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G.R. No.

L-34526 August 9, 1988


HIJO PLANTATION INC., DAVAO FRUITS CORPORATION, TWIN RIVERS PLANTATION, INC. and MARSMAN &
CO., INC., for themselves and in behalf of other persons and entities similarly situated, petitioners,
vs.
CENTRAL BANK OF THE PHILIPPINES, respondent.

PARAS, J.:
This is a petition for certiorari and prohibition which seeks: (1) to declare Monetary Board Resolution No. 1995, series of
1971, as null and void; (2) to prohibit the Central Bank from collecting the stabilization tax on banana exports shipped
during the period January 1, 1972 to June 30, 1982; and (3) a refund of the amount collected as stabilization tax from the
Central Bank.
The facts of this case as culled from the records are as follows:
Hijo Plantation, Inc., Davao Fruits Corporation, Twin Rivers Plantation, Inc. and Marsman Plantation (Manifestation,
Rollo, P. 18), collectively referred to herein as petitioners, are domestic corporations duly organized and existing under
the laws of the Philippines, all of which are engaged in the production and exportation of bananas in and from Mindanao.
Owing to the difficulty of determining the exchange rate of the peso to the dollar because of the floating rate and the
promulgation of Central Bank Circular No. 289 which imposes an 80% retention scheme on all dollar earners, Congress
passed Republic Act No. 6125 entitled "an act imposing STABILIZATION TAX ON CONSIGNMENTS ABROAD TO
ACCELERATE THE ECONOMIC DEVELOPMENT OF THE PHILIPPINES AND FOR OTHER PURPOSES," approved
and made effective on May 1, 1970 (Comment on Petition, Rollo, p, 32), to eliminate the necessity for said circular and to
stabilize the peso. Among others, it provides as follows:
SECTION 1. There shall be imposed, assessed and collected a stabilization tax on the gross F.O.B.
peso proceeds, based on the rate of exchange prevailing at the time of receipt of such proceeds, whether partial or total,
of any exportation of the following products in accordance with the following schedule:
a. In the case of logs, copra, centrifugal sugar, and copper ore and concentrates:
Ten per centum of the F.O.B. peso proceeds of exports received on or after the date of effectivity of this Act to June
thirty, nineteen hundred seventy one;
Eight per centum of the F.O.B. peso proceeds of exports received from July first, nineteen hundred
seventy-one to June thirty, nineteen hundred seventy-two;
Six per centum of the F.O.B. peso proceeds of exports received from July first, nineteen hundred
seventy two to June thirty, nineteen hundred seventy- three; and
Four per centum of the F.O.B. peso proceeds of exports received from
July first, nineteen hundred seventy-three to June thirty, nineteen hundred seventy-four.
b. In the case of molasses, coconut oil, dessicated coconut, iron ore
and concentrates, chromite ore and concentrates, copra meal or cake, unmanufactured abaca, unmanufactured tobacco,
veneer core and sheets, plywood (including plywood panels faced with plastics), lumber, canned pineapples, and bunker
fuel oil;
Eight per centum of the F.O.B. peso proceeds of exports shipped on or
after the date of effectivity of this Act to June thirty, nineteen hundred seventy-one;
Six per centum of the F.O.B. peso proceeds of exports shipped from
July first, nineteen hundred seventy one to June thirty nineteen hundred seventy- two;
Four per centum of the F.O.B. peso proceeds of exports shipped from
July first, nineteen hundred seventy-two to June thirty nineteen hundred seventy-three; and
Two per centum of the F.O.B. peso proceeds of exports shipped from
July first, nineteen hundred seventy three to June thirty nineteen hundred seventy-four.
Any export product the aggregate annual F.O.B. value of which shall exceed five million United States
dollars in any one calendar year during the effectivity of this Act shall likewise be subject to the rates of
tax in force during the fiscal years following its reaching the said aggregate value. (Emphasis supplied).
During the first nine (9) months of calendar year 1971, the total banana export amounted to an annual aggregate F.O.B.
value of P8,949,000.00 (Answer, Rollo, p. 73) thus exceeding the aggregate F.O.B. value of five million United States
Dollar, bringing it within the ambit of Republic Act No. 6125. Consequently, the banana industry was in a dilemma as to
when the stabilization tax was to become due and collectible from it and under what schedule of Section 1 (b) of
Republic Act 6125 should said tax be collected. Accordingly, petitioners through their counsel, by letter dated November
5, 1971, sought the authoritative pronouncement of the Central Bank (herein referred to as respondent), therein
advancing the opinion that the stabilization tax does not become due and collectible from the petitioners until July 1,
1972 at the rate of 4% of the F.O.B. peso proceeds of the exports shipped from July 1, 1972 to June 30,1973. Replying
by letter dated December 17,1971 (Rollo, p. 11), the Central Bank called attention to Monetary Board Resolution No.
1995 dated December 3, 1971 which clarified that:
1) For exports of bananas shipped during the period from January 1, 1972 to June 30, 1972; the
stabilization tax shall be at the rate of 6%;
2) For exports of bananas shipped during the period from July 1, 1972 to June 30, 1973, the stabilization
tax shall be at the rate of 4%; and
3) For exports of bananas shipped during the period from July 1, 1973, to June 30, 1974, the
stabilization tax shall be at the rate of 2%."
Contending that said Board Resolution No. 1995 was manifestly contrary to the legislative intent, petitioners sought a
reconsideration of said Board Resolution by letter dated December 27, 1971 (Rollo, p. 12) which request for
reconsideration was denied by the respondent, also by letter dated January 20, 1972 (Rollo, p. 24). With the denial of
petitioners' request for reconsideration, respondent thru its agent Bank, Rizal Commercial Banking Corporation has been
collecting from the petitioners who have been forced to pay under protest, such stabilization tax.
Petitioners view respondent's act as a clear violation of the provision of Republic Act No. 6125, and as an act in excess
of its jurisdiction, hence, this petition.
The sole issue in this case is whether or not respondent acted with grave abuse of discretion amounting to lack of
jurisdiction when it issued Monetary Board Resolution No. 1995, series of 1971 which in effect reaffirmed Central Bank
Circular No. 309, enacted pursuant to Monetary Board Resolution No. 1179.
There is here no dispute that the banana industry is liable to pay the stabilization tax prescribed under Republic Act No.
1995, it being the admission of both parties, that the Industry has indeed reached and for the first time in the calendar
year 1971, a total banana export exceeding the aggregate annual F.O.B. value of five million United States dollars. The
crux of the controversy, however, is the manner of implementation of Republic Act No. 6125.
Section 1 of R.A. 6125 clearly provides as follows:
An export product the aggregate annual F.O.B. value of which shall exceed five million US dollars in any
one calendar year during the effectivity of the act shall likewise be subject to the rates of tax in force
during the fiscal year following its reaching the said aggregate value."
Petitioners contend that the stabilization tax to be collected from the banana industry does not become due and
collectible until July 1, 1972 at the rate of 4% of the F.O.B. peso proceeds of the export shipped from July 1, 1972 to
June 30,1973. They further contend that respondent gave retroactive effect to the law (RA 6125) by ruling in Monetary
Board Resolution No. 1995 dated December 3, 1 971, that the export stabilization tax on banana industry would start to
accrue on January 1, 1972 at the rate of 6% of the F.O.B. peso proceeds of export shipped from July 1, 1971 to June 30,
1972 (Rollo, pp. 3-4).
Respondent, on the other hand, contends that the aforecited provision of RA 6125 merely prescribes the rates that may
be imposed but does not provide when the tax shall be collected and makes no reference to any definite fixed period
when the tax shall begin to be collected (Rollo, pp. 77-78).
There is merit in this petition.
In the very nature of things, in many cases it becomes impracticable for the legislative department of the Government to
provide general regulations for the various and varying details for the management of a particular department of the
Government. It therefore becomes convenient for the legislative department of the government, by law, in a most general
way, to provide for the conduct, control, and management of the work of the particular department of the government; to
authorize certain persons, in charge of the management and control of such department (United States v. Tupasi Molina,
29 Phil. 119 [19141).
Such is the case in RA 6125, which provided in its Section 6, as follows:
All rules and regulations for the purpose of carrying out the provisions of the act shall be promulgated by
the Central Bank of the Philippines and shall take effect fifteen days after publication in three
newspapers of general circulation throughout the Philippines, one of which shall be in the national
language.
Such regulations have uniformly been held to have the force of law, whenever they are found to be in consonance and in
harmony with the general purposes and objects of the law. Such regulations once established and found to be in
conformity with the general purposes of the law, are just as binding upon all the parties, as if the regulation had been
written in the original law itself (29 Phil. 119, Ibid). Upon the other hand, should the regulation conflict with the law, the
validity of the regulation cannot be sustained (Director of Forestry vs. Muroz 23 SCRA 1183).
Pursuant to the aforecited provision, the Monetary Board issued Resolution No. 1179 which contained the rules and
regulations for the implementation of said provision which Board resolution was subsequently embodied in Central Bank
Circular No. 309, dated August 10, 1970 (duly published in the Official Gazette, Vol. 66, No. 34, August 24, 1940, p.
7855 and in three newspapers of general circulation throughout the Philippines namely, the Manila Times, Manila
Chronicle and Manila Daily Bulletin). Section 3 of Central Bank Circular No. 309, "provides that the stabilization tax shall
begin to apply on January first following the calendar year during which such export products shall have reached the
aggregate annual F.O.B. value of more than $5 million and the applicable tax rates shall be the rates prescribed in
schedule (b) of Section 1 of RA No. 6125 for the fiscal year following the reaching of the said aggregate value." Central
Bank Circular No. 309 was subsequently reaffirmed in Monetary Board Resolution No. 1995 herein assailed by
petitioners for being null and void (Rollo, pp. 97- 98).
In its comment (Rollo, p. 40), respondent argues that the request for authoritative pronouncement of petitioners was
made because there was no express provision in Section 1 of RA 6125 which categorically states, when the stabilization
tax shall begin to accrue on those aggregate annual F.O.B. values exceeding five (5) million United States dollars in any
one calendar year during the effectivity of said act. For which reason, the law itself authorized it under Section 7 to
promulgate rules and regulations to carry out the provisions of said law.
In petitioner's reply (Rollo, p. 154) they argue that since the Banana Exports reached the aggregate annual F.O.B. value
of US $5 million in August 1971, the stabilization tax on banana should be imposed only on July 1, 1972, the fiscal year
following the calendar year during which the industry attained the $5 million mark. Their argument finds support in the
very language of the law and upon congressional record where a clarification on the applicability of the law was
categorically made by the then Senator Aytona who stated that the tax shall be applicable only after the $5 million
aggregate value is reached, making such tax prospective in application and for a period of one year- referring to the
fiscal year (Annex 8, Comment of Respondent; Rollo, p. 60). Clearly such clarification was indicative of the legislative
intent. Further, they argue that respondent bank through the Monetary Board clearly overstepped RA 6125 which
empowered it to promulgate rules and regulations for the purpose of carrying out the provisions of said act, because
while Section 1 of the law authorizes it to levy a stabilization tax on petitioners only in the fiscal year following their
reaching the aggregate annual F.O.B. value of US $5 million, that is, the fiscal year July 1, 1972 to June 30, 1973, at a
tax rate of 4% of the F.O.B. peso proceeds, respondent in gross violation of the law, instead issued Resolution No. 1995
which impose a 6% stabilization tax for the calendar year January 1, 1972 to June 30, 1972, which obviously is in excess
of its jurisdiction. It was further argued that in directing its agent bank to collect the stabilization tax in accordance with
Monetary Board Resolution No. 1995, it acted whimsically and capriciously. (Rollo, p. 155).
It will be observed that while Monetary Board Resolution No. 1995 cannot be said to be the product of grave abuse of
discretion but rather the result of respondent's overzealous desire to carry into effect the provisions of RA 6125, it is
evident that the Board acted beyond its authority under the law and the Constitution. Hence, the petition for certiorari and
prohibition in the case at bar, is proper.
Moreover, there is no dispute that in case of discrepancy between the basic law and a rule or regulation issued to
implement said law, the basic law prevails because said rule or regulation cannot go beyond the terms and provisions of
the basic law (People vs. Lim, 108 Phil. 1091). Rules that subvert the statute cannot be sanctioned (University of Sto.
Tomas v. Board of Tax Appeals, 93 Phil. 376; Del Mar v. Phil. Veterans Administration, 51 SCRA 340). Except for
constitutional officials who can trace their competence to act to the fundamental law itself, a public official must locate to
the statute relied upon a grant of power before he can exercise it. Department zeal may not be permitted to outrun the
authority conferred by statute (Radio Communications of the Philippines, Inc. v. Santiago L-29236, August 21, 1974, 58
SCRA 493; cited in Tayug Rural Bank v. Central Bank, L-46158, November 28,1986,146 SCRA 120,130).
PREMISES CONSIDERED, this petition is hereby GRANTED.
SO ORDERED.
G.R. No. L-46158 November 28, 1986
TAYUG RURAL BANK, plaintiff-appellee,
vs.
CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.
Bengzon, Bengzon, Villaroman & De Vera Law Office for plaintiff-appellee.
Evangelista, Bautista & Valdehuesa Law Office for defendant-appellant.

PARAS, J.:p
Submitted on May 20, 1977 for decision by this Court is this appeal from the decision dated January 6, 1971 rendered by
the Court of First Instance of Manila, Branch III in Civil Case No. 76920, the decretal portion of which states as follows:
WHEREFORE, judgment is rendered for the plaintiff on the complaint and the defendant is ordered to
further credit the plaintiff the amounts collected as 10% penalty in the sum of P19,335.88 or up to July
15, 1969 and to refrain from collecting the said 10% penalty on the remaining past due loans of plaintiff
with the defendant.
With respect to defendant's counterclaim, judgment is hereby rendered against the plaintiff and the
defendant is ordered to pay the Central Bank of the Philippines the outstanding balance of its past
overdue accounts in the sum of P444,809,45 plus accrued interest at the rate of 1/2 of 1 % per annum
with respect to the promissory notes (Annexes 1 to 1-E of defendant's Answer) and 2-1/2% per annum
with respect to the promissory notes (Annexes 1-f to 1-i of the Answer). From this amount shall be
deducted the sum of P19,335.88 collected as 10% penalty.
The facts of the case based on the parties' stipulation of facts (Record on Appeal p. 67), are as follows:
Plaintiff-Appellee, Tayug Rural Bank, Inc., is a banking corporation in Tayug, Pangasinan. During the period from
December 28, 1962 to July 30, 1963, it obtained thirteen (13) loans from Defendant-Appellant, Central Bank of the
Philippines, by way of rediscounting, at the rate of 1/2 of 1% per annum from 1962 to March 28, 1963 and thereafter at
the rate of 2-1/2% per anum. The loans, amounting to P813,000.00 as of July 30, 1963, were all covered by
corresponding promissory notes prescribing the terms and conditions of the aforesaid loans (Record on Appea, pp. 15-
53). As of July 15, 1969, the outstanding balance was P 444,809.45 (Record on Appeal, p. 56).
On December 23, 1964, Appellant, thru the Director of the Department of Loans and Credit, issued Memorandum
Circular No. DLC-8, informing all rural banks that an additional penalty interest rate of ten per cent (10%) per annum
would be assessed on all past due loans beginning January 4, 1965. Said Memorandum Circular was actually enforced
on all rural banks effective July 4, 1965.
On June 27, 1969, Appellee Rural Bank sued Appellant in the Court of First Instance of Manila, Branch III, to recover the
10% penalty imposed by Appellant amounting to P16,874.97, as of September 27, 1968 and to restrain Appellant from
continuing the imposition of the penalty. Appellant filed a counterclaim for the outstanding balance and overdue accounts
of Appellee in the total amount of P444,809.45 plus accrued interest and penalty at 10% per annum on the outstanding
balance until full payment. (Record on Appeal, p. 13). Appellant justified the imposition of the penalty by way of
affirmative and special defenses, stating that it was legally imposed under the provisions of Section 147 and 148 of the
Rules and Regulations Governing Rural Banks promulgated by the Monetary Board on September 5, 1958, under
authority of Section 3 of Republic Act No. 720, as amended (Record on Appeal, p. 8, Affirmative and Special Defenses
Nos. 2 and 3).
In its answer to the counterclaim, Appellee prayed for the dismissal of the counterclaim, denying Appellant's allegations
stating that if Appellee has any unpaid obligations with Appellant, it was due to the latter's fault on account of its flexible
and double standard policy in the granting of rediscounting privileges to Appellee and its subsequent arbitrary and illegal
imposition of the 10% penalty (Record on Appeal, p. 57). In its Memorandum filed on November 11, 1970, Appellee also
asserts that Appellant had no basis to impose the penalty interest inasmuch as the promissory notes covering the loans
executed by Appellee in favor of Appellants do not provide for penalty interest rate of 10% per annum on just due loans
beginning January 4, 1965 (Record on Appeal p. 96).
The lower court, in its Order dated March 3, 1970, stated that "only a legal question has been raised in the pleadings"
and upholding the stand of plaintiff Rural Bank, decided the case in its favor. (Rollo, p. 34).
Appellant appealed the decision of the trial court to the Court of Appeals, for determination of questions of facts and of
law. However, in its decision promulgated April 13, 1977, the Court of Appeals, finding no controverted facts and taking
note of the statement of the lower court in its pre-trial Order dated March 3, 1970 that only a legal question has been
raised in the pleadings, (Record on Appeal, p. 61), ruled that the resolution of the appeal will solely depend on the legal
issue of whether or not the Monetary Board had authority to authorize Appellant Central Bank to impose a penalty rate of
10% per annum on past due loans of rural banks which had failed to pay their accounts on time and ordered the
certification of this case to this Court for proper determination (Rollo, pp. 34-35).
On April 20, 1977, the entire record of the case was forwarded to this Court (Rollo, p. 36). In the resolution of May 20,
1977, the First Division of this Court, ordered the case docketed and as already stated declared the same submitted for
decision (Rollo, p. 38).
In its Brief, Appellant assigns the following errors:
I. THE LOWER COURT ERRED IN HOLDING THAT IT IS BEYOND THE REACH OF
THE MONETARY BOARD TO METE OUT PENALTIES ON PAST DUE LOANS OF
RURAL BANKS ESPECIALLY SINCE NO PENAL CLAUSE HAS BEEN INCLUDED IN
THE PROMISSORY NOTES.
II. THE LOWER COURT ERRED IN HOLDING THAT THE IMPOSITION OF THE
PENALTY IS AN IMPAIRMENT OF THE OBLIGATION OF CONTRACT WITHOUT
DUE PROCESS.
III. THE LOWER COURT ERRED IN NOT FINDING JUDGMENT AGAINST PLAINTIFF
FOR 10% COST OF COLLECTION OF THE PROMISSORY NOTE AS PROVIDED
THEREIN.
It is undisputed that no penal clause has been included in the promissory notes. For this reason, the trial court is of the
view that Memorandum Circular DLC-8 issued on December 23, 1964 prescribing retroactive effect on all past due loans,
impairs the obligation of contract and deprives the plaintiff of its property without due process of law. (Record on Appel,
p. 40).
On the other hand appellant without opposing appellee's right against impairment of contracts, contends that when the
promissory notes were signed by appellee, it was chargeable with knowledge of Sections 147 and 148 of the rules and
regulations authorizing the Central Bank to impose additional reasonable penalties, which became part of the
agreement. (ibid).
Accordingly, the issue is reduced to the sole question as to whether or not the Central Bank can validly impose the 10%
penalty on Appellee's past overdue loans beginning July 4, 1965, by virtue of Memorandum Circular No. DLC-8 dated
December 23, 1964.
The answer is in the negative.
Memorandum Circular No. DLC-8 issued by the Director of Appellant's Department of Loans and Credit on December
23, 1964, reads as follows:
Pursuant to Monetary Board Resolution No. 1813 dated December 18, 1964, and in consonance with
Section 147 and 148 of the Rules and Regulations Governing Rural Banks concerning the responsibility
of a rural bank to remit immediately to the Central Bank payments received on papers rediscounted with
the latter including the loan value of rediscounted papers as they mature, and to liquidate fully its
maturing loan obligations with the Central Bank, personal checks, for purposes of repayment, shall
considered only after such personal checks shall have been honored at clearing.
In addition, rural banks which shall default in their loan obligations, thus incurring past due accounts with
the Central Bank, shall be assessed an additional penalty interest rate of ten per cent (10%) per annum
on such past due accounts with the Central Bank over and above the customary interest rate(s) at which
such loans were originally secured from the Central Bank. (Record on Appeal, p. 135).
The above-quoted Memorandum Circular was issued on the basis of Sections 147 and 148 of the Rules and Regulations
Governing Rural Banks of the Philippines approved on September 5, 1958, which provide:
Section 147. Duty of Rural Bank to turn over payment received for papers discounted or used for
collateral. — A Rural Bank receiving any payment on account of papers discounted or used for collateral
must turn the same over to the creditor bank before the close of the banking day next following the
receipt of payment, as long as the aggregate discounting on loan amount is not fully paid, unless the
Rural Bank substitutes the same with another eligible paper with at least the same or earlier maturity
and the same or greater value.
A Rural Bank failing to comply with the provisions of the preceding paragraph shall ipso facto lose its
right to the rediscounting or loan period, without prejudice to the Central Bank imposing additional
reasonable penalties, including curtailment or withdrawal of financial assistance.
Sec. 148. Default and other violations of obligation by Rural Bank, effect. — A Rural Bank becomes in
default upon the expiration of the maturity period of its note, or that of the papers discounted or used as
collateral, without the necessity of demand.
A Rural Bank incurring default, or in any other manner, violating any of the stipulations in its note, shall
suffer the consequences provided in the second paragraph of the preceding section. (Record on Appeal,
p. 136.)
The "Rules and Regulations Governing Rural Banks" was published in the Official Gazette, 55 O.G., on June 13, 1959,
pp. 5186-5289. It is by virtue of these same Rules that Rural Banks re-discount their loan papers with the Central Bank
at 2-1/2% interest per annum and in turn lend the money to the public at 12% interest per annum (Defendant's Reply to
Plaintiff's Memorandum, Record on Appeal, p. 130).
Appellant maintains that it is pursuant to Section 3 of R.A. No. 720, as amended, that the Monetary Board has adopted
the set of Rules and Regulations Governing Rural Banks. It reads:
SEC. 3. In furtherance of this policy, the Monetary Board of the Central Bank of the Philippines shall
formulate the necessary rules and regulations governing the establishment and operatives of Rural
Banks for the purpose of providing adequate credit facilities to small farmers and merchants, or to
cooperatives of such farmers or merchants and to supervise the operation of such banks.
The specific provision under the law claimed as basis for Sections 147 and 148 of the Rules and Regulations Governing
Rural Banks, that is, on Appellant's authority to extend loans to Rural Banks by way of rediscounting is Section 13 of
R.A. 720, as amended, which provides:
SEC. 13. In an emergency or when a financial crisis is imminent the Central Bank may give a loan to any
Rural Bank against assets of the Rural Bank which may be considered acceptable by a concurrent vote
of at least, five members of the Monetary Board.
In normal times, the Central Bank may re-discount against papers evidencing a loan granted by a Rural
Bank to any of its customers which can be liquefied within a period of two hundred and seventy days:
PROVIDED, HOWEVER, That for the purpose of implementing a nationwide program of agricultural and
industrial development, Rural Banks are hereby authorized under such terms and conditions as the
Central Bank shall prescribe to borrow on a medium or long term basis, funds that the Central Bank or
any other government financing institutions shall borrow from the International Bank for Reconstruction
and Development or other international or foreign lending institutions for the specific purpose of
financing the above stated agricultural and industrial program. Repayment of loans obtained by the
Central Bank of the Philippines or any other government financing institution from said foreign lending
institutions under this section shall be guaranteed by the Republic of the Philippines.
As to the supervising authority of the Monetary Board of the Central Bank over Rural Banks, the same is spelled-out
under Section 10 of R.A. 720, as follows:
SEC. 10. The power to supervise the operation of any Rural Bank by the Monetary Board of the Central
Bank as herein indicated, shall consist in placing limits to the maximum credit allowed any individual
borrower; in prescribing the interest rate; in determining the loan period and loan procedure; in indicating
the manner in which technical assistance shall be extended to Rural Banks; in imposing a uniform
accounting system and manner of keeping the accounts and records of the Rural Banks; in undertaking
regular credit examination of the Rural Banks: in instituting periodic surveys of loan and lending
procedures, audits, test check of cash and other transactions of the Rural Banks; in conducting training
courses for personnel of Rural Banks; and, in general in supervising the business operation of the Rural
Banks.
Nowhere in any of the above-quoted pertinent provisions of R.A. 720 nor in any other provision of R.A. 720 for that
matter, is the monetary Board authorized to mete out on rural banks an additional penalty rate on their past due accounts
with Appellant. As correctly stated by the trial court, while the Monetary Board possesses broad supervisory powers,
nonetheless, the retroactive imposition of administrative penalties cannot be taken as a measure supervisory in
character. (Record on Appeal, p. 141).
