EN BANC

[G.R. No. 116422. November 4, 1996]

AVELINA B. CONTE and LETICIA BOISERPALMA, petitioners, vs. COMMISSION ON
AUDIT (COA), respondent.
DECISION
PANGANIBAN, J.:
Are the benefits provided for under Social
Security System Resolution No. 56 to be considered
simply as financial assistance for retiring employees,
or does such scheme constitute a supplementary
retirement plan proscribed by Republic Act No. 4968?
The foregoing question is addressed by this
Court
in
resolving
the
instant
petition
for certiorari which seeks to reverse and set aside
Decision No. 94-126[1]dated March 15, 1994 of
respondent Commission on Audit, which denied
petitioners request for reconsideration of its adverse
ruling disapproving claims for financial assistance
under SSS Resolution No. 56.

System (SSS) who retired from government service

on May
9,
1990 andSeptember
13,
1992,
respectively. They availed of compulsory retirement
benefits under Republic Act No. 660.[2]
In addition to retirement benefits provided under
R.A. 660, petitioners also claimed SSS financial
assistance benefits granted under SSS Resolution
No. 56, series of 1971.
A brief historical backgrounder is in order. SSS
Resolution No. 56,[3] approved on January 21, 1971,
provides financial incentive and inducement to SSS
employees qualified to retire to avail of retirement
benefits under RA 660 as amended, rather than the
retirement benefits under RA 1616 as amended, by
giving them financial assistance equivalent in amount
to the difference between what a retiree would have
received under RA 1616, less what he was entitled to
under RA 660. The said SSS Resolution No. 56
states:
RESOLUTION NO. 56
WHEREAS, the retirement benefits of SSS
employees are provided for under Republic Acts 660
and 1616 as amended;

The Facts
Petitioners Avelina B. Conte and Leticia BoiserPalma were former employees of the Social Security

WHEREAS, SSS employees who are qualified for

compulsory retirement at age 65 or for optional
retirement at a lower age are entitled to either the life

annuity under R.A. 660, as amended, or the gratuity

under R.A. 1616, as amended;
WHEREAS, a retirement benefit to be effective must
be a periodic income as close as possible to the
monthly income that would have been due to the
retiree during the remaining years of his life were he
still employed;
WHEREAS, the life annuity under R.A. 660, as
amended, being closer to the monthly income that
was lost on account of old age than the gratuity under
R.A. 1616, as amended, would best serve the interest
of the retiree;
WHEREAS, it is the policy of the Social Security
Commission to promote and to protect the interest of
all SSS employees, with a view to providing for their
well-being during both their working and retirement
years;
WHEREAS, the availment of life annuities built up by
premiums paid on behalf of SSS employees during
their working years would mean more savings to the
SSS;
WHEREAS, it is a duty of the Social Security
Commission to effect savings in every possible way
for economical and efficient operations;

WHEREAS, it is the right of every SSS employee to

choose freely and voluntarily the benefit he is entitled
to solely for his own benefit and for the benefit of his
family;
NOW, THEREFORE, BE IT RESOLVED, That all the
SSS employees who are simultaneously qualified for
compulsory retirement at age 65 or for optional
retirement at a lower age be encouraged to avail for
themselves the life annuity under R.A. 660, as
amended;
RESOLVED, FURTHER, That SSS employees who
availed themselves of the said life annuity, in
appreciation and recognition of their long and faithful
service, be granted financial assistance equivalent to
the gratuity plus return of contributions under R.A.
1616, as amended, less the five year guaranteed
annuity under R.A. 660, as amended;
RESOLVED, FINALLY, That the Administrator be
authorized to act on all applications for retirement
submitted by SSS employees and subject to
availability of funds, pay the corresponding benefits in
addition to the money value of all accumulated
leaves. (underscoring supplied)
Long after the promulgation of SSS Resolution
No. 56, respondent Commission on Audit (COA)
issued a ruling, captioned as 3rd Indorsement dated
July 10, 1989,[4] disallowing in audit all such claims for

financial assistance under SSS Resolution No. 56, for

the reason that: -x x x the scheme of financial assistance authorized by
the SSS is similar to those separate retirement plan or
incentive/separation pay plans adopted by other
government corporate agencies which results in the
increase of benefits beyond what is allowed under
existing retirement laws. In this regard, attention x x x
is invited to the view expressed by the Secretary of
Budget and Management dated February 17, 1988 to
the COA General Counsel against the proliferation of
retirement plans which, in COA Decision No. 591
dated August 31, 1988, was concurred in by this
Commission. x x x.
Accordingly, all such claims for financial assistance
under SSS Resolution No. 56 dated January 21,
1971 should be disallowed in audit. (underscoring
supplied)
Despite the aforequoted ruling of respondent
COA, then SSS Administrator Jose L. Cuisia, Jr.
nevertheless wrote[5] on February 12, 1990 then
Executive Secretary Catalino Macaraig, Jr., seeking
presidential authority for SSS to continue
implementing its Resolution No. 56 dated January 21,
1971 granting financial assistance to its qualified
retiring employees.

[6]

However, in a letter-reply dated May 28, 1990,

then Executive Secretary Macaraig advised

Administrator Cuisia that the Office of the President is

not inclined to favorably act on the herein request, let
alone overrule the disallowance by COA of such
claims, because, aside from the fact that decisions,
order or actions of the COA in the exercise of its audit
functions are appealable to the Supreme
Court[7] pursuant to Sec. 50 of PD 1445, the benefits
under said Res. 56, though referred to as financial
assistance, constituted additional retirement benefits,
and the scheme partook of the nature of a
supplementary pension/retirement plan proscribed by
law.
The law referred to above is RA 4968 (The Teves
Retirement Law), which took effect June 17, 1967 and
amended CA 186 (otherwise known as the
Government Service Insurance Act, or the GSIS
Charter), making Sec. 28 (b) of the latter act read as
follows:
(b) Hereafter, no insurance or retirement plan for
officers or employees shall be created by employer.
All supplementary retirement or pension plans
heretofore in force in any government office, agency
or instrumentality or corporation owned or controlled
by the government, are hereby declared inoperative
or abolished; Provided, That the rights of those who
are already eligible to retire thereunder shall not be
affected. (underscoring supplied)
On January 12, 1993, herein petitioners filed with
respondent COA their letter-appeal/protest[8] seeking

reconsideration of COAs ruling of July 10,

1989 disallowing claims for financial assistance under
Res. 56.
On November 15, 1993, petitioner Conte sought
payment from SSS of the benefits under Res. 56.
On December 9, 1993, SSS Administrator Renato C.
Valencia denied[9] the request in consonance with the
previous disallowance by respondent COA, but
assured petitioner that should the COA change its
position, the SSS will resume the grant of benefits
under said Res. 56.
On March 15, 1994, respondent COA rendered
its COA Decision No. 94-126 denying petitioners
request for reconsideration.
Thus this petition for certiorari under Rule 65 of
the Rules of Court.

contend that it is a social amelioration and economic

upliftment measure undertaken not only for the benefit
of the SSS but more so for the welfare of its qualified
retiring employees. As such, it should be interpreted
in a manner that would give the x x x most advantage
to the recipient -- the retiring employees whose
dedicated, loyal, lengthy and faithful service to the
agency of government is recognized and amply
rewarded -- the rationale for the financial assistance
plan. Petitioners reiterate the argument in their letter
dated January 12, 1993 to COA that:
Motivation can be in the form of financial assistance,
during their stay in the service or upon retirement, as
in the SSS Financial Assistance Plan. This is so,
because Government has to have some attractive
remuneration programs to encourage well-qualified
personnel to pursue a career in the government
service, rather than in the private sector or in foreign
countries ...

The Issues
The issues[10] submitted by petitioners may be
simplified and re-stated thus: Did public respondent
abuse its discretion when it disallowed in audit
petitioners claims for benefits under SSS Res. 56?
Petitioners argue that the financial assistance
under Res. 56 is not a retirement plan prohibited by
RA 4968, and that Res. 56 provides benefits different
from and aside from what a retiring SSS employee
would be entitled to under RA 660. Petitioners

A more developmental view of the financial institutions

grant of certain forms of financial assistance to its
personnel, we believe, would enable government
administrators to see these financial forms of
remuneration as contributory to the national
developmental efforts for effective and efficient
administration of the personnel programs in different
institutions.[11]
The Courts Ruling

Petitioners contentions are not supported by

law. We hold that Res. 56 constitutes a
supplementary retirement plan.
A cursory examination of the preambular clauses
and provisions of Res. 56 provides a number of clear
indications that its financial assistance plan
constitutes a supplemental retirement/pension
benefits plan. In particular, the fifth preambular clause
which provides that it is the policy of the Social
Security Commission to promote and to protect the
interest of all SSS employees, with a view to providing
for their well-being during both their working and
retirement years, and the wording of the resolution
itself which states Resolved, further, that SSS
employees who availed themselves of the said life
annuity (under RA 660), in appreciation and
recognition of their long and faithful service, be
granted financial assistance x x x can only be
interpreted to mean that the benefit being granted is
none other than a kind of amelioration to enable the
retiring employee to enjoy (or survive) his retirement
years and a reward for his loyalty and
service. Moreover, it is plain to see that the grant of
said financial assistance is inextricably linked with and
inseparable from the application for and approval of
retirement benefits under RA 660, i.e., that availment
of said financial assistance under Res. 56 may not be
done independently of but only in conjunction with the
availment of retirement benefits under RA 660, and
that the former is in augmentation or supplementation
of the latter benefits.

Likewise, then SSS Administrator Cuisias

historical overview of the origins and purpose of Res.
56 is very instructive and sheds much light on the
controversy:[12]
Resolution No. 56, x x x, applies where a retiring SSS
employee is qualified to claim under either RA 660
(pension benefit, that is, 5 year lump sum pension
and after 5 years, life time pension), or RA 1616
(gratuity benefit plus return of contribution), at his
option. The benefits under RA 660 are entirely
payable by GSIS while those under RA 1616 are
entirely shouldered by SSS except the return of
contribution by GSIS.
Resolution No. 56 came about upon observation
that qualified SSS employees have invariably opted to
retire under RA 1616 instead of RA 660 because the
total benefit under the former is much greater than
the 5-year lump sum under the latter. As a
consequence, the SSS usually ended up virtually
paying the entire retirement benefit, instead of GSIS
which is the main insurance carrier for government
employees. Hence, the situation has become so
expensive for SSS that a study of the problem
became inevitable.
As a result of the study and upon the
recommendation of its Actuary, the SSS Management
recommended to the Social Security Commission
that retiring employees who are qualified to claim
under either RA 660 or 1616 should be encouraged to

avail for themselves the life annuity under RA 660, as

amended, with the SSS providing a financial
assistance equivalent to the difference between the
benefit under RA 1616 (gratuity plus return of
contribution) and the 5-year lump sum pension under
RA 660.
The Social Security Commission, as the policymaking body of the SSS approved the
recommendation in line with its mandate to insure
the efficient, honest and economical administration of
the provisions and purposes of this Act. (Section 3 (c)
of the Social Security Law).
Necessarily, the situation was reversed with qualified
SSS employees opting to retire under RA No. 660 or
RA 1146 instead of RA 1616, resulting in substantial
savings for the SSS despite its having to pay financial
assistance.
Until Resolution No. 56 was questioned by COA.
(underscoring part of original text; italics ours)
Although such financial assistance package may
have been instituted for noble, altruistic purposes as
well as from self-interest and a desire to cut costs on
the part of the SSS, nevertheless, it is beyond any
dispute that such package effectively constitutes a
supplementary retirement plan. The fact that it was
designed to equalize the benefits receivable from RA
1616 with those payable under RA 660 and make the

latter program more attractive, merely confirms the

foregoing finding.
That the Res. 56 package is labelled financial
assistance
does not change
its essential
nature. Retirement benefits are, after all, a form of
reward for an employees loyalty and service to the
employer, and are intended to help the employee
enjoy the remaining years of his life, lessening the
burden of worrying about his financial support or
upkeep.[13] On the other hand, a pension partakes of
the nature of retained wages of the retiree for a dual
purpose: to entice competent people to enter the
government service, and to permit them to retire from
the service with relative security, not only for those
who have retained their vigor, but more so for those
who have been incapacitated by illness or accident.[14]
Is SSS Resolution No. 56 then within the ambit of
and thus proscribed by Sec. 28 (b) of CA 186 as
amended by RA 4968?
We answer in the affirmative. Said Sec. 28 (b) as
amended by RA 4968 in no uncertain terms bars the
creation of any insurance or retirement plan -- other
than the GSIS -- for government officers and
employees, in order to prevent the undue and
inequitous proliferation of such plans. It is beyond
cavil that Res. 56 contravenes the said provision of
law and is therefore invalid, void and of no effect. To
ignore this and rule otherwise would be tantamount to
permitting every other government office or agency to

put up its own supplementary retirement benefit plan

under the guise of such financial assistance.
We are not unmindful of the laudable purposes
for promulgating Res. 56, and the positive results it
must have had, not only in reducing costs and
expenses on the part of the SSS in connection with
the pay-out of retirement benefits and gratuities, but
also in improving the quality of life for scores of
retirees. But it is simply beyond dispute that the SSS
had no authority to maintain and implement such
retirement plan, particularly in the face of the statutory
prohibition. The SSS cannot, in the guise of rulemaking, legislate or amend laws or worse, render
them nugatory.
It is doctrinal that in case of conflict between a
statute and an administrative order, the former must
prevail.[15] A rule or regulation must conform to and be
consistent with the provisions of the enabling statute
in order for such rule or regulation to be valid. [16] The
rule-making power of a public administrative body is a
delegated legislative power, which it may not use
either to abridge the authority given it by the
Congress or the Constitution or to enlarge its power
beyond the scope intended. Constitutional and
statutory provisions control with respect to what rules
and regulations may be promulgated by such a body,
as well as with respect to what fields are subject to
regulation by it. It may not make rules and regulations
which are inconsistent with the provisions of the
Constitution or a statute, particularly the statute it is

administering or which created it, or which are in

derogation of, or defeat, the purpose of a statute.
[17]
Though well-settled is the rule that retirement laws
are liberally interpreted in favor of the retiree,
[18]
nevertheless, there is really nothing to interpret in
either RA 4968 or Res. 56, and correspondingly, the
absence of any doubt as to the ultra-vires nature and
illegality of the disputed resolution constrains us to
rule against petitioners.
As a necessary consequence of the invalidity of
Res. 56, we can hardly impute abuse of discretion of
any sort to respondent Commission for denying
petitioners request for reconsideration of the 3rd
Indorsement of July 10, 1989. On the contrary, we
hold that public respondent in its assailed Decision
acted with circumspection in denying petitioners
claim. It reasoned thus:
After a careful evaluation of the facts herein obtaining,
this Commission finds the instant request to be devoid
of merit. It bears stress that the financial assistance
contemplated under SSS Resolution No. 56 is
granted to SSS employees who opt to retire under
R.A. No. 660. In fact, by the aggrieved parties own
admission (page 2 of the request for reconsideration
dated January 12, 1993), it is a financial assistance
granted by the SSS management to its employees, in
addition to the retirement benefits under Republic Act
No. 660. (underscoring supplied for emphasis) There
is therefore no question, that the said financial
assistance partakes of the nature of a retirement

benefit that has the effect of modifying existing

retirement laws particularly R.A. No. 660.
Petitioners also asseverate that the scheme of
financial assistance under Res. 56 may be likened to
the monetary benefits of government officials and
employees who are paid, over and above their
salaries and allowances as provided by statute, an
additional honorarium in varying amounts. We find
this comparison baseless and misplaced. As clarified
by the Solicitor General:[19]
Petitioners comparison of SSS Resolution No. 56 with
the honoraria given to government officials and
employees of the National Prosecution Service of the
Department of Justice, Office of the Government
Corporate Counsel and even in the Office of the
Solicitor General is devoid of any basis. The monetary
benefits or honoraria given to these officials or
employees are categorized as travelling and/or
representation expenses which are incurred by them
in the course of handling cases, attending
court/administrative hearings, or performing other field
work. These monetary benefits are given upon
rendition of service while the financial benefits under
SSS Resolution No. 56 are given upon retirement
from service.
In a last-ditch attempt to convince this Court that
their position is tenable, petitioners invoke
equity. They believe that they are deserving of justice
and equity in their quest for financial assistance under

SSS Resolution No. 56, not so much because the

SSS is one of the very few stable agencies of
government where no doubt this recognition and
reputation is earned x x x but more so due to the
miserable scale of compensation granted to
employees in various agencies to include those
obtaining in the SSS.[20]
We must admit we sympathize with petitioners in
their financial predicament as a result of their
misplaced decision to avail of retirement benefits
under RA 660, with the false expectation that financial
assistance under the disputed Res. 56 will also
materialize. Nevertheless, this Court has always held
that equity, which has been aptly described as justice
outside legality, is applied only in the absence of, and
never against, statutory law or judicial rules of
procedure.[21] In this case, equity cannot be applied to
give validity and effect to Res. 56, which directly
contravenes the clear mandate of the provisions of
RA 4968.
Likewise, we cannot but be aware that the clear
imbalance between the benefits available under RA
660 and those under RA 1616 has created an unfair
situation for it has shifted the burden of paying such
benefits from the GSIS (the main insurance carrier of
government employees) to the SSS. Without the
corrective effects of Res. 56, all retiring SSS
employees without exception will be impelled to avail
of benefits under RA 1616. The cumulative effect of
such availments on the financial standing and stability

of the SSS is better left to actuarians.But the solution

or remedy for such situation can be provided only by
Congress. Judicial hands cannot, on the pretext of
showing concern for the welfare of government
employees, bestow equity contrary to the clear
provisions of law.
Nevertheless, insofar as herein petitioners are
concerned, this Court cannot just sit back and watch
as these two erstwhile government employees, who
after spending the best parts of their lives in public
service have retired hoping to enjoy their remaining
years, face a financially dismal if not distressed future,
deprived of what should have been due them by way
of additional retirement benefits, on account of a
bureaucratic boo-boo improvidently hatched by their
higher-ups. It is clear to our mind that petitioners
applied for benefits under RA 660 only because of the
incentives offered by Res. 56, and that absent such
incentives, they would have without fail availed of RA
1616 instead. We likewise have no doubt that
petitioners are simply innocent bystanders in this
whole bureaucratic rule-making/financial schememaking drama, and that therefore, to the extent
possible, petitioners ought not be penalized or made
to suffer as a result of the subsequently determined
invalidity of Res. 56, the promulgation and
implementation of which they had nothing to do with.
And here is where equity may properly be
invoked: since SSS employees who are qualified for
compulsory retirement at age 65 or for optional

retirement at a lower age are entitled to either the life

annuity under R.A. 660, as amended, or the gratuity
under R.A. 1616, as amended,[22] it appears that
petitioners, being qualified to avail of benefits under
RA 660, may also readily qualify under RA 1616. It
would therefore not be misplaced to enjoin the SSS to
render all possible assistance to petitioners for the
prompt processing and approval of their applications
under RA 1616, and in the meantime, unless barred
by existing regulations, to advance to petitioners the
difference between the amounts due under RA 1616,
and the amounts they already obtained, if any, under
RA 660.
WHEREFORE,
the
petition
is
hereby DISMISSED for lack of merit, there having
been no grave abuse of discretion on the part of
respondent Commission. The assailed Decision of
public respondent is AFFIRMED, and SSS Resolution
No. 56 is hereby declared ILLEGAL, VOID AND OF
NO EFFECT. The SSS is hereby urged to assist
petitioners and facilitate their applications under RA
1616, and to advance to them, unless barred by
existing regulations, the corresponding amounts
representing the difference between the two benefits
programs. No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

G.R. No. 96681 December 2, 1991

HON. ISIDRO CARIO, in his capacity as
Secretary of the Department of Education, Culture
& Sports, DR. ERLINDA LOLARGA, in her capacity
as Superintendent of City Schools of
Manila, petitioners,
vs.
THE COMMISSION ON HUMAN RIGHTS,
GRACIANO BUDOY, JULIETA BABARAN, ELSA
IBABAO, HELEN LUPO, AMPARO GONZALES,
LUZ DEL CASTILLO, ELSA REYES and
APOLINARIO ESBER, respondents.

NARVASA, J.:p
The issue raised in the special civil action
of certiorari and prohibition at bar, instituted by the

Solicitor General, may be formulated as follows:

where the relief sought from the Commission on
Human Rights by a party in a case consists of the
review and reversal or modification of a decision or
order issued by a court of justice or government
agency or official exercising quasi-judicial functions,
may the Commission take cognizance of the case and
grant that relief? Stated otherwise, where a particular
subject-matter is placed by law within the jurisdiction
of a court or other government agency or official for
purposes of trial and adjudgment, may the
Commission on Human Rights take cognizance of the
same subject-matter for the same purposes of
hearing and adjudication?
The facts narrated in the petition are not denied by
the respondents and are hence taken as substantially
correct for purposes of ruling on the legal questions
posed in the present action. These facts, 1 together
with others involved in related cases recently resolved
by this Court 2 or otherwise undisputed on the record,
are hereunder set forth.
1. On September 17, 1990, a Monday and a class
day, some 800 public school teachers, among them
members of the Manila Public School Teachers
Association (MPSTA) and Alliance of Concerned
Teachers (ACT) undertook what they described as
"mass concerted actions" to "dramatize and highlight"
their plight resulting from the alleged failure of the
public authorities to act upon grievances that had time
and again been brought to the latter's attention.

