the corporation's promissory notes, collateral or guarantee or security agreements, does
not make him a proper party. Jurisdiction over the subject matter must exist as a matter of law and cannot be fixed by agreement of the
parties, acquired through, or waived, enlarged or diminished by, any act or omission; neither can it be conferred by acquiescence of
the tribunal. Hence, Alfredo Ching, as a mere individual, cannot be allowed as a co-petitioner in SEC Case No. 2250.
WHEREFORE, the appealed decision is AFFIRMED as above modified, with costs against the petitioners.
SO ORDERED.
Narvasa, Gancayco and Medialdea, JJ., concur.
Grio-Aquino, J., took no part.
Footnotes
1 Rollo, pp. 41, 86.
2 Ibid.
3 Id.
4 Id., pp. 11, 41.
5 Id., p. 41.
6 Id., pp. 41-42.
7 Id., pp. 12-13, 42.
8 Id., pp. 13, 45.
9 Id., pp. 8-9.
10 Id., pp. 28-30.

11 Id., pp. 48-49.

12 Id., pp. 98-57.
13 Id., p. 113.
14 Id., p. 95.
15 Id., pp. 49, 58, 92, 98.
16 Tijam v. Sibonghanoy, 23 SCRA 29; Sotto v. Teves, 86 SCRA 154; De Castro v. Tan, 129 SCRA 85; Burgos, Sr. v. Chief of Staff,
AFP, 133 SCRA 800; Corro v. Lising, 137 SCRA 541; Tejido v. Zamacoma, 138 SCRA 78.
17 Supra.
18 Tijam v. Sibonghanoy, supra.
19 Ibid.
20 Z.E. Lotho, Inc. v. Ice & Cold Storage Industries, Inc., 3 SCRA 744; Abraham v. Intestate Estate of Juan C. Ysmael, 4 SCRA 298;
Custodio v. Casiano, 9 SCRA 841; Nielsen & Co., Inc. v. Lepanto Consolidated Msz*(ining Co., 18 SCRA 1040; Miguel v. Catalino,
26 SCRA 234; Perez v. Ong Chua, 116 SCRA 732, citing Go Chi Gun, et al. v. Co Cho, et al., 96 Phil. 622.
21 Under Memorandum Circular No. 11, SMD Series of 1987, it is provided:
Pursuant to the powers vested in the Commission by Batas Pambansa Blg. 68, and Republic Act No. 1143 and in order to effectively
implement Section 46 of the new Corporation Code of the Philippines, the following guidelines shall be observed:
All corporations which failed to file their by-laws within one month from receipt of the certificate of incorporation shall be fined in the
amount of P25.00 in case of non-stock corporations and P50.00 for stock corporations for every month of delay but in no case shall
the aggregate fines exceed P1000.00 and P250.00, respectively.
Corporations which have no by-laws but are active or operating are required to submit their General Information Sheet to the
Commission within thirty (30) days to be counted after the end of one (1) year from the date of incorporation and every year thereafter
until their by-laws are filed and approved by the Commission. Non-compliance thereto shall subject the corporation to a penalty in
accordance with the scale of fines for late filing of the General Information Sheet.
22 Rollo, p. 96.
23 Union Glass & Container Corp. v. SEC, 126 SCRA 31, 39; see also DMRC Enterprises v. Este del Sol Mountain Reserve, Inc., 132
SCRA 293.