Administrative rules and regulations have the force and effect of law (Valerio v. Hon. Secretary of Agriculture and Natural
Resources, 7 SCRA 719; Commissioner of Civil Service v. Cruz, 15 SCRA 638; R.B. Industrial Development Company,
Ltd. v. Enage, 24 SCRA 365; Director of Forestry v. Munoz, 23 SCRA 1183; Gonzalo Sy v. Central Bank of the
Philippines, 70 SCRA 570).
There are, however, limitations to the rule-making power of administrative agencies. A rule shaped out by jurisprudence
is that when Congress authorizes promulgation of administrative rules and regulations to implement given legislation, all
that is required is that the regulation be not in contradiction with it, but conform to the standards that the law prescribes
(Director of Forestry v. Munoz, 23 SCRA 1183). The rule delineating the extent of the binding force to be given to
administrative rules and regulations was explained by the Court in Teoxon v. Member of the Board of Administrators (33
SCRA 588), thus: "The recognition of the power of administrative officials to promulgate rules in the implementation of
the statute, as necessarily limited to what is provided for in the legislative enactment, may be found as early as 1908 in
the case of United States v. Barrias (11 Phil. 327) in 1914 U.S. v. Tupasi Molina (29 Phil. 119), in 1936 People v.
Santos(63 Phil. 300), in 1951 Chinese Flour Importers Ass. v. Price Stabilization Board (89 Phil. 439), and in
1962 Victorias Milling Co., Inc. v. Social Security Commission (4 SCRA 627). The Court held in the same case that "A
rule is binding on the courts so long as the procedure fixed for its promulgation is followed and its scope is within the
statute granted by the legislature, even if the courts are not in agreement with the policy stated therein or its innate
wisdom ...." On the other hand, "administrative interpretation of the law is at best merely advisory, for it is the courts that
finally determine what the law means." Indeed, it cannot be otherwise as the Constitution limits the authority of the
President, in whom all executive power resides, to take care that the laws be faithfully executed. No lesser
administrative, executive office, or agency then can, contrary to the express language of the Constitution, assert for itself
a more extensive prerogative. Necessarily, it is bound to observe the constitutional mandate. There must be strict
compliance with the legislative enactment. The rule has prevailed over the years, the latest restatement of which was
made by the Court in the case of Bautista v. Junio (L-50908, January 31, 1984, 127 SCRA 342).
In case of discrepancy between the basic law and a rule or regulation issued to implement said law, the basic law
prevails because said rule or regulation cannot go beyond the terms and provisions of the basic law (People v. Lim, 108
Phil. 1091). Rules that subvert the statute cannot be sanctioned (University of St. Tomas v. Board of Tax Appeals, 93
Phil. 376; Del Mar v. Phil. Veterans Administration, 51 SCRA 340). Except for constitutional officials who can trace their
competence to act to the fundamental law itself, a public official must locate in the statute relied upon a grant of power
before he can exercise it. Department zeal may not be permitted to outrun the authority conferred by statute (Radio
Communications of the Philippines, Inc. v. Santiago, L-29236, August 21, 1974, 58 SCRA 493).
When promulgated in pursuance of the procedure or authority conferred upon the administrative agency by law, the rules
and regulations partake of the nature of a statute, and compliance therewith may be enforced by a penal sanction
provided in the law (Victorias Milling Co., Inc. v. Social Security Commission, 114 Phil. 555; People v. Maceren, L-32166,
October 18, 1977, 79 SCRA 462; Daza v. Republic, L-43276, September 28, 1984, 132 SCRA 267). Conversely, the rule
is likewise clear. Hence an administrative agency cannot impose a penalty not so provided in the law authorizing the
promulgation of the rules and regulations, much less one that is applied retroactively.
The records show that DLC Form No. 11 (Folder of Exhibits, p. 16) was revised December 23, 1964 to include the penal
clause, as follows:
In the event that this note becomes past due, the undersigned shall pay a penalty at the rate of _____
per cent ( ) per annum on such past due account over and above the interest rate at which such loan
was originally secured from the Central Bank.
Such clause was not a part of the promissory notes executed by Appellee to secure its loans. Appellant inserted the
clause in the revised DLC Form No. 11 to make it a part of the contractual obligation of rural banks securing loans from
the Central Bank, after December 23, 1964. Thus, while there is now a basis for the imposition of the 10% penalty rate
on overdue accounts of rural banks, there was none during the period that Appellee contracted its loans from Appellant,
the last of which loan was on July 30, 1963. Surely, the rule cannot be given retroactive effect.
Finally, on March 31, 1970, the Monetary Board in its Resolution No. 475 effective April 1, 1970, revoked its Resolution
No. 1813, dated December 18, 1964 imposing the questioned 10% per annum penalty rate on past due loans of rural
banks and amended sub-paragraph (a), Section 10 of the existing guidelines governing rural banks' applications for a
loan or rediscount, dated May 7, 1969 (Folder of Exhibits, p. 19). As stated by the trial court, this move on the part of the
Monetary Board clearly shows an admission that it has no power to impose the 10% penalty interest through its rules
and regulations but only through the terms and conditions of the promissory notes executed by the borrowing rural
banks. Appellant evidently hoped that the defect could be adequately accomplished by the revision of DLC Form No. 11.
The contention that Appellant is entitled to the 10% cost of collection in case of suit and should therefore, have been
awarded the same by the court below, is well taken. It is provided in all the promissory notes signed by Appellee that in
case of suit for the collection of the amount of the note or any unpaid balance thereof, the Appellee Rural Bank shall pay
the Central Bank of the Philippines a sum equivalent to ten (10%) per cent of the amount unpaid not in any case less
than five hundred (P500.00) pesos as attorney's fees and costs of suit and collection. Thus, Appellee cannot be allowed
to come to Court seeking redress for an wrong done against it and then be allowed to renege on its corresponding
obligations.
PREMISES CONSIDERED, the decision of the trial court is hereby AFFIRMED with modification that Appellee Rural
Bank is ordered to pay a sum equivalent to 10% of the outstanding balance of its past overdue accounts, but not in any
case less than P500.00 as attorney's fees and costs of suit and collection.
SO ORDERED.
G.R. No. L-23004 June 30, 1965
MAKATI STOCK EXCHANGE, INC., petitioner,
vs.
SECURITIES AND EXCHANGE COMMISSION and MANILA STOCK EXCHANGE, respondents.
Hermenegildo B. Reyes for petitioner.
Office of the Solicitor General for respondent Securities and Exchange Commission.
Norberto J. Quisumbing and Emma Quisumbing-Fernando for respondent Manila Stock Exchange.
BENGZON, C.J.:
This is a review of the resolution of the Securities and Exchange Commission which would deny the Makati Stock
Exchange, Inc., permission to operate a stock exchange unless it agreed not to list for trading on its board, securities
already listed in the Manila Stock Exchange.
Objecting to the requirement, Makati Stock Exchange, Inc. contends that the Commission has no power to impose it and
that, anyway, it is illegal, discriminatory and unjust.
Under the law, no stock exchange may do business in the Philippines unless it is previously registered with the
Commission by filing a statement containing the information described in Sec. 17 of the Securities Act (Commonwealth
Act 83, as amended).
It is assumed that the Commission may permit registration if the section is complied with; if not, it may refuse. And there
is now no question that the section has been complied with, or would be complied with, except that the Makati Stock
Exchange, upon challenging this particular requirement of the Commission (rule against double listing) may be deemed
to have shown inability or refusal to abide by its rules, and thereby to have given ground for denying registration. [Sec.
17 (a) (1) and (d)].
Such rule provides: "... nor shall a security already listed in any securities exchange be listed anew in any other
securities exchange ... ."
The objection of Makati Stock Exchange, Inc., to this rule is understandable. There is actually only one securities
exchange — The Manila Stock Exchange — that has been operating alone for the past 25 years; and all — or
presumably all — available or worthwhile securities for trading in the market are now listed there. In effect, the
Commission permits the Makati Stock Exchange, Inc., to deal only with other securities. Which is tantamount to
permitting a store to open provided it sells only those goods not sold in other stores. And if there's only one existing
store, 1 the result is a monopoly.
It is not farfetched to assert — as petitioner does 2 that for all practical purposes, the Commission's order or resolution
would make it impossible for the Makati Stock Exchange to operate. So, its "permission" amounted to a "prohibition."
Apparently, the Commission acted "in the public interest." 3 Hence, it is pertinent to inquire whether the Commission may
"in the public interest" prohibit (or make impossible) the establishment of another stock exchange (besides the Manila
Stock Exchange), on the ground that the operation of two or more exchanges adversely affects the public interest.
At first glance, the answer should be in the negative, because the law itself contemplated, and, therefore, tacitly
permitted or tolerated at least, the operation of two or more exchanges.
Wherever two or more exchanges exist, the Commission, by order, shall require and enforce uniformity of
trading regulations in and/or between said exchanges. [Emphasis Ours] (Sec. 28b-13, Securities Act.)
In fact, as admitted by respondents, there were five stock exchanges in Manila, before the Pacific War (p. 10, brief),
when the Securities Act was approved or amended. (Respondent Commission even admits that dual listing was
practiced then.) So if the existence of more than one exchange were contrary to public interest, it is strange that the
Congress having from time to time enacted legislation amending the Securities Act, 4 has not barred multiplicity of
exchanges.
Forgetting for the moment the monopolistic aspect of the Commission's resolution, let us examine the authority of the
Commission to promulgate and implement the rule in question.
It is fundamental that an administrative officer has only such powers as are expressly granted to him by the statute, and
those necessarily implied in the exercise thereof.
In its brief and its resolution now subject to review, the Commission cites no provision expressly supporting its rule.
Nevertheless, it suggests that the power is "necessary for the execution of the functions vested in it"; but it makes no
explanation, perhaps relying on the reasons advanced in support of its position that trading of the same securities in two
or more stock exchanges, fails to give protection to the investors, besides contravening public interest. (Of this, we shall
treat later) .
On the legality of its rule, the Commission's argument is that: (a) it was approved by the Department Head — before the
War; and (b) it is not in conflict with the provisions of the Securities Act. In our opinion, the approval of the
Department, 5 by itself, adds no weight in a judicial litigation; and the test is not whether the Act forbids the Commission
from imposing a prohibition, but whether it empowers the Commission to prohibit. No specific portion of the statute has
been cited to uphold this power. It is not found in sec. 28 (of the Securities Act), which is entitled "Powers (of the
Commission) with Respect to Exchanges and Securities." 6
According to many court precedents, the general power to "regulate" which the Commission has (Sec. 33) does not
imply authority to prohibit." 7
The Manila Stock Exchange, obviously the beneficiary of the disputed rule, contends that the power may be inferred from
the express power of the Commission to suspend trading in a security, under said sec. 28 which reads partly:
And if in its opinion, the public interest so requires, summarily to suspend trading in any registered security on
any securities exchange ... . (Sec. 28[3], Securities Act.)
However, the Commission has not acted — nor claimed to have acted — in pursuance of such authority, for the simple
reason that suspension under it may only be for ten days. Indeed, this section, if applicable, precisely argues against the
position of the Commission because the "suspension," if it is, and as applied to Makati Stock Exchange, continues for an
indefinite period, if not forever; whereas this Section 28 authorizes suspension for ten days only. Besides, the
suspension of trading in the security should not be on one exchange only, but on all exchanges; bearing in mind that
suspension should be ordered "for the protection of investors" (first par., sec. 28) in all exchanges, naturally, and if "the
public interest so requires" [sec. 28(3)].
This brings up the Commission's principal conclusions underlying its determination viz.: (a) that the establishment of
another exchange in the environs of Manila would be inimical to the public interest; and (b) that double or multiple listing
of securities should be prohibited for the "protection of the investors."
(a) Public Interest — Having already adverted to this aspect of the matter, and the emerging monopoly of the Manila
Stock Exchange, we may, at this juncture, emphasize that by restricting free competition in the marketing of stocks, and
depriving the public of the advantages thereof the Commission all but permits what the law punishes as monopolies as
"crimes against public interest." 8
"A stock exchange is essentially monopolistic," the Commission states in its resolution (p. 14-a, Appendix, Brief for
Petitioner). This reveals the basic foundation of the Commission's process of reasoning. And yet, a few pages
afterwards, it recalls the benefits to be derived "from the existence of two or more exchanges," and the desirability of "a
healthy and fair competition in the securities market," even as it expresses the belief that "a fair field of competition
among stock exchanges should be encouraged only to resolve, paradoxically enough, that Manila Stock Exchange shall,
in effect, continue to be the only stock exchange in Manila or in the Philippines.
"Double listing of a security," explains the Commission, "divides the sellers and the buyers, thus destroying the essence
of a stock exchange as a two-way auction market for the securities, where all the buyers and sellers in one geographical
area converge in one defined place, and the bidders compete with each other to purchase the security at the lowest
possible price and those seeking to sell it compete with each other to get the highest price therefor. In this sense, a stock
exchange is essentially monopolistic."
Inconclusive premises, for sure. For it is debatable whether the buyer of stock may get the lowest price where all the
sellers assemble in only one place. The price there, in one sale, will tend to fix the price for the succeeding, sales,
and he has no chance to get a lower price except at another stock exchange. Therefore, the arrangement desired by the
Commission may, at most, be beneficial to sellers of stock — not to buyers — although what applies to buyers should
obtain equally as to sellers (looking for higher prices). Besides, there is the brokerage fee which must be considered. Not
to mention the personality of the broker.
(b) Protection of investors. — At any rate, supposing the arrangement contemplated is beneficial to investors (as the
Commission says), it is to be doubted whether it is "necessary" for their "protection" within the purview of the Securities
Act. As the purpose of the Act is to give adequate and effective protection to the investing public against fraudulent
representations, or false promises and the imposition of worthless ventures, 9 it is hard to see how the proposed
concentration of the market has a necessary bearing to the prevention of deceptive devices or unlawful practices. For it
is not mere semantics to declare that acts for the protection of investors are necessarily beneficial to them; but not
everything beneficial to them is necessary for their protection.
And yet, the Commission realizes that if there were two or more exchanges "the same security may sell for more in one
exchange and sell for less in the other. Variance in price of the same security would be the rule ... ." Needless to add, the
brokerage rates will also differ.
This, precisely, strengthens the objection to the Commission's ruling. Such difference in prices and rates gives the buyer
of shares alternative options, with the opportunity to invest at lower expense; and the seller, to dispose at higher prices.
Consequently, for the investors' benefit (protection is not the word), quality of listing 10 should be permitted, nay,
encouraged, and other exchanges allowed to operate. The circumstance that some people "made a lot of money due to
the difference in prices of securities traded in the stock exchanges of Manila before the war" as the Commission noted,
furnishes no sufficient reason to let one exchange corner the market. If there was undue manipulation or unfair
advantage in exchange trading the Commission should have other means to correct the specific abuses.
Granted that, as the Commission observes, "what the country needs is not another" market for securities already listed
on the Manila Stock Exchange, but "one that would focus its attention and energies on the listing of new securities and
thus effectively help in raising capital sorely needed by our ... unlisted industries and enterprises."
Nonetheless, we discover no legal authority for it to shore up (and stifle) free enterprise and individual liberty along
channels leading to that economic desideratum. 11
The Legislature has specified the conditions under which a stock exchange may legally obtain a permit (sec. 17,
Securities Act); it is not for the Commission to impose others. If the existence of two competing exchanges jeopardizes
public interest — which is doubtful — let the Congress speak. 12 Undoubtedly, the opinion and recommendation of the
Commission will be given weight by the Legislature, in judging whether or not to restrict individual enterprise and
business opportunities. But until otherwise directed by law, the operation of exchanges should not be so regulated as
practically to create a monopoly by preventing the establishment of other stock exchanges and thereby contravening:
(a) the organizers' (Makati's) Constitutional right to equality before the law;
(b) their guaranteed civil liberty to pursue any lawful employment or trade; and
(c) the investor's right to choose where to buy or to sell, and his privilege to select the brokers in his
employment. 13
And no extended elucidation is needed to conclude that for a licensing officer to deny license solely on the basis of what
he believes is best for the economy of the country may amount to regimentation or, in this instance, the exercise of
undelegated legislative powers and discretion.
Thus, it has been held that where the licensing statute does not expressly or impliedly authorize the officer in charge,
he may not refuse to grant a license simply on the ground that a sufficient number of licenses to serve the needs of the
public have already been issued. (53 C.J.S. p. 636.)
Concerning res judicata. — Calling attention to the Commission's order of May 27, 1963, which Makati Stock did not
appeal, the Manila Stock Exchange pleads the doctrine of res judicata. 14 (The order now reviewed is dated May 7,
1964.)
It appears that when Makati Stock Exchange, Inc. presented its articles of incorporation to the Commission, the latter,
after making some inquiries, issued on May 27, 1963, an order reading as follows.
Let the certificate of incorporation of the MAKATI STOCK EXCHANGE be issued, and if the organizers thereof
are willing to abide by the foregoing conditions, they may file the proper application for the registration and
licensing of the said Exchange.
In that order, the Commission advanced the opinion that "it would permit the establishment and operation of the
proposed Makati Stock Exchange, provided ... it shall not list for trading on its board, securities already listed in the
Manila Stock Exchange ... ."
Admittedly, Makati Stock Exchange, Inc. has not appealed from that order of May 27, 1963. Now, Manila Stock insists
on res judicata.
Why should Makati have appealed? It got the certificate of incorporation which it wanted. The condition or proviso
mentioned would only apply if and when it subsequently filed the application for registration as stock exchange. It had not
yet applied. It was not the time to question the condition; 15 Makati was still exploring the convenience of soliciting the
permit to operate subject to that condition. And it could have logically thought that, since the condition did not affect its
articles of incorporation, it should not appeal the order (of May 27, 1963) which after all, granted the certificate of
incorporation (corporate existence) it wanted at that time.
And when the Makati Stock Exchange finally found that it could not successfully operate with the condition attached, it
took the issue by the horns, and expressing its desire for registration and license, it requested that the condition (against
double listing) be dispensed with. The order of the Commission denying, such request is dated May 7, 1964, and is now
under, review.
Indeed, there can be no valid objection to the discussion of this issue of double listing now, 16 because even if the Makati
Stock Exchange, Inc. may be held to have accepted the permission to operate with the condition against double
listing (for having failed to appeal the order of May 27, 1963), still it was not precluded from afterwards contesting 17 the
validity of such condition or rule:
(1) An agreement (which shall not be construed as a waiver of any constitutional right or any right to contest the validity
of any rule or regulation) to comply and to enforce so far as is within its powers, compliance by its members, with the
provisions of this Act, and any amendment thereto, and any rule or regulation made or to be made thereunder. (See. 17-
a-1, Securities Act [Emphasis Ours].)
Surely, this petition for review has suitably been coursed. And making reasonable allowances for the presumption of
regularity and validity of administrative action, we feel constrained to reach the conclusion that the respondent
Commission possesses no power to impose the condition of the rule, which, additionally, results in discrimination and
violation of constitutional rights.
ACCORDINGLY, the license of the petition to operate a stock exchange is approved without such condition. Costs shall
be paid by the Manila Stock Exchange. So ordered.
Bautista Angelo, Concepcion, Reyes, J.B.L., Paredes, Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ.,
concur.
Barrera, J., is on leave.

G.R. No. 90482 August 5, 1991


REPUBLIC OF THE PHILIPPINES, acting through the SUGAR REGULATORY ADMINISTRATION, and REPUBLIC
PLANTERS BANK, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, 15th Division, THE HONORABLE CORONA IBAY-SOMERA, in her
official capacity as Presiding Judge of the Regional Trial Court, National Capital Region, Branch 26, Manila,
JORGE C. VICTORINO and JAIME K. DEL ROSARIO, in their official capacities as RTC Deputy Sheriffs of Manila,
ROGER Z. REYES, ERNESTO L. TREYES, JR., and EUTIQUIO M. FUDOLIN, respondents.
Enrique V. Olmedo for Independent Sugar Farmers, Inc.
Reyes, Treyes & Fudolin Law Firm for respondents.
DAVIDE, JR., J.:
This is an appeal by certiorari under Rule 45 of the Revised Rules of Court, with prayer for a temporary restraining order
or writ of preliminary injunction, filed on 25 October 1989 by the Office of the Government Corporate Counsel (OGCC) in
behalf of the Republic of the Philippines "acting through the Sugar Regulatory Administration" (SRA) and the Republic
Planters Bank (RPB) seeking the review of the 13 October 1989 Decision of the Court of Appeals (15th Division) in
CAGR No. 17188.
The assailed decision1 dismissed the petition for certiorari filed by Petitioners against herein public respondents Judge
and deputy sheriffs and private respondents for the nullification of the Orders of respondent Judge of 13 March 1989, 21
March 1989 and 27 March 1989 in Civil Case No. 86-35880 of Branch 26 of the Regional Trial Court of Manila on the
following grounds: (a) the funds upon which the attorney's fees are sought to be executed now belong to the Republic of
the Philippines due to legal subrogation, (b) execution is not proper against the Republic which is not a party to the case,
(c) the issuance of a writ of execution would violate the Constitution since according to it no money shall be paid out of
the treasury except in pursuance to an appropriations made by law, and (d) execution for attomey's fees is unwarranted.
Respondent Court of Appeals dismissed the petition for lack of merit principally because
(a) Under the compromise agreement petitioner (RPB) accepted the designation/appointment as Trustee whose
obligation is to pay; it received benefits by way of trustee's fees; it may not question the right of private respondents to
attorney's fees;
(b) Petitioner (SRA) may not lawfully bring an action on behalf of the Republic of the Philippines since under Section 13
of Executive Order No. 18 dated 28 May 1986, which created it, it simply was to take over the functions of the defunct
PHILSUCOM; however, the latter was to remain a judicial entity for three more years for the purpose of prosecuting and
defending suits against it; hence it is PHILSUCOM, being a party to the compromise agreement, which may properly
contest the right of private respondents to attomey's fees;
(c) The petition should have been filed through the Office of the Solicitor General OSG and not through the (OGCC);
neither the latter nor the (SRA) may lawfully represent the Government of the Philippines in any suit or proceeding such
as the present petition for administrative agencies may only perform such powers and functions as may be authorized by
the laws which created or gave them existence; and
(d) The respondent judge did not commit any error of jurisdiction in issuing the questioned orders; hence, the remedy
should be appeal.
The facts which gave rise to said petition are summarized by the Court of Appeals as follows:
On May 16,1986, Republic Planters Bank (hereafter referred to as RPB), Zosimo Maravilla, Rosendo de la
Rama, Bibiano Sabino, Roberto Mascufiana and Ernesto Kramer "for themselves and in representation of other
sugar producers" filed a Complaint with the respondent court, RTC Branch 26, docketed as C.C. 86-35880 "For
Sum of Money and/or Delivery of Personal Property with Restraining Order and/or Preliminary Injunction" against
the Philippine Sugar Commission (PHILSUCOM) and the National Sugar Trading Corporation (NASUTRA) with
the prayer:
WHEREFORE PREMISES CONSIDERED, it is respectfully prayed of this Honorable Court that, after
due hearing and trial, judgment be rendered in favor of Plaintiffs and against Defendants ordering them
to do the following:
1. To render a correct and faithful account of whatever amount of United States dollar accounts/deposits
in different banks, domestic and foreign, being held in agents and/or representatives.
2. To render a correct and faithful inventory of all the physical sugar stocks for crop year 1984-85
presently remaining in the warehouses of the different sugar mills all over the country.
3. To deliver or remit to the Plaintiffs any and all United States dollar accounts/deposits in various banks,
domestic or foreign, held in the name of Defendants, their subsidiaries, conducts (sic), agents and/or
representatives.
4. To deliver the entire remaining physical sugar stocks corresponding to crop year 1984-85 presently
remaining in the warehouses of the different sugar mills all over the country in favor of Plaintiffs who
were unlawfully deprived of their possession and control by Defendants, to be applied and deducted
from Defendant's liability to Plaintiffs for the unaccounted sugar for crop year 1984-85.
5. To jointly and severally pay Plaintiffs-Producers all interests and penalties imposed by Assignee-
banks/creditors for accounts covered by unpaid sugar quedans for crop year 1984-85.
6. To jointly and severally pay Plaintiffs claims for moral, compensatory and exemplary damages in such
accounts to be determined in the course of the trial.
7. To jointly and severally pay for the attorney's fees of twenty percent (20%) based on the total amount
that may be recovered.
8. To jointly and severally pay for the costs and litigation expenses incurred by the Plaintiffs.
Plaintiffs likewise pray that, in order to prevent grave and irreparable injury, this Honorable Court shall issue a
writ of preliminary injunction enjoining and/or prohibiting the Defendants, their officers and/or agents from
transferring, releasing or in any manner disposing of all U.S. dollar deposits/accounts held in the name of
Defendants, its subsidiaries, conduits agents and/or representatives in the different banks, domestic and foreign,
including the physical sugar corresponding to crop year 1984-85 presently remaining in the warehouses of the
different sugar mills all over the country after requiring the Plaintiffs to post a bond that may be determined by
the Honorable Court to answer for the damages in the event judgment will be rendered in Defendant's favor.