According to them they had decided to undertake said

"mass concerted actions" after the protest rally staged
at the DECS premises on September 14, 1990
without disrupting classes as a last call for the
government to negotiate the granting of demands had
elicited no response from the Secretary of Education.
The "mass actions" consisted in staying away from
their classes, converging at the Liwasang Bonifacio,
gathering in peaceable assemblies, etc. Through their
representatives, the teachers participating in the mass
actions were served with an order of the Secretary of
Education to return to work in 24 hours or face
dismissal, and a memorandum directing the DECS
officials concerned to initiate dismissal proceedings
against those who did not comply and to hire their
replacements. Those directives notwithstanding, the
mass actions continued into the week, with more
teachers joining in the days that followed. 3
Among those who took part in the "concerted mass
actions" were the eight (8) private respondents herein,
teachers at the Ramon Magsaysay High School,
Manila, who had agreed to support the non-political
demands of the MPSTA. 4
2. For failure to heed the return-to-work order, the
CHR complainants (private respondents) were
administratively charged on the basis of the principal's
report and given five (5) days to answer the charges.
They were also preventively suspended for ninety
(90) days "pursuant to Section 41 of P.D. 807" and
temporarily replaced (unmarked CHR Exhibits,

Annexes F, G, H). An investigation committee was

consequently formed to hear the charges in
accordance with P.D. 807. 5
3. In the administrative case docketed as Case No.
DECS 90-082 in which CHR complainants Graciano
Budoy, Jr., Julieta Babaran, Luz del Castillo,
Apolinario Esber were, among others, named
respondents, 6 the latter filed separate answers,
opted for a formal investigation, and also moved "for
suspension of the administrative proceedings pending
resolution by . . (the Supreme) Court of their
application for issuance of an injunctive
writ/temporary restraining order." But when their
motion for suspension was denied by Order dated
November 8, 1990 of the Investigating Committee,
which later also denied their motion for
reconsideration orally made at the hearing of
November 14, 1990, "the respondents led by their
counsel staged a walkout signifying their intent to
boycott the entire proceedings." 7 The case
eventually resulted in a Decision of Secretary Cario
dated December 17, 1990, rendered after evaluation
of the evidence as well as the answers, affidavits and
documents submitted by the respondents, decreeing
dismissal from the service of Apolinario Esber and the
suspension for nine (9) months of Babaran, Budoy
and del Castillo. 8
4. In the meantime, the "MPSTA filed a petition
for certiorari before the Regional Trial Court of Manila
against petitioner (Cario), which was dismissed

(unmarked CHR Exhibit, Annex I). Later, the MPSTA

went to the Supreme Court (on certiorari, in an
attempt to nullify said dismissal, grounded on the)
alleged violation of the striking teachers" right to due
process and peaceable assembly docketed as G.R.
No. 95445, supra. The ACT also filed a similar petition
before the Supreme Court . . . docketed as G.R. No.
95590." 9 Both petitions in this Court were filed in
behalf of the teacher associations, a few named
individuals, and "other teacher-members so
numerous similarly situated" or "other similarly
situated public school teachers too numerous to be
impleaded."
5. In the meantime, too, the respondent teachers
submitted sworn statements dated September 27,
1990 to the Commission on Human Rights to
complain that while they were participating in peaceful
mass actions, they suddenly learned of their
replacements as teachers, allegedly without notice
and consequently for reasons completely unknown to
them. 10
6. Their complaints and those of other teachers
also "ordered suspended by the . . . (DECS)," all
numbering forty-two (42) were docketed
as "Striking Teachers CHR Case No. 90775." In
connection therewith the Commission scheduled a
"dialogue" on October 11, 1990, and sent a subpoena
to Secretary Cario requiring his attendance
therein. 11

On the day of the "dialogue," although it said that it

was "not certain whether he (Sec. Cario) received
the subpoena which was served at his office, . . . (the)
Commission, with the Chairman presiding, and
Commissioners Hesiquio R. Mallilin and Narciso C.
Monteiro, proceeded to hear the case;" it heard the
complainants' counsel (a) explain that his clients had
been "denied due process and suspended without
formal notice, and unjustly, since they did not join the
mass leave," and (b) expatiate on the grievances
which were "the cause of the mass leave of MPSTA
teachers, (and) with which causes they (CHR
complainants) sympathize." 12 The Commission
thereafter issued an Order 13 reciting these facts and
making the following disposition:
To be properly apprised of the real
facts of the case and be accordingly
guided in its investigation and
resolution of the matter, considering
that these forty two teachers are now
suspended and deprived of their
wages, which they need very badly,
Secretary Isidro Cario, of the
Department of Education, Culture and
Sports, Dr. Erlinda Lolarga, school
superintendent of Manila and the
Principal of Ramon Magsaysay High
School, Manila, are hereby enjoined to
appear and enlighten the Commission
en banc on October 19, 1990 at 11:00
A.M. and to bring with them any and all

documents relevant to the allegations

aforestated herein to assist the
Commission in this matter. Otherwise,
the Commission will resolve the
complaint on the basis of complainants'
evidence.
xxx xxx xxx
7. Through the Office of the Solicitor General,
Secretary Cario sought and was granted leave to file
a motion to dismiss the case. His motion to dismiss
was submitted on November 14, 1990 alleging as
grounds therefor, "that the complaint states no cause
of action and that the CHR has no jurisdiction over the
case." 14
8. Pending determination by the Commission of the
motion to dismiss, judgments affecting the "striking
teachers" were promulgated in two (2) cases, as
aforestated, viz.:
a) The Decision dated December l7,
1990 of Education Secretary Cario in
Case No. DECS 90-082, decreeing
dismissal from the service of Apolinario
Esber and the suspension for nine (9)
months of Babaran, Budoy and del
Castillo; 15 and
b) The joint Resolution of this Court
dated August 6, 1991 in G.R. Nos.

95445 and 95590 dismissing the

petitions "without prejudice to any
appeals, if still timely, that the individual
petitioners may take to the Civil
Service Commission on the matters
complained of," 16 and inter alia "ruling
that it was prima facie lawful for
petitioner Cario to issue return-towork orders, file administrative charges
against recalcitrants, preventively
suspend them, and issue decision on
those charges." 17
9. In an Order dated December 28, 1990, respondent
Commission denied Sec. Cario's motion to dismiss
and required him and Superintendent Lolarga "to
submit their counter-affidavits within ten (10)
days . . . (after which) the Commission shall proceed
to hear and resolve the case on the merits with or
without respondents counter affidavit." 18 It held that
the "striking teachers" "were denied due process of
law; . . . they should not have been replaced without a
chance to reply to the administrative charges;" there
had been a violation of their civil and political rights
which the Commission was empowered to
investigate; and while expressing its "utmost respect
to the Supreme Court . . . the facts before . . . (it) are
different from those in the case decided by the
Supreme Court" (the reference being unmistakably to
this Court's joint Resolution of August 6, 1991 in G.R.
Nos. 95445 and 95590, supra).

It is to invalidate and set aside this Order of

December 28, 1990 that the Solicitor General, in
behalf of petitioner Cario, has commenced the
present action of certiorari and prohibition.
The Commission on Human Rights has made clear its
position that it does not feel bound by this Court's joint
Resolution in G.R. Nos. 95445 and 95590, supra. It
has also made plain its intention "to hear and resolve
the case (i.e., Striking Teachers HRC Case No. 90775) on the merits." It intends, in other words, to try
and decide or hear and determine, i.e., exercise
jurisdiction over the following general issues:
1) whether or not the striking teachers were denied
due process, and just cause exists for the imposition
of administrative disciplinary sanctions on them by
their superiors; and
2) whether or not the grievances which were "the
cause of the mass leave of MPSTA teachers, (and)
with which causes they (CHR complainants)
sympathize," justify their mass action or strike.
The Commission evidently intends to itself adjudicate,
that is to say, determine with character of finality and
definiteness, the same issues which have been
passed upon and decided by the Secretary of
Education, Culture & Sports, subject to appeal to the
Civil Service Commission, this Court having in fact, as
aforementioned, declared that the teachers affected

may take appeals to the Civil Service Commission on

said matters, if still timely.
The threshold question is whether or not the
Commission on Human Rights has the power under
the Constitution to do so; whether or not, like a court
of justice, 19 or even a quasi-judicial agency, 20 it has
jurisdiction or adjudicatory powers over, or the power
to try and decide, or hear and determine, certain
specific type of cases, like alleged human rights
violations involving civil or political rights.
The Court declares the Commission on Human Rights
to have no such power; and that it was not meant by
the fundamental law to be another court or quasijudicial agency in this country, or duplicate much less
take over the functions of the latter.
The most that may be conceded to the Commission in
the way of adjudicative power is that it
may investigate, i.e., receive evidence and make
findings of fact as regards claimed human rights
violations involving civil and political rights. But fact
finding is not adjudication, and cannot be likened to
the judicial function of a court of justice, or even a
quasi-judicial agency or official. The function of
receiving evidence and ascertaining therefrom the
facts of a controversy is not a judicial function,
properly speaking. To be considered such, the faculty
of receiving evidence and making factual conclusions
in a controversy must be accompanied by the
authority of applying the law to those factual

conclusions to the end that the controversy may be

decided or determined authoritatively, finally and
definitively, subject to such appeals or modes of
review as may be provided by law. 21 This function,
to repeat, the Commission does not have. 22
The proposition is made clear by the constitutional
provisions specifying the powers of the Commission
on Human Rights.
The Commission was created by the 1987
Constitution as an independent office. 23 Upon its
constitution, it succeeded and superseded the
Presidential Committee on Human Rights existing at
the time of the effectivity of the Constitution. 24 Its
powers and functions are the following 25
(1) Investigate, on its own or on
complaint by any party, all forms of
human rights violations involving civil
and political rights;
(2) Adopt its operational guidelines and
rules of procedure, and cite for
contempt for violations thereof in
accordance with the Rules of Court;
(3) Provide appropriate legal measures
for the protection of human rights of all
persons within the Philippines, as well
as Filipinos residing abroad, and
provide for preventive measures and

legal aid services to the

underprivileged whose human rights
have been violated or need protection;
(4) Exercise visitorial powers over jails,
prisons, or detention facilities;
(5) Establish a continuing program of
research, education, and information to
enhance respect for the primacy of
human rights;
(6) Recommend to the Congress
effective measures to promote human
rights and to provide for compensation
to victims of violations of human rights,
or their families;
(7) Monitor the Philippine
Government's compliance with
international treaty obligations on
human rights;
(8) Grant immunity from prosecution to
any person whose testimony or whose
possession of documents or other
evidence is necessary or convenient to
determine the truth in any investigation
conducted by it or under its authority;

(9) Request the assistance of any

department, bureau, office, or agency
in the performance of its functions;
(10) Appoint its officers and employees
in accordance with law; and
(11) Perform such other duties and
functions as may be provided by law.
As should at once be observed, only the first of the
enumerated powers and functions bears any
resemblance to adjudication or adjudgment. The
Constitution clearly and categorically grants to the
Commission the power toinvestigate all forms of
human rights violations involving civil and political
rights. It can exercise that power on its own initiative
or on complaint of any person. It may exercise that
power pursuant to such rules of procedure as it may
adopt and, in cases of violations of said rules, cite for
contempt in accordance with the Rules of Court. In
the course of any investigation conducted by it or
under its authority, it may grant immunity from
prosecution to any person whose testimony or whose
possession of documents or other evidence is
necessary or convenient to determine the truth. It may
also request the assistance of any department,
bureau, office, or agency in the performance of its
functions, in the conduct of its investigation or in
extending such remedy as may be required by its
findings. 26

But it cannot try and decide cases (or hear and

determine causes) as courts of justice, or even quasijudicial bodies do. To investigate is not to adjudicate
or adjudge. Whether in the popular or the technical
sense, these terms have well understood and quite
distinct meanings.
"Investigate," commonly understood, means to
examine, explore, inquire or delve or probe into,
research on, study. The dictionary definition of
"investigate" is "to observe or study closely: inquire
into systematically. "to search or inquire into: . . . to
subject to an official probe . . .: to conduct an official
inquiry." 27 The purpose of investigation, of course, is
to discover, to find out, to learn, obtain information.
Nowhere included or intimated is the notion of
settling, deciding or resolving a controversy involved
in the facts inquired into by application of the law to
the facts established by the inquiry.
The legal meaning of "investigate" is essentially the
same: "(t)o follow up step by step by patient inquiry or
observation. To trace or track; to search into; to
examine and inquire into with care and accuracy; to
find out by careful inquisition; examination; the taking
of evidence; a legal inquiry;" 28 "to inquire; to make
an investigation," "investigation" being in turn describe
as "(a)n administrative function, the exercise of which
ordinarily does not require a hearing. 2 Am J2d Adm L
Sec. 257; . . . an inquiry, judicial or otherwise, for the
discovery and collection of facts concerning a certain
matter or matters." 29

"Adjudicate," commonly or popularly understood,

means to adjudge, arbitrate, judge, decide, determine,
resolve, rule on, settle. The dictionary defines the
term as "to settle finally (the rights and duties of the
parties to a court case) on the merits of issues raised:
. . . to pass judgment on: settle judicially: . . . act as
judge." 30 And "adjudge" means "to decide or rule
upon as a judge or with judicial or quasi-judicial
powers: . . . to award or grant judicially in a case of
controversy . . . ." 31
In the legal sense, "adjudicate" means: "To settle in
the exercise of judicial authority. To determine finally.
Synonymous with adjudge in its strictest sense;" and
"adjudge" means: "To pass on judicially, to decide,
settle or decree, or to sentence or condemn. . . .
Implies a judicial determination of a fact, and the entry
of a judgment." 32
Hence it is that the Commission on Human Rights,
having merely the power "to investigate," cannot and
should not "try and resolve on the merits" (adjudicate)
the matters involved in Striking Teachers HRC Case
No. 90-775, as it has announced it means to do; and
it cannot do so even if there be a claim that in the
administrative disciplinary proceedings against the
teachers in question, initiated and conducted by the
DECS, their human rights, or civil or political rights
had been transgressed. More particularly, the
Commission has no power to "resolve on the merits"
the question of (a) whether or not the mass concerted
actions engaged in by the teachers constitute and are

prohibited or otherwise restricted by law; (b) whether

or not the act of carrying on and taking part in those
actions, and the failure of the teachers to discontinue
those actions, and return to their classes despite the
order to this effect by the Secretary of Education,
constitute infractions of relevant rules and regulations
warranting administrative disciplinary sanctions, or
are justified by the grievances complained of by them;
and (c) what where the particular acts done by each
individual teacher and what sanctions, if any, may
properly be imposed for said acts or omissions.
These are matters undoubtedly and clearly within the
original jurisdiction of the Secretary of Education,
being within the scope of the disciplinary powers
granted to him under the Civil Service Law, and also,
within the appellate jurisdiction of the Civil Service
Commission.
Indeed, the Secretary of Education has, as above
narrated, already taken cognizance of the issues and
resolved them, 33 and it appears that appeals have
been seasonably taken by the aggrieved parties to
the Civil Service Commission; and even this Court
itself has had occasion to pass upon said issues. 34
Now, it is quite obvious that whether or not the
conclusions reached by the Secretary of Education in
disciplinary cases are correct and are adequately
based on substantial evidence; whether or not the
proceedings themselves are void or defective in not
having accorded the respondents due process; and

whether or not the Secretary of Education had in truth

committed "human rights violations involving civil and
political rights," are matters which may be passed
upon and determined through a motion for
reconsideration addressed to the Secretary Education
himself, and in the event of an adverse verdict, may
be reviewed by the Civil Service Commission and
eventually the Supreme Court.
The Commission on Human Rights simply has no
place in this scheme of things. It has no business
intruding into the jurisdiction and functions of the
Education Secretary or the Civil Service Commission.
It has no business going over the same ground
traversed by the latter and making its own judgment
on the questions involved. This would accord success
to what may well have been the complaining teachers'
strategy to abort, frustrate or negate the judgment of
the Education Secretary in the administrative cases
against them which they anticipated would be adverse
to them.
This cannot be done. It will not be permitted to be
done.
In any event, the investigation by the Commission on
Human Rights would serve no useful purpose. If its
investigation should result in conclusions contrary to
those reached by Secretary Cario, it would have no
power anyway to reverse the Secretary's conclusions.
Reversal thereof can only by done by the Civil Service
Commission and lastly by this Court. The only thing

the Commission can do, if it concludes that Secretary

Cario was in error, is to refer the matter to the
appropriate Government agency or tribunal for
assistance; that would be the Civil Service
Commission. 35 It cannot arrogate unto itself the
appellate jurisdiction of the Civil Service Commission.
WHEREFORE, the petition is granted; the Order of
December 29, 1990 is ANNULLED and SET ASIDE,
and the respondent Commission on Human Rights
and the Chairman and Members thereof are
prohibited "to hear and resolve the case (i.e., Striking
Teachers HRC Case No. 90-775) on the merits."
SO ORDERED.

Inc., liable to DSM Construction in the amount

of P62,760,558.49.
The antecedents are as follows:

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 153310

March 2, 2004

MEGAWORLD GLOBUS ASIA, INC., petitioner,

vs.
DSM CONSTRUCTION AND DEVELOPMENT
CORPORATION and PRUDENTIAL GUARANTEE
AND ASSURANCE, INC., respondents.
DECISION
TINGA, J.:
Before this Court is a Petition for Review on
Certiorari assailing the Decision dated February 14,
2002, of the Court of Appeals in CA G.R. SP No.
67432,1 which affirmed the Decision2 of the
Construction Industry Arbitration Commission
(CIAC)3 dated September 8, 2001, in CIAC Case No.
22-2000 finding petitioner Megaworld Globus Asia,

Relative to the construction of a condominium project

called "The Salcedo Park," located at H.V. dela Costa
St., Salcedo Village, Makati City, the project owner,
Megaworld, entered into three separate contracts with
DSM Construction, namely: (1) Contract for
Architectural Finishing Works; (2) Contract for Interior
Finishing Works; and (3) Contract for Supply and
Installation of Kitchen Cabinets and Closets. The total
contract price, which was initially placed at P300
Million, was later reduced to P240 Million when the
items for kitchen cabinets and walk-in closets were
deleted.4 The contracts also contain a stipulation
for Retention Money, which is a portion of the total
contract price (usually, as in this case, 10%) set aside
by the project owner from all approved billings and
retained for a certain period to guarantee the
performance by the contractor of all corrective works
during the defect-liability period which, in this case, is
twelve months from the issuance of the Taking Over
Certificate of Works.5
The Letter of Award for Architectural Finishing
Works provides that the period for commencement
and completion shall be twelve months, from August
1, 1997 to July 31, 1998. However, on February 21,
2000, representatives of both Megaworld and DSM
Construction entered into an Interim

Agreement whereby they agreed on a new schedule

of the turnover of units from the 26th floor to the
40th floor, which was the last of the contracted
works.6The consideration agreed upon in the Interim
Agreement was P53,000,000.00. Of this
amount, P3,000,000.00 was to be released
immediately while five (5) equal installments
of P7,000,000.00 were to be released depending on
the turn-over of units from the 26th floor to the
40th floor. The remaining amount of P15,000,000.00 of
theP53,000,000.00 consisted of half of the retention
money.7
Because of the differences that arose from the
billings, DSM Construction filed on August 21, 2002,
a Complaintbefore the CIAC for compulsory
arbitration, claiming payment of P97,743,808.33 for
the outstanding balance of the three construction
contracts, variation works, labor escalation,
preliminaries loss and expense, earned retention
money, interests, and attorneys fees.8 DSM
Construction alleged that it already commenced the
finishing works on the existing 12 floors on August 1,
1997, instead of waiting for the entire 40-floor
structure to be completed. At one time, DSM
Construction worked with other contractors whose
work often depended on, interfered or conflicted with
said contractors. Delay by a trade contractor would
start a chain reaction by delaying or putting off other
works.9

Interposing mainly the defense of delay in the turnover of units and the poor quality of work of DSM
Construction, Megaworld filed its Answer and made a
counter-claim for loss of profits, liquidated damages,
costs of take-over and rectification works,
administration expenses, interests, attorneys fees
and cost of arbitration in the total amount
of P85,869,870.28.10
Prudential Guarantee and Assurance, Inc. (PGAI),
which issued a Performance Bond to guarantee
Megaworlds contractual obligation on the project, was
impleaded by Megaworld as a third-party
respondent.11
On March 28, 2001, the parties signed before the
members of the Arbitral Tribunal the Terms of
Reference12(TOR) where they setforth their admitted
facts,13 respective documentary evidence,14 summary
of claims15 and issues to be resolved by the
tribunal.16 After presenting their evidence in the form
of affidavits of witnesses,17 the parties submitted their
respective memoranda/draft decisions.18
On October 19, 2001, the Arbitral Tribunal
promulgated its Decision dated September 28, 2001,
awardingP62,760,558.49 to DSM Construction
and P9,473,799.46 to Megaworld.19
Megaworld filed a Petition for Review under Rule 43
of the Rules of Civil Procedure before the Court of
Appeals. It faulted the Arbitral Tribunal for finding that

DSM Construction achieved a 95.56% level of

accomplishment as of February 14, 2000; for
absolving DSM Corporation of the consequences of
the alleged delay in the performance of its work; and
for ruling that DSM Construction had complied with
the contractual requirements for filing requests for
extension. Megaworld likewise questioned the
sufficiency of evidence to justify the awards for
liquidated damages; the balance of the contract price;
the balance of amounts payable on account of
the Interim Agreementof February 21, 2000; the
amount of P6,596,675.55 for variation orders; the
amount of P29,380,902.35 as reimbursement for
preliminaries/loss and expense; the amount
of P413,041.52 for labor escalation costs; and the
balance of the retention money in the amount
of P14,700,000.00 despite its award
of P11,820,000.00 under the February 21,
2000, Interim Agreement. Finally, Megaworld claimed
that the Arbitral Tribunal erred in denying its claim for
liquidated damages, expenses incurred for the cost of
take-over work, administrative expenses, and its
recourse against PGAI and for limiting its recovery for
rectification work to only P9,197,863.55.20
On February 14, 2002, the Court of Appeals
promulgated its Decision21 affirming that of the Arbitral
Tribunal. The court pointed out that only questions of
law may be raised before it on appeal from an award
of the CIAC.22 That pronouncement notwithstanding,
the Court of Appeals proceeded to review the decision

of the Arbitral Tribunal and found the same to be

amply supported by evidence.23
Megaworld sought reconsideration of the Court of
Appeals Decision arguing, among other things, that
the appellate court ignored the ruling in Metro
Construction, Inc. v. Chatham Properties24 that the
review of the CIAC award may involve either
questions of fact, law, or both fact and law.
The Court of Appeals denied the motion for
reconsideration in its Resolution25 dated April 25,
2002. While acknowledging that the findings of fact of
the CIAC may be questioned in line with Metro
Construction,26 the appellate court stressed that the
tribunals decision is not devoid of factual or
evidentiary support.
Megaworld elevated the case to this Court through
the present Petition, advancing the following
grounds, viz:
I
THE COURT OF APPEALS IN EFFECT REFUSED
TO HEED THE RULE LAID DOWN BY THIS
Honorable Court in the Metro Construction, INC. vs.
Chatham properties, inc. case when it dismissed
mgais petition despite the grave questions of both
fact and law brought before it by the petitioner.
II

the finding of the appellate court that the decision was

based on substantial evidence adduced by both
parties sans any review of the record or of
attachments of dsm is fatally wrong, such finding
being merely an adoption of the tribunals decision
which, as earlier pointed out, was not supported by
competent, credible and admissible evidence.
III
the court of appeals seriously erred in giving blanket
approval of all the unfounded claims and conclusions
of the ciac arbitral tribunals SEPTEMBER 28, 2001
decision to the detriment of petitioners cardinal right
to due process, particularly to its right to
administrative due process.
IV
the findings and conclusions made by a highly
partisan ciac arbitral tribunal have no basis on the
evidence on record. hence, the exception to the rule
that only questions of law may be brought to the
honorable court is applicable in the case AT bar.27
Although Megaworld, at the outset,28 intimates that the
case involves grave questions of both fact and law, a
cursory reading of the Petition reveals that, except for
the amorphous advertence to administrative due
process, the alleged errors fundamentally involve only
questions of fact. Megaworlds plea for the Court to
pass upon the findings of facts of the Arbitral Tribunal,

which were upheld by the appellate court, must

perforce fail.
To jumpstart its bid, Megaworld exploits the Court of
Appeals pronouncement in the assailed decision that
only questions of law may be raised before it from an
award of the CIAC. The appellate court did so,
Megaworld continues, in evident disregard of Metro
Construction.29
Under Section 19 of Executive Order No. 1008,30 the
CIACs arbitral award "shall be final and inappealable
except on questions of law which shall be appealable
to the Supreme Court." In Metro Construction,
however, this Court held that, with the modification of
E.O. No. 1008 by subsequent laws and
issuances,31 decisions of the CIAC may be appealed
to the Court of Appeals not only on questions of law
but also on questions of fact and mixed questions of
law and fact.
Of such subsequent laws and issuances, only Section
1,32 Rule 43 of the 1997 Rules of Civil Procedure
expressly mentions the CIAC. While an argument
may be made that procedural rules cannot modify
substantive law, adding in support thereof that Section
1, Rule 43 has increased the jurisdiction of the Court
of Appeals by expanding the scope of review of CIAC
awards, or that it contravenes the rationale for
arbitration, extant from the record is the fact that no
party raised such argument. Consequently, the matter
need not be delved into.

In any case, the attack against the merits of the Court

of Appeals Decision must fail. Although Metro
Constructionmay have been unbeknownst to the
appellate court when it promulgated its Decision, the
fact remains that, as noted therein,33 it reviewed the
findings of facts of the CIAC and ruled that the
findings are amply supported by the evidence.
The Court of Appeals is presumed to have reviewed
the case based on the Petition and its annexes, and
weighed them against the Comment of DSM
Construction and the Decision of the Arbitral Tribunal
to arrive at the conclusion that the said Decision is
based on substantial evidence. In administrative or
quasi-judicial bodies like the CIAC, a fact may be
established if supported by substantial evidence or
that amount of relevant evidence which a reasonable
mind might accept as adequate to justify a
conclusion.34
The tenability of the assailed Decision is clear from
the following discussion of the arguments raised by
Megaworld before the Court of Appeals which
significantly are the same arguments it has raised
before this Court.
Issue of Accomplishment Level
Megaworld contested the finding of 95.56% level of
accomplishment by the Arbitral Tribunal, alleging that
the receipts DSM Construction issued for payments
under the Interim Agreement show that the latter only

achieved 90% accomplishment up to the 31st floor

while the 32nd to the 34th floors were only 60%
completed.35 Megaworld insisted, therefore, that the
level of accomplishment was nowhere near 90%.
DSM Construction countered that Megaworld, in
claiming a level of accomplishment of only 90%,
contradicted its own Project Manager, TCGI,36 which
came up with a different percentage of
accomplishment that are notably higher than
Megaworlds computation.37
In resolving this issue, the Arbitral Tribunal relied on
the computation of Davis Langdon & Seah (DLS), the
projects independent surveyor,38 which found the
level of accomplishment as of February 14, 2000, to
be 95.56%. DLSs computation is recited in Exhibit
"NN",39 thus:
Architectural Finishing :

40

The 24th
Php213,658,888.7741Php223,456,756.
Progress
6842
Billing
evaluated
by DLS
covering
the period
November
15, 1999 to
December
15, 1999

over the
Contract
Price for
Architectur
al
Finishing
Works.
Kitchen Cabinets & Bedroom Closets:43
The 9th
Progress
Billing
evaluated
by DLS
covering
the period
December
1, 1999 to
December
9, 1999
over the
contract
price for
Kitchen
Cabinet
and
Bedroom
Closet.

Php26,228,091.7344Php28,556,915.17
45

Interior Finishing Works:46

The 13th
Progress

Php49,383,114.6747Php50,685,416.55
48

Billing
evaluated
by DLS
covering
the period
January 8,
2000 to
February
7, 2000 for
the Interior
Finishing
Works
over the
contract
price for
Interior
Finishing
Work.

Php213,65
8,888.77 +

Php26,228 Php49,383 289,270,295.

,091.72 + ,114.67 =
17=95.56%

Php223,45
6,756.68

Php
28,556,91
5.17

Php50,685 302,699,097.
,416.55
40

Clearly, thus, CIACs finding that the level of

accomplishment of DSM Construction as of February
12, 2002, stood at 95.56% was affirmed by the Court
of Appeals because it is supported by substantial
evidence.

The Court of Appeals also noted that the Arbitral

Tribunal did not give due course to all of DSM
Constructions claims. Indeed, the Arbitral Tribunal
rejected the construction companys demand for
payment for subsequent works done after February
12, 2000, because Exhibit "OO," on which DSM
Constructions demand was based, does not bear any
mark that it had been received by Megaworld. Thus,
the Arbitral Tribunal concluded that subsequent works
up to September 22, 2000, when DSM Construction
supposedly stopped working on the project, had not
been established.49
This Court observes that between the two contrasting
claims of Megaworld and DSM Construction on the
percentage of work accomplishment, the Arbitral
Tribunal instead accorded weight to the assessment
of DLS which is the project surveyor. Apart from being
reasonable, DLSs evaluation is impartial. Thus, as
correctly pointed out by the Arbitral Tribunal, DLS
rejected DSM Constructions 99% accomplishment
claim when it limited its evaluation to only 95.56%.

contractors, the lack of privity among them prevented

coordination such that DSM Construction could not
require compliance on the part of the other trade
contractors.
The Arbitral Tribunal decided this question by turning
to Section 2.01 of the General Conditions of the
Contract, which states:
2.01 SITE, ACCESS & WORKS
The Contractor shall accept the Site as found on the
date for possession and at their own expense clear
the site of any debris which may have been left by the
preceding occupants/contractors.
The Arbitral Tribunal held that Section 2.01
presupposes that on the date of possession by DSM
Construction of the work premises, the preceding
contractor had already left the same.51 The tribunal
explained that the delay incurred by other trade
contractors also resulted in the delay of the work of
DSM Construction.

Issues of Delay and Liquidated Damages

Next, Megaworld attributed the delay in the
completion of the construction project solely to DSM
Construction. The latter countered that among the
causes of delay was the lack of coordination among
trade contractors and the absence of a general
contractor.50 Although the contract purportedly
contains a provision for the coordination of trade

It also pointed out that under Section 5.3 (1)52 of

the Interim Agreement,53 Megaworld is required to
complete and turn over to DSM Construction
preceding works for the latter to complete their works
in accordance with the Revised Work Schedule.
Section 5.3 (1), the Arbitral Tribunal noted, even
allows DSM Construction to recover losses incurred
on account of the standby time of DSMs

personnel/manpower or workers mobilized while

Megaworld is not ready to turn over the preceding
works. The Arbitral Tribunal further held that, in
accordance with Section 5.3 (2)54 of the Interim
Agreement, DSM Construction was entitled to an
extension of time corresponding to the number of
days of delay reckoned from the time the preceding
work item or area should have been turned over to
DSM Construction. Consequently, such delay, which
is not exclusively imputable to DSM Construction,
negates the claim for liquidated damages by
Megaworld.55
In affirming the Arbitral Tribunals disposition of the
issues of delay and payment of liquidated damages,
the appellate court noted that the Arbitral Tribunal
narrated the claims and defenses of both DSM
Construction and Megaworld before making an
evaluation thereof and arriving at its
conclusion.56 Clearly, the evidence and arguments
were carefully weighed to justify the said disposition.
The Tribunals finding that the project had already
been delayed even before DSM Construction
commenced its work is borne out by the evidence. In
his letter, Exhibit X-2,57 Project Management
Consultant Eduardo C. Arrojado, conceded that the
previous contractors had delayed the project, at the
same time faulting DSM Construction for incurring its
own delay. Furthermore, the work of DSM
Construction pertaining as it did to the architectural
and interior finishing stages as well as the supply and

installation of kitchen cabinets and closets, obviously

related to the final details and completion stage of the
project. Thus, commencement of its task had to
depend on the turn over of the complete work of the
prior contractors. Hence, the delay of the previous
contractors resulted in the delay of DSM
Constructions work.
Issues of the Contract Price Balance and Retention
Money
Megaworld also questioned the Arbitral Tribunals
awards of P7,129,825.19 corresponding to the
balance of the contract price, and P11,820,000.00
pursuant to the Interim Agreement.58 Megaworld
alleged that DSM Construction was no longer entitled
to the balance of the contract price and the retention
money after the latter received payments pursuant to
the Interim Agreement in the amounts
of P5,444,553.18 for the 26th to the 28thfloors,
another P5,444,553.18 for the 29th to the 31st floors at
a 90% completion rate, and P4,161,818.18 for the
32nd to the 34th floors which were 60% completed.
Megaworld also contended that since it spent more
money to complete the scope of work of DSM
Construction, the latter was no longer entitled to any
of the balance.
On the other hand, DSM Construction argued that the
award was justified in view of the failure of Megaworld
to controvert the amount of P7,129,825.19 included in
the Account Overview of DLS. DSM Construction also

emphasized that it was not claiming the entire P53

Million under the Interim Agreement but only the
amount corresponding to the actual work done. Even
based on DLSs computation, a total
of P11,820,000.00 of retention money is still unpaid
out of the 50% agreed to be released under
the Interim Agreement (P15,000,000.00
lessP3,180,000.00 retention money
or P11,820,000.00 for the paid billings).59
The Arbitral Tribunal ruled that the balance claimed
under the three contracts was based on what DSM
Construction had actually accomplished less the
payments it had previously received. Considering that
the remaining works which were performed by
another trade contractor, Deticio and Isabedra
Builders, were paid directly by Megaworld, no other
cost for work accomplished in the Interim
Agreement is due DSM Construction except the
retention money of P11,820,000.00.60
The Court of Appeals affirmed the award of the
Arbitral Tribunal regarding the balance of the contract
price ofP7,129,825.19 and the retention money
of P11,820,000.00 to DSM Construction. The Court of
Appeals noted that the Arbitral Tribunal again narrated
the claims and defenses of both DSM Construction
and Megaworld before arriving at its conclusion. The
appellate court further stated that the mere fact that
the tribunal did not award the whole amount claimed
by DSM Construction (P12,820,000.00) and instead
awarded only P11,820,000.00 belies Megaworlds

allegation that the tribunal adopted "hook, line and

sinker" DSM Constructions claims.61
This Court finds the award of the balance of the
contract price of P7,129,825.20 justified in view of
DLS explanation in Exhibit MM-362 that the amount
of P7,129,825.20 represented the unpaid billing for
architectural, interior and kitchen billings before
Megaworld and DSM Construction drafted the Interim
Agreement.
Issue of Variation Works
Megaworld also disputed before the Court of Appeals
the P6,686,675.5563 award by the Arbitral Tribunal for
variation works. Variation works consist of the
addition, omission or alteration to the kind, quality or
quantity of the works.64 DSM Construction originally
claimed a total of P26,208,639.00 for variation works
done but, of this claim, the Arbitral Tribunal only
awarded P6,686,675.55 in line with the evaluation of
DLS.
Megaworld conceded that DSM Construction
performed additional works to the extent
of P5,036,252.81. However, Megaworld claimed that
since it incurred expenses when it hired another trade
contractor to take over the works left uncompleted by
DSM Construction, the latter lost its right to claim
such amount especially since DSM Construction did
not comply with the documentation when claiming
variation works.65

DSM Construction asserted that the Arbitral Tribunal,

in fact, should have awarded P26,208,639.00 instead
of limiting the award to only P6,686,675.55 because it
was not even disputed that variation works were
performed. It also contended that it cannot be faulted
for the lack of documentation because the fault lay on
Megaworlds project manager who failed to forward
the variation orders to DLS.66
The Arbitral Tribunal ruled in favor of DSM
Construction, holding that there was enough evidence
to prove that the contractor made a request for
change or variation orders. The Arbitral Tribunal also
found the testimony of Engineer Eduardo C. Arrojado
convincing, factual and balanced despite Megaworlds
attempt to discredit him. However, while the amount
claimed for variation works was P26,208,639.00, the
Arbitral Tribunal limited the awarded to
only P6,686,675.5567 since a closer scrutiny of the
other items indicated that some works were not
performed.68
The appellate court upheld the award of the Arbitral
Tribunal because the award was based not only on
the documentary exhibits prepared by DLS but on the
testimony of Engineer Eduardo C. Arrojado, as well.69
This Court is convinced that payments for variation
works is due. Undoubtedly, variation works were
performed by DSM Construction. This was confirmed
by Engineer Eduardo C. Arrojado who testified that he
recommended the payment for substantial additional

works to DSM Construction. He further stated that

since time was of the essence in the completion of the
project, there were variation orders which were
performed without the prior approval of the owner.
However, he explained that this was a common
construction practice. Finally, he stated that he agreed
with the evaluation of DLS.70
The testimony justified the Arbitral Tribunals reliance
on the evaluation made by DLS which limited the
claim for variation works to P6,596,675.55.
Issue of Preliminaries/Loss and Expense
Megaworld also disputed the award
of P29,380,902.35 for preliminaries/losses and
expense.
The provision for preliminaries/loss and expense in
the contract assumes a direct loss and/or expense
incurred in the regular progress of work for which the
contractor would not be reimbursed under any other
provision of the contract.71 DSM Constructions claim
for preliminaries/loss and expense in the amount
of P36,603,192.82 covered the loss and expense
incurred on payroll, equipment rental, materials and
site clearing on account of such factors as delay in
the execution of the works for causes not attributable
to DSM Construction.72
Megaworld refused to recognize DSM Constructions
claim because the latter allegedly failed to comply

with Clause 6.16 of the Conditions of Contract, which

imposes a two-month deadline for submission of
claims for preliminaries reckoned from "the happening
of the event giving rise to the loss and
expense."73 DSM Construction, however, argued that
the documentary evidence shows that out of the four
claims for preliminaries, only one (Exhibit MM-5 with
an evaluation of P17,552,722.47), covering the period
August 1, 1998 to April 1999, was submitted beyond
the two-months requirement.74 DSM Construction also
pointed out that the two-month requirement for this
claim was waived by Megaworld through DLS when
the latter recognized the validity of claims by coming
up with an evaluation of P17,552,722.47 for the
period covered in Exhibit MM-5.75
The Arbitral Tribunal ruled that DSM Construction was
entitled to extended preliminaries considering that
delay was not attributable to DSM Construction. The
Arbitral Tribunal observed that Megaworld did not
present evidence to refute the claim for extended
preliminaries which were previously evaluated by
DLS. However, after assessing the two previous
evaluations by DLS, the tribunal ruled that the claims
for hauling and disposal and cleaning and clearing of
debris should not be included in the extended
preliminaries. Hence, the Arbitral Tribunal reduced the
amount of P44,051.62 from the claim
of P2,655,879.89 per Exhibit "MM7," and P3,883,309.54 from the claim
of P5,651,235.24 per Exhibit "MM-8," such amounts
being unnecessary.76

The appellate court affirmed the award, stressing the

fact that the Arbitral Tribunal denied some of the
claims which it did not find valid.77
DSM Constructions entitlement to the payment for
preliminaries was explained by Engineer Eduardo C.
Arrojado to be the necessary result of the extension of
the contract between DSM Construction and
Megaworld.78 Notably, majority of the claims of DSM
Construction was reduced by the Arbitral Tribunal on
the basis of Exhibit MM-479 or the Summary of
Variation Order Status Report prepared by DLS.
Although the Arbitral Tribunal ruled that DSM
Construction was entitled to claim for preliminaries,
the award was not based on the claim of DSM
Construction but on the evaluation made by DLS.
The foregoing disquisition adequately shows that the
evidence on record supports the findings of facts of
the Arbitral Tribunal on which the Court of Appeals
based its decision. In fact, although not all the exhibits
in the Arbitral Tribunal were presented before the
Court of Appeals, the record of the appellate court
contains the operative facts and the substance of said
exhibits, thus enabling the intelligent disposition of the
issues presented before it. This Court went over all
the records, including the exhibits, to ascertain
whether the appellate court missed any crucial point.
It did not.

The alleged undue favor accorded by the Arbitral

Tribunal to DSM Construction is belied by the fact that
the Arbitral Tribunal did not grant all of DSM
Constructions claims. In majority of DSM
Constructions claims, the Arbitral Tribunal awarded
amounts lower than what DSM Construction
demanded. The Arbitral Tribunal also granted some of
Megaworlds claims.80

Megaworld, however, adamantly contends that the

present case constitutes an exception to the above
rule because: (1) there is grave abuse of discretion in
the appreciation of facts; (2) the judgment is premised
on misapprehension of facts; and, (3) the findings of
fact of the Court of Appeals is premised on the
supposed absence of evidence and is contradicted by
the evidence on record.83

Neither did the Court of Appeals merely "swallow

hook, line and sinker" the award of the Arbitral
Tribunal. While the appellate court affirmed the
decision of the Arbitral Tribunal, it also ruled in favor
of Megaworld when it limited DSM Constructions lien
to only six units instead of all the condominium units
to which DSM was entitled under the Contract,
rationalizing that the P62 Million award can be
covered by the value of the six units of the
condominium project.81

We disagree. None of these flaws appear in this case.

Grave abuse of discretion means the capricious or
whimsical exercise of judgment that is so patent and
gross as to amount to an evasion of positive duty or a
virtual refusal to perform a duty enjoined by law, or to
act at all in contemplation of law, as where the power
is exercised in an arbitrary and despotic manner by
reason of passion or hostility.84 No abuse of discretion
was established by Megaworld. On the contrary, what
is apparent is Megaworlds effort to attribute grave
abuse of discretion to the Arbitral Tribunal simply
because of the unfavorable judgment against it.
Megaworlds assertion that there was
misapprehension of facts and that the evidence is
insufficient to support the decision is also untenable.
TheDecisions of the Arbitral Tribunal and the Court of
Appeals adequately explain the reasons therefor and
are supported by substantial evidence.

Considering that the computations, as well as the

propriety of the awards of the Arbitral Tribunal, are
unquestionably factual issues that have been
discussed and ruled upon by Arbitral Tribunal and
affirmed by the Court of Appeals, we cannot depart
from such findings. Findings of fact of administrative
agencies and quasi-judicial bodies, which have
acquired expertise because their jurisdiction is
confined to specific matters, are generally accorded
not only respect, but finality when affirmed by the
Court of Appeals.82

Likewise unmeritorious is Megaworlds assertion that

it was deprived of administrative due process. The
Arbitral Tribunal considered the arguments and the
evidence submitted by both parties. That it accorded

greater weight to DSM Constructions evidence, by

itself, does not constitute a denial of due process.
WHEREFORE, the Petition is DENIED.
The Decision dated February 14, 2001, of the Court of
Appeals is AFFIRMED. The Temporary Restraining
Order issued by this Court on July 12, 2002, is hereby
LIFTED. Costs against Petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 148318

November 22, 2004

NATIONAL POWER CORPORATION, petitioner,

vs.
HON. ROSE MARIE ALONZO-LEGASTO, as
Presiding Judge, RTC of Quezon City, Branch 99,
JOSE MARTINEZ, Deputy Sheriff, RTC of Quezon
City, CARMELO V. SISON, Chairman, Arbitration
Board, and FIRST UNITED CONSTRUCTORS
CORPORATION, respondents.