Furthermore, Plaintiffs pray that a Restraining Order be immediately issued for the purpose of enjoining the
Defendants from committing and/or proceeding with the foregoing acts, pending hearing of the application for a
writ of preliminary injunction.
Plaintiffs further pray for such other reliefs and remedies, just and equitable under the premises.
Before PHILSUCOM and NASUTRA could answer, a Compromise Agreement dated May 23, 1986 was
submitted by the parties which the lower court approved and based on it, the Judgment dated June 2,1986
(Annex "B", Petition, Id., pp. 22-36) was issued. A motion for the issuance of writ of execution was filed (Annex
"C", Petition, Id., pp, 37-50). PHILSUCOM and NASUTRA filed their "Comment and Opposition (To Motion for
Issuance of Writ of Execution)" (Annex D Petition, Id., pp. 51- 62). A Reply was filed by the plaintiffs (Annex
"E", Id., pp. 63- 72) and a Rejoinder was also filed by the defendants (Annex "E", Petition, Id., pp. 73-78). The
lower court issued the Order dated March 13, 1989 which dismissed the separate petitions for relief from
judgment filed by Franklin Fuentebella, George Lacson, Fernando Ballesteros, and Antonio Lopez in one
petition; Romeo Guanzon as sugar producer and president of National Federation of Sugar Cane Planters;
PASSI (Iloilo) Sugar Central, Inc., represented by Romeo Villavicencio; the Independent Sugar Planters
represented by Corazon Sagimalet (In a Motion for Intervention which substituted as a Petition for Relief from
Judgment); and Zosimo Maravilla, Rosendo dela Rama and Bibiano Sabino (Annex "G", Petition, Id., pp. 79-98).
This Order dated March 13, 1989 (which as aforesaid, dismissed the petitions for relief from judgment) is the first
of the orders now being assailed.
On March 21, 1989, the lower court issued the second of the assailed orders which granted a second motion to
resolve a pending motion for issuance of a writ of execution and allowed the issuance of an alias writ of
execution in words, thus:
Let an alias writ of execution be issued for the final implementation of the Judgment on Compromise
Agreement, dated June 2, 1986, the only remaining provision of said judgment is the 10% attorney's
fees of counsels for the plaintiffs (Paragraph 12 sub-section Annex "H", Petition, Id., pp. 99-100).
Correspondingly, on that same date March 21, 1989, RTC Mala Deputy Sheriff Jaime K. del Rosario issued a
"Notice of Delivery of Money" asking the RPB to "pay in cash the 10% of P45,293,552.60 to Attys. Roger Reyes,
Ernesto Treyes, Jr. and Eutiquio Fudolin, Jr. ... immediately upon receipt of this notice" (Annex "I", Petition, Id.,
p. 101).
And on March 27, 1989, the third of the questioned orders was issued by the lower court, in response to the "Ex-
Parte Motion to Require Officers of Trustee Republic Planters Bank to Deliver Amount Subject of Alias Writ of
Execution", requiring the officers of the RPB named therein to "appear before the Court on March 29,1989 at
10:30 in the morning to explain why they should not be cited for contempt of court for defying ... the alias writ of
execution." (Annex "J", Petition, Id. pp. 102-103).
The instant petition was filed in this court on March 29, 1989, ...
Parenthetically, it may also be added that, as stated in paragraph 15 of the instant petition, the producers and producer
organizations who filed various petitions for relief from the judgment based on the compromise agreement have
appealed to the Court of Appeals the Order of 13 March 1989 denying their petitions. 2
In the instant petition petitioners limit their grounds to only two errors allegedly committed by respondent Court of
Appeals, namely: (a) it erred in holding that neither the OGCC nor the SRA can represent the Government of the
Philippines in the action before it and (b) it deviated from the decision of the Ninth Division of said court in CAGR SP No.
11046 (Kramer, et al. vs. Hon. Doroteo, Cañeba, et al. promulgated on 16 March 1987), which declared that there was
no valid class suit and the controversial compromise agreement did not extend to the 40,000 unnamed sugar producers. 3
In the resolution of 26 October 1989 We required respondents to comment on the petition and issued a temporary
restraining order directing respondent Judge to desist and refrain from further proceeding in Civil Case No. 86-35880,
entitled Republic Planters Bank, et al. vs. Philippine Sugar Commission, et al. 4
On 23 November 1989 petitioners filed a manifestation informing this Court that at 9:30 a.m. on 26 October 1989, private
respondents, accompanied by respondents sheriff and a squad of police Special Action Force, swooped upon RPB's
Bacolod Branch and divested a teller of money from her booth allegedly because the branch manager had instructed the
bank personnel to close the bank vault while the enforcement of the court order was being verified - with the head office
in Manila; the amount taken was P179,955.31; these acts were allegedly done by virtue of, among others, the orders
dated October 24 and 25, 1989 of respondent judge ordering the implementation of an alias Writ of Execution dated 21
March 1989 and the Writ of Execution dated 21 March 1986; and claiming that what was enforced was an expired writ. 5
In Our resolution of 5 December 1989 respondents were required to comment on this manifestation. 6
After motions for extension of time to file their Comments on the petition, separately filed by the private respondents and
the Solicitor General for the public respondents, were granted, the former ultimately filed their Comment on 20 December
1989.7 The Solicitor General filed his Comment on 4 January 1990.8
In his Comment the Solicitor General maintains that the SRA has no legal personality to file the instant petition in the
name of the Republic of the Philippines for under its charter, Executive Order No. 18, the SRA is not vested with legal
capacity to sue. He further argues that the SRA was not a party to the court-approved compromise agreement in Civil
Case No. 8635880 which provided for the questioned 10% attorney's fees; PHILSUCOM and NASUTRA, which were
parties thereto, did not file any action to annul the compromise agreement; that while Executive Order No. 18 abolished
the PHILSUCOM, the latter's juridical personality was to continue for three (3) years, during which period it may
prosecute and defend suits against it; and that, finally, even if SRA has the capacity to sue, it cannot still bring any action
on behalf of the Republic of the Philippines as this can be done only by the Office of the Solicitor General per Section 1
of P.D. No. 478.
The Solicitor General likewise stresses that the interest of the national government in this case is confined only to the
amount remaining in RPB subject to legal subrogation; the judgment on the compromise agreement had long become
final and executory; and that no reversible error was committed by respondent judge and respondent Court of Appeals.
Private respondents assert that the SRA and RPB do not have the legal authority to sue for and in behalf of the Republic
of the Philippines. In respect to the former, their conclusion is supported by almost the same arguments as that asserted
by the Solicitor General. As regards the RPB, they maintain that it "is a government-controlled corporation engaged in
the banking business with corporate powers vested in a Board of Directors," hence, it is "legally untenable for such a
banking institution, even assuming that it is government-controlled, to initiate suits for and in behalf of the Republic of the
Philippines." p.171, Rollo). They further argued that petitioners have no legal personality to initiate the instant petition for
(a) SRA is not a party in the case before the trial court; the only reason why it became involved was because of the
contempt proceedings initiated by private respondents against SRA's Arsenio Yulo, Carlos Ledesma and Bibiano Sabino
for issuing Sugar Orders No. 9 and 14; and that neither can it be presumed that SRA had substituted defendants
PHILSUCOM and the NASUTRA in the case as both continue to legally exist for the purpose of prosecuting and
defending suits in liquidation of its affairs; both did not file any petition for relief from judgment questioning the validity of
the judgment of the trial court approving the compromise agreement; and that, moreover, RPB was a signatory to the
Compromise Agreement as a Trustee and, as such, it regarded itself as only a nominal party and in a series of pleadings
it recognized the final and executory nature of the decision approving the compromise agreement.
As to the second assigned error, private respondents pointed out that the Ninth Division of the Court of Appeals did not
rule in C.A.-G.R. No. 11046 that Civil Case No. 86-35880 before the trial court was not a class suit, and whether or not it
was a class suit was not an issue therein.
On 15 January 1990 petitioners filed a motion for leave to file consolidated reply, which We granted in the resolution of
18 January 1990.9
On 18 January 1990 petitioners filed a Manifestation and Motion10 "wherein they informed the Court that despite the
temporary restraining order issued on 26 October 1989, respondent Judge, to whom the Order was addressed,
continued to hear the case, particularly on the whereabouts of 177,087.14 piculs of sugar for the crop year 1984-1985
allegedly stored in the different warehouses throughout the country".
In the resolution of 30 January 199011 We required respondent judge to show cause why no disciplinary action should be
taken against her for failure to comply with the resolution of 26 October 1989 ordering her to refrain from further
proceeding with Civil Case No. 86-35880 and to answer why she should not be cited for contempt of court for such
failure, within ten (10) days from notice.
On 8 March 1990 petitioners filed their Consolidated Reply to the Comment with Motion to Dismiss filed by private
respondents and the Comment of the Solicitor General.12
On 5 April 1990 private respondents filed a Rejoinder to the Consolidated Reply. 13
On 16 April 1990 respondent judge, through the OSG, filed her Compliance as required by the Resolution of 30 January
1990.14 She claims that she did not defy the temporary restraining order issued by this Court on 26 October 1989
because the petitioners sought for the issuance of the temporary restraining order to stop the enforcement of the
decision of the respondent Court of Appeals in CA GR No. 17188 dated October 13, 1989; hence, the temporary
restraining order that this Court issued "actually orders herein respondent judge to desist from enforcing the Decision of
the respondent Court of Appeals in CAGR No. 17188 which is the subject of the instant petition for review".
Consequently, she stresses, her 15 December 1989 order was not issued in defiance of the restraining resolution; said
order pertains exclusively to the whereabouts of the 177,087.14 piculs of physical sugar for the crop year 1984-1985 and
did not in any way attempt to enforce the questioned decisions of the court a quo and the Court of Appeals to the
prejudice of petitioner's right to appeal.
In Our resolution of 15 May 199015 We resolved to consider the comments of respondents as Answers to the petition,
give due course to the petition, require the parties to submit their respective memoranda within thirty days from notice,
and to note the compliance of respondent judge.
Petitioners filed their memorandum on 28 June 1990.16 Private respondents sent theirs by registered mail on 22 August
1990 which this Court actually received on 8 September 1990.17 We shall now take up the assigned errors.
I.
The Court of Appeals correctly ruled that petitioner Sugar Regulatory Administration may not lawfully bring an action on
behalf of the Republic of the Philippines and that the Office of the Government Corporate Counsel does not have the
authority to represent said petitioner in this case.
Executive Order No. 18, enacted on 28 May 1986 and which took effect immediately, abolished the Philippine Sugar
Commission (PHILSUCOM) and created the Sugar Regulatory Administration (SRA) which shall be under the Office of
the President. However, under the third paragraph of Section 13 thereof, the PHILSUCOM was allowed to continue as a
juridical entity for three (3) years for the purpose of prosecuting and defending suits by or against it and enabling it to
settle and close its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of
continuing the functions for which it was established, under the supervision of the SRA.
Section 3 of said Executive Order enumerates the powers and functions of the SRA; but it does not specifically include
the power to represent the Republic of the Philippines in suits filed by or against it, nor the power to sue and be sued
although it has the power to "enter, make and execute routinary contracts as may be necessary for or incidental to the
attainment of its purposes between any persons, firms, public or private, and the Government of the Philippines" and "[t]o
do all such other things, transact such other businesses and perform such functions directly or indirectly incidental or
conducive to the attainment of the purposes of the Sugar Regulatory Administration."18
Section 4 thereof provides for the governing board of the Administration, known as the Sugar Board, which shall exercise
"[a]ll the corporate powers" of the SRA. Its specific functions are enumerated in Section 6; however, the enumeration
does not include the power to represent the Republic of the Philippines, although among such functions is "[t]o enter into
contracts, transactions, or undertakings of whatever nature which are necessary or incidental to its functions and
objectives with any natural or juridical persons and with any foreign government institutions, private corporations,
partnership or private individuals.19
It is apparent that its charter does not grant the SRA the power to represent the Republic of the Philippines in suits filed
by or against the latter.
It is a fundamental rule that an administrative agency has only such powers as are expressly granted to it by law and
those that are necessarily implied in the exercise thereof. (Guerzon vs Court of Appeals, et al., 77707, August 8, 1988,
164 SCRA 182,189, citing Makati Stock Exchange, Inc. vs. SEC, 14 SCRA 620, and Sy vs. Central Bank, 70 SCRA
570.)20
The SRA no doubt, is an administrative agency or body. An administrative agency is defined as "[a] government body
charged with administering and implementing particular legislation. Examples are workers' compensation commissions ...
and the like. ... The term 'agency' includes any department, independent establishment, commission, administration,
authority board or bureau ...21
The power to represent the Republic of the Philippines in any suit by or against it having been withheld from SRA, it
following that the latter cannot institute the instant petition and the petition in C.A.-G.R. No. 17188 on behalf of the
Republic of the Philippines.
This conclusion does not, however, mean that the SRA cannot sued and be sued. This power can be implied from its
powers to make and execute routinary contracts as may be necessary for or incidental to the attainment of its purposes
between any persons, firms public or private, and the Government of the Philippines and to do all such other things,
transact such other businesses and perform such other functions directly or indirectly incidental or conducive to the
attainment of the purposes of the SRA and the powers of its governing board to enter into contracts, transactions, or
undertaking of whatever nature which are necessary or incidental to its functions and objectives with any natural or
juridical persons and with any foreign government institutions, private corporations, partnership or private individuals.
The Court of Appeals also correctly ruled that the OGCC can represent neither the SRA nor the Republic of the
Philippines. We do not, however, share the view that only the Office of the Solicitor General can represent the SRA.
The entry of appearance by the OGCC for the SRA was precipitated by the sudden turn-about of the Office of the
Solicitor General. Records show that the OSG eventually represented the PHILSUCOM, NASUTRA and SRA in the trial
court. However, on 29 January 1988 it filed a Manifestation dated January 27, 1988 informing the court that its
appearance in the case "is limited to the issues relating only to the contempt proceedings against the public respondents
and is not concerned with the other issues raised by various parties in their petitions for relief". 22 By reason thereof, the
Chairman/Administrator of SRA, Mr. Arsenio Yulo, Jr., sent a letter23 dated 6 April 1988 to the Solicitor General,
informing him that since the appearance of the OSG is limited and that it has taken a different position, SRA's only
alternative is to seek another representative and that much to its regret, it is constrained to terminate OSG's services. He
further informed the Solicitor General that the case is being indorsed to the Office of the Government Corporate Counsel
for appropriate legal action pursuant to P.D. No. 478. There is, however, no showing that the OSG withdrew its
appearance for PHILSUCOM, NASUTRA or the SRA in the trial court. On the contrary, per its Manifestation dated 8
February 1990, and filed with this Court on 12 February 1990, 24 it "has retained its appearance" "on behalf of the
Republic of the Philippines to recover whatever amount may be owing to the National Treasury by virtue of legal
subrogation."
Also on April 6,1988, SRA sent a letter25 to OGCC to engage its legal services to represent SRA as successor agency of
the PHILSUCOM in the case pending before the trial court.
The OGCC, availing of P.D. No. 1415, the law creating it, particularly Section 1 which, as quoted by it on page 16 of the
Petition,26 reads:
SECTION 1. The Office of the Government Corporate Counsel shall be the principal law office of all government-
owned and controlled corporations, including their subsidiaries except as may otherwise be provided by their
respective charters or authorized by the President (Emphasis supplied).
sent a letter to the Office of the President, "in essence, requesting for authority for OGCC to represent SRA in the case
before the trial court," This was favorably acted by Executive Secretary Catalino Macaraig, Jr.27
Indeed, under Section 35, Chapter 12, Title III of Book IV of the Administrative Code of 1987 (Executive Order No. 292)
the Solicitor General is the lawyer of the government, its agencies and instrumentalities, and its officials or agents. Said
Section reads as follows:
SECTION 35. Functions and Organization. — The Office of the Solicitor General shall represent the Government
of the Philippines, its agencies and instrumentalities and its officials and agents in any litigation, proceeding,
investigation or matter requiring the services of lawyers. When authorized by the President or head of the office
concerned, it shall also represent government-owned and controlled corporations. The Office of the Solicitor
General shall constitute the law office of the Government and, as such, shall discharge duties requiring the
services of lawyers. ... .
This is similar to subsection (1) of Section 1 of P.D. No. 478.
In Republic, et al. vs. Partisala et al. (G.R. No. 61997, 15 November 1982, 118 SCRA 370, 373), We ruled that only the
Solicitor General can bring or defend actions on behalf of the Republic of the Philippines and that, henceforth, actions
filed in the name of the Republic if not initiated by the Solicitor General will be summarily dismissed.
However, in Secretary Oscar Orbos vs. Civil Service Commission, et al., G.R. No. 92561, 12 September 1990,28 We
stated:
In the discharge of this task, the Solicitor General must see to it that the best interest of the government is
upheld within the limits set by law. When confronted with a situation where one government office takes an
adverse position against another government agency, as in this case, the Solicitor General should not refrain
from performing his duty as the lawyer of the government. It is incumbent upon him to present to the court what
he considers should legally uphold the best interest of the government although it may run counter to a client's
position. In such an instance the government office adversely affected by the position taken by the Solicitor
General, if it still believes in the merit of its case, may appear in its own behalf through its legal personnel or
representative.
Consequently, the SRA need not be represented by the Office of the Solicitor General. It may appear in its own behalf
through its legal personnel or representative.
The question that logically crops up then is: May it be represented by the OGCC? Respondents hold the negative view.
Petitioners maintain otherwise, for the reason that pursuant to Section 1 of the charter of the OGCC (P.D. No. 1415), as
they quoted, the Office of the President, through the Executive Secretary, has authorized it to represent the SRA. The
specific basis for such authority is the alleged portion of the exceptionary clause therein, reading "... or authorized by the
President."
The words or authorized by the President are not found in the law. We are not aware of any law, decree or executive
order which amended Section 1 of P.D. No. 1415 by inserting therein said words. Besides, even granting for the sake of
argument that such words are written into the law, such exception cannot confer upon the OGCC authority to represent
the SRA. The exception simply means that although the OGCC is the principal law office of all government-owned and
controlled corporations including their subsidiaries, the President may not allow it to act as lawyer for a specified
government-owned or controlled corporation or a subsidiary thereof. It will be noted that under Section 1 of P.D. No. 478
the President may authorize the OSG to represent government-owned or controlled corporations. In short, the exception
limits, rather than expands, the authority of the OGCC. Thus, the so-called approval by the Executive Secretary of the
request of OGCC to represent the SRA is based on an erroneous interpretation of the law.
In any case, even if we grant that there was such an exception, as well construed in the manner urged by petitioners, it
must be deemed, nevertheless, to have been repealed by the Administrative Code of 1987. Section 10, Chapter 3, Title
III, Book IV thereof on the Office of the Government Corporate counsel does not contain the purported exception. It
reads:
SECTION 10. Office of the Government Corporate Counsel. —The Office of the Government Corporate Counsel
(OGCC) shall act as the principal law office of all government-owned or controlled corporations, their
subsidiaries, other corporate offsprings and government acquired asset corporations and shall exercise control
and supervision over all legal departments or divisions maintained separately and such powers and functions as
are now or may hereafter be provided by law. In the exercise of such control or suspension, the Government
Corporate Counsel shall promulgate rules and regulations to effectively implement the objectives of the Office. ...
Since the SRA is neither a government-owned or controlled corporation nor a subsidiary thereof, OGCC does not have
the authority to represent it. As to who may represent it, the Orbos case29 provides the answer.
The case of the RPB is, however, different. It is admitted to be a government-owned corporation. The OGCC can,
therefore, legally represent RPB in actions filed by or against it. Unfortunately, this issue was not categorically and
expressly addressed by the Court of Appeals and has not been raised in the petition. Anyway, even if We have to rule
that OGCC's appearance for the RPB in the petition before the Court of Appeals in CAGR No. 17188 was proper, the
result would be the same dismissal of the petition. As also correctly pointed out by the Court of Appeals, having received
benefits by way of trustee's fees, the RPB may not question the right of private respondents to attorney's fees; its only
obligation under the judgment based on compromise was to pay the attorney's fees from out of the funds it held in trust.
II.
The second assigned error is without merit. Petitioners have misread the decision of the Court of Appeals in CAGR SP
No. 11046 (Ernesto Kramer, et al. vs. Hon. Doroteo Caneba et al. promulgated on 16 March 1987). 30 The case was a
petition for certiorari and mandamus with a prayer for preliminary injunction wherein petitioners principally prayed the
Court to declare null and void the order of respondent judge of 16 December 1986 and to order him to issue the writ of
execution of the judgment of 2 June 1986, require respondent NASUTRA to account and turn over to petitioners any and
all sales proceeds of 1984-1985 sugar from 2 June 1986 up to the present in favor of respondent Trustee Bank RPB for
proper distribution to petitioners, issue an order requiring respondent Trustee Bank to distribute without delay all the
sales proceeds of the 1984-1985 sugar in its possession in accordance with the judgment of respondent court, and issue
a restraining order/preliminary injunction enjoining the SRA, its agents/representatives from implementing Sugar Order
No. 9 dated 25 September 1986. Although in the body of the opinion a discussion was made on the matter of the
sufficiency of representation to make Civil Case No. 86-35880 a class suit, the resolution of the petition was not in any
way based thereon or influenced by it. As a matter of fact, the Court categorically stated that it was premature to rule on
that issue because of the pendency of the petition for relief from judgment and interventions. The full disquisition of the
Court of Appeals on this point reads:
xxx xxx xxx
At the outset, let it be stated that the incidents which arose from the class suit before the respondent court are
predominantly related to the ten percent (10%) attorney's fees stipulated in the compromise agreement approved
by the respondent court in its June 2, 1986 judgment in favor of petitioner's counsels Atty. Roger Z. Reyes,
Ernesto L. Treyes, Jr. and Eutiquio M. Fudolin, Jr.
In the said class suit, only the five original plaintiffs and producers Zosimo Maravilla, for himself and in
representation of Rosendo dela Rama, Roberto Mascurafia and Bibiano Sabino per Special Power of Attorney,
and Ernesto Kramer represented by Atty. Roger Z. Reyes per Special Power of Attorney, have authorized said
Attys. Reyes, Treyes, Jr. and Fudolin, Jr. to represent them as counsel.
On page 18 of the instant petition, petitioners allege that there is no necessity to secure Special Powers of
Attorney from the unnamed parties in a class suit, and the failure of petitioners' counsel to do so does not
constitute fraud, the named parties having contest over the class suit.' By such statement, petitioners and their
counsels admit their lack of authority from the rest of the alleged 40,000 sugar producers to file the class suit and
enter into the compromise agreement.
Section 12, Rule 3, Revised Rules of Court provides that in order that one or more may sue for the benefit of
others as a class suit, it is necessary that 'the court shall make sure that the parties actually before it
are sufficiently numerous and representative so that all interests are fully protected. (Dimayuga, et al. vs. CIR, et
al., G.R. No. L-1 0213, May 27, 1957).
For that matter, in the case below, therein plaintiffs Zosimo Maravilla, Rosendo dela Rama and Bibiano Sabino
filed with the respondent court a motion to partially annul decision and/or petition for relief against the said ten
(10%) percent attorney's fees on the allegation that they were deceived into signing the compromise agreement
believing, as was agreed upon during the negotiations, that the ten (10%) percent of whatever would be
collected would go to a trust fund for the benefit of the sugar farmers and producers and not as attorney's fees.
Also, petition, for relief was filed by thirteen other alleged sugar producers principally on the ground that the
compromise agreement entered into was without their express authority by way of Special Power of Attorney
and that the class suit was unnecessary. Some of these sugar producers are the Association de Agricultores de
la Region Oesta de Batangas, Inc. (AAROB) with 742 members; the Samahang Mag-aasukal sa Kanluran
Batangas (SABA) with 4,000 members and Independent Sugar Farmers, Inc. with 200 members.
Here is a situation, as pointed out by respondent NASUTRA and SRA, where petitioners in filing the class suit
claim to represent 40,000 sugar producers all over the country and yet when some of these producers filed
petition for relief and interventions, petitioners 'disowned' them, stating that the other sugar producers have no
personality to intervene, not having been named parties to the class suit.
It should not be overlooked that the said sugar producers, although not named parties in the class suit, are the
very alleged persons represented in the class suit. They certainly have interests in the subject matter of the
controversy; in the contents of the compromise agreement.
The filing of petitions for relief from judgment has not been prohibited by B.P. 129. The remedy of petitions for
relief from judgment is still available when a judgment is rendered by an inferior court in a case, and a party
thereto, by fraud, accident, mistake or excusable negligence, has been unjustly deprived of a hearing therein, or
has been prevented from taking an appeal. Section 9, paragraph 2 of BP 129 placing the original exclusive
jurisdiction on the Court of Appeals to annul judgments of Regional Trial Courts has no relation to (sic) all to the
petition for relief provided for in Rule 38 because these two are completely different remedies.