DECISION

National Power Corporation (NPC) filed the instant

Petition for Review1 dated July 19, 2001, assailing the
Decision2 of the Court of Appeals dated May 28, 2001
which affirmed with modification the Order3 and Writ
of Execution4 respectively dated May 22, 2000 and
June 9, 2000 issued by the Regional Trial Court. In its
assailed Decision, the appellate court declared
respondent First United Constructors Corporation
(FUCC) entitled to just compensation for blasting
works it undertook in relation to a contract for the
construction of power facilities it entered into with
petitioner. The Court of Appeals, however, deleted the
award for attorney's fees having found no basis
therefor.
The facts culled from the Decision of the Court of
Appeals are undisputed:
On April 14, 1992, NPC and FUCC entered
into a contract for the construction of power
facilities (civil works) Schedule 1 1x20 MW
Bacon-Manito II Modular Geothermal Power
Plant (Cawayan area) and Schedule 1A
1x20 MW Bacon-Manito II Modular
Geothermal Power Plant (Botong area) in
Bacon, Sorsogon (BACMAN II). The total
contract price for the two schedules is
P108,493,966.30, broken down as follows:

TINGA, J.:
SCHEDULE

1 Cawayan area

P 52,081,421.00

1A Botong area

P 56,412,545.30

P 108,493,966.30

Appended with the Contract is the contract

price schedule which was submitted by the
respondent FUCC during the bidding. The
price for grading excavation was P76.00 per
cubic meter.
Construction activities commenced in August
1992. In the latter part of September 1992 and
after excavating 5.0 meters above the plant
elevation, FUCC requested NPC that it be
allowed to blast to the design grade of 495
meters above sea level as its dozers and
rippers could no longer excavate. It further
requested that it be paid P1,346.00 per cubic
meter similar to the rate of NPC's project in
Palinpinon.

While blasting commenced on October 6,

1992, NPC and FUCC were discussing the
propriety of an extra work order and if such is
in order, at what price should FUCC be paid.

May 1993, civil works in Botong were kept at a

minimum until on November 1, 1993, the
entire operation in the area completely ceased
and FUCC abandoned the project.

Sometime in March 1993, NPC Vice President

for Engineering Construction, Hector Campos,
created a task force to review FUCC's blasting
works. The technical task force recommended
that FUCC be paid P458.07 per cubic meter
as such being the price agreed upon by
FUCC.

Several written and verbal warnings were

given by NPC to FUCC. On March 14, 1994,
NPC's Board of Directors passed Resolution
No. 94-63 approving the recommendation of
President Francisco L. Viray to take over the
contract. President Viray's recommendation to
take over the project was compelled by the
need to stave-off huge pecuniary and nonmonetary losses, namely:

The matter was further referred to the

Department of Public [W]orks and Highways
(DPWH), which in a letter dated May 19, 1993,
recommended the price range of P500.00 to
P600.00 per cubic meter as reasonable. It
further opined that the price of P983.75 per
cubic meter proposed by Lauro R. Umali,
Project Manager of BACMAN II was high. A
copy of the DPWH letter is attached as Annex
"C", FUCC's Exhibit EEE-Arbitration.
In a letter dated June 28, 1993, FUCC formally
informed NPC that it is accepting the proposed
price of P458.07 per cubic meter. A copy of the
said letter is attached as Annex "D", FUCC's
Exhibit L Arbitration.
In the meantime, by March 1993, the works in
Botong area were in considerable delay. By

(a) Generation loss estimated

to be at P26,546,400/month;
(b) Payment of steam penalties
to PNOC-EDC the amount
estimated to be at
P10,206,048.00/month;
(c) Payment of liquidated
damages due to the standby of
electromechanical contractor;
(d) Loss of guaranteed
protection (warranties) of all
delivered plant equipment and
accessories as Mitsubishi
Corporation, electromechanical

contractor, will not be liable

after six months of delivery.
To prevent NPC from taking over the project,
on March 28, 1994, FUCC filed an action for
Specific Performance and Damages with
Preliminary Injunction and Temporary
Restraining Order before Branch 99, Regional
Trial Court, Quezon City.
Under paragraph 19 of its Complaint, FUCC
admitted that it agreed to pay the price of
P458.07 per cubic meter.
On April 5, 1994, Judge de Guzman issued a
temporary restraining order and on April 21,
1994, the trial court resolved to grant the
application for issuance of a writ of preliminary
injunction.
On July 7, 1994, NPC filed a Petition for
Certiorari with Prayer for Temporary
Restraining Order and Preliminary Injunction
before the First Division of the Court of
Appeals asserting that no injunction may issue
against any government projects pursuant to
Presidential Decree 1818.
On July 8, 1994, the Court of Appeals through
then Associate Justice Bernardo Pardo issued
a temporary restraining order and on October
20, 1994, the said court rendered a Decision

granting NPC's Petition for Certiorari and

setting aside the lower court's Order dated
April 21, 1994 and the Writ of Preliminary
Injunction dated May 5, 1994.
However, notwithstanding the dissolution by
the Court of Appeals of the said injunction, on
July 15, 1995, FUCC filed a Complaint before
the Office of the Ombudsman against several
NPC employees for alleged violation of
Republic Act No. 3019, otherwise known as
the Anti-Graft and Corrupt Practices Act.
Together with the complaint was an Urgent ExParte Motion for the issuance of a cease and
[d]esist [o]rder to restrain NPC and other NPC
officials involved in the BACMAN II project
from canceling and/or from taking over
FUCC's contract for civil works of said project.
Then on November 16, 1994, FUCC filed
before the Supreme Court a Petition for
Review assailing the Decision of the Court of
[A]ppeals dated October 20, 1994. In its
Comment, NPC raised the issue that FUCC
resorted to forum shopping as it applied for a
cease and desist order before the National
Ombudsman despite the dissolution of the
injunction by the Court of Appeals.
Pending the petition filed by FUCC before the
Supreme Court, on April 20, 1995 the NPC

and FUCC entered into a Compromise

Agreement.
Under the Compromise Agreement, the parties
agreed on the following:
1. Defendant shall process and pay the
undisputed unpaid billings of Plaintiff in
connection with the entire project
fifteen (15) days after a reconciliation
of accounts by both Plaintiff and
Defendant or thirty (30) days from the
date of approval of this Compromise
Agreement by the Court whichever
comes first. Both parties agree to
submit and include those accounts
which could not be reconciled among
the issues to be arbitrated as
hereunder provided;
2. Plaintiff accepts and acknowledges
that Defendant shall have the right to
proceed with the works by re-bidding or
negotiating the project immediately
upon the signing of herein
Compromise Agreement;
3. This Compromise Agreement shall
serve as the Supplemental Agreement
for payment of plaintiff's blasting works
at the Botong site;

4. Upon approval of this Compromise

Agreement by the Court or Plaintiff's
receipt of payment of this undisputed
unpaid billings from Defendant
whichever comes first, the parties shall
immediately file a Joint Manifestation
and Motion for the withdrawal of the
following Plaintiff's petition from the
Supreme Court, Plaintiff's Complaint
from the National Ombudsman, the
Complaint and Amended Complaint
from the RTC, Br. 99 of Quezon City;
5. Upon final resolution of the
Arbitration, as hereunder prescribed,
the parties shall immediately execute
the proper documents mutually
terminating Plaintiff's contract for the
civil works of the BACMAN II Project
(Contract No. Sp90DLM-918 (I & A);
6. Such mutual termination of Plaintiff's
contract shall have the following effects
and/or consequences: (a) the
construction works of Plaintiff at the
Kawayan and Bolong sites, at its
present stage of completion, shall be
accepted and/or deemed to have been
accepted by defendant; (b) Plaintiff
shall have no more obligation to
Defendant in respect of the BACMAN II
Project except as provided in clause

(e) below; (c) Defendant shall release

all retention moneys of plaintiff within a
maximum period of thirty (30) days
from the date of final Resolution of the
Arbitration; (d) no retention money
shall thenceforth be withheld by
Defendant in its payment to Plaintiff
under this Compromise Agreement,
and (e) Plaintiff shall put up a one-year
guaranty bond for its completed civil
works at the Kawayan site, retroactive
to the date of actual use of the plant by
defendant;
7. Plaintiff's blasting works claims and
other unresolved claims, as well as the
claims of damages of both parties shall
be settled through a two stage process
to wit:
STAGE 1
7.1 Plaintiff and Defendant shall
execute and sign this
Compromise Agreement which
they will submit for approval by
this Court. Under this
Compromise Agreement both
parties agree that:
xxx xxx

STAGE 2
7.1 The parties shall submit for
arbitration to settle: (a) the price
of blasting, (b) both parties'
claims for damages, delays,
interests, and (c) all other
unresolved claims of both
parties, including the exact
volume of blasted rocks;
7.2 The arbitration shall be
through a three-member
commission to be appointed by
the Honorable Court. Each
party shall nominate one
member. The Chairman of the
Arbitration Board shall be [a]
person mutually acceptable to
both parties, preferably from the
academe;
7.3 The parties shall likewise
agree upon the terms under
which the arbitrable issues shall
be referred to the Arbitration
Board. The terms of reference
shall form part of the
Compromise Agreement and
shall be submitted by the
parties to the Honorable Court
within a period of seven (7)

days from the signing of the

Compromise Agreement;
7.4 The Arbitration Board shall
have a non-extendible period of
three (3) months within which to
complete the arbitration
process and submit its Decision
to the Honorable Court;
7.5 The parties agree that the
Decision of the Arbitration
Board shall be final and
executory;
7.6 By virtue of this
Compromise Agreement,
except as herein provided, the
parties shall mutually waive,
forgo and dismiss all of their
other claims and/or
counterclaim in this case.
Plaintiff and defendant warrant
that after approval by the Court
of this Compromise Agreement
neither party shall file Criminal
or Administrative cases or suits
against each other or its Board
or member of its officials on
grounds arising from the case.

The Compromise Agreement was

subsequently approved by the Court on May
24, 1995.
The case was subsequently referred by the
parties to the arbitration board pursuant to
their Compromise Agreement. On December
9, 1999 the Arbitration Board rendered its
ruling the dispositive portion of which states:
WHEREFORE, claimant is hereby declared
entitled to an award of P118,681,328.28 as
just compensation for blasting works, plus ten
percent (10%) thereof for attorney's fees and
expenses of litigation.
Considering that payment in the total amount
of P36,550,000.00 had previously been made,
respondent is hereby ordered to pay claimant
the remaining sum of P82,131,328.28 for
attorney's fees and expenses of litigation.
Pursuant to the Compromise Agreement
approved by this Honorable Court, the parties
have agreed that the decision of the Arbitration
Board shall be final and executory.
SO ORDERED.
On December 10, 1999 plaintiff FUCC filed a
Motion for Execution while defendant NPC

filed a Motion to Vacate Award by the

Arbitration Board on December 20, 1999.
On May 22, 2000 Presiding Judge Rose Marie
Alonzo Legasto issued an order the dispositive
portion of which states:
"WHEREFORE, the Arbitration Award issued
by the Arbitration Board is hereby APPROVED
and the Motion for Execution filed by plaintiff
hereby GRANTED. The Motion to Vacate
Award filed by defendant is hereby DENIED
for lack of merit.
Accordingly, let a writ of execution be issued to
enforce the Arbitration Award.
SO ORDERED."5 (Bracketed words supplied)
NPC went to the Court of Appeals on the lone issue of
whether respondent judge acted with grave abuse of
discretion in issuing the Order dated May 22, 2000
and directing the issuance of a Writ of Execution.
In its assailed Decision, the appellate court declared
that the court a quo did not commit grave abuse of
discretion considering that the Arbitration Board acted
pursuant to its powers under the Compromise
Agreement and that its award has factual and legal
bases.

The Court of Appeals gave primacy to the courtapproved Compromise Agreement entered into by the
parties and concluded that they intended the decision
of the arbitration panel to be final and executory. Said
the court:
For one, what the price agreed to be
submitted for arbitration are pure issues of fact
(i.e., the price of blasting; both parties' claims
for damages, delay, interests and all other
unresolved claims of both parties, including
the exact volume of blasted rocks). Also, the
manner by which the Arbitration Board was
formed and the terms under which the
arbitrable issues were referred to said Board
are specified in the agreement. Clearly, the
parties had left to the Arbitration Board the
final adjudication of their remaining claims and
waived their right to question said Decision of
the Board. Hence, they agreed in clear and
unequivocal terms in the Compromise
Agreement that said Decision would be
immediately final and executory. Plaintiff relied
upon this stipulation in complying with its
various obligations under the agreement. To
allow defendant to now go back on its word
and start questioning the Decision would be
grossly unfair considering that the latter was
also a party to the Compromise Agreement
entered into part of which dealt with the
creation of the Arbitration Board.6

The appellate court likewise held that petitioner failed

to present evidence to prove its claim of bias and
partiality on the part of the Chairman of the Arbitration
Board, Mr. Carmelo V. Sison (Mr. Sison).
Further, the Court of Appeals found that blasting is not
part of the unit price for grading and structural
excavation provided for in the contract for the
BACMAN II Project, and that there was no perfected
contract between the parties for an extra work order
for blasting. Nonetheless, since FUCC relied on the
representation of petitioner's officials that the extra
work order would be submitted to its Board of
Directors for approval and that the blasting works
would be paid, the Court of Appeals ruled that FUCC
is entitled to just compensation on grounds of equity
and promissory estoppel.
Anent the issue of just compensation, the appellate
court took into account the estimate prepared by a
certain Mr. Lauro R. Umali (Mr. Umali), Project
Manager of the BACMAN II Project, which itemized
the various costs involved in blasting works and came
up with P1,310.82 per cubic meter, consisting of the
direct cost for drilling, blasting excavation, stockpiling
and hauling, and a 30% mark up for overhead,
contractor's tax and contingencies. This estimate was
later changed to P983.75 per cubic meter to which
FUCC agreed. The Court of Appeals, however, held
that just compensation should cover only the direct
costs plus 10% for overhead expenses. Thus, it
declared that the amount of P763.007 per cubic meter

is sufficient. Since the total volume of blasted rocks as

computed by Dr. Benjamin Buensuceso, Jr.8 of the
U.P. College of Engineering is 97,032.16 cubic
meters, FUCC is entitled to the amount of
P74,035,503.50 as just compensation.
Although the Court of Appeals adjudged FUCC
entitled to interest,9 the dispositive portion of the
assailed Decision10 did not provide for the payment of
interest. Moreover, the award of attorney's fees was
deleted as there was no legal and factual ground for
its imposition.
Petitioner, represented by the Office of the Solicitor
General in the instant Petition, rehashes its
submissions before the Court of Appeals. It claims
that the appellate court failed to pass upon the
following issues:

4. The Arbitration Board Committed manifest

injustice prejudicial to petitioner based on the
following:
a. It rendered an award based on
equity despite the mandatory provision
of the law.
b. The Board's decision to justify that
equity applies herein despite the fact
that FUCC never submitted its own
actual costs for blasting and PHESCO,
INC., the succeeding contractor, did
not employ blasting but used ordinary
excavation method at P75.59 per cubic
meter which is approximately the same
unit price of plaintiff (FUCC).

2. The Chairman of the Arbitration Board

greatly exceeded his powers when he
mediated for settlement in the court of
arbitration proceedings.

c. It gravely erred when the Board

claimed that an award of just
compensation must be given to
respondent FUCC for what it has
actually spent and yet instead of using
as basis P458.07 which is the price
agreed upon by FUCC, it chose an
estimate made by an NPC employee.

3. The Chairman of the Arbitration Board

committed serious irregularity in hastily
convening the Board in two days, which
thereafter released its report.

d. It gravely erred when it relied heavily

on the purported letter of NPC Project
Manager Lauro R. Umali, when the
same has not been identified nor were

1. The Chairman of the Arbitration Board

showed extreme bias in prejudging the case.

the handwritten entries in Annex ii

established to be made by him.
5. The Arbitration Board gravely erred in
computing interest at 12% and from the time
of plaintiff's extrajudicial claim despite the fact
that herein case is an action for specific
performance and not for payment of loan or
forbearance of money, and despite the fact
that it has resolved that there was no
perfected contract and there was no bad faith
on the part of defendant.
6. On June 25, 2000, NPC discovered the
Sub-Contract Agreement of FUCC with a
unit price of only P430/per cubic
meter.11 [Emphasis in the original]
Specifically, petitioner asserts that Mr. Sison exhibited
bias and prejudgment when he exhorted it to pay
FUCC for the blasting works after concluding that the
latter was allowed to blast. Moreover, Mr. Sison
allegedly attempted to mediate the conflict between
the parties in violation of Section 20,12 paragraph 2 of
Republic Act No. 876 (R.A. 876) otherwise known as
the Arbitration Law. Petitioner also questions the
abrupt manner by which the decision of the Arbitration
Board was released.
Petitioner avers that FUCC's claim for blasting works
was not approved by authorized officials in
accordance with Presidential Decree No. 1594 (P.D.

1594) and its implementing rules which specifically

require the approval of the extra work by authorized
officials before an extra work order may be issued in
favor of the contractor. Thus, it should not be held
liable for the claim. If at all, only the erring officials
should be held liable. Further, FUCC did not present
evidence to prove the actual expenses it incurred for
the blasting works. What the Arbitration Board relied
upon was the memorandum of Mr. Umali which was
neither identified or authenticated during the
arbitration proceedings nor marked as evidence for
FUCC. Moreover, the figures indicated in Mr. Umali's
memorandum were allegedly mere estimates and
were recommendatory at most.
Petitioner likewise claims that its succeeding
contractor, Phesco, Inc. (Phesco), was able to
excavate the same rock formation without blasting.
Finally, it asserts that the award of P763.00 per cubic
meter has no factual and legal basis as the subcontract between FUCC and its blasting subcontractor, Dynamic Blasting Specialists of the
Philippines (Dynamic), was only P430.00 per cubic
meter.
In its Comment13 dated October 15, 2001, FUCC
points out that petitioner's arguments are exactly the
same as the ones it raised before the Arbitration
Board, the trial court and the Court of Appeals.
Moreover, in the Compromise Agreement between the
parties, petitioner committed to abide by the decision

of the Arbitration Board. It should not now be allowed

to question the decision.
FUCC likewise notes that Atty. Jose G. Samonte (Atty.
Samonte), one of the members of the Arbitration
Board, was nominated by petitioner itself. If there was
any irregularity in its proceedings such as the bias
and prejudgment petitioner imputes upon Mr. Sison,
Atty. Samonte would have complained. As it is, Atty.
Samonte concurred in the decision of the Arbitration
Board and dissented only as to the award of
attorney's fees.
As regards the issue of interest, FUCC claims that the
case involves forbearance of money and not a claim
for damages for breach of an obligation in which case
interest on the amount of damages awarded may be
imposed at the rate of six percent (6%) per annum.
Finally, FUCC asserts that its sub-contract agreement
with Dynamic is not newly-discovered evidence.
Petitioner's lawyers allegedly had a copy of the subcontract in their possession. In any event, the unit
price of P430.00 per cubic meter appearing in the
sub-contract represents only a fraction of the costs
incurred by FUCC for the blasting works.
Petitioner filed a Reply14 dated March 18, 2002
reiterating its earlier submissions.
The parties in the present case mutually agreed to
submit to arbitration the settlement of the price of

blasting, the parties' claims for damages, delay and

interests and all other unresolved claims including the
exact volume of blasted rocks.15 They further mutually
agreed that the decision of the Arbitration Board shall
be final and immediately executory.16
A stipulation submitting an ongoing dispute to
arbitration is valid. As a rule, the arbitrator's award
cannot be set aside for mere errors of judgment either
as to the law or as to the facts. Courts are generally
without power to amend or overrule merely because
of disagreement with matters of law or facts
determined by the arbitrators. They will not review the
findings of law and fact contained in an award, and
will not undertake to substitute their judgment for that
of the arbitrators. A contrary rule would make an
arbitration award the commencement, not the end, of
litigation. Errors of law and fact, or an erroneous
decision on matters submitted to the judgment of the
arbitrators, are insufficient to invalidate an award fairly
and honestly made. Judicial review of an arbitration
award is, thus, more limited than judicial review of a
trial.17
However, an arbitration award is not absolute and
without exceptions. Where the conditions described in
Articles 2038, 2039 and 2040 of the Civil
Code18 applicable to both compromises and
arbitrations are obtaining, the arbitrators' award may
be annulled or rescinded.19 Additionally, judicial review
of an arbitration award is warranted when the
complaining party has presented proof of the

existence of any of the grounds for vacating,

modifying or correcting an award outlined under
Sections 24 and 25 of R.A. 876, viz:
Section 24. Grounds for vacating an award.
In any of the following cases, the court must
make an order vacating the award upon the
petition of any party to the controversy when
such party proves affirmatively that in the
arbitration proceedings:
(a) The award was procured by
corruption, fraud, or other undue
means; or
(b) That there was evident partiality or
corruption in the arbitrators or any of
them; or
(c) That the arbitrators were guilty of
misconduct in refusing to postpone the
hearing upon sufficient cause shown,
or in refusing to hear evidence
pertinent and material to the
controversy; that one or more of the
arbitrators was disqualified to act as
such under section nine hereof, and
willfully refrained from disclosing such
disqualifications or of any other
misbehavior by which the rights of any
party have been materially prejudiced;
or

(d) That the arbitrators exceeded their

powers, or so imperfectly executed
them, that a mutual, final and definite
award upon the subject matter
submitted to them was not made.
When an award is vacated, the court, in its
discretion, may direct a new hearing either
before the same arbitrators or before a new
arbitrator or arbitrators to be chosen in the
manner provided in the submission or contract
for the selection of the original arbitrator or
arbitrators, and any provision limiting the time
in which the arbitrators may make a decision
shall be deemed applicable to the new
arbitration to commence from the date of the
court's order.
Where the court vacates an award, costs not
exceeding fifty pesos and disbursements may
be awarded to the prevailing party and the
payment thereof may be enforced in like
manner as the payment of costs upon the
motion in an action.
Section 25. Grounds for modifying or
correcting an award. In any one of the
following cases, the court must make an order
modifying or correcting the award, upon the
application of any party to the controversy
which was arbitrated:

(a) Where there was an evident

miscalculation of figures, or an evident
mistake in the description of any
person, thing or property referred to in
the award; or
(b) Where the arbitrators have awarded
upon a matter not submitted to them,
not affecting the merits of the decision
upon the matter submitted; or
(c) Where the award is imperfect in a
matter of form not affecting the merits
of the controversy, and if it had been a
commissioner's report, the defect could
have been amended or disregarded by
the court.
The order may modify and correct the award
so as to effect the intent thereof and promote
justice between the parties.
In this case, petitioner does not specify which of the
foregoing grounds it relies upon for judicial review.
Petitioner avers that "if and when the factual
circumstances referred to in the provisions
aforementioned are present, judicial review of the
award is warranted."20 From its presentation of issues,
however, it appears that the alleged evident partiality
of Mr. Sison is singled out as a ground to vacate the
board's decision.