The petitions for relief from judgment and interventions are still pending action by respondent court.1âwphi1 In
view thereof, it would be premature for this Court to resolve the issue of estoppel on the part of the said sugar
producers to question the pertinent portion of the judgment of compromise, and fraud on the part of the counsels
for petitioners therein. (Emphasis supplied).
IV.
Having disposed of the main issues, We shall now consider the motion of petitioners of 16 January 1990 to hold in
contempt respondent Judge Corona Ibay-Somera for violating/defying the Temporary Restraining Order issued by Us on
26 October 1989. They allegedly "continued to hear the case particularly on the whereabouts of 177,087.14 piculs of
sugar for the crop year 1984-1985 allegedly stored in different warehouses throughout the country," and that she even
further reset the hearing of the case on January 19, 1990 notwithstanding the cautionary manifestation filed by
petitioners during the 15 December 1989 hearing that said continued hearing would be a violation of the TRO. In the
resolution of 26 October 1989, this Court specifically ordered respondent Judge to desist and refrain from further
proceeding in Civil Case No. 86-35880, entitled Republic Planters Bank, et al. vs. Philippine Sugar Commission, et al.
In her Compliance, respondent judge explained that the TRO in question actually ordered her to desist from enforcing
the Decision of the respondent Court of Appeals in CAGR No. 17188, which is the subject of the instant petition, and that
her "only honest motivation "in making the inquiry is to see to it that while the instant petition is pending ... , whatever
funds may be owing to the Republic of the Philippines is duly preserved and protected."
We find the explanation to be satisfactory. No malice attended the commission of the challenged act. We accord to
respondent judge good faith in her claimed desire to preserve and protect public funds. Moreover, petitioners failed to
show that the act in question caused any injury or damage to their rights or interest.
IN VIEW OF ALL THE FOREGOING, the Petition is DENIED for lack of merit. Costs against petitioners.
SO ORDERED.
G.R. No. 164527 August 15, 2007
FRANCISCO I. CHAVEZ, Petitioner,
vs.
NATIONAL HOUSING AUTHORITY, R-II BUILDERS, INC., R-II HOLDINGS, INC., HARBOUR CENTRE PORT
TERMINAL, INC., and MR. REGHIS ROMERO II, Respondents.
DECISION
VELASCO, JR., J.:
In this Petition for Prohibition and Mandamus with Prayer for Temporary Restraining Order and/or Writ of Preliminary
Injunction under Rule 65, petitioner, in his capacity as taxpayer, seeks:
to declare NULL AND VOID the Joint Venture Agreement (JVA) dated March 9, 1993 between the National Housing
Authority and R-II Builders, Inc. and the Smokey Mountain Development and Reclamation Project embodied therein; the
subsequent amendments to the said JVA; and all other agreements signed and executed in relation thereto – including,
but not limited to the Smokey Mountain Asset Pool Agreement dated 26 September 1994 and the separate agreements
for Phase I and Phase II of the Project––as well as all other transactions which emanated therefrom, for being
UNCONSTITUTIONAL and INVALID;
to enjoin respondents—particularly respondent NHA—from further implementing and/or enforcing the said project and
other agreements related thereto, and from further deriving and/or enjoying any rights, privileges and interest therefrom x
x x; and
to compel respondents to disclose all documents and information relating to the project––including, but not limited to, any
subsequent agreements with respect to the different phases of the project, the revisions over the original plan, the
additional works incurred thereon, the current financial condition of respondent R-II Builders, Inc., and the transactions
made respecting the project.1
The Facts
On March 1, 1988, then President Corazon C. Aquino issued Memorandum Order No. (MO) 1612 approving and
directing the implementation of the Comprehensive and Integrated Metropolitan Manila Waste Management Plan (the
Plan). The Metro Manila Commission, in coordination with various government agencies, was tasked as the lead agency
to implement the Plan as formulated by the Presidential Task Force on Waste Management created by Memorandum
Circular No. 39. A day after, on March 2, 1988, MO 161-A3 was issued, containing the guidelines which prescribed the
functions and responsibilities of fifteen (15) various government departments and offices tasked to implement the Plan,
namely: Department of Public Works and Highway (DPWH), Department of Health (DOH), Department of Environment
and Natural Resources (DENR), Department of Transportation and Communication, Department of Budget and
Management, National Economic and Development Authority (NEDA), Philippine Constabulary Integrated National
Police, Philippine Information Agency and the Local Government Unit (referring to the City of Manila), Department of
Social Welfare and Development, Presidential Commission for Urban Poor, National Housing Authority (NHA),
Department of Labor and Employment, Department of Education, Culture and Sports (now Department of Education),
and Presidential Management Staff.
Specifically, respondent NHA was ordered to "conduct feasibility studies and develop low-cost housing projects at the
dumpsite and absorb scavengers in NHA resettlement/low-cost housing projects."4 On the other hand, the DENR was
tasked to "review and evaluate proposed projects under the Plan with regard to their environmental impact, conduct
regular monitoring of activities of the Plan to ensure compliance with environmental standards and assist DOH in the
conduct of the study on hospital waste management."5
At the time MO 161-A was issued by President Aquino, Smokey Mountain was a wasteland in Balut, Tondo, Manila,
where numerous Filipinos resided in subhuman conditions, collecting items that may have some monetary value from the
garbage. The Smokey Mountain dumpsite is bounded on the north by the Estero Marala, on the south by the property of
the National Government, on the east by the property of B and I Realty Co., and on the west by Radial Road 10 (R-10).
Pursuant to MO 161-A, NHA prepared the feasibility studies of the Smokey Mountain low-cost housing project which
resulted in the formulation of the "Smokey Mountain Development Plan and Reclamation of the Area Across R-10" or the
Smokey Mountain Development and Reclamation Project (SMDRP; the Project). The Project aimed to convert the
Smokey Mountain dumpsite into a habitable housing project, inclusive of the reclamation of the area across R-10,
adjacent to the Smokey Mountain as the enabling component of the project. 6 Once finalized, the Plan was submitted to
President Aquino for her approval.
On July 9, 1990, the Build-Operate-and-Transfer (BOT) Law (Republic Act No. [RA] 6957) was enacted. 7 Its declared
policy under Section 1 is "[t]o recognize the indispensable role of the private sector as the main engine for national
growth and development and provide the most appropriate favorable incentives to mobilize private resources for the
purpose." Sec. 3 authorized and empowered "[a]ll government infrastructure agencies, including government-owned and
controlled corporations and local government units x x x to enter into contract with any duly pre-qualified private
contractor for the financing, construction, operation and maintenance of any financially viable infrastructure facilities
through the build-operate-transfer or build and transfer scheme."
RA 6957 defined "build-and-transfer" scheme as "[a] contractual arrangement whereby the contractor undertakes the
construction, including financing, of a given infrastructure facility, and its turnover after the completion to the government
agency or local government unit concerned which shall pay the contractor its total investment expended on the project,
plus reasonable rate of return thereon." The last paragraph of Sec. 6 of the BOT Law provides that the repayment
scheme in the case of "land reclamation or the building of industrial estates" may consist of "[t]he grant of a portion or
percentage of the reclaimed land or industrial estate built, subject to the constitutional requirements with respect to the
ownership of lands."
On February 10, 1992, Joint Resolution No. 038 was passed by both houses of Congress. Sec. 1 of this resolution
provided, among other things, that:
Section 1. There is hereby approved the following national infrastructure projects for implementation under the provisions
of Republic Act No. 6957 and its implementing rules and regulations:
xxxx
(d) Port infrastructure like piers, wharves, quays, storage handling, ferry service and related facilities;
xxxx
(k) Land reclamation, dredging and other related development facilities;
(l) Industrial estates, regional industrial centers and export processing zones including steel mills, iron-making and
petrochemical complexes and related infrastructure and utilities;
xxxx
(p) Environmental and solid waste management-related facilities such as collection equipment, composting plants,
incinerators, landfill and tidal barriers, among others; and
(q) Development of new townsites and communities and related facilities.
This resolution complied with and conformed to Sec. 4 of the BOT Law requiring the approval of all national infrastructure
projects by the Congress.
On January 17, 1992, President Aquino proclaimed MO 4159 approving and directing the implementation of the SMDRP.
Secs. 3 and 4 of the Memorandum Order stated:
Section 3. The National Housing Authority is hereby directed to implement the Smokey Mountain Development Plan and
Reclamation of the Area Across R-10 through a private sector joint venture scheme at the least cost to the government.
Section 4. The land area covered by the Smokey Mountain dumpsite is hereby conveyed to the National Housing
Authority as well as the area to be reclaimed across R-10. (Emphasis supplied.)
In addition, the Public Estates Authority (PEA) was directed to assist in the evaluation of proposals regarding the
technical feasibility of reclamation, while the DENR was directed to (1) facilitate titling of Smokey Mountain and of the
area to be reclaimed and (2) assist in the technical evaluation of proposals regarding environmental impact statements. 10
In the same MO 415, President Aquino created an Executive Committee (EXECOM) to oversee the implementation of
the Plan, chaired by the National Capital Region-Cabinet Officer for Regional Development (NCR-CORD) with the heads
of the NHA, City of Manila, DPWH, PEA, Philippine Ports Authority (PPA), DENR, and Development Bank of the
Philippines (DBP) as members.11 The NEDA subsequently became a member of the EXECOM. Notably, in a September
2, 1994 Letter,12 PEA General Manager Amado Lagdameo approved the plans for the reclamation project prepared by
the NHA.
In conformity with Sec. 5 of MO 415, an inter-agency technical committee (TECHCOM) was created composed of the
technical representatives of the EXECOM "[t]o assist the NHA in the evaluation of the project proposals, assist in the
resolution of all issues and problems in the project to ensure that all aspects of the development from squatter relocation,
waste management, reclamation, environmental protection, land and house construction meet governing regulation of
the region and to facilitate the completion of the project."13
Subsequently, the TECHCOM put out the Public Notice and Notice to Pre-Qualify and Bid for the right to become NHA’s
joint venture partner in the implementation of the SMDRP. The notices were published in newspapers of general
circulation on January 23 and 26 and February 1, 14, 16, and 23, 1992, respectively. Out of the thirteen (13) contractors
who responded, only five (5) contractors fully complied with the required pre-qualification documents. Based on the
evaluation of the pre-qualification documents, the EXECOM declared the New San Jose Builders, Inc. and R-II Builders,
Inc. (RBI) as the top two contractors.14
Thereafter, the TECHCOM evaluated the bids (which include the Pre-feasibility Study and Financing Plan) of the top two
(2) contractors in this manner:
(1) The DBP, as financial advisor to the Project, evaluated their Financial Proposals;
(2) The DPWH, PPA, PEA and NHA evaluated the Technical Proposals for the Housing Construction and
Reclamation;
(3) The DENR evaluated Technical Proposals on Waste Management and Disposal by conducting the
Environmental Impact Analysis; and
(4) The NHA and the City of Manila evaluated the socio-economic benefits presented by the proposals.
On June 30, 1992, Fidel V. Ramos assumed the Office of the President (OP) of the Philippines.
On August 31, 1992, the TECHCOM submitted its recommendation to the EXECOM to approve the R-II Builders, Inc.
(RBI) proposal which garnered the highest score of 88.475%.
Subsequently, the EXECOM made a Project briefing to President Ramos. As a result, President Ramos issued
Proclamation No. 3915 on September 9, 1992, which reads:
WHEREAS, the National Housing Authority has presented a viable conceptual plan to convert the Smokey Mountain
dumpsite into a habitable housing project, inclusive of the reclamation of the area across Road Radial 10 (R-10) adjacent
to the Smokey Mountain as the enabling component of the project;
xxxx
These parcels of land of public domain are hereby placed under the administration and disposition of the National
Housing Authority to develop, subdivide and dispose to qualified beneficiaries, as well as its development for mix land
use (commercial/industrial) to provide employment opportunities to on-site families and additional areas for port-related
activities.
In order to facilitate the early development of the area for disposition, the Department of Environment and Natural
Resources, through the Lands and Management Bureau, is hereby directed to approve the boundary and subdivision
survey and to issue a special patent and title in the name of the National Housing Authority, subject to final survey and
private rights, if any there be. (Emphasis supplied.)
On October 7, 1992, President Ramos authorized NHA to enter into a Joint Venture Agreement with RBI "[s]ubject to
final review and approval of the Joint Venture Agreement by the Office of the President."16
On March 19, 1993, the NHA and RBI entered into a Joint Venture Agreement17 (JVA) for the development of the
Smokey Mountain dumpsite and the reclamation of the area across R-10 based on Presidential Decree No. (PD)
75718 which mandated NHA "[t]o undertake the physical and socio-economic upgrading and development of lands of the
public domain identified for housing," MO 161-A which required NHA to conduct the feasibility studies and develop a low-
cost housing project at the Smokey Mountain, and MO 415 as amended by MO 415-A which approved the Conceptual
Plan for Smokey Mountain and creation of the EXECOM and TECHCOM. Under the JVA, the Project "involves the
clearing of Smokey Mountain for eventual development into a low cost medium rise housing complex and
industrial/commercial site with the reclamation of the area directly across [R-10] to act as the enabling component of the
Project."19 The JVA covered a lot in Tondo, Manila with an area of two hundred twelve thousand two hundred thirty-four
(212,234) square meters and another lot to be reclaimed also in Tondo with an area of four hundred thousand (400,000)
square meters.
The Scope of Work of RBI under Article II of the JVA is as follows:
a) To fully finance all aspects of development of Smokey Mountain and reclamation of no more than 40 hectares
of Manila Bay area across Radial Road 10.
b) To immediately commence on the preparation of feasibility report and detailed engineering with emphasis to
the expedient acquisition of the Environmental Clearance Certificate (ECC) from the DENR.
c) The construction activities will only commence after the acquisition of the ECC, and
d) Final details of the contract, including construction, duration and delivery timetables, shall be based on the
approved feasibility report and detailed engineering.
Other obligations of RBI are as follows:
2.02 The [RBI] shall develop the PROJECT based on the Final Report and Detailed Engineering as approved by
the Office of the President. All costs and expenses for hiring technical personnel, date gathering, permits,
licenses, appraisals, clearances, testing and similar undertaking shall be for the account of the [RBI].
2.03 The [RBI] shall undertake the construction of 3,500 temporary housing units complete with basic amenities
such as plumbing, electrical and sewerage facilities within the temporary housing project as staging area to
temporarily house the squatter families from the Smokey Mountain while development is being undertaken.
These temporary housing units shall be turned over to the [NHA] for disposition.
2.04 The [RBI] shall construct 3,500 medium rise low cost permanent housing units on the leveled Smokey
Mountain complete with basic utilities and amenities, in accordance with the plans and specifications set forth in
the Final Report approved by the [NHA]. Completed units ready for mortgage take out shall be turned over by
the [RBI] to NHA on agreed schedule.
2.05 The [RBI] shall reclaim forty (40) hectares of Manila Bay area directly across [R-10] as contained in
Proclamation No. 39 as the enabling component of the project and payment to the [RBI] as its asset share.
2.06 The [RBI] shall likewise furnish all labor materials and equipment necessary to complete all herein
development works to be undertaken on a phase to phase basis in accordance with the work program stipulated
therein.
The profit sharing shall be based on the approved pre-feasibility report submitted to the EXECOM, viz:
For the developer (RBI):
1. To own the forty (40) hectares of reclaimed land.
2. To own the commercial area at the Smokey Mountain area composed of 1.3 hectares, and
3. To own all the constructed units of medium rise low cost permanent housing units beyond the 3,500 units
share of the [NHA].
For the NHA:
1. To own the temporary housing consisting of 3,500 units.
2. To own the cleared and fenced incinerator site consisting of 5 hectares situated at the Smokey Mountain area.
3. To own the 3,500 units of permanent housing to be constructed by [RBI] at the Smokey Mountain area to be
awarded to qualified on site residents.
4. To own the Industrial Area site consisting of 3.2 hectares, and
5. To own the open spaces, roads and facilities within the Smokey Mountain area.
In the event of "extraordinary increase in labor, materials, fuel and non-recoverability of total project expenses,"20the OP,
upon recommendation of the NHA, may approve a corresponding adjustment in the enabling component.
The functions and responsibilities of RBI and NHA are as follows:
For RBI:
4.01 Immediately commence on the preparation of the FINAL REPORT with emphasis to the expedient acquisition, with
the assistance of the [NHA] of Environmental Compliance Certificate (ECC) from the Environmental Management
Bureau (EMB) of the [DENR]. Construction shall only commence after the acquisition of the ECC. The Environment
Compliance Certificate (ECC) shall form part of the FINAL REPORT.
The FINAL REPORT shall provide the necessary subdivision and housing plans, detailed engineering and architectural
drawings, technical specifications and other related and required documents relative to the Smokey Mountain area.
With respect to the 40-hectare reclamation area, the [RBI] shall have the discretion to develop the same in a manner that
it deems necessary to recover the [RBI’s] investment, subject to environmental and zoning rules.
4.02 Finance the total project cost for land development, housing construction and reclamation of the PROJECT.
4.03 Warrant that all developments shall be in compliance with the requirements of the FINAL REPORT.
4.04 Provide all administrative resources for the submission of project accomplishment reports to the [NHA] for proper
evaluation and supervision on the actual implementation.
4.05 Negotiate and secure, with the assistance of the [NHA] the grant of rights of way to the PROJECT, from the owners
of the adjacent lots for access road, water, electrical power connections and drainage facilities.
4.06 Provide temporary field office and transportation vehicles (2 units), one (1) complete set of computer and one (1)
unit electric typewriter for the [NHA’s] field personnel to be charged to the PROJECT.
For the NHA:
4.07 The [NHA] shall be responsible for the removal and relocation of all squatters within Smokey Mountain to the
Temporary Housing Complex or to other areas prepared as relocation areas with the assistance of the [RBI]. The [RBI]
shall be responsible in releasing the funds allocated and committed for relocation as detailed in the FINAL REPORT.
4.08 Assist the [RBI] and shall endorse granting of exemption fees in the acquisition of all necessary permits, licenses,
appraisals, clearances and accreditations for the PROJECT subject to existing laws, rules and regulations.
4.09 The [NHA] shall inspect, evaluate and monitor all works at the Smokey Mountain and Reclamation Area while the
land development and construction of housing units are in progress to determine whether the development and
construction works are undertaken in accordance with the FINAL REPORT. If in its judgment, the PROJECT is not
pursued in accordance with the FINAL REPORT, the [NHA] shall require the [RBI] to undertake necessary remedial
works. All expenses, charges and penalties incurred for such remedial, if any, shall be for the account of the [RBI].
4.10 The [NHA] shall assist the [RBI] in the complete electrification of the PROJECT. x x x
4.11 Handle the processing and documentation of all sales transactions related to its assets shares from the venture
such as the 3,500 units of permanent housing and the allotted industrial area of 3.2 hectares.
4.12 All advances outside of project costs made by the [RBI] to the [NHA] shall be deducted from the proceeds due to
the [NHA].
4.13 The [NHA] shall be responsible for the acquisition of the Mother Title for the Smokey Mountain and Reclamation
Area within 90 days upon submission of Survey returns to the Land Management Sector. The land titles to the 40-
hectare reclaimed land, the 1.3 hectare commercial area at the Smokey Mountain area and the constructed units of
medium-rise permanent housing units beyond the 3,500 units share of the [NHA] shall be issued in the name of the [RBI]
upon completion of the project. However, the [RBI] shall have the authority to pre-sell its share as indicated in this
agreement.
The final details of the JVA, which will include the construction duration, costs, extent of reclamation, and delivery
timetables, shall be based on the FINAL REPORT which will be contained in a Supplemental Agreement to be executed
later by the parties.
The JVA may be modified or revised by written agreement between the NHA and RBI specifying the clauses to be
revised or modified and the corresponding amendments.
If the Project is revoked or terminated by the Government through no fault of RBI or by mutual agreement, the
Government shall compensate RBI for its actual expenses incurred in the Project plus a reasonable rate of return not
exceeding that stated in the feasibility study and in the contract as of the date of such revocation, cancellation, or
termination on a schedule to be agreed upon by both parties.
As a preliminary step in the project implementation, consultations and dialogues were conducted with the settlers of the
Smokey Mountain Dumpsite Area. At the same time, DENR started processing the application for the Environmental
Clearance Certificate (ECC) of the SMDRP. As a result however of the consultative dialogues, public hearings, the report
on the on-site field conditions, the Environmental Impact Statement (EIS) published on April 29 and May 12, 1993 as
required by the Environmental Management Bureau of DENR, the evaluation of the DENR, and the recommendations
from other government agencies, it was discovered that design changes and additional work have to be undertaken to
successfully implement the Project.21
Thus, on February 21, 1994, the parties entered into another agreement denominated as the Amended and Restated
Joint Venture Agreement22 (ARJVA) which delineated the different phases of the Project. Phase I of the Project involves
the construction of temporary housing units for the current residents of the Smokey Mountain dumpsite, the clearing and
leveling-off of the dumpsite, and the construction of medium-rise low-cost housing units at the cleared and leveled
dumpsite.23 Phase II of the Project involves the construction of an incineration area for the on-site disposal of the
garbage at the dumpsite.24 The enabling component or consideration for Phase I of the Project was increased from 40
hectares of reclaimed lands across R-10 to 79 hectares.25 The revision also provided for the enabling component for
Phase II of 119 hectares of reclaimed lands contiguous to the 79 hectares of reclaimed lands for Phase I. 26 Furthermore,
the amended contract delineated the scope of works and the terms and conditions of Phases I and II, thus:
The PROJECT shall consist of Phase I and Phase II.
Phase I shall involve the following:
a. the construction of 2,992 units of temporary housing for the affected residents while clearing and development
of Smokey Mountain [are] being undertaken
b. the clearing of Smokey Mountain and the subsequent construction of 3,520 units of medium rise housing and
the development of the industrial/commercial site within the Smokey Mountain area
c. the reclamation and development of a 79 hectare area directly across Radial Road 10 to serve as the enabling
component of Phase I
Phase II shall involve the following:
a. the construction and operation of an incinerator plant that will conform to the emission standards of the DENR
b. the reclamation and development of 119-hectare area contiguous to that to be reclaimed under Phase I to
serve as the enabling component of Phase II.
Under the ARJVA, RBI shall construct 2,992 temporary housing units, a reduction from 3,500 units under the
JVA.27However, it was required to construct 3,520 medium-rise low-cost permanent housing units instead of 3,500 units
under the JVA. There was a substantial change in the design of the permanent housing units such that a "loft shall be
incorporated in each unit so as to increase the living space from 20 to 32 square meters. The additions and changes in
the Original Project Component are as follows:
ORIGINAL CHANGES/REVISIONS
1. TEMPORARY HOUSING
Wood/Plywood, ga. 31 G.I. Concrete/Steel Frame Structure Sheet usable life of 3 years, gauge 26 G.I.
roofing sheets future 12 SM floor area. use as permanent structures for factory and warehouses mixed
17 sm & 12 sm floor area.
2. MEDIUM RISE MASS
HOUSING
Box type precast Shelter Conventional and precast component 20 square meter concrete structures, 32
square floor area with 2.4 meter meter floor area with loft floor height; bare type, 160 units/ (sleeping
quarter) 3.6 m. floor building. height, painted and improved
architectural façade, 80 units/building.
3. MITIGATING MEASURES
3.1 For reclamation work Use of clean dredgefill material below the MLLW and SM material mixed with
dredgefill above MLLW.
a. 100% use of Smokey Mountain material as dredgefill Use of Steel Sheet Piles needed for
longer depth of embedment.
b. Concrete Sheet Piles short depth of embedment
c. Silt removal approximately Need to remove more than 3.0
1.0 meter only meters of silt after sub-soil investigation.28
These material and substantial modifications served as justifications for the increase in the share of RBI from 40
hectares to 79 hectares of reclaimed land.
Under the JVA, the specific costs of the Project were not stipulated but under the ARJVA, the stipulated cost for
Phase I was pegged at six billion six hundred ninety-three million three hundred eighty-seven thousand three
hundred sixty-four pesos (PhP 6,693,387,364).
In his February 10, 1994 Memorandum, the Chairperson of the SMDRP EXECOM submitted the ARJVA for
approval by the OP. After review of said agreement, the OP directed that certain terms and conditions of the
ARJVA be further clarified or amended preparatory to its approval. Pursuant to the President’s directive, the
parties reached an agreement on the clarifications and amendments required to be made on the ARJVA.