We note, however, that the Court of Appeals found

that petitioner did not present any proof to back up its
claim of evident partiality on the part of Mr. Sison. Its
averments to the effect that Mr. Sison was biased and
had prejudged the case do not suffice to establish
evident partiality. Neither does the fact that a party
was disadvantaged by the decision of the arbitration
committee prove evident partiality.21
According to the appellate court, "[p]etitioner was
never deprived of the right to present evidence nor
was there any showing that the Board showed signs
of any bias in favor of FUCC. As correctly found by
the trial court, this Court cannot find its way to support
petitioner's contention that there was evident partiality
in the assailed Award of the Arbitrator in favor of the
respondent because the conclusion of the Board,
which the Court found to be well-founded, is fully
supported by substantial evidence."22
There is no reason to depart from this conclusion.
However, we take exception to the arbitrators'
determination that based on promissory estoppel per
se or alone, FUCC is entitled to just compensation for
blasting works for the reasons discussed hereunder.
Section 9 of P.D. No. 1594, entitled Prescribing
Policies, Guidelines, Rules and Regulations for
Government Infrastructure Contracts, provides:

SECTION 9. Change Order and Extra Work

Order.A change order or extra work order
may be issued only for works necessary for
the completion of the project and, therefore,
shall be within the general scope of the
contract as bid[ded] and awarded. All change
orders and extra work orders shall be subject
to the approval of the Minister of Public Works,
Transportation and Communications, the
Minister of Public Highways, or the Minister of
Energy, as the case may be.
The pertinent portions of the Implementing Rules and
Regulations of P.D. 1594 provide:
CI - Contract Implementation:
These Provisions Refer to Activities During
Project Construction, i.e., After Contract Award
Until Completion, Except as May Otherwise be
Specifically Referred to Provisions Under
Section II. IB - Instructions to Bidders.
CI 1 - Variation Orders - Change Order/Extra
Work Order/Supplemental Agreement
4. An Extra Work Order may be issued by the
implementing official to cover the introduction
of new work items after the same has been
found to strictly comply with Section CI-1-1
and approved by the appropriate official if the
amount of the Extra Work Order is within the

limits of the former's authority to approve

original contracts and under the following
conditions:
a. Where there are additional works needed
and necessary for the completion,
improvement or protection of the project which
were not included as items of work in the
original contract.
b. Where there are subsurface or latent
physical conditions at the site differing
materially from those indicated in the contract.
c. Where there are duly unknown physical
conditions at the site of an unusual nature
differing materially from those ordinarily
encountered and generally recognized as
inherent in the work or character provided for
in the contract.
d. Where there are duly approved construction
drawings or any instruction issued by the
implementing office/agency during the term of
contract which involve extra cost.

6. A separate Supplemental Agreement may

be entered into for all Change Orders and
Extra Work Orders if the aggregate amount
exceeds 25% of the escalated original contract

price. All change orders/extra work orders

beyond 100% of the escalated original
contract cost shall be subject to public bidding
except where the works involved are
inseparable from the original scope of the
project in which case negotiation with the
incumbent contractor may be allowed, subject
to approval by the appropriate authorities.
7. Any Variation Order (Change Order, Extra
Work Order or Supplemental Agreement) shall
be subject to the escalation formula used to
adjust the original contract price less the cost
of mobilization. In claiming for any Variation
Order, the contractor shall, within seven (7)
calendar days after such work has been
commenced or after the circumstances
leading to such condition(s) leading to the
extra cost, and within 28 calendar days deliver
a written communication giving full and
detailed particulars of any extra cost in order
that it may be investigated at that time. Failure
to provide either of such notices in the time
stipulated shall constitute a waiver by the
contractor for any claim. The preparation and
submission of Change Orders, Extra Work
Orders or Supplemental Agreements are as
follows:
a. If the Project Engineer believes that a
Change Order, Extra Work Order or
Supplemental Agreement should be issued, he

shall prepare the proposed Order or

Supplemental Agreement accompanied with
the notices submitted by the contractor, the
plans therefore, his computations as to the
quantities of the additional works involved per
item indicating the specific stations where
such works are needed, the date of his
inspections and investigations thereon, and
the log book thereof, and a detailed estimate
of the unit cost of such items of work, together
with his justifications for the need of such
Change Order, Extra Work Order or
Supplemental Agreement, and shall submit the
same to the Regional Director of
office/agency/corporation concerned.
b. The Regional Director concerned, upon
receipt of the proposed Change Order, Extra
Work Order or Supplemental Agreement shall
immediately instruct the technical staff of the
Region to conduct an on-the-spot investigation
to verify the need for the work to be
prosecuted. A report of such verification shall
be submitted directly to the Regional Director
concerned.
c. The Regional Director concerned after being
satisfied that such Change Order, Extra Work
Order or Supplemental Agreement is justified
and necessary, shall review the estimated
quantities and prices and forward the proposal

with the supporting documentation to the head

of office/agency/corporation for consideration.
d. If, after review of the plans, quantities and
estimated unit cost of the items of work
involved, the proper office/agency/corporation
committee empowered to review and evaluate
Change Orders, Extra Work Orders or
Supplemental Agreements recommends
approval thereof, the head of
office/agency/corporation, believing the
Change Order, Extra Work Order or
Supplemental Agreement to be in order, shall
approve the same. The limits of approving
authority for any individual, and the aggregate
of, Change Orders, Extra Work Orders or
Supplemental Agreements for any project of
the head of office/agency/corporation shall not
be greater than those granted for an original
project.
CI 3 - Conditions under which Contractor is to
Start Work under Variation Orders and
Receive Payments
1. Under no circumstances shall a contractor
proceed to commence work under any
Change Order, Extra Work Order or
Supplemental Agreement unless it has been
approved by the Secretary or his duly
authorized representative. Exceptions to the
preceding rule are the following:

a. The Regional Director, or its equivalent

position in agencies/offices/corporations
without plantilla position for the same, may,
subject to the availability of funds, authorize
the immediate start of work under any Change
or Extra Work Order under any or all of the
following conditions:
(1) In the event of an emergency where the
prosecution of the work is urgent to avoid
detriment to public service, or damage to life
and/or property; and/or
(2) When time is of the essence; provided,
however, that such approval is valid on work
done up to the point where the cumulative
increase in value of work on the project which
has not yet been duly fully approved does not
exceed five percent (5%) of the adjusted
original contract price, or P500,000 whichever
is less; provided, further, that immediately after
the start of work, the corresponding
Change/Extra Work Order shall be prepared
and submitted for approval in accordance with
the above rules herein set. Payments for
works satisfactorily accomplished on any
Change/Extra Work Order may be made only
after approval of the same by the Secretary or
his duly authorized representative.
b. For a Change/Extra Work Order involving a
cumulative amount exceeding five percent

(5%) of the original contract price or original

adjusted contract price no work thereon may
be commenced unless said Change/Extra
Work Order has been approved by the
Secretary or his duly authorized
representative. [Emphasis supplied]
It is petitioner's submission, and FUCC does not deny,
that the claim for payment of blasting works in Botong
alone was approximately P170,000,000.00, a figure
which far exceeds the original contract price of
P80,000,000.00 for two (2) project sites. Under the
foregoing implementing rules, for an extra work order
which exceeds 5% of the original contract price, no
blasting work may be commenced without the
approval of the Secretary or his duly authorized
representative. Moreover, the procedure for the
preparation and approval of the extra work order
outlined under Contract Implementation (CI) 1(7)
above should have been complied with. Accordingly,
petitioner's officials should not have authorized the
commencement of blasting works nor should FUCC
have proceeded with the same.
The following events, culled from the decision of the
Arbitration Board and the assailed Decision, are made
the bases for the finding of promissory estoppel on
the part of petitioner:
1. After claimant [respondent herein]
encountered what it claimed to be massive
hard rock formation (Testimony of witness

Dumaliang, TSN, 28 October 1996, pp. 41-42;

Testimony of witness Lataquin, 28 November
1996, pp. 2-3; 20-23; Exh. "JJJ" and submarkings) and informed respondent [petitioner
herein] about it, respondent's own geologists
went to the Botong site to investigate and
confirmed the rock formation and
recommended blasting (Cf. Memorandum of
Mr. Petronilo E. Pana, Acting Manager of the
Geoscience Services Department and the
report of the geologists who conducted the site
investigation; Exhs. "F" and "F-1").
2. Claimant asked for clearance to blast the
rock formation to the design grade (Letter
dated 28 September 1992; Exh. "UU"). The
engineers of respondent at the project site
advised claimant to proceed with its suggested
method of extraction (Order/Instruction given
by Mr. Reuel R. Declaro and Mr. Francis A.
Paderna dated 29 September 1992; Exh. "C").
3. Claimant requested that the intended
blasting works be confirmed as extra work
order by responsible officials of respondent
directly involved in the BACMAN II Project
(i.e., then BACMAN II Project Manager, Mr.
Lauro R. Umali and Mr. Angelito G. Senga,
Section Chief, Civil Engineering Design of
respondent's Design Department which bidded
the project). These officials issued verbal
instructions to the effect: (a) that claimant

could blast the rock formation down to the

design grade of 495 masl; (b) that said
blasting works would be an extra work order;
and (c) that claimant would be paid for said
blasting works using the price per cubic meter
for similar blasting works at Palinpinon, or at
P1,346.00 per cubic meter.

Thank you for your timely action and we look

forward to the immediate issuance of the extra
work order.

4. Claimant sent two (2) confirmatory letters to

respondent, both addressed to its President,
one dated 30 September 1992, and sent
through Mr. Angelito Senga, Chief Civil Design
Thermal, the other dated 02 October 1992,
and sent through Mr. Lauro R. Umali, Project
ManagerBacMan II (Exhs. "D" and "E";
Testimony of witness Dumaliang, TSN, 28
October 1996, pp. 43-49). The identical letters
read:

5. Respondent received the letters but did not

reply thereto nor countermand the earlier
instructions given to claimant to proceed with
the blasting works. The due execution and
authenticity of these letters (Exhs. "D-1" and
"E-1") and the fact of receipt (Exhs. "D-2" and
"E-2") were duly proved by claimant
(Testimony of witness Dumaliang, TSN, 28
October 1996, 43-49).

We wish to confirm your instruction for us to

proceed with the blasting of the Botong Plant
site to the design grade pending issuance of
the relevant variation order. This is to avoid
delay in the implementation of this critical
project due to the urgent need to blast rocks
on the plant site.
We are confirming further your statement that
the said blasting works is an extra work order
and that we will be paid using the price
established in your Palinpinon contract with
Phesco.

We are now mobilizing equipment and

manpower for the said work and hope to start
blasting next week.

6. In mid-October 1992, three (3) VicePresidents of respondent visited the project

site and were informed of claimant's blasting
activities. While respondent claims that one of
the Vice-Presidents, Mr. Rodrigo Falcon,
raised objections to claimant's blasting works
as an extra work order, they instructed
claimant to speed up the works because of the
power crisis then hounding the country.
Stipulation no. 24 of the Joint Stipulation of
Facts of the parties which reads: "24. In midOctober 1992, three (3) Vice-Presidents of
respondent, namely: Mr. Hector N. Campos,
Sr., of Engineering Construction, Mr. C.A.

Pastoral of Engineering Design, and Mr.

Rodrigo P. Falcon, visited the project site and
were likewise apprised of claimant's blasting
activities. They never complained about the
blasting works, much less ordered its
cessation. In fact, no official of respondent
ever ordered that the blasting works be
stopped."
7. After visiting Botong, Mr. Hector N. Campos,
Sr., then Vice President of Engineering
Construction, instructed Mr. Fernando A.
Magallanes then Manager of the Luzon
Engineering Projects Department, to evaluate
claimant's blasting works and to submit his
recommendations on the proper price therefor.
In a memorandum dated 17 November 1992
(Exh. "G" and sub-markings), Mr. Magallanes
confirmed that claimant's blasting works was
an extra work order and recommended that it
be paid at the price for similar blasting works
at Palinpinon, or at P1,346.00 per cubic meter.
Mr. Campos concurred with the findings and
recommendations of Mr. Magallanes and
instructed Mr. Lauro R. Umali, then Project
Manager of BacMan II, to implement the same
as shown by his instructions scribbled on the
memorandum.
8. Mr. Umali and the project team prepared
proposed Extra Work Order No. 2 Blasting
(Exh. "DDD" Memorandum of Mr. Umali to

Mr. Campos dated 20 January 1993

forwarding proposed Extra Work Order No. 2),
recommending a price of P983.75 per cubic
meter for claimant's blasting works. Claimant
agreed to this price (Testimony of witness
Dumaliang, 7 November 1996, p. 48).
9. On 19 February 1993, claimant brought the
matter of its unpaid blasting works to the
attention of the then NPC Chairman [also
Secretary of the Department of Energy then]
Delfin L. Lazaro during a meeting with the
multi-sectoral task force monitoring the
implementation of power plant projects, who
asked then NPC President Pablo B. Malixi
what he was doing about the problem.
President Malixi thereafter convened
respondent's vice-presidents and ordered
them to quickly document the variation order
and pay claimant. The vice-president, and
specifically Mr. Campos, pledged that the
variation order for claimant's blasting works
would be submitted for the approval of the
NPC Board during the first week of March
1993. Claimant thereafter sent respondent a
letter dated 22 February 1993 (Ex. "K") to
confirm this pledge (Testimony of witness
Dumaliang, 7 November 1996, pp. 28-30).
10. Mr. Campos created a task force (i.e., the
Technical Task Force on the Study and Review
of Extra Work Order No. 2; Exh. "FFF") to

review claimant's blasting works. After several

meetings with the task force, claimant agreed
to the lower price of P458.07 per cubic meter,
in exchange for quick payment (Testimony of
witness Dumaliang, 7 November 1996, p. 30).
11. However, no variation order was issued
and no payment came, although it appears
from two (2) radiograms sent by Mr. Campos
to Mr. Paderna at the project site that the
variation order was being processed and that
payment to claimant was forthcoming (Exhs.
"AAA" and "BBB").
12. Respondent asked the Department of
Public Works and Highways (DPWH) about
the standard prices for blasting in the projects
of the DPWH. The DPWH officially replied to
respondent's query in a letter dated 19 May
1993 but the task force still failed to seek
Board approval for claimant's variation order.
The task force eventually recommended that
the issue of grading excavation and structural
excavation and the unit prices therefor be
brought into voluntary arbitration (Testimony of
witness Dumaliang, 7 November 1996, pp. 3057).
13. Claimant thereafter saw Mr. Francisco L.
Viray, the new NPC President, who proposed
that claimant accept the price of P458.07 per
cubic meter for its blasting works with the

balance of its claim to be the subject of

arbitration. Claimant accepted the offer and
sent the letter dated 28 September 1993 (Exh.
"O") to formalize said acceptance. However,
no variation order was issued and the
promised payment never came. (Testimony of
witness Dumaliang, 7 November 1996, p. 58).

or would result in other injustice."24 Promissory

estoppel presupposes the existence of a promise on
the part of one against whom estoppel is claimed. The
promise must be plain and unambiguous and
sufficiently specific so that the court can understand
the obligation assumed and enforce the promise
according to its terms.25

14. After some time, claimant met Mr. Viray on

19 October 1993 at the project site, and with
some NPC officers in attendance, particularly
Mr. Gilberto A. Pastoral, Vice-President for
Engineering Design, who was instructed by
Mr. Viray to prepare the necessary
memorandum (i.e., that claimant would be
paid P458.07 per cubic meter with the balance
of its claim to be the subject of arbitration) for
the approval of the NPC Board. Claimant
formalized what transpired during this meeting
in its letter to Mr. Pastoral dated 22 October
1993 (Exhibit "R"). But no action was taken by
Mr. Pastoral and no variation order was issued
by respondent (Testimony of witness
Dumaliang, 7 November 1996, pp. 5758).23 [Emphasis supplied and bracketed
words]

In the present case, the foregoing events clearly

evince that the promise that the blasting works would
be paid was predicated on the approval of the extra
work order by petitioner's Board. Even FUCC
acknowledged that the blasting works should be an
extra work order and requested that the extra work
order be confirmed as such and approved by the
appropriate officials. Notably, even as the extra work
order allegedly promised to it was not yet forthcoming,
FUCC commenced blasting.

Promissory estoppel "may arise from the making of a

promise, even though without consideration, if it was
intended that the promise should be relied upon and
in fact it was relied upon, and if a refusal to enforce it
would be virtually to sanction the perpetration of fraud

The alleged promise to pay was therefore conditional

and up to this point, promissory estoppel cannot be
established as the basis of petitioner's liability
especially in light of P.D. 1594 and its implementing
rules of which both parties are presumed to have
knowledge. In Mendoza v. Court of Appeals, supra,
we ruled that "[a] cause of action for promissory
estoppel does not lie where an alleged oral promise
was conditional, so that reliance upon it was not
reasonable. It does not operate to create liability
where it does not otherwise exist."

Petitioner's argument that it is not bound by the acts

of its officials who acted beyond the scope of their
authority in allowing the blasting works is correct.
Petitioner is a government agency with a juridical
personality separate and distinct from the
government. It is not a mere agency of the
government but a corporate entity performing
proprietary functions. It has its own assets and
liabilities and exercises corporate powers, including
the power to enter into all contracts, through its Board
of Directors.
In this case, petitioner's officials exceeded the scope
of their authority when they authorized FUCC to
commence blasting works without an extra work order
properly approved in accordance with P.D. 1594.
Their acts cannot bind petitioner unless it has ratified
such acts or is estopped from disclaiming them.26
However, the Compromise Agreement entered into by
the parties, petitioner being represented by its
President, Mr. Guido Alfredo A. Delgado, acting
pursuant to its Board Resolution No. 95-54 dated April
3, 1995, is a confirmatory act signifying petitioner's
ratification of all the prior acts of its officers.
Significantly, the parties agreed that "[t]his
Compromise Agreement shall serve as the
Supplemental Agreement for the payment of plaintiff's
blasting works at the Botong site"27 in accordance with
CI 1(6) afore-quoted. In other words, it is primarily by
the force of this Compromise Agreement that the

Court is constrained to declare FUCC entitled to

payment for the blasting works it undertook.

it is supported by detailed cost estimates that will

serve as basis to determine just compensation.

Moreover, since the blasting works were already

rendered by FUCC and accepted by petitioner and in
the absence of proof that the blasting was done
gratuitously, it is but equitable that petitioner should
make compensation therefor, pursuant to the principle
that no one should be permitted to enrich himself at
the expense of another.28

While the Arbitration Board found that FUCC did not

present evidence showing the amount it paid to its
blasting sub-contractor, it did present testimony to the
effect that it incurred other costs and expenses on top
of the actual blasting cost. Hence, the amount of
P430.00 per cubic meter indicated in FUCC's
Contract of Agreement with Dynamic is not
controlling.

This brings us to the issue of just compensation.