On August 11, 1994, the NHA and RBI executed an Amendment To the Amended and Restated Joint Venture
Agreement (AARJVA)29 clarifying certain terms and condition of the ARJVA, which was submitted to President
Ramos for approval, to wit:
Phase II shall involve the following:
a. the construction and operation of an incinerator plant that will conform to the emission standards of
the DENR
b. the reclamation and development of 119-hectare area contiguous to that to be reclaimed under Phase
I to serve as the enabling component of Phase II, the exact size and configuration of which shall be
approved by the SMDRP Committee30
Other substantial amendments are the following:
4. Paragraph 2.05 of Article II of the ARJVA is hereby amended to read as follows:
2.05. The DEVELOPER shall reclaim seventy nine (79) hectares of the Manila Bay area directly across Radial
Road 10 (R-10) to serve as payment to the DEVELOPER as its asset share for Phase I and to develop such
land into commercial area with port facilities; provided, that the port plan shall be integrated with the Philippine
Port Authority’s North Harbor plan for the Manila Bay area and provided further, that the final reclamation and
port plan for said reclaimed area shall be submitted for approval by the Public Estates Authority and the
Philippine Ports Authority, respectively: provided finally, that subject to par. 2.02 above, actual reclamation work
may commence upon approval of the final reclamation plan by the Public Estates Authority.
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9. A new paragraph to be numbered 5.05 shall be added to Article V of the ARJVA, and shall read as follows:
5.05. In the event this Agreement is revoked, cancelled or terminated by the AUTHORITY through no fault of the
DEVELOPER, the AUTHORITY shall compensate the DEVELOPER for the value of the completed portions of, and
actual expenditures on the PROJECT plus a reasonable rate of return thereon, not exceeding that stated in the Cost
Estimates of Items of Work previously approved by the SMDRP Executive Committee and the AUTHORITY and stated in
this Agreement, as of the date of such revocation, cancellation, or termination, on a schedule to be agreed upon by the
parties, provided that said completed portions of Phase I are in accordance with the approved FINAL REPORT.
Afterwards, President Ramos issued Proclamation No. 465 dated August 31, 1994 31 increasing the proposed area for
reclamation across R-10 from 40 hectares to 79 hectares,32 to wit:
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by virtue of the powers vested in
me by the law, and as recommended by the SMDRP Executive Committee, do hereby authorize the increase of the area
of foreshore or submerged lands of Manila Bay to be reclaimed, as previously authorized under Proclamation No. 39 (s.
1992) and Memorandum Order No. 415 (s. 1992), from Four Hundred Thousand (400,000) square meters, more or less,
to Seven Hundred Ninety Thousand (790,000) square meters, more or less.
On September 1, 1994, pursuant to Proclamation No. 39, the DENR issued Special Patent No. 3591 conveying in favor
of NHA an area of 211,975 square meters covering the Smokey Mountain Dumpsite.
In its September 7, 1994 letter to the EXECOM, the OP through then Executive Secretary Teofisto T. Guingona, Jr.,
approved the ARJVA as amended by the AARJVA.
On September 8, 1994, the DENR issued Special Patent 3592 pursuant to Proclamation No. 39, conveying in favor of
NHA a 401,485-square meter area.
On September 26, 1994, the NHA, RBI, Home Insurance and Guaranty Corporation (HIGC), now known as the Home
Guaranty Corporation, and the Philippine National Bank (PNB) 33 executed the Smokey Mountain Asset Pool Formation
Trust Agreement (Asset Pool Agreement).34 Thereafter, a Guaranty Contract was entered into by NHA, RBI, and HIGC.
On June 23, 1994, the Legislature passed the Clean Air Act.35 The Act made the establishment of an incinerator illegal
and effectively barred the implementation of the planned incinerator project under Phase II. Thus, the off-site disposal of
the garbage at the Smokey Mountain became necessary.36
The land reclamation was completed in August 1996.37
Sometime later in 1996, pursuant likewise to Proclamation No. 39, the DENR issued Special Patent No. 3598 conveying
in favor of NHA an additional 390,000 square meter area.
During the actual construction and implementation of Phase I of the SMDRP, the Inter-Agency Technical Committee
found and recommended to the EXECOM on December 17, 1997 that additional works were necessary for the
completion and viability of the Project. The EXECOM approved the recommendation and so, NHA instructed RBI to
implement the change orders or necessary works.38
Such necessary works comprised more than 25% of the original contract price and as a result, the Asset Pool incurred
direct and indirect costs. Based on C1 12 A of the Implementing Rules and Regulations of PD 1594, a supplemental
agreement is required for "all change orders and extra work orders, the total aggregate cost of which being more than
twenty-five (25%) of the escalated original contract price."
The EXECOM requested an opinion from the Department of Justice (DOJ) to determine whether a bidding was required
for the change orders and/or necessary works. The DOJ, through DOJ Opinion Nos. 119 and 155 dated August 26, 1993
and November 12, 1993, opined that "a rebidding, pursuant to the aforequoted provisions of the implementing rules
(referring to PD 1594) would not be necessary where the change orders inseparable from the original scope of the
project, in which case, a negotiation with the incumbent contractor may be allowed."
Thus, on February 19, 1998, the EXECOM issued a resolution directing NHA to enter into a supplemental agreement
covering said necessary works.
On March 20, 1998, the NHA and RBI entered into a Supplemental Agreement covering the aforementioned necessary
works and submitted it to the President on March 24, 1998 for approval.
Outgoing President Ramos decided to endorse the consideration of the Supplemental Agreement to incoming President
Joseph E. Estrada. On June 30, 1998, Estrada became the 13th Philippine President.
However, the approval of the Supplemental Agreement was unacted upon for five months. As a result, the utilities and
the road networks were constructed to cover only the 79-hectare original enabling component granted under the ARJVA.
The 220-hectare extension of the 79-hectare area was no longer technically feasible. Moreover, the financial crises and
unreliable real estate situation made it difficult to sell the remaining reclaimed lots. The devaluation of the peso and the
increase in interest cost led to the substantial increase in the cost of reclamation.
On August 1, 1998, the NHA granted RBI’s request to suspend work on the SMDRP due to "the delay in the approval of
the Supplemental Agreement, the consequent absence of an enabling component to cover the cost of the necessary
works for the project, and the resulting inability to replenish the Asset Pool funds partially used for the completion of the
necessary works."39
As of August 1, 1998 when the project was suspended, RBI had "already accomplished a portion of the necessary works
and change orders which resulted in [RBI] and the Asset Pool incurring advances for direct and indirect cost which
amount can no longer be covered by the 79-hectare enabling component under the ARJVA."40
Repeated demands were made by RBI in its own capacity and on behalf of the asset pool on NHA for payment for the
advances for direct and indirect costs subject to NHA validation.
In November 1998, President Estrada issued Memorandum Order No. 33 reconstituting the SMDRP EXECOM and
further directed it to review the Supplemental Agreement and submit its recommendation on the completion of the
SMDRP.
The reconstituted EXECOM conducted a review of the project and recommended the amendment of the March 20, 1998
Supplemental Agreement "to make it more feasible and to identify and provide new sources of funds for the project and
provide for a new enabling component to cover the payment for the necessary works that cannot be covered by the 79-
hectare enabling component under the ARJVA."41
The EXECOM passed Resolution Nos. 99-16-01 and 99-16-0242 which approved the modification of the Supplemental
Agreement, to wit:
a) Approval of 150 hectares additional reclamation in order to make the reclamation feasible as part of the
enabling component.
b) The conveyance of the 15-hectare NHA Vitas property (actually 17 hectares based on surveys) to the SMDRP
Asset Pool.
c) The inclusion in the total development cost of other additional, necessary and indispensable infrastructure
works and the revision of the original cost stated in the Supplemental Agreement dated March 20, 1998 from
PhP 2,953,984,941.40 to PhP 2,969,134,053.13.
d) Revision in the sharing agreement between the parties.
In the March 23, 2000 OP Memorandum, the EXECOM was authorized to proceed and complete the SMDRP subject to
certain guidelines and directives.
After the parties in the case at bar had complied with the March 23, 2000 Memorandum, the NHA November 9, 2000
Resolution No. 4323 approved "the conveyance of the 17-hectare Vitas property in favor of the existing or a newly
created Asset Pool of the project to be developed into a mixed commercial-industrial area, subject to certain conditions."
On January 20, 2001, then President Estrada was considered resigned. On the same day, President Gloria M. Arroyo
took her oath as the 14th President of the Philippines.
As of February 28, 2001, "the estimated total project cost of the SMDRP has reached P8.65 billion comprising of P4.78
billion in direct cost and P3.87 billion in indirect cost,"43 subject to validation by the NHA.
On August 28, 2001, NHA issued Resolution No. 4436 to pay for "the various necessary works/change orders to
SMDRP, to effect the corresponding enabling component consisting of the conveyance of the NHA’s Vitas Property and
an additional 150-hectare reclamation area" and to authorize the release by NHA of PhP 480 million "as advance to the
project to make the Permanent Housing habitable, subject to reimbursement from the proceeds of the expanded
enabling component."44
On November 19, 2001, the Amended Supplemental Agreement (ASA) was signed by the parties, and on February 28,
2002, the Housing and Urban Development Coordinating Council (HUDCC) submitted the agreement to the OP for
approval.
In the July 20, 2002 Cabinet Meeting, HUDCC was directed "to submit the works covered by the PhP 480 million
[advance to the Project] and the ASA to public bidding."45 On August 28, 2002, the HUDCC informed RBI of the decision
of the Cabinet.
In its September 2, 2002 letter to the HUDCC Chairman, RBI lamented the decision of the government "to bid out the
remaining works under the ASA thereby unilaterally terminating the Project with RBI and all the agreements related
thereto." RBI demanded the payment of just compensation "for all accomplishments and costs incurred in developing the
SMDRP plus a reasonable rate of return thereon pursuant to Section 5.05 of the ARJVA and Section 6.2 of the ASA."46
Consequently, the parties negotiated the terms of the termination of the JVA and other subsequent agreements.
On August 27, 2003, the NHA and RBI executed a Memorandum of Agreement (MOA) whereby both parties agreed to
terminate the JVA and other subsequent agreements, thus:
1. TERMINATION
1.1 In compliance with the Cabinet directive dated 30 July 2002 to submit the works covered by the
P480 Million and the ASA to public bidding, the following agreements executed by and between the NHA
and the DEVELOPER are hereby terminated, to wit:
a. Joint Venture Agreement (JVA) dated 19 March 1993
b. Amended and Restated Joint Venture Agreement (ARJVA) dated 21 February 1994
c. Amendment and Restated Joint Venture Agreement dated 11 August 1994
d. Supplemental Agreement dated 24 March 1998
e. Amended Supplemental Agreement (ASA) dated 19 November 2001.
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5. SETTLEMENT OF CLAIMS
5.1 Subject to the validation of the DEVELOPER’s claims, the NHA hereby agrees to initially compensate the
Developer for the abovementioned costs as follows:
a. Direct payment to DEVELOPER of the amounts herein listed in the following manner:
a.1 P250 Million in cash from the escrow account in accordance with Section 2 herewith;
a.2 Conveyance of a 3 hectare portion of the Vitas Industrial area immediately after joint
determination of the appraised value of the said property in accordance with the procedure
herein set forth in the last paragraph of Section 5.3. For purposes of all payments to be made
through conveyance of real properties, the parties shall secure from the NHA Board of Directors
all documents necessary and sufficient to effect the transfer of title over the properties to be
conveyed to RBI, which documents shall be issued within a reasonable period.
5.2 Any unpaid balance of the DEVELOPERS claims determined after the validation process referred to in
Section 4 hereof, may be paid in cash, bonds or through the conveyance of properties or any combination
thereof. The manner, terms and conditions of payment of the balance shall be specified and agreed upon later
within a period of three months from the time a substantial amount representing the unpaid balance has been
validated pursuant hereto including, but not limited to the programming of quarterly cash payments to be sourced
by the NHA from its budget for debt servicing, from its income or from any other sources.
5.3 In any case the unpaid balance is agreed to be paid, either partially or totally through conveyance of
properties, the parties shall agree on which properties shall be subject to conveyance. The NHA and
DEVELOPER hereby agree to determine the valuation of the properties to be conveyed by getting the average
of the appraisals to be made by two (2) mutually acceptable independent appraisers.
Meanwhile, respondent Harbour Centre Port Terminal, Inc. (HCPTI) entered into an agreement with the asset pool for
the development and operations of a port in the Smokey Mountain Area which is a major component of SMDRP to
provide a source of livelihood and employment for Smokey Mountain residents and spur economic growth. A
Subscription Agreement was executed between the Asset Pool and HCPTI whereby the asset pool subscribed to 607
million common shares and 1,143 million preferred shares of HCPTI. The HCPTI preferred shares had a premium and
penalty interest of 7.5% per annum and a mandatory redemption feature. The asset pool paid the subscription by
conveying to HCPTI a 10-hectare land which it acquired from the NHA being a portion of the reclaimed land of the
SMDRP. Corresponding certificates of titles were issued to HCPTI, namely: TCT Nos. 251355, 251356, 251357, and
251358.
Due to HCPTI’s failure to obtain a license to handle foreign containerized cargo from PPA, it suffered a net income loss
of PhP 132,621,548 in 2002 and a net loss of PhP 15,540,063 in 2003. The Project Governing Board of the Asset Pool
later conveyed by way of dacion en pago a number of HCPTI shares to RBI in lieu of cash payment for the latter’s work
in SMDRP.
On August 5, 2004, former Solicitor General Francisco I. Chavez, filed the instant petition which impleaded as
respondents the NHA, RBI, R-II Holdings, Inc. (RHI), HCPTI, and Mr. Reghis Romero II, raising constitutional issues.
The NHA reported that thirty-four (34) temporary housing structures and twenty-one (21) permanent housing structures
had been turned over by respondent RBI. It claimed that 2,510 beneficiary-families belonging to the poorest of the poor
had been transferred to their permanent homes and benefited from the Project.
The Issues
The grounds presented in the instant petition are:
I
Neither respondent NHA nor respondent R-II builders may validly reclaim foreshore and submerged land because:
1. Respondent NHA and R-II builders were never granted any power and authority to reclaim lands of the public
domain as this power is vested exclusively with the PEA.
2. Even assuming that respondents NHA and R-II builders were given the power and authority to reclaim
foreshore and submerged land, they were never given the authority by the denr to do so.
II
Respondent R-II builders cannot acquire the reclaimed foreshore and submerged land areas because:
1. The reclaimed foreshore and submerged parcels of land are inalienable public lands which are beyond the
commerce of man.
2. Assuming arguendo that the subject reclaimed foreshore and submerged parcels of land were already
declared alienable lands of the public domain, respondent R-II builders still could not acquire the same because
there was never any declaration that the said lands were no longer needed for public use.
3. Even assuming that the subject reclaimed lands are alienable and no longer needed for public use,
respondent R-II builders still cannot acquire the same because there was never any law authorizing the sale
thereof.
4. There was never any public bidding awarding ownership of the subject land to respondent R-II builders.
5. Assuming that all the requirements for a valid transfer of alienable public had been performed, respondent R-II
Builders, being private corporation is nonetheless expresslyprohibited by the Philippine Constitution to acquire
lands of the public domain.
III
Respondent harbour, being a private corporation whose majority stocks are owned and controlled by respondent
Romero’s Corporations – R-II builders and R-II Holdings – is disqualified from being a transferee of public land.
IV
Respondents must be compelled to disclose all information related to the smokey mountain development and
reclamation project.
The Court’s Ruling
Before we delve into the substantive issues raised in this petition, we will first deal with several procedural matters raised
by respondents.
Whether petitioner has the requisite locus standi to file this case
Respondents argue that petitioner Chavez has no legal standing to file the petition.
Only a person who stands to be benefited or injured by the judgment in the suit or entitled to the avails of the suit can file
a complaint or petition.47 Respondents claim that petitioner is not a proper party-in-interest as he was unable to show
that "he has sustained or is in immediate or imminent danger of sustaining some direct and personal injury as a result of
the execution and enforcement of the assailed contracts or agreements."48 Moreover, they assert that not all government
contracts can justify a taxpayer’s suit especially when no public funds were utilized in contravention of the Constitution or
a law.
We explicated in Chavez v. PCGG49 that in cases where issues of transcendental public importance are presented, there
is no necessity to show that petitioner has experienced or is in actual danger of suffering direct and personal injury as the
requisite injury is assumed. We find our ruling in Chavez v. PEA50 as conclusive authority on locus standi in the case at
bar since the issues raised in this petition are averred to be in breach of the fair diffusion of the country’s natural
resources and the constitutional right of a citizen to information which have been declared to be matters of
transcendental public importance. Moreover, the pleadings especially those of respondents readily reveal that public
funds have been indirectly utilized in the Project by means of Smokey Mountain Project Participation Certificates
(SMPPCs) bought by some government agencies.
Hence, petitioner, as a taxpayer, is a proper party to the instant petition before the court.
Whether petitioner’s direct recourse to this Court was proper
Respondents are one in asserting that petitioner circumvents the principle of hierarchy of courts in his petition. Judicial
hierarchy was made clear in the case of People v. Cuaresma, thus:
There is after all a hierarchy of courts. That hierarchy is determinative of the venue of appeals, and should also serve as
a general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard for that judicial
hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first level ("inferior") courts
should be filed with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation
of the Supreme Court’s original jurisdiction to issue these writs should be allowed only when there are special and
important reasons therefor, clearly and specifically set out in the petition. This is established policy. It is a policy that is
necessary to prevent inordinate demands upon the Court’s time and attention which are better devoted to those matters
within its exclusive jurisdiction, and to prevent further over-crowding of the Court’s docket.51 x x x
The OSG claims that the jurisdiction over petitions for prohibition and mandamus is concurrent with other lower courts
like the Regional Trial Courts and the Court of Appeals. Respondent NHA argues that the instant petition is misfiled
because it does not introduce special and important reasons or exceptional and compelling circumstances to warrant
direct recourse to this Court and that the lower courts are more equipped for factual issues since this Court is not a trier
of facts. Respondents RBI and RHI question the filing of the petition as this Court should not be unduly burdened with
"repetitions, invocation of jurisdiction over constitutional questions it had previously resolved and settled."
In the light of existing jurisprudence, we find paucity of merit in respondents’ postulation.
While direct recourse to this Court is generally frowned upon and discouraged, we have however ruled in Santiago v.
Vasquez that such resort to us may be allowed in certain situations, wherein this Court ruled that petitions for certiorari,
prohibition, or mandamus, though cognizable by other courts, may directly be filed with us if "the redress desired cannot
be obtained in the appropriate courts or where exceptional compelling circumstances justify availment of a remedy within
and calling for the exercise of [this Court’s] primary jurisdiction."521avvphi1
The instant petition challenges the constitutionality and legality of the SMDRP involving several hectares of government
land and hundreds of millions of funds of several government agencies. Moreover, serious constitutional challenges are
made on the different aspects of the Project which allegedly affect the right of Filipinos to the distribution of natural
resources in the country and the right to information of a citizen—matters which have been considered to be of
extraordinary significance and grave consequence to the public in general. These concerns in the instant action compel
us to turn a blind eye to the judicial structure meant to provide an orderly dispensation of justice and consider the instant
petition as a justified deviation from an established precept.
Core factual matters undisputed
Respondents next challenge the projected review by this Court of the alleged factual issues intertwined in the issues
propounded by petitioner. They listed a copious number of questions seemingly factual in nature which would make this
Court a trier of facts.53
We find the position of respondents bereft of merit.
For one, we already gave due course to the instant petition in our January 18, 2005 Resolution. 54 In said issuance, the
parties were required to make clear and concise statements of established facts upon which our decision will be based.
Secondly, we agree with petitioner that there is no necessity for us to make any factual findings since the facts needed to
decide the instant petition are well established from the admissions of the parties in their pleadings 55 and those derived
from the documents appended to said submissions. Indeed, the core facts which are the subject matter of the numerous
issues raised in this petition are undisputed.
Now we will tackle the issues that prop up the instant petition.
Since petitioner has cited our decision in PEA as basis for his postulations in a number of issues, we first resolve the
query—is PEA applicable to the case at bar?
A juxtaposition of the facts in the two cases constrains the Court to rule in the negative.
The Court finds that PEA is not a binding precedent to the instant petition because the facts in said case are substantially
different from the facts and circumstances in the case at bar, thus:
(1) The reclamation project in PEA was undertaken through a JVA entered into between PEA and AMARI. The
reclamation project in the instant NHA case was undertaken by the NHA, a national government agency in
consultation with PEA and with the approval of two Philippine Presidents;
(2) In PEA, AMARI and PEA executed a JVA to develop the Freedom Islands and reclaim submerged areas
without public bidding on April 25, 1995. In the instant NHA case, the NHA and RBI executed a JVA after RBI
was declared the winning bidder on August 31, 1992 as the JVA partner of the NHA in the SMDRP after
compliance with the requisite public bidding.
(3) In PEA, there was no law or presidential proclamation classifying the lands to be reclaimed as alienable and
disposal lands of public domain. In this RBI case, MO 415 of former President Aquino and Proclamation No. 39
of then President Ramos, coupled with Special Patents Nos. 3591, 3592, and 3598, classified the reclaimed
lands as alienable and disposable;
(4) In PEA, the Chavez petition was filed before the amended JVA was executed by PEA and
AMARI.1avvphi1 In this NHA case, the JVA and subsequent amendments were already substantially
implemented. Subsequently, the Project was terminated through a MOA signed on August 27, 2003. Almost one
year later on August 5, 2004, the Chavez petition was filed;
(5) In PEA, AMARI was considered to be in bad faith as it signed the amended JVA after the Chavez petition
was filed with the Court and after Senate Committee Report No. 560 was issued finding that the subject lands
are inalienable lands of public domain. In the instant petition, RBI and other respondents are considered to have
signed the agreements in good faith as the Project was terminated even before the Chavez petition was filed;
(6) The PEA-AMARI JVA was executed as a result of direct negotiation between the parties and not in
accordance with the BOT Law. The NHA-RBI JVA and subsequent amendments constitute a BOT contract
governed by the BOT Law; and
(7) In PEA, the lands to be reclaimed or already reclaimed were transferred to PEA, a government entity tasked
to dispose of public lands under Executive Order No. (EO) 525.56 In the NHA case, the reclaimed lands were
transferred to NHA, a government entity NOT tasked to dispose of public land and therefore said alienable lands
were converted to patrimonial lands upon their transfer to NHA.57
Thus the PEA Decision58 cannot be considered an authority or precedent to the instant case. The principle of stare
decisis59 has no application to the different factual setting of the instant case.
We will now dwell on the substantive issues raised by petitioner. After a perusal of the grounds raised in this petition, we
find that most of these issues are moored on our PEA Decision which, as earlier discussed, has no application to the
instant petition. For this reason alone, the petition can already be rejected. Nevertheless, on the premise of the
applicability of said decision to the case at bar, we will proceed to resolve said issues.
First Issue: Whether respondents NHA and RBI have been granted
the power and authority to reclaim lands of the public domain as
this power is vested exclusively in PEA as claimed by petitioner
Petitioner contends that neither respondent NHA nor respondent RBI may validly reclaim foreshore and submerged land
because they were not given any power and authority to reclaim lands of the public domain as this power was delegated
by law to PEA.
Asserting that existing laws did not empower the NHA and RBI to reclaim lands of public domain, the Public Estates
Authority (PEA), petitioner claims, is "the primary authority for the reclamation of all foreshore and submerged lands of
public domain," and relies on PEA where this Court held:
Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily responsible for integrating,
directing, and coordinating all reclamation projects for and on behalf of the National Government." The same section also
states that "[A]ll reclamation projects shall be approved by the President upon recommendation of the PEA, and shall be
undertaken by the PEA or through a proper contract executed by it with any person or entity; x x x." Thus, under EO No.
525, in relation to PD No. 3-A and PD No. 1084, PEA became the primary implementing agency of the National
Government to reclaim foreshore and submerged lands of the public domain. EO No. 525 recognized PEA as the
government entity "to undertake the reclamation of lands and ensure their maximum utilization in promoting public
welfare and interests." Since large portions of these reclaimed lands would obviously be needed for public service, there
must be a formal declaration segregating reclaimed lands no longer needed for public service from those still needed for
public service.60
In the Smokey Mountain Project, petitioner clarifies that the reclamation was not done by PEA or through a contract
executed by PEA with another person or entity but by the NHA through an agreement with respondent RBI. Therefore,
he concludes that the reclamation is null and void.
Petitioner’s contention has no merit.
EO 525 reads:
Section 1. The Public Estates Authority (PEA) shall be primarily responsible for integrating, directing, and coordinating
all reclamation projects for and on behalf of the National Government. All reclamation projects shall be approved by the
President upon recommendation of the PEA, and shall be undertaken by the PEA or through a proper contract executed
by it with any person or entity; Provided, that, reclamation projects of any national government agency or entity
authorized under its charter shall be undertaken in consultation with the PEA upon approval of the President. (Emphasis
supplied.)