The parties proposed in the terms of reference jointly
submitted to the Arbitration Board that should FUCC
be adjudged entitled to just compensation for its
blasting works, the price therefor should be
determined based on the payment for blasting works
in similar projects of FUCC and the amount it paid to
its blasting subcontractor.29They agreed further that
"the price of the blasting at the Botong site . . . shall
range from Defendant's position of P76.00 per cubic
meter as per contract to a maximum of P1,144.00"30
Petitioner contends that the Arbitration Board, trial
court and the appellate court unduly relied on the
memorandum of Mr. Umali which was allegedly not
marked as an exhibit. We note, however, that this
memorandum actually forms part of the record of the
case as Exhibit "DDD."31 Moreover, both the
Arbitration Board and the Court of Appeals found that
Mr. Umali's proposal is the best evidence on record as

Moreover, FUCC presented evidence showing that in

two (2) other projects where blasting works were
undertaken, petitioner paid the contractors P1,346 per
cubic meter for blasting and disposal of solid rocks in
the Palinpinon project and P1,144.51 per cubic meter
for rock excavation in the Hermosa Balintawak
project. Besides, while petitioner claims that in a
contract with Wilper Construction for the construction
of the Tayabas sub-station, the price agreed for
blasting was only P96.13, petitioner itself did not
present evidence in support of this claim.32
Parenthetically, the point raised by petitioner that its
subsequent contractor, Phesco, did not undertake
blasting works in excavating the same rock formation
is extraneous and irrelevant. The fact is that petitioner
allowed FUCC to blast and undertook to pay for the
blasting works.

At this point, we hearken to the rule that the findings

of the Arbitration Board, affirmed by the trial court and
the Court of Appeals and supported as they are by
substantial evidence, should be accorded not only
respect but finality.33 Accordingly, the amount of
P763.00 per cubic meter fixed by the Arbitration
Board and affirmed by the appellate court as just
compensation should stand.
As regards the issue of interest, while the appellate
court declared in the body of its Decision "that interest
which would represent the cost of the money spent be
imposed on the money actually spent by claimant for
the blasting works,"34 there is no pronouncement as to
the payment of interest in the dispositive portion of the
Decision even as it specifically deleted the award of
attorney's fees.
Despite its knowledge of the appellate court's
omission, FUCC did not file a motion for
reconsideration or appeal from its Decision. In failing
to do so, FUCC allowed the Decision to become final
as to it.
In Edwards v. Arce,35 we ruled that in a case decided
by a court, the true judgment of legal effect is that
entered by the clerk of said court pursuant to the
dispositive part of its decision. The only portion of the
decision that may be the subject of execution is that
which is ordained or decreed in the dispositive
portion. Whatever may be found in the body of the
decision can only be considered as part of the

reasons or conclusions of the court and serve only as

guides to determine the ratio decidendi.36
Even so, the Court allows a judgment which had
become final and executory to be clarified when there
is an ambiguity caused by an omission or mistake in
the dispositive portion of the decision.37 In
Reinsurance Company of the Orient, Inc. v. Court of
Appeals,38 we held:
In Republic Surety and Insurance Company,
Inc. v. Intermediate Appellate Court, the Court
applying the above doctrine said:
"xxx We clarify, in other words, what we did
affirm. What is involved here is not what is
ordinarily regarded as a clerical error in the
dispositive part of the decision of the Court of
First Instance, which type of error is perhaps
best typified by an error in arithmetical
computation. At the same time, what is
involved here is not a correction of an
erroneous judgment or dispositive portion of a
judgment. What we believe is involved here is
in the nature of an inadvertent omission on the
part of the Court of First Instance (which
should have been noticed by private
respondent's counsel who had prepared the
complaint), of what might be described as a
logical follow-through of something set forth
both in the body of the decision and in the
dispositive portion thereof: the inevitable

follow-through, or translation into, operational

or behavioral terms, of the annulment of the
Deed of Sale with Assumption of Mortgage,
from which petitioners' title or claim of title
embodied in TCT 133153 flows." (Italics
supplied)39
In this case, the omission of the award of interest was
obviously inadvertent. Correction is therefore in order.
However, we do not agree with the Arbitration Board
that the interest should be computed at 12%. Since
the case does not involve a loan or forbearance of
money, goods or credit and court judgments thereon,
the interest due shall be computed at 6% per annum
computed from the time the claim was made in 1992
as determined by the Arbitration Board and in
accordance with Articles 2209 and 1169 of the Civil
Code. The actual base for the computation of legal
interest shall be on the amount finally
adjudged.40 Further, when the judgment awarding a
sum of money becomes final and executory, the rate
of legal interest shall be 12% per annum from such
finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance
of credit.41
WHEREFORE, the petition is GRANTED in part. The
appealed decision is MODIFIED in that the amount of
P74,035,503.50 shall earn legal interest of six percent
(6%) from 1992. A twelve percent (12%) interest, in
lieu of six percent (6%), shall be imposed on such

amount upon finality of this decision until the payment

thereof.
SO ORDERED.

The Solicitor General for respondents.

GANCAYCO, J.:

Republic of the Philippines

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

Is the Regional Trial Court of the same category as

the Professional Regulation Commission so that it
cannot pass upon the validity of the administrative
acts of the latter? Can this Commission lawfully
prohibit the examiness from attending review classes,
receiving handout materials, tips, or the like three (3)
days before the date of the examination? Theses are
the issues presented to the court by this petition for
certiorari to review the decision of the Court of
Appeals promulagated on January 13, 1987, in CAG.R. SP No. 10598, * declaring null and void the other
dated Ocober 21, 1986 issued by the Regional Trial
Court of Manila, Branch 32 in Civil Case No. 8637950 entitled " Lupo L. Lupangco, et al. vs.
Professional Regulation Commission."
The records shows the following undisputed facts:
On or about October 6, 1986, herein respondent
Professional Regulation Commission (PRC) issued
Resolution No. 105 as parts of its "Additional
Instructions to Examiness," to all those applying for
admission to take the licensure examinations in
accountancy. The resolution embodied the following
pertinent provisions:

No examinee shall attend any review

class, briefing, conference or the like
conducted by, or shall receive any
hand-out, review material, or any tip
from any school, college or university,
or any review center or the like or any
reviewer, lecturer, instructor official or
employee of any of the aforementioned
or similars institutions during the three
days immediately proceeding every
examination day including examination
day.
Any examinee violating this instruction
shall be subject to the sanctions
prescribed by Sec. 8, Art. III of the
Rules and Regulations of the
Commission. 1
On October 16, 1986, herein petitioners, all reviewees
preparing to take the licensure examinations in
accountancy schedule on October 25 and November
2 of the same year, filed on their own behalf of all
others similarly situated like them, with the Regional
Trial Court of Manila, Branch XXXII, a complaint for
injuction with a prayer with the issuance of a writ of a
preliminary injunction against respondent PRC to
restrain the latter from enforcing the above-mentioned
resolution and to declare the same unconstitution.
Respondent PRC filed a motion to dismiss on October
21, 1987 on the ground that the lower court had no

jurisdiction to review and to enjoin the enforcement of

its resolution. In an Order of October 21, 1987, the
lower court declared that it had jurisdiction to try the
case and enjoined the respondent commission from
enforcing and giving effect to Resolution No. 105
which it found to be unconstitutional.
Not satisfied therewith, respondent PRC, on
November 10, 1986, filed with the Court of Appeals a
petition for the nullification of the above Order of the
lower court. Said petiton was granted in the Decision
of the Court of Appeals promulagated on January 13,
1987, to wit:
WHEREFORE, finding the petition
meritorious the same is hereby
GRANTED and the other dated
October 21, 1986 issued by
respondent court is declared null and
void. The respondent court is further
directed to dismiss with prejudice Civil
Case No. 86-37950 for want of
jurisdiction over the subject matter
thereof. No cost in this instance.
SO ORDERED. 2
Hence, this petition.
The Court of Appeals, in deciding that the Regional
Trial Court of Manila had no jurisdiction to entertain
the case and to enjoin the enforcement of the

Resolution No. 105, stated as its basis its conclusion

that the Professional Regulation Commission and the
Regional Trial Court are co-equal bodies. Thus it held

That the petitioner Professional

Regulatory Commission is at least a
co-equal body with the Regional Trial
Court is beyond question, and co-equal
bodies have no power to control each
other or interfere with each other's
acts. 3
To strenghten its position, the Court of Appeals relied
heavily on National Electrification Administration vs.
Mendoza, 4 which cites Pineda vs. Lantin 5 and
Philippine Pacific Fishing, Inc. vs. Luna, 6 where this
Court held that a Court of First Instance cannot
interfere with the orders of the Securities and
Exchange Commission, the two being co-equal
bodies.
After a close scrutiny of the facts and the record of
this case,
We rule in favor of the petitioner.
The cases cited by respondent court are not in point.
It is glaringly apparent that the reason why this Court
ruled that the Court of First Instance could not
interfere with the orders of the Securities and
Exchange Commission was that this was so provided

for by the law. In Pineda vs. Lantin, We explained that

whenever a party is aggrieved by or disagree with an
order or ruling of the Securities and Exchange
Commission, he cannot seek relief from courts of
general jurisdiction since under the Rules of Court
and Commonwealth Act No. 83, as amended by
Republic Act No. 635, creating and setting forth the
powers and functions of the old Securities and
Exchange Commission, his remedy is to go the
Supreme Court on a petition for review. Likewise,
in Philippine Pacific Fishing Co., Inc. vs. Luna, it was
stressed that if an order of the Securities and
Exchange Commission is erroneous, the appropriate
remedy take is first, within the Commission itself,
then, to the Supreme Court as mandated in
Presidential Decree No. 902-A, the law creating the
new Securities and Exchange Commission. Nowhere
in the said cases was it held that a Court of First
Instance has no jurisdiction over all other government
agencies. On the contrary, the ruling was specifically
limited to the Securities and Exchange Commission.
The respondent court erred when it place the
Securities and Exchange Commission and the
Professional Regulation Commsision in the same
category. As alraedy mentioned, with respect to the
Securities and Exchange Commission, the laws cited
explicitly provide with the procedure that need be
taken when one is aggrieved by its order or ruling.
Upon the other hand, there is no law providing for the
next course of action for a party who wants to
question a ruling or order of the Professional

Regulation Commission. Unlike Commonwealth Act

No. 83 and Presidential Decree No. 902-A, there is no
provision in Presidential Decree No. 223, creating the
Professional Regulation Commission, that orders or
resolutions of the Commission are appealable either
to the Court of Appeals or to theSupreme Court.
Consequently, Civil Case No. 86-37950, which was
filed in order to enjoin the enforcement of a resolution
of the respondent Professional Regulation
Commission alleged to be unconstitutional, should fall
within the general jurisdiction of the Court of First
Instance, now the Regional Trial Court. 7
What is clear from Presidential Decree No. 223 is that
the Professional Regulation Commission is attached
to the Office of the President for general direction and
coordination. 8 Well settled in our jurisprudence is the
view that even acts of the Office of the President may
be reviewed by the Court of First Instance (now the
Regional Trial Court). In Medalla vs. Sayo, 9 this rule
was thoroughly propounded on, to wit:
In so far as jurisdiction of the Court
below to review by certiorari decisions
and/or resolutions of the Civil Service
Commission and of the residential
Executive Asssistant is concerned,
there should be no question but that
the power of judicial review should be
upheld. The following rulings buttress
this conclusion:

The objection to a
judicial review of a
Presidential act arises
from a failure to
recognize the most
important principle in
our system of
government, i.e., the
separation of powers
into three co-equal
departments, the
executives, the
legislative and the
judicial, each supreme
within its own assigned
powers and duties.
When a presidential act
is challenged before the
courts of justice, it is not
to be implied therefrom
that the Executive is
being made subject and
subordinate to the
courts. The legality of
his acts are under
judicial review, not
because the Executive
is inferior to the courts,
but because the law is
above the Chief
Executive himself, and
the courts seek only to

interpret, apply or
implement it (the law). A
judicial review of the
President's decision on
a case of an employee
decided by the Civil
Service Board of
Appeals should be
viewed in this light and
the bringing of the case
to the Courts should be
governed by the same
principles as govern the
jucucial review of all
administrative acts of all
administrative officers. 10
Republic vs. Presiding Judge, CFI of Lanao del Norte,
Br. II, 11 is another case in point. Here, "the Executive
Office"' of the Department of Education and Culture
issued Memorandum Order No. 93 under the
authority of then Secretary of Education Juan Manuel.
As in this case, a complaint for injunction was filed
with the Court of First Instance of Lanao del Norte
because, allegedly, the enforcement of the circular
would impair some contracts already entered into by
public school teachers. It was the contention of
petitioner therein that "the Court of First Instance is
not empowered to amend, reverse and modify what is
otherwise the clear and explicit provision of the
memorandum circular issued by the Executive Office

which has the force and effect of law." In resolving the

issue, We held:
... We definitely state that respondent
Court lawfully acquired jurisdiction in
Civil Case No. II-240 (8) because the
plaintiff therein asked the lower court
for relief, in the form of injunction, in
defense of a legal right (freedom to
enter into contracts) . . . . .

pecuniary estimation (Sec. 44,

Republic Act 296, as
amended). 12 (Emphasis supplied.)
In San Miguel Corporation vs. Avelino, 13 We ruled
that a judge of the Court of First Instance has the
authority to decide on the validity of a city tax
ordinance even after its validity had been contested
before the Secretary of Justice and an opinion
thereon had been rendered.

judicial agencies, instrumentalities,

boards or commissions, except those
falling within the appellate jurisdiction
of the Supreme Court in accordance
with the Constitution, the provisions of
this Act, and of subparagraph (1) of the
third paragraph and subparagraph (4)
of the fourth paragraph of Section 17 of
the Judiciary Act of 1948.
The contention is devoid of merit.

Hence there is a clear infringement of

private respondent's constitutional right
to enter into agreements not contrary
to law, which might run the risk of being
violated by the threatened
implementation of Executive Office
Memorandum Circular No. 93, dated
February 5, 1968, which prohibits, with
certain exceptions, cashiers and
disbursing officers from honoring
special powers of attorney executed by
the payee employees. The respondent
Court is not only right but duty bound
to take cognizance of cases of this
nature wherein a constitutional and
statutory right is allegedly infringed by
the administrative action of a
government office. Courts of first
Instance have original jurisdiction over
all civil actions in which the subject of
the litigation is not capable of

In view of the foregoing, We find no cogent reason

why Resolution No. 105, issued by the respondent
Professional Regulation Commission, should be
exempted from the general jurisdiction of the Regional
Trial Court.
Respondent PRC, on the other hand, contends that
under Section 9, paragraph 3 of B.P. Blg. 129, it is the
Court of Appeals which has jurisdiction over the case.
The said law provides:
SEC. 9. Jurisdiction. The
Intermediate Appellate Court shall
exercise:
xxx xxx xxx
(3) Exclusive appellate jurisdiction over
all final judgments, decisions,
resolutions, orders, or awards of
Regional Trial Courts and quasi-

In order to invoke the exclusive appellate jurisdiction

of the Court of Appeals as provided for in Section 9,
paragraph 3 of B.P. Blg. 129, there has to be a final
order or ruling which resulted from proceedings
wherein the administrative body involved exercised
its quasi-judicial functions. In Black's Law
Dictionary, quasi-judicial is defined as a term applied
to the action, discretion, etc., of public administrative
officers or bodies required to investigate facts, or
ascertain the existence of facts, hold hearings, and
draw conclusions from them, as a basis for their
official action, and to exercise discretion of a judicial
nature. To expound thereon, quasi-judicialadjudication
would mean a determination of rights, privileges and
duties resulting in a decision or order which applies to
a specific situation . 14 This does not cover rules and
regulations of general applicability issued by the
administrative body to implement its purely
administrative policies and functions like Resolution
No. 105 which was adopted by the respondent PRC

as a measure to preserve the integrity of licensure

examinations.
The above rule was adhered to in Filipinas
Engineering and Machine Shop vs. Ferrer. 15 In this
case, the issue presented was whether or not the
Court of First Instance had jurisdiction over a case
involving an order of the Commission on Elections
awarding a contract to a private party which originated
from an invitation to bid. The said issue came about
because under the laws then in force, final awards,
judgments, decisions or orders of the Commission on
Elections fall within the exclusive jurisdiction of the
Supreme Court by way of certiorari. Hence, it has
been consistently held that "it is the Supreme Court,
not the Court of First Instance, which has exclusive
jurisdiction to review on certiorari final decisions,
orders, or rulings of the Commission on Elections
relative to the conduct of elections and the
enforcement of election laws."16
As to whether or not the Court of First Instance had
jurisdiction in saidcase, We said:
We are however, far from convinced
that an order of the COMELEC
awarding a contract to a private party,
as a result of its choice among various
proposals submitted in response to its
invitation to bid comes within the
purview of a "final order" which is
exclusively and directly appealable to

this court on certiorari. What is

contemplated by the term "final orders,
rulings and decisions, of the
COMELEC reviewable by certiorari by
the Supreme Court as provided by law
are those rendered in actions or
proceedings before the COMELEC and
taken cognizance of by the said body
in the exercise of its adjudicatory or
quasi-judicial powers. (Emphasis
supplied.)
xxx xxx xxx
We agree with petitioner's contention
that the order of the Commission
granting the award to a bidder is not an
order rendered in a legal controversy
before it wherein the parties filed their
respective pleadings and presented
evidence after which the questioned
order was issued; and that this order of
the commission was issued pursuant
to its authority to enter into contracts in
relation to election purposes. In short,
the COMELEC resolution awarding the
contract in favor of Acme was not
issued pursuant to its quasi-judicial
functions but merely as an incident of
its inherent administrative functions
over the conduct of elections, and
hence, the said resolution may not be

deemed as a "final order reviewable by

certiorari by the Supreme Court. Being
non-judicial in character, no contempt
order may be imposed by the
COMELEC from said order, and no
direct and exclusive appeal by
certiorari to this Tribunal lie from such
order. Any question arising from said
order may be well taken in an ordinary
civil action before the trial courts.
(Emphasis supplied.) 17
One other case that should be mentioned in this
regard is Salud vs. Central Bank of the
Philippines. 18 Here, petitioner Central Bank, like
respondent in this case, argued that under Section 9,
paragraph 3 of B.P. Blg. 129, orders of the Monetary
Board are appealable only to the Intermediate
Appellate Court. Thus:
The Central Bank and its Liquidator
also postulate, for the very first time,
that the Monetary Board is among the
"quasi-judicial ... boards" whose
judgments are within the exclusive
appellate jurisdiction of the IAC; hence,
it is only said Court, "to the exclusion of
the Regional Trial Courts," that may
review the Monetary Board's
resolutions. 19

Anent the posture of the Central Bank, We made the

following pronouncement:
The contention is utterly devoid of
merit. The IAC has no appellate
jurisdiction over resolution or orders of
the Monetary Board. No law prescribes
any mode of appeal from the Monetary
Board to the IAC. 20
In view of the foregoing, We hold that the Regional
Trial Court has jurisdiction to entertain Civil Case No.
86-37950 and enjoin the respondent PRC from
enforcing its resolution.

of any of the aforementioned or similar

institutions . ... 21
The unreasonableness is more obvious in that one
who is caught committing the prohibited acts even
without any ill motives will be barred from taking
future examinations conducted by the respondent
PRC. Furthermore, it is inconceivable how the
Commission can manage to have a watchful eye on
each and every examinee during the three days
before the examination period.

Although We have finally settled the issue of

jurisdiction, We find it imperative to decide once and
for all the validity of Resolution No. 105 so as to
provide the much awaited relief to those who are and
will be affected by it.