The aforequoted provision points to three (3) requisites for a legal and valid reclamation project, viz:
(1) approval by the President;
(2) favorable recommendation of PEA; and
(3) undertaken by any of the following:
a. by PEA
b. by any person or entity pursuant to a contract it executed with PEA
c. by the National Government agency or entity authorized under its charter to reclaim lands subject to
consultation with PEA
Without doubt, PEA under EO 525 was designated as the agency primarily responsible for integrating, directing, and
coordinating all reclamation projects. Primarily means "mainly, principally, mostly, generally." Thus, not all reclamation
projects fall under PEA’s authority of supervision, integration, and coordination. The very charter of PEA, PD
1084,61 does not mention that PEA has the exclusive and sole power and authority to reclaim lands of public domain. EO
525 even reveals the exception—reclamation projects by a national government agency or entity authorized by its
charter to reclaim land. One example is EO 405 which authorized the Philippine Ports Authority (PPA) to reclaim and
develop submerged areas for port related purposes. Under its charter, PD 857, PPA has the power "to reclaim, excavate,
enclose or raise any of the lands" vested in it.
Thus, while PEA under PD 1084 has the power to reclaim land and under EO 525 is primarily responsible for integrating,
directing and coordinating reclamation projects, such authority is NOT exclusive and such power to reclaim may be
granted or delegated to another government agency or entity or may even be undertaken by the National Government
itself, PEA being only an agency and a part of the National Government.
Let us apply the legal parameters of Sec. 1, EO 525 to the reclamation phase of SMDRP. After a scrutiny of the facts
culled from the records, we find that the project met all the three (3) requirements, thus:
1. There was ample approval by the President of the Philippines; as a matter of fact, two Philippine Presidents approved
the same, namely: Presidents Aquino and Ramos. President Aquino sanctioned the reclamation of both the SMDRP
housing and commercial-industrial sites through MO 415 (s. 1992) which approved the SMDRP under Sec. 1 and
directed NHA "x x x to implement the Smokey Mountain Development Plan and Reclamation of the Area across R-10
through a private sector joint venture scheme at the least cost to government" under Section 3.
For his part, then President Ramos issued Proclamation No. 39 (s. 1992) which expressly reserved the Smokey
Mountain Area and the Reclamation Area for a housing project and related commercial/industrial development.
Moreover, President Ramos issued Proclamation No. 465 (s. 1994) which authorized the increase of the Reclamation
Area from 40 hectares of foreshore and submerged land of the Manila Bay to 79 hectares. It speaks of the reclamation of
400,000 square meters, more or less, of the foreshore and submerged lands of Manila Bay adjoining R-10 as an
enabling component of the SMDRP.
As a result of Proclamations Nos. 39 and 465, Special Patent No. 3591 covering 211,975 square meters of Smokey
Mountain, Special Patent No. 3592 covering 401,485 square meters of reclaimed land, and Special Patent No. 3598
covering another 390,000 square meters of reclaimed land were issued by the DENR.
Thus, the first requirement of presidential imprimatur on the SMDRP has been satisfied.
2. The requisite favorable endorsement of the reclamation phase was impliedly granted by PEA. President Aquino saw to
it that there was coordination of the project with PEA by designating its general manager as member of the EXECOM
tasked to supervise the project implementation. The assignment was made in Sec. 2 of MO 415 which provides:
Section 2. An Executive Committee is hereby created to oversee the implementation of the Plan, chaired by the NCR-
CORD, with the heads of the following agencies as members: The National Housing Authority, the City of Manila, the
Department of Public Works and Highways, the Public Estates Authority, the Philippine Ports Authority, the Department
of Environment and Natural Resources and the Development Bank of the Philippines. (Emphasis supplied.)
The favorable recommendation by PEA of the JVA and subsequent amendments were incorporated as part of the
recommendations of the EXECOM created under MO 415. While there was no specific recommendation on the SMDRP
emanating solely from PEA, we find that the approbation of the Project and the land reclamation as an essential
component by the EXECOM of which PEA is a member, and its submission of the SMDRP and the agreements on the
Project to the President for approval amply met the second requirement of EO 525.
3. The third element was also present—the reclamation was undertaken either by PEA or any person or entity under
contract with PEA or by the National Government agency or entity authorized under its charter to reclaim lands subject to
consultation with PEA. It cannot be disputed that the reclamation phase was not done by PEA or any person or entity
under contract with PEA. However, the reclamation was implemented by the NHA, a national government agency whose
authority to reclaim lands under consultation with PEA is derived from its charter—PD 727 and other pertinent laws—RA
727962 and RA 6957 as amended by RA 7718.
While the authority of NHA to reclaim lands is challenged by petitioner, we find that the NHA had more than enough
authority to do so under existing laws. While PD 757, the charter of NHA, does not explicitly mention "reclamation" in any
of the listed powers of the agency, we rule that the NHA has an implied power to reclaim land as this is vital or incidental
to effectively, logically, and successfully implement an urban land reform and housing program enunciated in Sec. 9 of
Article XIII of the 1987 Constitution.
Basic in administrative law is the doctrine that a government agency or office has express and implied powers based on
its charter and other pertinent statutes. Express powers are those powers granted, allocated, and delegated to a
government agency or office by express provisions of law. On the other hand, implied powers are those that can be
inferred or are implicit in the wordings of the law63 or conferred by necessary or fair implication in the enabling act.64 In
Angara v. Electoral Commission, the Court clarified and stressed that when a general grant of power is conferred or duty
enjoined, every particular power necessary for the exercise of the one or the performance of the other is also conferred
by necessary implication.65 It was also explicated that when the statute does not specify the particular method to be
followed or used by a government agency in the exercise of the power vested in it by law, said agency has the authority
to adopt any reasonable method to carry out its functions.66
The power to reclaim on the part of the NHA is implicit from PD 757, RA 7279, MO 415, RA 6957, and PD 3-A,67viz:
1. NHA’s power to reclaim derived from PD 757 provisions:
a. Sec. 3 of PD 757 implies that reclamation may be resorted to in order to attain the goals of NHA:
Section 3. Progress and Objectives. The Authority shall have the following purposes and objectives:
xxxx
b) To undertake housing, development, resettlement or other activities as would enhance the provision of
housing to every Filipino;
c) To harness and promote private participation in housing ventures in terms of capital expenditures, land,
expertise, financing and other facilities for the sustained growth of the housing industry. (Emphasis supplied.)
Land reclamation is an integral part of the development of resources for some of the housing requirements of the NHA.
Private participation in housing projects may also take the form of land reclamation.
b. Sec. 5 of PD 757 serves as proof that the NHA, as successor of the Tondo Foreshore Development Authority (TFDA),
has the power to reclaim, thus:
Section 5. Dissolution of Existing Housing Agencies. The People's Homesite and Housing Corporation (PHHC), the
Presidential Assistant on Housing Resettlement Agency (PAHRA), the Tondo Foreshore Development Authority (TFDA),
the Central Institute for the Training and Relocation of Urban Squatters (CITRUS), the Presidential Committee for
Housing and Urban Resettlement (PRECHUR), Sapang Palay Development Committee, Inter-Agency Task Force to
Undertake the Relocation of Families in Barrio Nabacaan, Villanueva, Misamis Oriental and all other existing government
housing and resettlement agencies, task forces and ad-hoc committees, are hereby dissolved. Their powers and
functions, balance of appropriations, records, assets, rights, and choses in action, are transferred to, vested in, and
assumed by the Authority. x x x (Emphasis supplied.)
PD 570 dated October 30, 1974 created the TFDA, which defined its objectives, powers, and functions. Sec. 2 provides:
Section 2. Objectives and Purposes. The Authority shall have the following purposes and objectives:
a) To undertake all manner of activity, business or development projects for the establishment of harmonious,
comprehensive, integrated and healthy living community in the Tondo Foreshoreland and its resettlement site;
b) To undertake and promote the physical and socio-economic amelioration of the Tondo Foreshore residents in
particular and the nation in general (Emphasis supplied.)
The powers and functions are contained in Sec. 3, to wit:
a) To develop and implement comprehensive and integrated urban renewal programs for the Tondo Foreshore
and Dagat-dagatan lagoon and/or any other additional/alternative resettlement site and to formulate and enforce
general and specific policies for its development which shall ensure reasonable degree of compliance with
environmental standards.
b) To prescribe guidelines and standards for the reservation, conservation and utilization of public lands covering
the Tondo Foreshore land and its resettlement sites;
c) To construct, acquire, own, lease, operate and maintain infrastructure facilities, housing complex, sites and
services;
d) To determine, regulate and supervise the establishment and operation of housing, sites, services and
commercial and industrial complexes and any other enterprises to be constructed or established within the
Tondo Foreshore and its resettlement sites;
e) To undertake and develop, by itself or through joint ventures with other public or private entities, all or any of
the different phases of development of the Tondo Foreshore land and its resettlement sites;
f) To acquire and own property, property-rights and interests, and encumber or otherwise dispose of the same as
it may deem appropriate (Emphasis supplied.)
From the foregoing provisions, it is readily apparent that the TFDA has the explicit power to develop public lands
covering the Tondo foreshore land and any other additional and alternative resettlement sites under letter b, Sec. 3 of PD
570. Since the additional and/or alternative sites adjacent to Tondo foreshore land cover foreshore and submerged
areas, the reclamation of said areas is necessary in order to convert them into a comprehensive and integrated
resettlement housing project for the slum dwellers and squatters of Tondo. Since the powers of TFDA were assumed by
the NHA, then the NHA has the power to reclaim lands in the Tondo foreshore area which covers the 79-hectare land
subject of Proclamations Nos. 39 and 465 and Special Patents Nos. 3592 and 3598.
c. Sec. 6 of PD 757 delineates the functions and powers of the NHA which embrace the authority to reclaim land, thus:
Sec. 6. Powers and functions of the Authority.—The Authority shall have the following powers and functions to be
exercised by the Board in accordance with its established national human settlements plan prepared by the Human
Settlements Commission:
(a) Develop and implement the comprehensive and integrated housing program provided for in Section hereof;
xxxx
(c) Prescribe guidelines and standards for the reservation, conservation and utilization of public lands identified for
housing and resettlement;
xxxx
(e) Develop and undertake housing development and/or resettlement projects through joint ventures or other
arrangements with public and private entities;
xxxx
(k) Enter into contracts whenever necessary under such terms and conditions as it may deem proper and reasonable;
(l) Acquire property rights and interests and encumber or otherwise dispose the same as it may deem appropriate;
xxxx
(s) Perform such other acts not inconsistent with this Decree, as may be necessary to effect the policies and objectives
herein declared. (Emphasis supplied.)
The NHA’s authority to reclaim land can be inferred from the aforequoted provisions. It can make use of public lands
under letter (c) of Sec. 6 which includes reclaimed land as site for its comprehensive and integrated housing projects
under letter (a) which can be undertaken through joint ventures with private entities under letter (e). Taken together with
letter (s) which authorizes NHA to perform such other activities "necessary to effect the policies and objectives" of PD
757, it is safe to conclude that the NHA’s power to reclaim lands is a power that is implied from the exercise of its explicit
powers under Sec. 6 in order to effectively accomplish its policies and objectives under Sec. 3 of its charter. Thus, the
reclamation of land is an indispensable component for the development and construction of the SMDRP housing
facilities.
2. NHA’s implied power to reclaim land is enhanced by RA 7279.
PD 757 identifies NHA’s mandate to "[d]evelop and undertake housing development and/or resettlement projects through
joint ventures or other arrangements with public and private entities."
The power of the NHA to undertake reclamation of land can be inferred from Secs. 12 and 29 of RA 7279, which provide:
Section 12. Disposition of Lands for Socialized Housing.—The National Housing Authority, with respect to lands
belonging to the National Government, and the local government units with respect to other lands within their respective
localities, shall coordinate with each other to formulate and make available various alternative schemes for the
disposition of lands to the beneficiaries of the Program. These schemes shall not be limited to those involving transfer of
ownership in fee simple but shall include lease, with option to purchase, usufruct or such other variations as the local
government units or the National Housing Authority may deem most expedient in carrying out the purposes of this Act.
xxxx
Section 29. Resettlement.—With two (2) years from the effectivity of this Act, the local government units, in coordination
with the National Housing Authority, shall implement the relocation and resettlement of persons living in danger areas
such as esteros, railroad tracks, garbage dumps, riverbanks, shorelines, waterways, and in other public places as
sidewalks, roads, parks, and playgrounds. The local government unit, in coordination with the National Housing
Authority, shall provide relocation or resettlement sites with basic services and facilities and access to employment and
livelihood opportunities sufficient to meet the basic needs of the affected families. (Emphasis supplied.)
Lands belonging to the National Government include foreshore and submerged lands which can be reclaimed to
undertake housing development and resettlement projects.
3. MO 415 explains the undertaking of the NHA in SMDRP:
WHEREAS, Memorandum Order No. 161-A mandated the National Housing Authority to conduct feasibility studies and
develop low-cost housing projects at the dumpsites of Metro Manila;
WHEREAS, the National Housing Authority has presented a viable Conceptual Plan to convert the Smokey Mountain
dumpsite into a habitable housing project inclusive of the reclamation area across R-10 as enabling component of the
Project;
WHEREAS, the said Plan requires the coordinated and synchronized efforts of the City of Manila and other government
agencies and instrumentalities to ensure effective and efficient implementation;
WHEREAS, the government encourages private sector initiative in the implementation of its projects. (Emphasis
supplied.)
Proceeding from these "whereas" clauses, it is unequivocal that reclamation of land in the Smokey Mountain area is an
essential and vital power of the NHA to effectively implement its avowed goal of developing low-cost housing units at the
Smokey Mountain dumpsites. The interpretation made by no less than the President of the Philippines as Chief of the
Executive Branch, of which the NHA is a part, must necessarily command respect and much weight and credit.
4. RA 6957 as amended by RA 7718—the BOT Law—serves as an exception to PD 1084 and EO 525.
Based on the provisions of the BOT Law and Implementing Rules and Regulations, it is unequivocal that all government
infrastructure agencies like the NHA can undertake infrastructure or development projects using the contractual
arrangements prescribed by the law, and land reclamation is one of the projects that can be resorted to in the BOT
project implementation under the February 10, 1992 Joint Resolution No. 3 of the 8th Congress.
From the foregoing considerations, we find that the NHA has ample implied authority to undertake reclamation projects.
Even without an implied power to reclaim lands under NHA’s charter, we rule that the authority granted to NHA, a
national government agency, by the President under PD 3-A reinforced by EO 525 is more than sufficient statutory basis
for the reclamation of lands under the SMDRP.
PD 3-A is a law issued by then President Ferdinand E. Marcos under his martial law powers on September 23, 1972. It
provided that "[t]he provisions of any law to the contrary notwithstanding, the reclamation of areas, underwater, whether
foreshore or inland, shall be limited to the National Government or any person authorized by it under the proper
contract." It repealed, in effect, RA 1899 which previously delegated the right to reclaim lands to municipalities and
chartered cities and revested it to the National Government.68 Under PD 3-A, "national government" can only mean the
Executive Branch headed by the President. It cannot refer to Congress as it was dissolved and abolished at the time of
the issuance of PD 3-A on September 23, 1972. Moreover, the Executive Branch is the only implementing arm in the
government with the equipment, manpower, expertise, and capability by the very nature of its assigned powers and
functions to undertake reclamation projects. Thus, under PD 3-A, the Executive Branch through the President can
implement reclamation of lands through any of its departments, agencies, or offices.
Subsequently, on February 4, 1977, President Marcos issued PD 1084 creating the PEA, which was granted, among
others, the power "to reclaim land, including foreshore and submerged areas by dredging, filling or other means or to
acquire reclaimed lands." The PEA’s power to reclaim is not however exclusive as can be gleaned from its charter, as
the President retained his power under PD 3-A to designate another agency to reclaim lands.
On February 14, 1979, EO 525 was issued. It granted PEA primary responsibility for integrating, directing, and
coordinating reclamation projects for and on behalf of the National Government although other national government
agencies can be designated by the President to reclaim lands in coordination with the PEA. Despite the issuance of EO
525, PD 3-A remained valid and subsisting. Thus, the National Government through the President still retained the power
and control over all reclamation projects in the country.
The power of the National Government through the President over reclamation of areas, that is, underwater whether
foreshore or inland, was made clear in EO 54369 which took effect on June 24, 2006. Under EO 543, PEA was renamed
the Philippine Reclamation Authority (PRA) and was granted the authority to approve reclamation projects, a power
previously reposed in the President under EO 525. EO 543 reads:
Section 1. The power of the President to approve reclamation projects is hereby delegated to the Philippine Reclamation
Authority [formerly PEA], through its governing board, subject to compliance with existing laws and rules and subject to
the condition that reclamation contracts to be executed with any person or entity go through public bidding.
Section 2. Nothing in the Order shall be construed as diminishing the President’s authority to modify, amend or nullify
PRA’s action.
Section 3. All executive issuances inconsistent with this Executive Order are hereby repealed or amended accordingly.
(Emphasis supplied.)
Sec. 2 of EO 543 strengthened the power of control and supervision of the President over reclamation of lands as s/he
can modify, amend, or nullify the action of PEA (now PRA).
From the foregoing issuances, we conclude that the President’s delegation to NHA, a national government agency, to
reclaim lands under the SMDRP, is legal and valid, firmly anchored on PD 3-A buttressed by EO 525 notwithstanding the
absence of any specific grant of power under its charter, PD 757.
Second Issue: Whether respondents NHA and RBI were given the
power and authority by DENR to reclaim foreshore and submerged
lands
Petitioner Chavez puts forth the view that even if the NHA and RBI were granted the authority to reclaim, they were not
authorized to do so by the DENR.
Again, reliance is made on our ruling in PEA where it was held that the DENR’s authority is necessary in order for the
government to validly reclaim foreshore and submerged lands. In PEA, we expounded in this manner:
As manager, conservator and overseer of the natural resources of the State, DENR exercises "supervision and control
over alienable and disposable public lands." DENR also exercises "exclusive jurisdiction on the management and
disposition of all lands of the public domain." Thus, DENR decides whether areas under water, like foreshore or
submerged areas of Manila Bay, should be reclaimed or not. This means that PEA needs authorization from DENR
before PEA can undertake reclamation projects in Manila Bay, or in any part of the country.
DENR also exercises exclusive jurisdiction over the disposition of all lands of the public domain. Hence, DENR decides
whether reclaimed lands of PEA should be classified as alienable under Sections 6 and 7 of CA No. 141. Once DENR
decides that the reclaimed lands should be so classified, it then recommends to the President the issuance of a
proclamation classifying the lands as alienable or disposable lands of the public domain open to disposition. We note
that then DENR Secretary Fulgencio S. Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the
Revised Administrative Code and Sections 6 and 7 of CA No. 141.
In short, DENR is vested with the power to authorize the reclamation of areas under water, while PEA is vested with the
power to undertake the physical reclamation of areas under water, whether directly or through private contractors. DENR
is also empowered to classify lands of the public domain into alienable or disposable lands subject to the approval of the
President. On the other hand, PEA is tasked to develop, sell or lease the reclaimed alienable lands of the public
domain.70
Despite our finding that PEA is not a precedent to the case at bar, we find after all that under existing laws, the NHA is
still required to procure DENR’s authorization before a reclamation project in Manila Bay or in any part of the Philippines
can be undertaken. The requirement applies to PEA, NHA, or any other government agency or office granted with such
power under the law.
Notwithstanding the need for DENR permission, we nevertheless find petitioner’s position bereft of merit.
The DENR is deemed to have granted the authority to reclaim in the Smokey Mountain Project for the following reasons:
1. Sec. 17, Art. VII of the Constitution provides that "the President shall have control of all executive departments,
bureaus and offices." The President is assigned the task of seeing to it that all laws are faithfully executed. "Control," in
administrative law, means "the power of an officer to alter, modify, nullify or set aside what a subordinate officer has
done in the performance of his duties and to substitute the judgment of the former for that of the latter." 71
As such, the President can exercise executive power motu proprio and can supplant the act or decision of a subordinate
with the President’s own. The DENR is a department in the executive branch under the President, and it is only an alter
ego of the latter. Ordinarily the proposed action and the staff work are initially done by a department like the DENR and
then submitted to the President for approval. However, there is nothing infirm or unconstitutional if the President decides
on the implementation of a certain project or activity and requires said department to implement it. Such is a presidential
prerogative as long as it involves the department or office authorized by law to supervise or execute the Project. Thus, as
in this case, when the President approved and ordered the development of a housing project with the corresponding
reclamation work, making DENR a member of the committee tasked to implement the project, the required authorization
from the DENR to reclaim land can be deemed satisfied. It cannot be disputed that the ultimate power over alienable and
disposable public lands is reposed in the President of the Philippines and not the DENR Secretary. To still require a
DENR authorization on the Smokey Mountain when the President has already authorized and ordered the
implementation of the Project would be a derogation of the powers of the President as the head of the executive branch.
Otherwise, any department head can defy or oppose the implementation of a project approved by the head of the
executive branch, which is patently illegal and unconstitutional.
In Chavez v. Romulo, we stated that when a statute imposes a specific duty on the executive department, the President
may act directly or order the said department to undertake an activity, thus:
[A]t the apex of the entire executive officialdom is the President. Section 17, Article VII of the Constitution specifies [her]
power as Chief executive departments, bureaus and offices. [She] shall ensure that the laws be faithfully executed. As
Chief Executive, President Arroyo holds the steering wheel that controls the course of her government. She lays down
policies in the execution of her plans and programs. Whatever policy she chooses, she has her subordinates to
implement them. In short, she has the power of control. Whenever a specific function is entrusted by law or regulation to
her subordinate, she may act directly or merely direct the performance of a duty x x x. Such act is well within the
prerogative of her office (emphasis supplied).72
Moreover, the power to order the reclamation of lands of public domain is reposed first in the Philippine President. The
Revised Administrative Code of 1987 grants authority to the President to reserve lands of public domain for settlement
for any specific purpose, thus:
Section 14. Power to Reserve Lands of the Public and Private Domain of the Government.—(1) The President shall have
the power to reserve for settlement or public use, and for specific public purposes, any of the lands of the public domain,
the use of which is not otherwise directed by law. The reserved land shall thereafter remain subject to the specific public
purpose indicated until otherwise provided by law or proclamation. (Emphasis supplied.)
President Aquino reserved the area of the Smokey Mountain dumpsite for settlement and issued MO 415 authorizing the
implementation of the Smokey Mountain Development Project plus the reclamation of the area across R-10. Then
President Ramos issued Proclamation No. 39 covering the 21-hectare dumpsite and the 40-hectare
commercial/industrial area, and Proclamation No. 465 and MO 415 increasing the area of foreshore and submerged
lands of Manila Bay to be reclaimed from 40 to 79 hectares. Having supervision and control over the DENR, both
Presidents directly assumed and exercised the power granted by the Revised Administrative Code to the DENR
Secretary to authorize the NHA to reclaim said lands. What can be done indirectly by the DENR can be done directly by
the President. It would be absurd if the power of the President cannot be exercised simply because the head of a
department in the executive branch has not acted favorably on a project already approved by the President. If such
arrangement is allowed then the department head will become more powerful than the President.
2. Under Sec. 2 of MO 415, the DENR is one of the members of the EXECOM chaired by the NCR-CORD to oversee the
implementation of the Project. The EXECOM was the one which recommended approval of the project plan and the joint
venture agreements. Clearly, the DENR retained its power of supervision and control over the laws affected by the
Project since it was tasked to "facilitate the titling of the Smokey Mountain and of the area to be reclaimed," which shows
that it had tacitly given its authority to the NHA to undertake the reclamation.
3. Former DENR Secretary Angel C. Alcala issued Special Patents Nos. 3591 and 3592 while then Secretary Victor O.
Ramos issued Special Patent No. 3598 that embraced the areas covered by the reclamation. These patents conveyed
the lands to be reclaimed to the NHA and granted to said agency the administration and disposition of said lands for
subdivision and disposition to qualified beneficiaries and for development for mix land use (commercial/industrial) "to
provide employment opportunities to on-site families and additional areas for port related activities." Such grant of
authority to administer and dispose of lands of public domain under the SMDRP is of course subject to the powers of the
EXECOM of SMDRP, of which the DENR is a member.
4. The issuance of ECCs by the DENR for SMDRP is but an exercise of its power of supervision and control over the
lands of public domain covered by the Project.
Based on these reasons, it is clear that the DENR, through its acts and issuances, has ratified and confirmed the
reclamation of the subject lands for the purposes laid down in Proclamations Nos. 39 and 465.
Third Issue: Whether respondent RBI can acquire reclaimed
foreshore and submerged lands considered as inalienable and
outside the commerce of man
Petitioner postulates that respondent RBI cannot acquire the reclaimed foreshore and submerged areas as these are
inalienable public lands beyond the commerce of man based on Art. 1409 of the Civil Code which provides:
Article 1409. The following contracts are inexistent and void from the beginning:
(1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;
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(7) Those expressly prohibited or declared void by law.
These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.
Secs. 2 and 3, Art. XII of the Constitution declare that all natural resources are owned by the State and they cannot be
alienated except for alienable agricultural lands of the public domain. One of the State’s natural resources are lands of
public domain which include reclaimed lands.
Petitioner contends that for these reclaimed lands to be alienable, there must be a law or presidential proclamation
officially classifying these reclaimed lands as alienable and disposable and open to disposition or concession. Absent
such law or proclamation, the reclaimed lands cannot be the enabling component or consideration to be paid to RBI as
these are beyond the commerce of man.
We are not convinced of petitioner’s postulation.
The reclaimed lands across R-10 were classified alienable and disposable lands of public domain of the State for the
following reasons, viz:
First, there were three (3) presidential proclamations classifying the reclaimed lands across R-10 as alienable or
disposable hence open to disposition or concession, to wit:
(1) MO 415 issued by President Aquino, of which Sec. 4 states that "[t]he land covered by the Smokey Mountain
Dumpsite is hereby conveyed to the National Housing Authority as well as the area to be reclaimed across R-
10."
The directive to transfer the lands once reclaimed to the NHA implicitly carries with it the declaration that said
lands are alienable and disposable. Otherwise, the NHA cannot effectively use them in its housing and
resettlement project.
(2) Proclamation No. 39 issued by then President Ramos by which the reclaimed lands were conveyed to NHA
for subdivision and disposition to qualified beneficiaries and for development into a mixed land use
(commercial/industrial) to provide employment opportunities to on-site families and additional areas for port-
related activities. Said directive carries with it the pronouncement that said lands have been transformed to
alienable and disposable lands. Otherwise, there is no legal way to convey it to the beneficiaries.
(3) Proclamation No. 465 likewise issued by President Ramos enlarged the reclaimed area to 79 hectares to be
developed and disposed of in the implementation of the SMDRP. The authority put into the hands of the NHA to
dispose of the reclaimed lands tacitly sustains the conversion to alienable and disposable lands.
Secondly, Special Patents Nos. 3591, 3592, and 3598 issued by the DENR anchored on Proclamations Nos. 39 and 465
issued by President Ramos, without doubt, classified the reclaimed areas as alienable and disposable.
Admittedly, it cannot be said that MO 415, Proclamations Nos. 39 and 465 are explicit declarations that the lands to be
reclaimed are classified as alienable and disposable. We find however that such conclusion is derived and implicit from
the authority given to the NHA to transfer the reclaimed lands to qualified beneficiaries.
The query is, when did the declaration take effect? It did so only after the special patents covering the reclaimed areas
were issued. It is only on such date that the reclaimed lands became alienable and disposable lands of the public
domain. This is in line with the ruling in PEA where said issue was clarified and stressed:
PD No. 1085, coupled with President Aquino’s actual issuance of a special patent covering the Freedom Islands, is
equivalent to an official proclamation classifying the Freedom Islands as alienable or disposable lands of the public
domain. PD No. 1085 and President Aquino’s issuance of a land patent also constitute a declaration that the Freedom
Islands are no longer needed for public service. The Freedom Islands are thus alienable or disposable lands of the public
domain, open to disposition or concession to qualified parties.73 (Emphasis supplied.)
Thus, MO 415 and Proclamations Nos. 39 and 465 cumulatively and jointly taken together with Special Patent Nos.
3591, 3592, and 3598 more than satisfy the requirement in PEA that "[t]here must be a law or presidential proclamation
officially classifying these reclaimed lands as alienable or disposable and open to disposition or concession (emphasis
supplied)."74
Apropos the requisite law categorizing reclaimed land as alienable or disposable, we find that RA 6957 as amended by
RA 7718 provides ample authority for the classification of reclaimed land in the SMDRP for the repayment scheme of the
BOT project as alienable and disposable lands of public domain. Sec. 6 of RA 6957 as amended by RA 7718 provides:
For the financing, construction, operation and maintenance of any infrastructure projects undertaken through the build-
operate-and transfer arrangement or any of its variations pursuant to the provisions of this Act, the project proponent x x
x may likewise be repaid in the form of a share in the revenue of the project or other non-monetary payments, such as,
but not limited to, the grant of a portion or percentage of the reclaimed land, subject to the constitutional requirements
with respect to the ownership of the land. (Emphasis supplied.)
While RA 6957 as modified by RA 7718 does not expressly declare that the reclaimed lands that shall serve as payment
to the project proponent have become alienable and disposable lands and opened for disposition; nonetheless, this
conclusion is necessarily implied, for how else can the land be used as the enabling component for the Project if such
classification is not deemed made?
It may be argued that the grant of authority to sell public lands, pursuant to PEA, does not convert alienable lands of
public domain into private or patrimonial lands. We ruled in PEA that "alienable lands of public domain must be
transferred to qualified private parties, or to government entities not tasked to dispose of public lands, before these lands
can become private or patrimonial lands (emphasis supplied)."75 To lands reclaimed by PEA or through a contract with a
private person or entity, such reclaimed lands still remain alienable lands of public domain which can be transferred only
to Filipino citizens but not to a private corporation. This is because PEA under PD 1084 and EO 525 is tasked to hold
and dispose of alienable lands of public domain and it is only when it is transferred to Filipino citizens that it becomes
patrimonial property. On the other hand, the NHA is a government agency not tasked to dispose of public lands under its
charter—The Revised Administrative Code of 1987. The NHA is an "end-user agency" authorized by law to administer
and dispose of reclaimed lands. The moment titles over reclaimed lands based on the special patents are transferred to
the NHA by the Register of Deeds, they are automatically converted to patrimonial properties of the State which can be
sold to Filipino citizens and private corporations, 60% of which are owned by Filipinos. The reason is obvious: if the
reclaimed land is not converted to patrimonial land once transferred to NHA, then it would be useless to transfer it to the
NHA since it cannot legally transfer or alienate lands of public domain. More importantly, it cannot attain its avowed
purposes and goals since it can only transfer patrimonial lands to qualified beneficiaries and prospective buyers to raise
funds for the SMDRP.
From the foregoing considerations, we find that the 79-hectare reclaimed land has been declared alienable and
disposable land of the public domain; and in the hands of NHA, it has been reclassified as patrimonial property.
Petitioner, however, contends that the reclaimed lands were inexistent prior to the three (3) Presidential Acts (MO 415
and Proclamations Nos. 39 and 465) and hence, the declaration that such areas are alienable and disposable land of the
public domain, citing PEA, has no legal basis.
Petitioner’s contention is not well-taken.
Petitioner’s sole reliance on Proclamations Nos. 39 and 465 without taking into consideration the special patents issued
by the DENR demonstrates the inherent weakness of his proposition. As was ruled in PEA cited by petitioner himself,
"PD No. 1085, coupled with President Aquino’s actual issuance of a special patent covering the Freedom Islands is
equivalent to an official proclamation classifying the Freedom islands as alienable or disposable lands of public domain."
In a similar vein, the combined and collective effect of Proclamations Nos. 39 and 465 with Special Patents Nos. 3592
and 3598 is tantamount to and can be considered to be an official declaration that the reclaimed lots are alienable or
disposable lands of the public domain.
The reclaimed lands covered by Special Patents Nos. 3591, 3592, and 3598, which evidence transfer of ownership of
reclaimed lands to the NHA, are official acts of the DENR Secretary in the exercise of his power of supervision and
control over alienable and disposable public lands and his exclusive jurisdiction over the management and disposition of
all lands of public domain under the Revised Administrative Code of 1987. Special Patent No. 3592 speaks of the
transfer of Lots 1 and 2, and RI-003901-000012-D with an area of 401,485 square meters based on the survey and
technical description approved by the Bureau of Lands. Lastly, Special Patent No. 3598 was issued in favor of the NHA
transferring to said agency a tract of land described in Plan RL-00-000013 with an area of 390,000 square meters based
on the survey and technical descriptions approved by the Bureau of Lands.
The conduct of the survey, the preparation of the survey plan, the computation of the technical description, and the
processing and preparation of the special patent are matters within the technical area of expertise of administrative
agencies like the DENR and the Land Management Bureau and are generally accorded not only respect but at times
even finality.76 Preparation of special patents calls for technical examination and a specialized review of calculations and
specific details which the courts are ill-equipped to undertake; hence, the latter defer to the administrative agency which
is trained and knowledgeable on such matters.77
Subsequently, the special patents in the name of the NHA were submitted to the Register of Deeds of the City of Manila
for registration, and corresponding certificates of titles over the reclaimed lots were issued based on said special patents.
The issuance of certificates of titles in NHA’s name automatically converts the reclaimed lands to patrimonial properties
of the NHA. Otherwise, the lots would not be of use to the NHA’s housing projects or as payment to the BOT contractor
as the enabling component of the BOT contract. The laws of the land have to be applied and interpreted depending on
the changing conditions and times. Tempora mutantur et legis mutantur in illis (time changes and laws change with it).
One such law that should be treated differently is the BOT Law (RA 6957) which brought about a novel way of
implementing government contracts by allowing reclaimed land as part or full payment to the contractor of a government
project to satisfy the huge financial requirements of the undertaking. The NHA holds the lands covered by Special
Patents Nos. 3592 and 3598 solely for the purpose of the SMDRP undertaken by authority of the BOT Law and for
disposition in accordance with said special law. The lands become alienable and disposable lands of public domain upon
issuance of the special patents and become patrimonial properties of the Government from the time the titles are issued
to the NHA.
As early as 1999, this Court in Baguio v. Republic laid down the jurisprudence that:
It is true that, once a patent is registered and the corresponding certificate of title is issued, the land covered by them
ceases to be part of the public domain and becomes private property, and the Torrens Title issued pursuant to the patent
becomes indefeasible upon the expiration of one year from the date of issuance of such patent. 78
The doctrine was reiterated in Republic v. Heirs of Felipe Alijaga, Sr., 79 Heirs of Carlos Alcaraz v. Republic,80 and the
more recent case of Doris Chiongbian-Oliva v. Republic of the Philippines.81 Thus, the 79-hectare reclaimed land
became patrimonial property after the issuance of certificates of titles to the NHA based on Special Patents Nos. 3592
and 3598.
One last point. The ruling in PEA cannot even be applied retroactively to the lots covered by Special Patents Nos. 3592
(40 hectare reclaimed land) and 3598 (39-hectare reclaimed land). The reclamation of the land under SMDRP was
completed in August 1996 while the PEA decision was rendered on July 9, 2002. In the meantime, subdivided lots
forming parts of the reclaimed land were already sold to private corporations for value and separate titles issued to the
buyers. The Project was terminated through a Memorandum of Agreement signed on August 27, 2003. The PEA
decision became final through the November 11, 2003 Resolution. It is a settled precept that decisions of the Supreme
Court can only be applied prospectively as they may prejudice vested rights if applied retroactively.
In Benzonan v. Court of Appeals, the Court trenchantly elucidated the prospective application of its decisions based on
considerations of equity and fair play, thus:
At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as amended was that enunciated in Monge
and Tupas cited above. The petitioners Benzonan and respondent Pe and the DBP are bound by these decisions for
pursuant to Article 8 of the Civil Code "judicial decisions applying or interpreting the laws of the Constitution shall form a
part of the legal system of the Philippines." But while our decisions form part of the law of the land, they are also subject
to Article 4 of the Civil Code which provides that "laws shall have no retroactive effect unless the contrary is provided."
This is expressed in the familiar legal maxim lex prospicit, non respicit, the law looks forward not backward. The rationale
against retroactivity is easy to perceive. The retroactive application of a law usually divests rights that have already
become vested or impairs the obligations of contract and hence, is unconstitutional.
The same consideration underlies our rulings giving only prospective effect to decisions enunciating new doctrines.
Thus, we emphasized in People v. Jabinal, 55 SCRA 607 [1974] "x x x when a doctrine of this Court is overruled and a
different view is adopted, the new doctrine should be applied prospectively and should not apply to parties who had
relied on the old doctrine and acted on the faith thereof.82
Fourth Issue: Whether respondent RBI can acquire reclaimed
lands when there was no declaration that said lands are no
longer needed for public use
Petitioner Chavez avers that despite the declaration that the reclaimed areas are alienable lands of the public domain,
still, the reclamation is flawed for there was never any declaration that said lands are no longer needed for public use.
We are not moved by petitioner’s submission.
Even if it is conceded that there was no explicit declaration that the lands are no longer needed for public use or public
service, there was however an implicit executive declaration that the reclaimed areas R-10 are not necessary anymore
for public use or public service when President Aquino through MO 415 conveyed the same to the NHA partly for
housing project and related commercial/industrial development intended for disposition to and enjoyment of certain
beneficiaries and not the public in general and partly as enabling component to finance the project.
President Ramos, in issuing Proclamation No. 39, declared, though indirectly, that the reclaimed lands of the Smokey
Mountain project are no longer required for public use or service, thus:
These parcels of land of public domain are hereby placed under the administration and disposition of the National
Housing Authority to develop, subdivide and dispose to qualified beneficiaries, as well as its development for mix land
use (commercial/industrial) to provide employment opportunities to on-site families and additional areas for port related
activities. (Emphasis supplied.)
While numerical count of the persons to be benefited is not the determinant whether the property is to be devoted to
public use, the declaration in Proclamation No. 39 undeniably identifies only particular individuals as beneficiaries to
whom the reclaimed lands can be sold, namely—the Smokey Mountain dwellers. The rest of the Filipinos are not
qualified; hence, said lands are no longer essential for the use of the public in general.
In addition, President Ramos issued on August 31, 1994 Proclamation No. 465 increasing the area to be reclaimed from
forty (40) hectares to seventy-nine (79) hectares, elucidating that said lands are undoubtedly set aside for the
beneficiaries of SMDRP and not the public—declaring the power of NHA to dispose of land to be reclaimed, thus: "The
authority to administer, develop, or dispose lands identified and reserved by this Proclamation and Proclamation No. 39
(s.1992), in accordance with the SMDRP, as enhance, is vested with the NHA, subject to the provisions of existing laws."
(Emphasis supplied.)
MO 415 and Proclamations Nos. 39 and 465 are declarations that proclaimed the non-use of the reclaimed areas for
public use or service as the Project cannot be successfully implemented without the withdrawal of said lands from public
use or service. Certainly, the devotion of the reclaimed land to public use or service conflicts with the intended use of the
Smokey Mountain areas for housing and employment of the Smokey Mountain scavengers and for financing the Project
because the latter cannot be accomplished without abandoning the public use of the subject land. Without doubt, the
presidential proclamations on SMDRP together with the issuance of the special patents had effectively removed the
reclaimed lands from public use.
More decisive and not in so many words is the ruling in PEA which we earlier cited, that "PD No. 1085 and President
Aquino’s issuance of a land patent also constitute a declaration that the Freedom Islands are no longer needed for public
service." Consequently, we ruled in that case that the reclaimed lands are "open to disposition or concession to qualified
parties."83
In a similar vein, presidential Proclamations Nos. 39 and 465 jointly with the special patents have classified the reclaimed
lands as alienable and disposable and open to disposition or concession as they would be devoted to units for Smokey
Mountain beneficiaries. Hence, said lands are no longer intended for public use or service and shall form part of the
patrimonial properties of the State under Art. 422 of the Civil Code. 84 As discussed a priori, the lands were classified as
patrimonial properties of the NHA ready for disposition when the titles were registered in its name by the Register of
Deeds.
Moreover, reclaimed lands that are made the enabling components of a BOT infrastructure project are necessarily
reclassified as alienable and disposable lands under the BOT Law; otherwise, absurd and illogical consequences would
naturally result. Undoubtedly, the BOT contract will not be accepted by the BOT contractor since there will be no
consideration for its contractual obligations. Since reclaimed land will be conveyed to the contractor pursuant to the BOT
Law, then there is an implied declaration that such land is no longer intended for public use or public service and, hence,
considered patrimonial property of the State.
Fifth Issue: Whether there is a law authorizing sale of
reclaimed lands
Petitioner next claims that RBI cannot acquire the reclaimed lands because there was no law authorizing their sale. He
argues that unlike PEA, no legislative authority was granted to the NHA to sell reclaimed land.
This position is misplaced.
Petitioner relies on Sec. 60 of Commonwealth Act (CA) 141 to support his view that the NHA is not empowered by any
law to sell reclaimed land, thus:
Section 60. Any tract of land comprised under this title may be leased or sold, as the case may be, to any person,
corporation or association authorized to purchase or lease public lands for agricultural purposes. The area of the land so
leased or sold shall be such as shall, in the judgment of the Secretary of Agriculture and Natural Resources, be
reasonably necessary for the purposes for which such sale or lease if requested and shall in no case exceed one
hundred and forty-four hectares: Provided, however, That this limitation shall not apply to grants, donations, transfers,
made to a province, municipality or branch or subdivision of the Government for the purposes deemed by said entities
conducive to the public interest; but the land so granted donated or transferred to a province, municipality, or branch or
subdivision of the Government shall not be alienated, encumbered, or otherwise disposed of in a manner affecting its
title, except when authorized by Congress; Provided, further, That any person, corporation, association or partnership
disqualified from purchasing public land for agricultural purposes under the provisions of this Act, may lease land
included under this title suitable for industrial or residential purposes, but the lease granted shall only be valid while such
land is used for the purposes referred to. (Emphasis supplied.)
Reliance on said provision is incorrect as the same applies only to "a province, municipality or branch or subdivision of
the Government." The NHA is not a government unit but a government corporation performing governmental and
proprietary functions.
In addition, PD 757 is clear that the NHA is empowered by law to transfer properties acquired by it under the law to other
parties, thus:
Section 6. Powers and functions of the Authority. The Authority shall have the following powers and functions to be
exercised by the Boards in accordance with the established national human settlements plan prepared by the Human
Settlements Commission:
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(k) Enter into contracts whenever necessary under such terms and conditions as it may deem proper and reasonable;
(l) Acquire property rights and interests, and encumber or otherwise dispose the same as it may deem appropriate
(Emphasis supplied.)
Letter (l) is emphatic that the NHA can acquire property rights and interests and encumber or otherwise dispose of them
as it may deem appropriate. The transfer of the reclaimed lands by the National Government to the NHA for housing,
commercial, and industrial purposes transformed them into patrimonial lands which are of course owned by the State in
its private or proprietary capacity. Perforce, the NHA can sell the reclaimed lands to any Filipino citizen or qualified
corporation.
Sixth Issue: Whether the transfer of reclaimed lands to RBI
was done by public bidding
Petitioner also contends that there was no public bidding but an awarding of ownership of said reclaimed lands to RBI.
Public bidding, he says, is required under Secs. 63 and 67 of CA 141 which read:
Section 63. Whenever it is decided that lands covered by this chapter are not needed for public purposes, the Director of
Lands shall ask the Secretary of Agriculture and Commerce for authority to dispose of the same. Upon receipt of such
authority, the Director of Lands shall give notice by public advertisement in the same manner as in the case of leases or
sales of agricultural public land, that the Government will lease or sell, as the case may be, the lots or blocks specified in
the advertisement, for the purpose stated in the notice and subject to the conditions specified in this chapter.
xxxx
Section 67. The lease or sale shall be made through oral bidding; and adjudication shall be made to the highest bidder.
However, where an applicant has made improvements on the land by virtue of a permit issued to him by competent
authority, the sale or lease shall be made by sealed bidding as prescribed in section twenty-six of this Act, the provisions
of which shall be applied whenever applicable. If all or part of the lots remain unleased or unsold, the Director of Lands
shall from time to time announce in the Official Gazette or in any other newspapers of general circulation, the lease of
sale of those lots, if necessary.
He finds that the NHA and RBI violated Secs. 63 and 67 of CA 141, as the reclaimed lands were conveyed to RBI by
negotiated contract and not by public bidding as required by law.
This stand is devoid of merit.
There is no doubt that respondent NHA conducted a public bidding of the right to become its joint venture partner in the
Smokey Mountain Project. Notices or Invitations to Bid were published in the national dailies on January 23 and 26, 1992
and February 1, 14, 16, and 23, 1992. The bidding proper was done by the Bids and Awards Committee (BAC) on May
18, 1992. On August 31, 1992, the Inter-Agency Techcom made up of the NHA, PEA, DPWH, PPA, DBP, and DENR
opened the bids and evaluated them, resulting in the award of the contract to respondent RBI on October 7, 1992.
On March 19, 1993, respondents NHA and RBI signed the JVA. On February 23, 1994, said JVA was amended and
restated into the ARJVA. On August 11, 1994, the ARJVA was again amended. On September 7, 1994, the OP
approved the ARJVA and the amendments to the ARJVA. From these factual settings, it cannot be gainsaid that there
was full compliance with the laws and regulations governing public biddings involving a right, concession, or property of
the government.
Petitioner concedes that he does not question the public bidding on the right to be a joint venture partner of the NHA, but
the absence of bidding in the sale of alienable and disposable lands of public domain pursuant to CA 141 as amended.
Petitioner’s theory is incorrect.
Secs. 63 and 67 of CA 141, as amended, are in point as they refer to government sale by the Director of Lands of
alienable and disposable lands of public domain. This is not present in the case at bar. The lands reclaimed by and
conveyed to the NHA are no longer lands of public domain. These lands became proprietary lands or patrimonial
properties of the State upon transfer of the titles over the reclaimed lands to the NHA and hence outside the ambit of CA
141. The NHA can therefore legally transfer patrimonial land to RBI or to any other interested qualified buyer without any
bidding conducted by the Director of Lands because the NHA, unlike PEA, is a government agency not tasked to sell
lands of public domain. Hence, it can only hold patrimonial lands and can dispose of such lands by sale without need of
public bidding.
Petitioner likewise relies on Sec. 79 of PD 1445 which requires public bidding "when government property has become
unserviceable for any cause or is no longer needed." It appears from the Handbook on Property and Supply
Management System, Chapter 6, that reclaimed lands which have become patrimonial properties of the State, whose
titles are conveyed to government agencies like the NHA, which it will use for its projects or programs, are not within the
ambit of Sec. 79. We quote the determining factors in the Disposal of Unserviceable Property, thus:
Determining Factors in the Disposal of Unserviceable Property
 Property, which can no longer be repaired or reconditioned;
 Property whose maintenance costs of repair more than outweigh the benefits and services that will be derived
from its continued use;
 Property that has become obsolete or outmoded because of changes in technology;
 Serviceable property that has been rendered unnecessary due to change in the agency’s function or mandate;
 Unused supplies, materials and spare parts that were procured in excess of requirements; and
 Unused supplies and materials that [have] become dangerous to use because of long storage or use of which is
determined to be hazardous.85
Reclaimed lands cannot be considered unserviceable properties. The reclaimed lands in question are very much needed
by the NHA for the Smokey Mountain Project because without it, then the projects will not be successfully implemented.
Since the reclaimed lands are not unserviceable properties and are very much needed by NHA, then Sec. 79 of PD 1445
does not apply.
More importantly, Sec. 79 of PD 1445 cannot be applied to patrimonial properties like reclaimed lands transferred to a
government agency like the NHA which has entered into a BOT contract with a private firm. The reason is obvious. If the
patrimonial property will be subject to public bidding as the only way of disposing of said property, then Sec. 6 of RA
6957 on the repayment scheme is almost impossible or extremely difficult to implement considering the uncertainty of a
winning bid during public auction. Moreover, the repayment scheme of a BOT contract may be in the form of non-
monetary payment like the grant of a portion or percentage of reclaimed land. Even if the BOT partner participates in the
public bidding, there is no assurance that he will win the bid and therefore the payment in kind as agreed to by the
parties cannot be performed or the winning bid prize might be below the estimated valuation of the land. The only way to
harmonize Sec. 79 of PD 1445 with Sec. 6 of RA 6957 is to consider Sec. 79 of PD 1445 as inapplicable to BOT
contracts involving patrimonial lands. The law does not intend anything impossible (lex non intendit aliquid impossibile).
Seventh Issue: Whether RBI, being a private corporation,
is barred by the Constitution to acquire lands of public domain
Petitioner maintains that RBI, being a private corporation, is expressly prohibited by the 1987 Constitution from acquiring
lands of public domain.
Petitioner’s proposition has no legal mooring for the following reasons:
1. RA 6957 as amended by RA 7718 explicitly states that a contractor can be paid "a portion as percentage of
the reclaimed land" subject to the constitutional requirement that only Filipino citizens or corporations with at
least 60% Filipino equity can acquire the same. It cannot be denied that RBI is a private corporation, where
Filipino citizens own at least 60% of the stocks. Thus, the transfer to RBI is valid and constitutional.
2. When Proclamations Nos. 39 and 465 were issued, inalienable lands covered by said proclamations were
converted to alienable and disposable lands of public domain. When the titles to the reclaimed lands were
transferred to the NHA, said alienable and disposable lands of public domain were automatically classified as
lands of the private domain or patrimonial properties of the State because the NHA is an agency NOT tasked to
dispose of alienable or disposable lands of public domain. The only way it can transfer the reclaimed land in
conjunction with its projects and to attain its goals is when it is automatically converted to patrimonial properties
of the State. Being patrimonial or private properties of the State, then it has the power to sell the same to any
qualified person—under the Constitution, Filipino citizens as private corporations, 60% of which is owned by
Filipino citizens like RBI.