It is an aixiom in administrative law that administrative

authorities should not act arbitrarily and capriciously
in the issuance of rules and regulations. To be valid,
such rules and regulations must be reasonable and
fairly adapted to the end in view. If shown to bear no
reasonable relation to the purposes for which they are
authorized to be issued, then they must be held to be
invalid. 22

Of course, We realize that the questioned resolution

was adopted for a commendable purpose which is "to
preserve the integrity and purity of the licensure
examinations." However, its good aim cannot be a
cloak to conceal its constitutional infirmities. On its
face, it can be readily seen that it is unreasonable in
that an examinee cannot even attend any review
class, briefing, conference or the like, or receive any
hand-out, review material, or any tip from any school,
collge or university, or any review center or the like or
any reviewer, lecturer, instructor, official or employee

Resolution No. 105 is not only unreasonable and

arbitrary, it also infringes on the examinees' right to
liberty guaranteed by the Constitution. Respondent
PRC has no authority to dictate on the reviewees as
to how they should prepare themselves for the
licensure examinations. They cannot be restrained
from taking all the lawful steps needed to assure the
fulfillment of their ambition to become public
accountants. They have every right to make use of
their faculties in attaining success in their endeavors.
They should be allowed to enjoy their freedom to

acquire useful knowledge that will promote their

personal growth. As defined in a decision of the
United States Supreme Court:
The term "liberty" means more than
mere freedom from physical restraint
or the bounds of a prison. It means
freedom to go where one may choose
and to act in such a manner not
inconsistent with the equal rights of
others, as his judgment may dictate for
the promotion of his happiness, to
pursue such callings and vocations as
may be most suitable to develop his
capacities, and giv to them their
highest enjoyment. 23
Another evident objection to Resolution No. 105 is
that it violates the academic freedom of the schools
concerned. Respondent PRC cannot interfere with the
conduct of review that review schools and centers
believe would best enable their enrolees to meet the
standards required before becoming a full fledged
public accountant. Unless the means or methods of
instruction are clearly found to be inefficient,
impractical, or riddled with corruption, review schools
and centers may not be stopped from helping out their
students. At this juncture, We call attention to Our
pronouncement in Garcia vs. The Faculty Admission
Committee, Loyola School of Theology, 24 regarding
academic freedom to wit:

... It would follow then that the school

or college itself is possessed of such a
right. It decides for itself its aims and
objectives and how best to attain them.
It is free from outside coercion or
interference save possibly when the
overriding public welfare calls for some
restraint. It has a wide sphere of
autonomy certainly extending to the
choice of students. This constitutional
provision is not to be construed in a
niggardly manner or in a grudging
fashion.
Needless to say, the enforcement of Resolution No.
105 is not a guarantee that the alleged leakages in
the licensure examinations will be eradicated or at
least minimized. Making the examinees suffer by
depriving them of legitimate means of review or
preparation on those last three precious days-when
they should be refreshing themselves with all that
they have learned in the review classes and preparing
their mental and psychological make-up for the
examination day itself-would be like uprooting the tree
to get ride of a rotten branch. What is needed to be
done by the respondent is to find out the source of
such leakages and stop it right there. If corrupt
officials or personnel should be terminated from their
loss, then so be it. Fixers or swindlers should be
flushed out. Strict guidelines to be observed by
examiners should be set up and if violations are
committed, then licenses should be suspended or

revoked. These are all within the powers of the

respondent commission as provided for in
Presidential Decree No. 223. But by all means the
right and freedom of the examinees to avail of all
legitimate means to prepare for the examinations
should not be curtailed.
In the light of the above, We hereby REVERSE and
SET ASIDE, the decision of the Court of Appeals in
CA-G.R. SP No. 10591 and another judgment is
hereby rendered declaring Resolution No. 105 null
and void and of no force and effect for being
unconstitutional. This decision is immediately
executory. No costs.
SO ORDERED.

accused become a public officer and therefore subject

to the graft courts jurisdiction as a consequence of
such designation by the BIR?
These are the main questions in the instant
petition for review of respondent Sandiganbayans
Decision[1] in Criminal Case No. 14260 promulgated
on March 8, 1994, convicting petitioner of
malversation of public funds and property, and
Resolution[2] dated June 20, 1994, denying his motion
for new trial or reconsideration thereof.
THIRD DIVISION

[G.R. No. 116033. February 26, 1997]

ALFREDO
L.
AZARCON, petitioner,
vs. SANDIGANBAYAN, PEOPLE OF THE
PHILIPPINES
and
JOSE
C.
BATAUSA, respondents.
DECISION
PANGANIBAN, J.:
Does the Sandiganbayan have jurisdiction over a
private individual who is charged with malversation of
public funds as a principal after the said individual had
been designated by the Bureau of Internal Revenue
as a custodian of distrained property? Did such

The Facts
Petitioner Alfredo Azarcon owned and operated
an earth-moving business, hauling dirt and ore.[3] His
services were contracted by the Paper Industries
Corporation of the Philippines (PICOP) at its
concession
in
Mangagoy,
Surigao
del
Sur. Occasionally, he engaged the services of subcontractors like Jaime Ancla whose trucks were left at
the
formers
premises.[4] From
this
set
of
circumstances arose the present controversy.
x x x It appears that on May 25, 1983, a Warrant of
Distraint of Personal Property was issued by the Main
Office of the Bureau of Internal Revenue (BIR)
addressed to the Regional Director (Jose Batausa) or
his authorized representative of Revenue Region 10,
Butuan City commanding the latter to distraint the
goods, chattels or effects and other personal property

of Jaime Ancla, a sub-contractor of accused Azarcon

and, a delinquent taxpayer. The Warrant of
Garnishment was issued to accused Alfredo Azarcon
ordering him to transfer, surrender, transmit and/or
remit to BIR the property in his possession owned by
taxpayer Ancla. The Warrant of Garnishment was
received by accused Azarcon on June 17, 1985.[5]
Petitioner Azarcon, in signing the Receipt for
Goods, Articles, and Things Seized Under Authority of
the National Internal Revenue, assumed the
undertakings specified in the receipt the contents of
which are reproduced as follows:
(I), the undersigned, hereby acknowledge to have
received from Amadeo V. San Diego, an Internal
Revenue Officer, Bureau of Internal Revenue of the
Philippines, the following described goods, articles,
and things:

Kind of property

---

Isuzu dump truck

Motor number

---

E120-229598

Chassis No.

---

SPZU50-1772440

Number of CXL

---

Color

---

Blue

Owned By

---

Mr. Jaime Ancla

the same having been this day seized and left in (my)
possession pending investigation by the
Commissioner of Internal Revenue or his duly
authorized representative. (I) further promise that (I)
will faithfully keep, preserve, and, to the best of (my)
ability, protect said goods, articles, and things seized
from defacement, demarcation, leakage, loss, or
destruction in any manner; that (I) will neither alter nor
remove, nor permit others to alter or remove or
dispose of the same in any manner without the
express authority of the Commissioner of Internal
Revenue; and that (I) will produce and deliver all of
said goods, articles, and things upon the order of any
court of the Philippines, or upon demand of the
Commissioner of Internal Revenue or any authorized
officer or agent of the Bureau of Internal Revenue.[6]
Subsequently, Alfredo Azarcon wrote a letter
dated November 21, 1985 to the BIRs Regional
Director for Revenue Region 10 B, Butuan City stating
that
x x x while I have made representations to retain
possession of the property and signed a receipt of the
same, it appears now that Mr. Jaime Ancla intends to

cease his operations with us. This is evidenced by the

fact that sometime in August, 1985 he surreptitiously
withdrew his equipment from my custody. x x x In this
connection, may I therefore formally inform you that it
is my desire to immediately relinquish whatever
responsibilities I have over the above-mentioned
property by virtue of the receipt I have signed. This
cancellation shall take effect immediately. x x x .[7]
Incidentally, the petitioner reported the taking of the
truck to the security manager of PICOP, Mr. Delfin
Panelo, and requested him to prevent this truck from
being taken out of the PICOP concession. By the time
the order to bar the trucks exit was given, however, it
was too late.[8]
Regional Director Batausa responded in a letter
dated May 27, 1986, to wit:
An analysis of the documents executed by you
reveals that while you are (sic) in possession of the
dump truck owned by JAIME ANCLA, you voluntarily
assumed the liabilities of safekeeping and preserving
the unit in behalf of the Bureau of Internal
Revenue. This is clearly indicated in the provisions of
the Warrant of Garnishment which you have signed,
obliged and committed to surrender and transfer to
this office. Your failure therefore, to observe said
provisions does not relieve you of your responsibility.[9]
Thereafter, the Sandiganbayan found that

On 11 June 1986, Mrs. Marilyn T. Calo, Revenue

Document Processor of Revenue Region 10 B,
Butuan City, sent a progress report to the Chief of the
Collection Branch of the surreptitious taking of the
dump truck and that Ancla was renting out the truck to
a certain contractor by the name of Oscar Cueva at
PICOP (Paper Industries Corporation of the
Philippines, the same company which engaged
petitioners earth moving services), Mangagoy,
Surigao del Sur. She also suggested that if the report
were true, a warrant of garnishment be reissued
against Mr. Cueva for whatever amount of rental is
due from Ancla until such time as the latters tax
liabilities shall be deemed satisfied. x x x However,
instead of doing so, Director Batausa filed a lettercomplaint against the (herein Petitioner) and Ancla on
22 January 1988, or after more than one year had
elapsed from the time of Mrs. Calos report.[10]
Provincial
Fiscal
Pretextato
Montenegro
forwarded the records of the complaint x x x to the
Office of the Tanodbayan on May 18, 1988. He was
deputized Tanodbayan prosecutor and granted
authority to conduct preliminary investigation on
August 22, 1988, in a letter by Special Prosecutor
Raul
Gonzales
approved
by
Ombudsman
(Tanodbayan) Conrado Vasquez.[11]
Along with his co-accused Jaime Ancla, petitioner
Azarcon was charged before the Sandiganbayan with
the crime of malversation of public funds or property
under Article 217 in relation to Article 222 of the

Revised Penal Code (RPC) in the following

Information[12]filed on January 12, 1990, by Special
Prosecution Officer Victor Pascual:

prejudice of the government in the amount

of P80,831.59 in a form of unsatisfied tax liability.
CONTRARY TO LAW.

That on or about June 17, 1985, in the Municipality of

Bislig, Province of Surigao del Sur, Philippines, and
within the jurisdiction of this Honorable Court,
accused Alfredo L. Azarcon, a private individual but
who, in his capacity as depository/administrator of
property seized or deposited by the Bureau of Internal
Revenue, having voluntarily offered himself to act as
custodian of one Isuzu Dumptruck (sic) with Motor
No. E120-22958, Chasis No. SPZU 50-1772440, and
number CXL-6 and was authorized to be such under
the authority of the Bureau of Internal Revenue, has
become a responsible and accountable officer and
said motor vehicle having been seized from Jaime C.
Ancla in satisfaction of his tax liability in the total sum
of EIGHTY THOUSAND EIGHT HUNDRED THIRTY
ONE PESOS and 59/100 (P80,831.59) became a
public property and the value thereof as public fund,
with grave abuse of confidence and conspiring and
confederating with said Jaime C. Ancla, likewise, a
private individual, did then and there wilfully, (sic)
unlawfully and feloniously misappropriate, misapply
and convert to his personal use and benefit the
aforementioned motor vehicle or the value thereof in
the aforestated amount, by then and there allowing
accused Jaime C. Ancla to remove, retrieve, withdraw
and tow away the said Isuzu Dumptruck (sic) with the
authority, consent and knowledge of the Bureau of
Internal Revenue, Butuan City, to the damage and

The petitioner filed a motion for reinvestigation

before the Sandiganbayan on May 14, 1991, alleging
that: (1) the petitioner never appeared in the
preliminary investigation; and (2) the petitioner was
not a public officer, hence a doubt exists as to why he
was being charged with malversation under Article
217
of
the
Revised
Penal
Code.[13] The
Sandiganbayan granted the motion for reinvestigation
on May 22, 1991.[14] After the reinvestigation, Special
Prosecution
Officer
Roger
Berbano,
Sr.,
recommended the withdrawal of the information[15] but
was overruled by the Ombudsman.[16]
A motion to dismiss was filed by petitioner on
March 25, 1992 on the ground that the
Sandiganbayan did not have jurisdiction over the
person of the petitioner since he was not a public
officer.[17] On May 18, 1992, the Sandiganbayan
denied the motion.[18]
When the prosecution finished presenting its
evidence, the petitioner then filed a motion for leave
to file demurrer to evidence which was denied on
November 16, 1992, for being without merit.[19] The
petitioner then commenced and finished presenting
his evidence on February 15, 1993.

The Respondent Courts Decision

On
March
8,
1994,
respondent
[20]
Sandiganbayan rendered
a
Decision,[21] the
dispositive portion of which reads:
WHEREFORE, the Court finds accused Alfredo
Azarcon y Leva GUILTY beyond reasonable doubt as
principal of Malversation of Public Funds defined and
penalized under Article 217 in relation to Article 222 of
the Revised Penal Code and, applying the
Indeterminate Sentence Law, and in view of the
mitigating circumstance of voluntary surrender, the
Court hereby sentences the accused to suffer the
penalty of imprisonment ranging from TEN (10)
YEARS and ONE (1) DAY of prision mayor in its
maximum period to SEVENTEEN (17) YEARS, FOUR
(4) MONTHS and ONE (1) DAY of Reclusion
Temporal.To indemnify the Bureau of Internal
Revenue the amount of P80,831.59; to pay a fine in
the same amount without subsidiary imprisonment in
case of insolvency; to suffer special perpetual
disqualification; and, to pay the costs.
Considering that accused Jaime Ancla has not yet
been brought within the jurisdiction of this Court up to
this date, let this case be archived as against him
without prejudice to its revival in the event of his
arrest or voluntary submission to the jurisdiction of
this Court.
SO ORDERED.

Petitioner, through new counsel,[22] filed a motion

for new trial or reconsideration on March 23, 1994,
which was denied by the Sandiganbayan in its
Resolution[23] dated December 2, 1994.
Hence, this petition.

The Issues
The petitioner submits the following reasons for
the reversal of the Sandiganbayans assailed Decision
and Resolution:
I. The Sandiganbayan does not have
jurisdiction over crimes committed solely
by private individuals.
II. In any event, even assuming arguendo
that the appointment of a private individual
as a custodian or a depositary of distrained
property is sufficient to convert such
individual into a public officer, the petitioner
cannot still be considered a public officer
because:
[A]
There is no provision in the National Internal Revenue
Code which authorizes the Bureau of Internal
Revenue to constitute private individuals as
depositaries of distrained properties.

[B]
His appointment as a depositary was not by virtue of
a direct provision of law, or by election or by
appointment by a competent authority.
III. No proof was presented during trial to prove that
the distrained vehicle was actually owned by the
accused Jaime Ancla; consequently, the governments
right to the subject property has not been established.
IV. The procedure provided for in the National Internal
Revenue Code concerning the disposition of
distrained property was not followed by the B.I.R.,
hence the distraint of personal property belonging to
Jaime C. Ancla and found allegedly to be in the
possession of the petitioner is therefore invalid.
V. The B.I.R. has only itself to blame for not promptly
selling the distrained property of accused Jaime C.
Ancla in order to realize the amount of back taxes
owed by Jaime C. Ancla to the Bureau.[24]
In fine, the fundamental issue is whether the
Sandiganbayan had jurisdiction over the subject
matter of the controversy. Corollary to this is the
question of whether petitioner can be considered a
public officer by reason of his being designated by the
Bureau of Internal Revenue as a depositary of
distrained property.

The Courts Ruling

The petition is meritorious.

Jurisdiction of the Sandiganbayan

It is hornbook doctrine that in order (to) ascertain
whether a court has jurisdiction or not, the provisions
of the law should be inquired into.[25] Furthermore, the
jurisdiction of the court must appear clearly from the
statute law or it will not be held to exist. It cannot be
presumed or implied.[26] And for this purpose in
criminal cases, the jurisdiction of a court is
determined by the law at the time of commencement
of the action.[27]
In this case, the action was instituted with the
filing of this information on January 12, 1990; hence,
the applicable statutory provisions are those of P.D.
No. 1606, as amended by P.D. No. 1861 on March 23,
1983, but prior to their amendment by R.A. No. 7975
on May 16, 1995. At that time, Section 4 of P.D. No.
1606 provided that:
SEC. 4. Jurisdiction. -- The Sandiganbayan shall
exercise:
(a) Exclusive original jurisdiction in all cases involving:
(1) Violations of Republic Act No. 3019, as amended,
otherwise known as the Anti-Graft and Corrupt

Practices Act, Republic Act No. 1379, and Chapter II,

Section 2, Title VII of the Revised Penal Code;
(2) Other offenses or felonies committed by public
officers and employees in relation to their office,
including those employed in government-owned or
controlled corporations, whether simple or complexed
with other crimes, where the penalty prescribed by
law is higher than prision correccional or
imprisonment for six (6) years, or a fine of P6,000.00:
PROVIDED, HOWEVER, that offenses or felonies
mentioned in this paragraph where the penalty
prescribed by law does not exceed prision
correccional or imprisonment for six (6) years or a fine
of P6,000.00 shall be tried by the proper Regional
Trial Court, Metropolitan Trial Court, Municipal Trial
Court and Municipal Circuit Trial Court.
xxxxxxxxx
In case private individuals are charged as coprincipals, accomplices or accessories with the public
officers or employees, including those employed in
government-owned or controlled corporations, they
shall be tried jointly with said public officers and
employees.
x x x x x x x x x.
The foregoing provisions unequivocally specify
the only instances when the Sandiganbayan will have
jurisdiction over a private individual, i.e. when the
complaint charges the private individual either as a

co-principal, accomplice or accessory of a public

officer or employee who has been charged with a
crime within its jurisdiction.

Azarcon: A Public Officer or A Private Individual?

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

(1) Taking part in the performance of public

functions in the government, or
Performing in said Government or any of its
branches public duties as an employee, agent, or
subordinate official, of any rank or class; and
(2) That his authority to take part in the performance
of public functions or to perform public duties must be
-a. by direct provision of the law, or
b. by popular election, or
c. by appointment by competent authority.[28]
Granting arguendo that the petitioner, in signing
the receipt for the truck constructively distrained by
the BIR, commenced to take part in an activity
constituting public functions, he obviously may not be
deemed authorized by popular election. The next
logical query is whether petitioners designation by the
BIR as a custodian of distrained property qualifies as
appointment by direct provision of law, or by
competent authority.[29] We answer in the negative.
The Solicitor General contends that the BIR, in
effecting constructive distraint over the truck allegedly
owned by Jaime Ancla, and in requiring the petitioner
Alfredo Azarcon who was in possession thereof to
sign a pro forma receipt for it, effectively designated
petitioner a depositary and, hence, citing U.S. vs.

Rastrollo,[30] a public officer.[31] This is based on the

theory that
(t)he power to designate a private person who has
actual possession of a distrained property as a
depository of distrained property is necessarily
implied in the BIRs power to place the property of a
delinquent tax payer (sic) in distraint as provided for
under Sections 206, 207 and 208 (formerly Sections
303, 304 and 305) of the National Internal Revenue
Code, (NIRC) x x x.[32]
We disagree. The case of U.S. vs. Rastrollo is
not applicable to the case before us simply because
the facts therein are not identical, similar or analogous
to those obtaining here. While the cited case involved
a judicial deposit of the proceeds of the sale of
attached property in the hands of the debtor, the case
at bench dealt with the BIRs administrative act of
effecting constructive distraint over alleged property of
taxpayer Ancla in relation to his back taxes, property
which was received by petitioner Azarcon. In the cited
case, it was clearly within the scope of that courts
jurisdiction and judicial power to constitute the judicial
deposit and give the depositary a character equivalent
to that of a public official. [33] However, in the instant
case, while the BIR had authority to require petitioner
Azarcon to sign a receipt for the distrained truck, the
NIRC did not grant it power to appoint Azarcon a
public officer.

It is axiomatic in our constitutional framework,

which mandates a limited government, that its
branches and administrative agencies exercise only
that power delegated to them as defined either in the
Constitution or in legislation or in both.[34] Thus,
although the appointing power is the exclusive
prerogative of the President, x x x[35] the quantum of
powers possessed by an administrative agency
forming part of the executive branch will still be limited
to that conferred expressly or by necessary or fair
implication in its enabling act. Hence, (a)n
administrative officer, it has been held, has only such
powers as are expressly granted to him and those
necessarily implied in the exercise thereof.
[36]
Corollarily, implied powers are those which are
necessarily included in, and are therefore of lesser
degree than the power granted. It cannot extend to
other matters not embraced therein, nor are not
incidental thereto.[37] For to so extend the statutory
grant of power would be an encroachment on powers
expressly lodged in Congress by our Constitution.[38] It
is true that Sec. 206 of the NIRC, as pointed out by
the prosecution, authorizes the BIR to effect a
constructive distraint by requiring any person to
preserve a distrained property, thus:
xxxxxxxxx
The constructive distraint of personal property
shall be effected by requiring the taxpayer or any
person having possession or control of such
property to sign a receipt covering the property

distrained and obligate himself to preserve the

same intact and unaltered and not to dispose of
the same in any manner whatever without the
express authority of the Commissioner.
xxxxxxxxx
However, we find no provision in the NIRC
constituting such person a public officer by reason of
such requirement. The BIRs power authorizing a
private individual to act as a depositary cannot be
stretched to include the power to appoint him as a
public officer. The prosecution argues that Article 222
of the Revised Penal Code x x x defines the
individuals covered by the term officers under Article
217[39] x x x of the same Code.[40] And accordingly,
since Azarcon became a depository of the truck
seized by the BIR he also became a public officer who
can be prosecuted under Article 217 x x x.[41]
The Court is not persuaded. Article 222 of the
RPC reads:
Officers included in the preceding provisions. -- The
provisions of this chapter shall apply to private
individuals who, in any capacity whatever, have
charge of any insular, provincial or municipal funds,
revenues, or property and to any administrator or
depository of funds or property attached, seized or
deposited by public authority, even if such property
belongs to a private individual.

Legislative intent is determined principally from

the language of a statute. Where the language of a
statute is clear and unambiguous, the law is applied
according to its express terms, and interpretation
would be resorted to only where a literal interpretation
would be either impossible or absurd or would lead to
an injustice.[42] This is particularly observed in the
interpretation of penal statutes which must be
construed with such strictness as to carefully
safeguard the rights of the defendant x x x. [43] The
language of the foregoing provision is clear. A private
individual who has in his charge any of the public
funds or property enumerated therein and commits
any of the acts defined in any of the provisions of
Chapter Four, Title Seven of the RPC, should likewise
be penalized with the same penalty meted to erring
public officers. Nowhere in this provision is it
expressed or implied that a private individual falling
under said Article 222 is to be deemed a public officer.
After a thorough review of the case at bench, the
Court thus finds petitioner Alfredo Azarcon and his coaccused Jaime Ancla to be both private individuals
erroneously charged before and convicted by
Respondent Sandiganbayan which had no jurisdiction
over them. The Sandiganbayans taking cognizance of
this case is of no moment since (j)urisdiction cannot
be conferred by x x x erroneous belief of the court that
it had jurisdiction.[44] As aptly and correctly stated by
the petitioner in his memorandum:

From the foregoing discussion, it is evident that the

petitioner did not cease to be a private individual
when he agreed to act as depositary of the garnished
dump truck. Therefore, when the information charged
him and Jaime Ancla before the Sandiganbayan for
malversation of public funds or property, the
prosecution was in fact charging two private
individuals without any public officer being similarly
charged as a co-conspirator. Consequently, the
Sandiganbayan had no jurisdiction over the
controversy and therefore all the proceedings taken
below as well as the Decision rendered by
Respondent Sandiganbayan, are null and void for
lack of jurisdiction.[45]
WHEREFORE, the questioned Resolution and
Decision
of
the
Sandiganbayan
are
hereby SET ASIDE and declared NULL and VOID for
lack of jurisdiction. No costs.
SO ORDERED.

FERNANDO, J.:

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-25133

September 28, 1968

S/SGT. JOSE SANTIAGO, petitioner-appellant,

vs.
LT. COL. CELSO ALIKPALA, ET AL., respondentsappellees.
Floro A. Sarmiento and Noe Maines for petitionerappellant.
Cuadrato Palma and the Office of the Solicitor
General for respondents-appellees.

The validity of a court-martial proceeding was

challenged in the lower court on due process grounds
to show lack of jurisdiction. Petitioner, a sergeant in
the Philippine Army and the accused in a court-martial
proceeding, through a writ of certiorari and prohibition,
filed on April 17, 1963, with the lower court, sought to
restrain respondents, the officers, constituting the
court-martial, that was then in the process of trying
petitioner for alleged violation of two provisions of the
Articles of War, from continuing with the proceedings
on the ground of its being without jurisdiction. There
was likewise a plea for a restraining order, during the
pendency of his petition, but it was unsuccessful.
No response, either way, was deemed necessary by
the then Presiding Judge of the lower court, now
Justice Nicasio Yatco of the Court of Appeals, as
petitioner had, in the meanwhile, been convicted by
the court-martial. The lower court verdict, rendered on
September 16, 1963, was one of dismissal, as in its
opinion, "this case had already become moot and
academic ... ."
An appeal was taken to us, the same due process
objections being raised. We think that the question
before us is of such import and significance that an
easy avoidance through the technicality of the "moot
and academic" approach hardly recommends itself.

For reasons to be more fully set forth, we find that

such court-martial was not lawfully convened, and,
consequently, devoid of jurisdiction. Accordingly, we
reverse the lower court.
There was a stipulation of facts submitted to the lower
court on July 10, 1963, to the following effect: "That
the arraignment of the petitioner on December 17,
1962 was for the purpose of avoiding prescription
pursuant to Article of War 38 of one of the offenses
with which the accused is charged since, as charged,
same was allegedly committed on or about December
18, 1960; That prior to the said arraignment, no
written summons or subpoena was issued addressed
to the petitioner or his counsel, informing them of said
arraignment; That instead of said written summons or
subpoena Col. Eladio Samson, Constabulary Staff
Judge Advocate called up First Sergeant Manuel
Soriano at the Headquarters II Philippine
Constabulary Zone, Camp Vicente Lim, Canlubang,
Laguna on December 16, 1962 by telephone with
instructions to send the petitioner to HPC, Camp
Crame, Quezon City, under escort, for arraignment
and only for arraignment; That upon arrival in HPC,
the petitioner was directed to proceed to the PC
Officer's Clubhouse, where a General Court-Martial
composed of the respondents, created to try the case
of 'People vs. Capt. Egmidio Jose, for violation of
Articles of War 96 and 97', pursuant to paragraph 10,
Special Order No. 14, Headquarters Philippine
Constabulary, dated 18 July 1962, ..., was to resume,
as scheduled, the trial of 'People vs. Pfc. Numeriano

Ohagan, for violation of Articles of War 64, 85, and

97'; That it was only at the time (December 17, 1962)
that petitioner learned that he will be arraigned for
alleged violation of Articles of War 85 and 97, after
being informed by one of the respondents, Capt.
Cuadrato Palma as Trial Judge Advocate why he was
there; That prior to that arraignment on December 17,
1962 there was no special order published by the
Headquarters Philippine Constabulary creating or
directing the General Court-Martial composed of the
respondents to arraign and try the case against the
petitioner, there however was already an existing
court trying another case; That the respondents relied
on the first indorsement of the Acting Adjutant
General, HPC, Camp Crame, Quezon City, dated
December 14, 1962 and addressed to the Trial Judge
Advocate of the General Court-martial ... directing the
said Trial Judge Advocate to refer the case against
petitioner to the above-mentioned court, ...; That the
above paragraph 10, Special Order No. 14 dated 18
July 1962, does not contain the phrase 'and such
other cases which may be referred to it,' but however
said orders were amended only on 8 January 1963, to
include such phrase, ... ." 1
It was further stipulated that petitioner's counsel did
object to his arraignment asserting that a general
court-martial then convened was without jurisdiction,
as there was no special order designating
respondents to compose a general court-martial for
the purpose of trying petitioner, as petitioner was not
furnished a copy of the charge sheet prior to his

arraignment as required in the Manual for CourtMartial, except on the very day thereof, and as there
was no written summons or subpoena served on
either the petitioner, as accused, or the counsel.
Respondents, acting as the general court-martial,
overruled the above objections, and the Trial Judge
Advocate was then ordered to proceed to read the
charges and specifications against petitioner over the
vigorous objections of counsel. It was shown,
likewise, in the stipulation of facts, that the case,
having been postponed to February 21, 1963,
petitioner's counsel had in the meanwhile complained
to the Chief of Constabulary against the proceedings
on the ground of its nullity, and sought to have
respondents restrained from continuing with the trial
of petitioner due to such lack of jurisdiction but the
Chief of Constabulary ruled that he could not act on
such complaint until the records of the trial were
forwarded to him for review. With such a ruling, and
with the denial of two other motions by petitioner upon
the court-martial being convened anew on February
21, 1963, one to invalidate his arraignment on
December 17, 1962, and the other to quash the
complaint based on the denial of due process and
lack of jurisdiction, the present petition
for certiorari and prohibition was filed with the lower
court. 2
As above noted, the lower court dismissed the petition
due to its belief that, petitioner having been convicted
in the meanwhile, there being no restraining order, the
matter had become moot and academic. As was set

forth earlier, we differ, the alleged lack of jurisdiction

being too serious a matter to be thus summarily
ignored.
The firm insistence on the part of petitioner that the
general court-martial lacks jurisdiction on due process
grounds, cannot escape notice. The basic objection
was the absence of a special order "designating
respondents to compose a general court-martial to
convene and try the case of petitioner; ... ." It was
expressly stipulated that the respondents were
convened to try the case of a certain Capt. Egmidio
Jose and not that filed against petitioner. As a matter
of fact, the opening paragraph of the stipulation of
facts made clear that he was arraigned on December
17, 1962 by respondents as a general court-martial
appointed precisely to try the above Capt. Jose solely
"for the purpose of avoiding prescription pursuant to
Article of War 38 of one of the offenses with which the
accused is charged ... ."
Is such a departure from what the law and
regulations 3 prescribe offensive to the due process
clause? If it were, then petitioner should be sustained
in his plea for a writ of certiorari and prohibition, as
clearly the denial of the constitutional right would oust
respondents of jurisdiction, even on the assumption
that they were vested with it originally. Our decisions
to that effect are impressive for their unanimity.
In Harden v. The Director of Prisons, 4 Justice Tuason,
speaking for the Court, explicitly announced that

"deprivation of any fundamental or constitutional

rights" justify a proceeding for habeas corpus on the
ground of lack of jurisdiction. Abriol v. Homeres 5 is
even more categorical. In that case, the action of a
lower court, denying the accused the opportunity to
present proof for his defense, his motion for dismissal
failing, was held by this Court as a deprivation of his
right to due process. As was made clear by the
opinion of Justice Ozaeta: "No court of justice under
our system of government has the power to deprive
him of that right. If the accused does not waive his
right to be heard but on the contrary as in the
instant case invokes the right, and the court denies
it to him, that court no longer has jurisdiction to
proceed; it has no power to sentence the accused
without hearing him in his defense; and the sentence
thus pronounced is void and may be collaterally
attacked in a habeas corpus proceeding." 6
A recent decision rendered barely a month ago,
in Chavez v. Court of Appeals, 7 is even more in point.
Here, again, habeas corpus was relied upon by
petitioner whose constitutional rights were not
respected, but, in addition, the special civil actions
of certiorari and mandamus were likewise availed of,
in view of such consequent lack of jurisdiction. The
stress though in the opinion of Justice Sanchez was
on habeas corpus. Thus: "The course which petitioner
takes is correct. Habeas corpus is a high prerogative
writ. It is traditionally considered as an exceptional
remedy to release a person whose liberty is illegally
restrained such as when the accused's constitutional

rights are disregarded. Such defect results in the

absence or loss of jurisdiction and therefore
invalidates the trial and the consequent conviction of
the accused whose fundamental right was violated.
That void judgment of conviction may be challenged
by collateral attack, which precisely is the function
of habeas corpus. This writ may issue even if another
remedy which is less effective may be availed of by
the defendant."
The due process concept rightfully referred to as "a
vital and living force in our jurisprudence" calls for
respect and deference, otherwise the governmental
action taken suffers from a fatal infirmity. As was so
aptly expressed by the then Justice, now Chief
Justice, Concepcion: "... acts of Congress, as well as
those of the Executive, can deny due process only
under pain of nullity, and judicial proceedings suffering
from the same flaw are subject to the same sanction,
any statutory provision to the contrary
notwithstanding." 8
The crucial question, then, is whether such failure to
comply with the dictates of the applicable law insofar
as convening a valid court martial is concerned,
amounts to a denial of due process. We hold that it
does. There is such a denial not only under the broad
standard which delimits the scope and reach of the
due process requirement, but also under one of the
specific elements of procedural due process.

It is to be admitted that there is no controlling and

precise definition of due process which, at the most
furnishes a standard to which governmental action
should conform in order to impress with the stamp of
validity any deprivation of life, liberty or property. A
recent decision of this Court, in Ermita-Malate Hotel v.
Mayor of Manila 9treated the matter thus: "It is
responsiveness to the supremacy of reason,
obedience to the dictates of justice. Negatively put,
arbitrariness is ruled out and unfairness avoided. To
satisfy the due process requirement, official action, to
paraphrase Cardozo, must not outrun the bounds of
reason and result in sheer oppression. Due process is
thus hostile to any official action marred by lack of
reasonableness. Correctly has it been identified as
freedom from arbitrariness. It is the embodiment of
the sporting idea of fair play. It exacts fealty 'to those
strivings for justice' and judges the act of officialdom
of whatever branch 'in the light of reason drawn from
considerations of fairness that reflect [democratic]
traditions of legal and political thought.'"
Nor is such a reliance on the broad reach of due
process the sole ground on which the lack of
jurisdiction of the court-martial convened in this case
could be predicated. Recently, stress was laid anew
by us on the first requirement of procedural due
process, namely, the existence of the court or tribunal
clothed with judicial, or quasi-judicial, power to hear
and determine the matter before it. 10 This is a
requirement that goes back to Banco Espaol-Filipino
v. Palanca, a decision rendered half a century ago. 11

There is the express admission in the statement of

facts that respondents, as a court-martial, were not
convened to try petitioner but someone else, the
action taken against petitioner being induced solely by
a desire to avoid the effects of prescription; it would
follow then that the absence of a competent court or
tribunal is most marked and undeniable. Such a
denial of due process is therefore fatal to its assumed
authority to try petitioner. The writ ofcertiorari and
prohibition should have been granted and the lower
court, to repeat, ought not to have dismissed his
petition summarily.
The significance of such insistence on a faithful
compliance with the regular procedure of convening
court-martials in accordance with law cannot be overemphasized. As was pointed out by Justice Tuason
in Ruffy v. The Chief of Staff, Philippine
Army: 12 "Courts-martial are agencies of executive
character, and one of the authorities for the ordering
of courts-martial has been held to be attached to the
constitutional functions of the President as
Commander-in-Chief, independently of legislation.
(Winthrop's Military Law and Precedents, 2d Edition,
p. 49.) Unlike courts of law, they are not a portion of
the judiciary." Further on, his opinion continues: "Not
belonging to the judicial branch of the government, it
follows that courts-martial must pertain to the
executive department; and they are in fact simply
instrumentalities of the executive power, provided by
Congress for the President as Commander-in-Chief,
to aid him in properly commanding the army and navy

and enforcing discipline therein, and utilized under his

orders or those of his authorized military
representatives." 13
It is even more indispensable, therefore, that such
quasi-judicial agencies, clothed with the solemn
responsibility of depriving members of the Armed
Forces of their liberties, even of their lives, as a
matter of fact, should be held all the more strictly
bound to manifest fidelity to the fundamental concept
of fairness and the avoidance of arbitrariness for
which due process stands as a living vital principle. If
it were otherwise, then, abuses, even if not intended,
might creep in, and the safeguards so carefully
thrown about the freedom of an individual, ignored or
disregarded. Against such an eventuality, the vigilance
of the judiciary furnishes a shield. That is one of its
grave responsibilities. Such a trust must be lived up
to; such a task cannot be left undone.
WHEREFORE, the order of respondent Court of
September 6, 1963, dismissing the petition
for certiorari and prohibition is reversed, and the writ
of certiorari and prohibition granted, annulling the
proceedings as well as the decision rendered by
respondents as a court-martial and perpetually
restraining them from taking any further action on the
matter. Without pronouncement as to costs.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-19180

October 31, 1963

NATIONAL DEVELOPMENT COMPANY, ET

AL., petitioners-appellees,
vs.
THE COLLECTOR OF CUSTOMS OF
MANILA, respondent-appellant.
Ross, Selph and Carrascoso for petitionersappellees.
Office of the Solicitor General for respondentappellant.
BAUTISTA ANGELO, J.:

The National Development Company which is

engaged in the shipping business under the name of
"Philippine National Lines" is the owner of steamship
"S.S. Doa Nati" whose local agent in Manila is A. V.
Rocha. On August 4, 1960, the Collector of Customs
sent a notice to C.F. Sharp & Company as alleged
operator of the vessel informing it that said vessel
was apprehended and found to have committed a
violation of the customs laws and regulations in that it
carried an unmanifested cargo consisting of one RCA
Victor TV set 21" in violation of Section 2521 of the
Tariff and Customs Code. Inserted in said notice is a
note of the following tenor: "The above article was
being carried away by Dr. Basilio de Leon y Mendez,
official doctor of M/S "Doa Nati" who readily admitted
ownership of the same." C.F. Sharp & Company was
given 48 hours to show cause why no administrative
fine should be imposed upon it for said violation.
C.F. Sharp & Company, not being the agent or
operator of the vessel, referred the notice to A. V.
Rocha, the agent and operator thereof, who on
August 8, 1960, answered the notice stating, among
other things, that the television set referred to therein
was not a cargo of the vessel and, therefore, was not
required by law to be manifested. Rocha stated
further: "If this explanation is not sufficient, we request
that this case be set for investigation and hearing in
order to enable the vessel to be informed of the
evidence against it to sustain the charge and to
present evidence in its defense."

The Collector of Customs replied to Rocha on August

9, 1960 stating that the television set in question was
a cargo on board the vessel and that he does not find
his explanation satisfactory enough to exempt the
vessel from liability for violating Section 2521 of the
Tariff and Customs Code. In said letter, the collector
imposed a fine of P5,000.00 on the vessel and
ordered payment thereof within 48 hours with a threat
that he will deny clearance to said vessel and will
issue a warrant of seizure and detention against it if
the fine is not paid.
And considering that the Collector of Customs has
exceeded his jurisdiction or committed a grave abuse
of discretion in imposing the fine of P5,000.00 on the
vessel without the benefit of an investigation or
hearing as requested by A. V. Rocha, the National
Development Company, as owner of the vessel, as
well as A. V. Rocha as agent and operator thereof,
filed the instant special civil action of certiorari with
preliminary injunction before the Court of First
Instance of Manila against the official
abovementioned. The court, finding the petition for
injunction sufficient in form and substance, issued ex
parte the writ prayed for upon the filing of a bond in
the amount of P5,00.00.
Respondent set up the following special defenses: (1)
the court a quo has no jurisdiction to act on matters
arising from violations of the Customs Law, but the
Court of Tax Appeals; (2) assuming that it has,
petitioners have not exhausted all available

administrative remedies, one of which is to appeal to

the Commissioner of Customs; (3) the requirements
of administrative due process have already been
complied with in that the written notice given by
respondent to petitioner Rocha clearly specified the
nature of the violation complained of and that the
defense set up by Rocha constitute merely a legal
issue which does not require further investigation; and
(4) the investigation conducted by the customs
authorities showed that the television set in question
was unloaded by the ship's doctor without going thru
the custom house as required by law and was not
declared either in the ship's manifest or in the crew
declaration list.
On the basis of the stipulation of facts submitted by
the parties, the court a quo rendered decision setting
aside the ruling of respondent which imposes a fine of
P5,000.00 on the vessel Doa Nati payable within 48
hours from receipt thereof. The court stated that said
ruling appears to be unjust and arbitrary because the
party affected has not been accorded the investigation
it requested from the Collector of Customs.
Respondent interposed the present appeal.
When the customs authorities found that the vessel
Doa Nati carried on board an unmanifested cargo
consisting of one RCA Victor TV set 21" in violation of
Section 2521 of the Tariff and Customs Code,
respondent sent a written notice to C. F. Sharp &
Company, believing it to be the operator or agent of

the vessel, and when the latter referred the notice to

A. V. Rocha, the real operator of the vessel, for such
step as he may deem necessary to be taken the latter
answered the letter stating that the television set was
not cargo and so was not required by law to be
manifested, and he added to his answer the following:
"If this explanation is not sufficient, we request that
this case be set for investigation and hearing in order
to enable the vessel to be informed of the evidence
against it to sustain the charge and to present
evidence in its defense. "Respondent, however,
replied to this letter saying that said television was a
cargo within the meaning of the law and so he does
not find his explanation satisfactory and then and
there imposed on the vessel a fine of P5,00.00.
Respondent even went further. He ordered that said
fine be paid within 48 hours from receipt with a threat
that the vessel would be denied clearance and a
warrant of seizure would be issued if the fine will not
be paid. Considering this to be a grave abuse of
discretion, petitioners commenced the present action
for certiorari before the court a quo.
We find this action proper for it really appears that
petitioner Rocha was not given an opportunity to
prove that the television set complained of is not a
cargo that needs to be manifested as required by
Section 2521 of the Tariff and Customs Code. Under
said section, in order that an imported article or
merchandise may be considered a cargo that should
be manifested it is first necessary that it be so
established for the reason that there are other effects

that a vessel may carry that are excluded from the

requirement of the law, among which are the personal
effects of the members of the crew. The fact that the
set in question was claimed by the customs
authorities not to be within the exception does not
automatically make the vessel liable. It is still
necessary that the vessel, its owner or operator, be
given a chance to show otherwise. This is precisely
what petitioner Rocha has requested in his letter. Not
only was he denied this chance, but respondent
collector immediately imposed upon the vessel the
huge fine of P5,000.00. This is a denial of the
elementary rule of due process.
True it is that the proceedings before the Collector of
Customs insofar as the determination of any act or
irregularity that may involve a violation of any customs
law or regulation is concerned, or of any act arising
under the Tariff and Customs Code, are not judicial in
character, but merely administrative, where the rules
of procedure are generally disregarded, but even in
the administrative proceedings due process should be
observed because that is a right enshrined in our
Constitution. The right to due process is not merely
statutory. It is a constitutional right. Indeed, our
Constitution provides that "No person shall be
deprived of life, liberty, or property without due
process of law", which clause epitomize the principle
of justice which hears before it condemns, which
proceeds upon inquiry and renders judgment only
after trial. That this principle applies with equal force

to administrative proceedings was well elaborated

upon by this Court in the Ang Tibay case as follows:
... The fact, however, that the Court of
Industrial Relations may be said to be free
from the rigidity of certain procedural
requirements does not mean that it can, in
justiciable case coming before it, entirely
ignore or disregard the fundamental and
essential requirements of due process in trials
and investigations of an administrative
character.
... There are cardinal primary rights which
must be respected even in proceedings of this
character. The first of these rights is the right
to a hearing, which includes the right of the
party interested or affected to present his own
case and submit evidence in support thereof.
Not only must the party be given an
opportunity to present his case and to adduce
evidence tending to establish the rights which
he asserts but the tribunal must consider the
evidence presented. While the duty to
deliberate does not impose the obligation to
decide right, it does imply a necessity which

cannot be disregarded, namely, that of having

something to support its decision. No only
must there be some evidence to support a
finding or conclusion, but the evidence must
be substantial. The decision must be rendered
on the evidence presented at the hearing, or
at least contained in the record and disclosed
to the parties affected. The Court of Industrial
Relations or any of its judges, therefore, must
act on its or his own independent
consideration of the law and facts of the
controversy, and not simply accept the views
of a subordinate in arriving at a decision. The
Court of Industrial Relations should, in all
controversial questions, render its decision in
such a manner that the parties to the
proceeding can know the various issues
involved, and the reason for the decision
rendered. The performance of this duty is
inseparable from the authority conferred upon
it. (Ang Tibay, et al. v. The Court of Industrial
Relations, et al., 40 O.G., No. 11, Supp. p. 29).
There is, therefore, no point in the contention that the
court a quo has no jurisdiction over the present case

because what is here involved is not whether the

imposition of the fine by the Collector of Customs on
the operator of the ship is correct or not but whether
he acted properly in imposing said fine without first
giving the operator an opportunity to be heard. Here
we said that he acted improvidently and so the action
taken against him is in accordance with Rule 67 of our
Rules of Court.
Another point raised is that petitioners have brought
this action prematurely for they have not yet
exhausted all the administrative remedies available to
them, one of which is to appeal the ruling to the
Commissioner of Customs. This may be true, but
such step we do not consider a plain, speedy or
adequate remedy in the ordinary course of law as
would prevent petitioners from taking the present
action, for it is undisputed that respondent collector
has acted in utter disregard of the principle of due
process.
WHEREFORE, the decision appealed from is
affirmed. No costs.