3. The NHA is an end-user entity such that when alienable lands of public domain are transferred to said agency,
they are automatically classified as patrimonial properties. The NHA is similarly situated as BCDA which was
granted the authority to dispose of patrimonial lands of the government under RA 7227. The nature of the
property holdings conveyed to BCDA is elucidated and stressed in the May 6, 2003 Resolution in Chavez v.
PEA, thus:
BCDA is an entirely different government entity. BCDA is authorized by law to sell specific government lands that have
long been declared by presidential proclamations as military reservations for use by the different services of the armed
forces under the Department of National Defense. BCDA’s mandate is specific and limited in area, while PEA’s mandate
is general and national. BCDA holds government lands that have been granted to end-user government entities––the
military services of the armed forces. In contrast, under Executive Order No. 525, PEA holds the reclaimed public lands,
not as an end-user entity, but as the government agency "primarily responsible for integrating, directing, and
coordinating all reclamation projects for and on behalf of the National Government."
x x x Well-settled is the doctrine that public land granted to an end-user government agency for a specific public use may
subsequently be withdrawn by Congress from public use and declared patrimonial property to be sold to private parties.
R.A. No. 7227 creating the BCDA is a law that declares specific military reservations no longer needed for defense or
military purposes and reclassifies such lands as patrimonial property for sale to private parties.
Government owned lands, as long as they are patrimonial property, can be sold to private parties, whether Filipino
citizens or qualified private corporations. Thus, the so-called Friar Lands acquired by the government under Act No. 1120
are patrimonial property which even private corporations can acquire by purchase. Likewise, reclaimed alienable lands of
the public domain if sold or transferred to a public or municipal corporation for a monetary consideration become
patrimonial property in the hands of the public or municipal corporation. Once converted to patrimonial property, the land
may be sold by the public or municipal corporation to private parties, whether Filipino citizens or qualified private
corporations.86 (Emphasis supplied.)
The foregoing Resolution makes it clear that the SMDRP was a program adopted by the Government under Republic Act
No. 6957 (An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the
Private Sector, and For Other Purposes), as amended by RA 7718, which is a special law similar to RA 7227. Moreover,
since the implementation was assigned to the NHA, an end-user agency under PD 757 and RA 7279, the reclaimed
lands registered under the NHA are automatically classified as patrimonial lands ready for disposition to qualified
beneficiaries.
The foregoing reasons likewise apply to the contention of petitioner that HCPTI, being a private corporation, is
disqualified from being a transferee of public land. What was transferred to HCPTI is a 10-hectare lot which is already
classified as patrimonial property in the hands of the NHA. HCPTI, being a qualified corporation under the 1987
Constitution, the transfer of the subject lot to it is valid and constitutional.
Eighth Issue: Whether respondents can be compelled to disclose
all information related to the SMDRP
Petitioner asserts his right to information on all documents such as contracts, reports, memoranda, and the like relative
to SMDRP.
Petitioner asserts that matters relative to the SMDRP have not been disclosed to the public like the current stage of the
Project, the present financial capacity of RBI, the complete list of investors in the asset pool, the exact amount of
investments in the asset pool and other similar important information regarding the Project.
He prays that respondents be compelled to disclose all information regarding the SMDRP and furnish him with originals
or at least certified true copies of all relevant documents relating to the said project including, but not limited to, the
original JVA, ARJVA, AARJVA, and the Asset Pool Agreement.
This relief must be granted.
The right of the Filipino people to information on matters of public concern is enshrined in the 1987 Constitution, thus:
ARTICLE II
xxxx
SEC. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public
disclosure of all its transactions involving public interest.
ARTICLE III
SEC. 7. The right of the people to information on matters of public concern shall be recognized. Access to official
records, and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government
research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be
provided by law.
In Valmonte v. Belmonte, Jr., this Court explicated this way:
[A]n essential element of these freedoms is to keep open a continuing dialogue or process of communication between
the government and the people. It is in the interest of the State that the channels for free political discussion be
maintained to the end that the government may perceive and be responsive to the people’s will. Yet, this open dialogue
can be effective only to the extent that the citizenry is informed and thus able to formulate its will intelligently. Only when
the participants in the discussion are aware of the issues and have access to information relating thereto can such bear
fruit.87
In PEA, this Court elucidated the rationale behind the right to information:
These twin provisions of the Constitution seek to promote transparency in policy-making and in the operations of the
government, as well as provide the people sufficient information to exercise effectively other constitutional rights. These
twin provisions are essential to the exercise of freedom of expression. If the government does not disclose its official
acts, transactions and decisions to citizens, whatever citizens say, even if expressed without any restraint, will be
speculative and amount to nothing. These twin provisions are also essential to hold public officials "at all times x x x
accountable to the people," for unless citizens have the proper information, they cannot hold public officials accountable
for anything. Armed with the right information, citizens can participate in public discussions leading to the formulation of
government policies and their effective implementation. An informed citizenry is essential to the existence and proper
functioning of any democracy.88
Sec. 28, Art. II compels the State and its agencies to fully disclose "all of its transactions involving public interest." Thus,
the government agencies, without need of demand from anyone, must bring into public view all the steps and
negotiations leading to the consummation of the transaction and the contents of the perfected contract.89 Such
information must pertain to "definite propositions of the government," meaning official recommendations or final positions
reached on the different matters subject of negotiation. The government agency, however, need not disclose "intra-
agency or inter-agency recommendations or communications during the stage when common assertions are still in the
process of being formulated or are in the exploratory stage." The limitation also covers privileged communication like
information on military and diplomatic secrets; information affecting national security; information on investigations of
crimes by law enforcement agencies before the prosecution of the accused; information on foreign relations, intelligence,
and other classified information.
It is unfortunate, however, that after almost twenty (20) years from birth of the 1987 Constitution, there is still no enabling
law that provides the mechanics for the compulsory duty of government agencies to disclose information on government
transactions. Hopefully, the desired enabling law will finally see the light of day if and when Congress decides to approve
the proposed "Freedom of Access to Information Act." In the meantime, it would suffice that government agencies post
on their bulletin boards the documents incorporating the information on the steps and negotiations that produced the
agreements and the agreements themselves, and if finances permit, to upload said information on their respective
websites for easy access by interested parties. Without any law or regulation governing the right to disclose information,
the NHA or any of the respondents cannot be faulted if they were not able to disclose information relative to the SMDRP
to the public in general.
The other aspect of the people’s right to know apart from the duty to disclose is the duty to allow access to information
on matters of public concern under Sec. 7, Art. III of the Constitution. The gateway to information opens to the public the
following: (1) official records; (2) documents and papers pertaining to official acts, transactions, or decisions; and (3)
government research data used as a basis for policy development.
Thus, the duty to disclose information should be differentiated from the duty to permit access to information. There is no
need to demand from the government agency disclosure of information as this is mandatory under the Constitution;
failing that, legal remedies are available. On the other hand, the interested party must first request or even demand that
he be allowed access to documents and papers in the particular agency. A request or demand is required; otherwise, the
government office or agency will not know of the desire of the interested party to gain access to such papers and what
papers are needed. The duty to disclose covers only transactions involving public interest, while the duty to allow access
has a broader scope of information which embraces not only transactions involving public interest, but any matter
contained in official communications and public documents of the government agency.
We find that although petitioner did not make any demand on the NHA to allow access to information, we treat the
petition as a written request or demand. We order the NHA to allow petitioner access to its official records, documents,
and papers relating to official acts, transactions, and decisions that are relevant to the said JVA and subsequent
agreements relative to the SMDRP.
Ninth Issue: Whether the operative fact doctrine applies to the instant petition
Petitioner postulates that the "operative fact" doctrine is inapplicable to the present case because it is an equitable
doctrine which could not be used to countenance an inequitable result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that the existence of the various agreements implementing the
SMDRP is an operative fact that can no longer be disturbed or simply ignored, citing Rieta v. People of the Philippines.90
The argument of the Solicitor General is meritorious.
The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated that a legislative or
executive act, prior to its being declared as unconstitutional by the courts, is valid and must be complied with, thus:
As the new Civil Code puts it: "When the courts declare a law to be inconsistent with the Constitution, the former shall be
void and the latter shall govern. Administrative or executive acts, orders and regulations shall be valid only when they are
not contrary to the laws of the Constitution." It is understandable why it should be so, the Constitution being supreme and
paramount. Any legislative or executive act contrary to its terms cannot survive.
Such a view has support in logic and possesses the merit of simplicity. It may not however be sufficiently realistic. It does
not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in
force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is
entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be
more fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive
act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being
nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the
judiciary is the governmental organ which has the final say on whether or not a legislative or executive measure is valid,
a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of
nullity. It would be to deprive the law of its quality of fairness and justice then, if there be no recognition of what had
transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination
[of unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot
always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be
considered in various aspects, with respect to particular relations, individual and corporate, and particular conduct,
private and official." This language has been quoted with approval in a resolution in Araneta v. Hill and the decision in
Manila Motor Co., Inc. v. Flores. An even more recent instance is the opinion of Justice Zaldivar speaking for the Court in
Fernandez v. Cuerva and Co.91 (Emphasis supplied.)
This doctrine was reiterated in the more recent case of City of Makati v. Civil Service Commission, wherein we ruled that:
Moreover, we certainly cannot nullify the City Government’s order of suspension, as we have no reason to do so, much
less retroactively apply such nullification to deprive private respondent of a compelling and valid reason for not filing the
leave application. For as we have held, a void act though in law a mere scrap of paper nonetheless confers legitimacy
upon past acts or omissions done in reliance thereof. Consequently, the existence of a statute or executive order prior to
its being adjudged void is an operative fact to which legal consequences are attached. It would indeed be ghastly unfair
to prevent private respondent from relying upon the order of suspension in lieu of a formal leave application.92 (Emphasis
supplied.)
The principle was further explicated in the case of Rieta v. People of the Philippines, thus:
In similar situations in the past this Court had taken the pragmatic and realistic course set forth in Chicot County
Drainage District vs. Baxter Bank to wit:
The courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional, was
not a law; that it was inoperative, conferring no rights and imposing no duties, and hence affording no basis for the
challenged decree. x x x It is quite clear, however, that such broad statements as to the effect of a determination of
unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to [the determination of its
invalidity], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in
various aspects –with respect to particular conduct, private and official. Questions of rights claimed to have become
vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light
of the nature both of the statute and of its previous application, demand examination. These questions are among the
most difficult of those which have engaged the attention of courts, state and federal, and it is manifest from numerous
decisions that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified.
In the May 6, 2003 Resolution in Chavez v. PEA, 93 we ruled that De Agbayani94 is not applicable to the case considering
that the prevailing law did not authorize private corporations from owning land. The prevailing law at the time was the
1935 Constitution as no statute dealt with the same issue.
In the instant case, RA 6957 was the prevailing law at the time that the joint venture agreement was signed. RA 6957,
entitled "An Act Authorizing The Financing, Construction, Operation And Maintenance Of Infrastructure Projects By The
Private Sector And For Other Purposes," which was passed by Congress on July 24, 1989, allows repayment to the
private contractor of reclaimed lands.95 Such law was relied upon by respondents, along with the above-mentioned
executive issuances in pushing through with the Project. The existence of such law and issuances is an "operative fact"
to which legal consequences have attached. This Court is constrained to give legal effect to the acts done in consonance
with such executive and legislative acts; to do otherwise would work patent injustice on respondents.
Further, in the May 6, 2003 Resolution in Chavez v. PEA, we ruled that in certain cases, the transfer of land, although
illegal or unconstitutional, will not be invalidated on considerations of equity and social justice. However, in that case, we
did not apply the same considering that PEA, respondent in said case, was not entitled to equity principles there being
bad faith on its part, thus:
There are, moreover, special circumstances that disqualify Amari from invoking equity principles. Amari cannot claim
good faith because even before Amari signed the Amended JVA on March 30, 1999, petitioner had already filed the
instant case on April 27, 1998 questioning precisely the qualification of Amari to acquire the Freedom Islands. Even
before the filing of this petition, two Senate Committees had already approved on September 16, 1997 Senate
Committee Report No. 560. This Report concluded, after a well-publicized investigation into PEA’s sale of the Freedom
Islands to Amari, that the Freedom Islands are inalienable lands of the public domain. Thus, Amari signed the Amended
JVA knowing and assuming all the attendant risks, including the annulment of the Amended JVA. 96
Such indicia of bad faith are not present in the instant case. When the ruling in PEA was rendered by this Court on July
9, 2002, the JVAs were all executed. Furthermore, when petitioner filed the instant case against respondents on August
5, 2004, the JVAs were already terminated by virtue of the MOA between the NHA and RBI. The respondents had no
reason to think that their agreements were unconstitutional or even questionable, as in fact, the concurrent acts of the
executive department lent validity to the implementation of the Project. The SMDRP agreements have produced vested
rights in favor of the slum dwellers, the buyers of reclaimed land who were issued titles over said land, and the agencies
and investors who made investments in the project or who bought SMPPCs. These properties and rights cannot be
disturbed or questioned after the passage of around ten (10) years from the start of the SMDRP implementation.
Evidently, the "operative fact" principle has set in. The titles to the lands in the hands of the buyers can no longer be
invalidated.
The Court’s Dispositions
Based on the issues raised in this petition, we find that the March 19, 1993 JVA between NHA and RBI and the SMDRP
embodied in the JVA, the subsequent amendments to the JVA and all other agreements signed and executed in relation
to it, including, but not limited to, the September 26, 1994 Smokey Mountain Asset Pool Agreement and the agreement
on Phase I of the Project as well as all other transactions which emanated from the Project, have been shown to be
valid, legal, and constitutional. Phase II has been struck down by the Clean Air Act.
With regard to the prayer for prohibition, enjoining respondents particularly respondent NHA from further implementing
and/or enforcing the said Project and other agreements related to it, and from further deriving and/or enjoying any rights,
privileges and interest from the Project, we find the same prayer meritless.
Sec. 2 of Rule 65 of the 1997 Rules of Civil Procedure provides:
Sec. 2. Petition for prohibition.—When the proceedings of any tribunal, corporation, board, officer or person, whether
exercising judicial, quasi-judicial or ministerial functions, are without or in excess of its or his jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or any other plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper
court, alleging the facts with certainty and praying that judgment be rendered commanding the respondent to desist from
further proceedings in the action or matter specified therein, or otherwise granting such incidental reliefs as law and
justice may require.
It has not been shown that the NHA exercised judicial or quasi-judicial functions in relation to the SMDRP and the
agreements relative to it. Likewise, it has not been shown what ministerial functions the NHA has with regard to the
SMDRP.
A ministerial duty is one which is so clear and specific as to leave no room for the exercise of discretion in its
performance. It is a duty which an officer performs in a given state of facts in a prescribed manner in obedience to the
mandate of legal authority, without regard to the exercise of his/her own judgment upon the propriety of the act done. 97
Whatever is left to be done in relation to the August 27, 2003 MOA, terminating the JVA and other related agreements,
certainly does not involve ministerial functions of the NHA but instead requires exercise of judgment. In fact, Item No. 4
of the MOA terminating the JVAs provides for validation of the developer’s (RBI’s) claims arising from the termination of
the SMDRP through the various government agencies.98 Such validation requires the exercise of discretion.
In addition, prohibition does not lie against the NHA in view of petitioner’s failure to avail and exhaust all administrative
remedies. Clear is the rule that prohibition is only available when there is no adequate remedy in the ordinary course of
law.
More importantly, prohibition does not lie to restrain an act which is already a fait accompli. The "operative fact" doctrine
protecting vested rights bars the grant of the writ of prohibition to the case at bar. It should be remembered that petitioner
was the Solicitor General at the time SMDRP was formulated and implemented. He had the opportunity to question the
SMDRP and the agreements on it, but he did not. The moment to challenge the Project had passed.
On the prayer for a writ of mandamus, petitioner asks the Court to compel respondents to disclose all documents and
information relating to the project, including, but not limited to, any subsequent agreements with respect to the different
phases of the Project, the revisions of the original plan, the additional works incurred on the Project, the current financial
condition of respondent RBI, and the transactions made with respect to the project. We earlier ruled that petitioner will be
allowed access to official records relative to the SMDRP. That would be adequate relief to satisfy petitioner’s right to the
information gateway.
WHEREFORE, the petition is partially granted.
The prayer for a writ of prohibition is DENIED for lack of merit.
The prayer for a writ of mandamus is GRANTED. Respondent NHA is ordered to allow access to petitioner to all public
documents and official records relative to the SMDRP—including, but not limited to, the March 19, 1993 JVA between
the NHA and RBI and subsequent agreements related to the JVA, the revisions over the original plan, and the additional
works incurred on and the transactions made with respect to the Project.
No costs.
SO ORDERED.
G.R. No. 93237 November 6, 1992
RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI), petitioner,
vs.
NATIONAL TELECOMMUNICATIONS COMMISSION (NTC) and JUAN A. ALEGRE, respondents.

PADILLA, J.:
Private respondent Juan A. Alegre's wife, Dr. Jimena Alegre, sent two (2) RUSH telegrams through petitioner RCPI's
facilities in Taft Ave., Manila at 9:00 in the morning of 17 March 1989 to his sister and brother-in-law in Valencia, Bohol
and another sister-in-law in Espiritu, Ilocos Norte, with the following identical texts:
MANONG POLING DIED INTERMENT TUESDAY 1
Both telegrams did not reach their destinations on the expected dates. Private respondent filed a letter-complaint against
the RCPI with the National Telecommunications Commission (NTC) for poor service, with a request for the imposition of
the appropriate punitive sanction against the company.
Taking cognizance of the complaint, NTC directed RCPI to answer the complaint and set the initial hearing of the case to
2 May 1989. After two (2) resettings, RCPI moved to dismiss the case on the following grounds:
1. Juan Alegre is not the real party in interest;
2. NTC has no jurisdiction over the case;
3. the continued hearing of the case violates its constitutional right to due process of law. 2
RCPI likewise moved for deferment of scheduled hearings until final determination of its motion to dismiss.
On 15 June 1989, NTC proceeded with the hearing and received evidence for private respondent Juan Alegre. On 3
October 1989, RCPI's motion to dismiss was denied, thus:
The herein complainant is the husband of the sender of the "rush" telegram that respondent allegedly
failed to deliver in a manner respondent bound itself to undertake, so his legal interest in this
administrative case cannot be seriously called in question. As regards the issue of jurisdiction, the
authority of the Commission to hear and decide this case stems from its power of control and
supervision over the operation of public communication utilities as conferred upon it by law.
Besides, the filing of a motion to dismiss is not allowed by the rules (Section 1, Rule 12, Rules of
Practice and Procedures). Following, however, the liberal construction of the rules, respondent (sic)
motion shall be treated as its answer or be passed upon after the conclusion of the hearing on the
merits. . . . 3
Hearings resumed in the absence of petitioner RCPI which was, however, duly notified thereof. On 27 November 1989,
NTC disposed of the controversy in the following manner:
WHEREFORE, in view of all the foregoing, the Commission finds respondent administratively liable for
deficient and inadequate service defined under Section 19(a) of C.A. 146 and hereby imposes the
penalty of FINE payable within thirty (30) days from receipt hereof in the aggregate amount of ONE
THOUSAND PESOS (P1,000.00) for:
1. Rush Telegram sent to Valencia, Bohol on March 17, 1989 and received on March 21, 1989
3 days x P200.00 per day = P600.00
2. Rush Telegram sent to Espiritu, Ilocos Norte on March 17, 1989 and received on March 20, 1989
2 days x P200.00 per day = P400.00
Total = P1,000.00
ENTERED. November 27, 1989. 4
A motion for reconsideration by RCPI reiterating averments in its earlier motion to dismiss was denied for lack of
merit; 5 hence, this petition for review invoking C.A. 146 Sec. 19(a) which limits the jurisdiction of the Public Service
Commission (precursor of the NTC) to the fixing of rates. RCPI submits that its position finds support in two (2) decided
cases 6 identical with the present one. Then Justice (later Chief Justice) Fernando writing for the Court stated:
. . . There can be no justification then for the Public Service Commission imposing the fines for these two
petitions. The law cannot be any clearer. The only power it possessed over radio companies, as noted
was the (sic ) fix rates. It could not take to task a radio company for negligence or misfeasance. It was
bereft of such competence. It was not vested within such authority. . . .
The Public Service Commission having been abolished by virtue of a Presidential Decree, as set forth at
the outset, and a new Board of Communications having been created to take its place, nothing said in its
decision has reference to whatever powers are now lodged in the latter body. . . . . . . (Footnotes
omitted)
Two (2) later cases, 7 adhering to the above tenet ruled:
Even assuming that the respondent Board of Communications has the power of jurisdiction over
petitioner in the exercise of its supervision to insure adequate public service, petitioner cannot be
subjected to payment of fine under sec. 21 of the Public Service Act, because this provision of the law
subjects to a fine every public service that violates or falls (sic) to comply with the terms and conditions
of any certificate or any orders, decisions and regulations of the Commission. . . . .
The Office of the Solicitor General now claims that the cited cases are no longer applicable, that the power and authority
of the NTC to impose fines is incidental to its power to regulate public service utilities and to supervise
telecommunications facilities, which are now clearly defined in Section 15, Executive Order No. 546 dated 23 July 1979:
thus:
Functions of the Commission. The Commission shall exercise the following functions:
xxx xxx xxx
b. Establish, prescribe and regulate the areas of operation of particular operators of the public service
communications;
xxx xxx xxx
h. Supervise and inspect the operation of radio stations and telecommunications facilities.
Regulatory administrative agencies necessarily impose sanctions, adds the Office of the Solicitor General. RCPI was
fined based on the finding of the NTC that it failed to undertake adequate service in delivering two (2) rush telegrams.
NTC takes the view that its power of supervision was broadened by E. O. No. 546, and that this development
superseded the ruling in RCPI vs. Francisco Santiago and companion cases.
The issues of due process and real parties in interest do not have to be discussed in this case. This decision will dwell on
the primary question of jurisdiction of the NTC to administratively impose fines on a telegraph company which fails to
render adequate service to a consumer.
E. O. 546, it will be observed, is couched in general terms. The NTC stepped "into the shoes" of the Board of
Communications which exercised powers pursuant to the Public Service Act. The power to impose fines should therefore
be read in the light of the Francisco Santiago case because subsequent legislation did not grant additional powers to the
Board of Communications. The Board in other words, did not possess the power to impose administrative fines on public
services rendering deficient service to customers, ergo its successor cannot arrogate unto itself such power, in the
absence of legislation. It is true that the decision in RCPI vs. Board of Communications seems to have modified
the Santiago ruling in that the later case held that the Board of Communications can impose fines if the public service
entity violates or fails to comply with the terms and conditions of any certificate or any order, decision or regulation of the
Commission. But can private respondent's complaint be similarly treated when the complaint seeks redress of a
grievance against the company? 8 NTC has no jurisdiction to impose a fine. Globe Wireless Ltd. vs.Public Service
Commission (G. R. No. L-27250, 21 January 1987, 147 SCRA 269) says so categorically.
Verily, Section 13 of Commonwealth Act No. 146, as amended, otherwise known as the Public Service
Act, vested in the Public Service Commission jurisdiction, supervision and control over all public services
and their franchises, equipment and other properties.
xxx xxx xxx
The act complained of consisted in petitioner having allegedly failed to deliver the telegraphic message
of private respondent to the addressee in Madrid, Spain. Obviously, such imputed negligence has
nothing whatsoever to do with the subject matter of the very limited jurisdiction of the Commission over
petitioner.
Moreover, under Section 21 of C. A. 146, as amended, the Commission was empowered to impose an
administrative fine in cases of violation of or failure by a public service to comply with the terms and
conditions of any certificate or any orders, decisions or regulations of the Commission. Petitioner
operated under a legislative franchise, so there were no terms nor conditions of any certificate issued by
the Commission to violate. Neither was there any order, decision or regulation from the Commission
applicable to petitioner that the latter had allegedly violated, disobeyed, defied or disregarded.
No substantial change has been brought about by Executive Order No. 546 invoked by the Solicitor General's Office to
bolster NTC's jurisdiction. The Executive Order is not an explicit grant of power to impose administrative fines on public
service utilities, including telegraphic agencies, which have failed to render adequate service to consumers. Neither has
it expanded the coverage of the supervisory and regulatory power of the agency. There appears to be no alternative but
to reiterate the settled doctrine in administrative law that:
Too basic in administrative law to need citation of jurisprudence is the rule that jurisdiction and powers of
administrative agencies, like respondent Commission, are limited to those expressly granted or
necessarily implied from those granted in the legislation creating such body; and any order without or
beyond such jurisdiction is void and ineffective . . . (Globe Wireless case, supra).
WHEREFORE, the decision appealed from is REVERSED and SET ASIDE for lack of jurisdiction of the NTC to render it.
The temporary restraining order issued on 18 June 1990 is made PERMANENT without prejudice, however, to the filing
by the party aggrieved by the conduct of RCPI, of the proper action in the proper forum. No costs.
SO ORDERED.