G.R. No.
96681 December 2, 1991 concerned to initiate dismissal proceedings against those who did not comply and
HON. ISIDRO CARIÑO, in his capacity as Secretary of the Department of Education,
Culture & Sports, DR. ERLINDA LOLARGA, in her capacity as Superintendent of City
Schools of Manila, petitioners,
vs.
THE COMMISSION ON HUMAN RIGHTS, GRACIANO BUDOY, JULIETA BABARAN,
ELSA IBABAO, HELEN LUPO, AMPARO GONZALES, LUZ DEL CASTILLO, ELSA REYES
and APOLINARIO ESBER, respondent
NARVASA, J.:
The issue raised in the special civil action of certiorari and prohibition at bar,
instituted by the Solicitor General, may be formulated as follows: where the relief
sought from the Commission on Human Rights by a party in a case consists of the
review and reversal or modification of a decision or order issued by a court of
justice or government agency or official exercising quasi-judicial functions, may the
Commission take cognizance of the case and grant that relief? Stated otherwise,
where a particular subject-matter is placed by law within the jurisdiction of a court
or other government agency or official for purposes of trial and adjudgment, may
the Commission on Human Rights take cognizance of the same subject-matter for
the same purposes of hearing and adjudication?
The facts narrated in the petition are not denied by the respondents and are hence
taken as substantially correct for purposes of ruling on the legal questions posed in
the present action. These facts, 1 together with others involved in related cases
recently resolved by this Court 2 or otherwise undisputed on the record, are
hereunder set forth.
1. On September 17, 1990, a Monday and a class day, some 800 public school
teachers, among them members of the Manila Public School Teachers Association
(MPSTA) and Alliance of Concerned Teachers (ACT) undertook what they described
as "mass concerted actions" to "dramatize and highlight" their plight resulting from
the alleged failure of the public authorities to act upon grievances that had time
and again been brought to the latter's attention. According to them they had
decided to undertake said "mass concerted actions" after the protest rally staged at
the DECS premises on September 14, 1990 without disrupting classes as a last call
for the government to negotiate the granting of demands had elicited no response
from the Secretary of Education. The "mass actions" consisted in staying away from
their classes, converging at the Liwasang Bonifacio, gathering in peaceable
assemblies, etc. Through their representatives, the teachers participating in the
mass actions were served with an order of the Secretary of Education to return to
work in 24 hours or face dismissal, and a memorandum directing the DECS officials
to hire their replacements. Those directives notwithstanding, the mass actions
continued into the week, with more teachers joining in the days that followed. 3
Among those who took part in the "concerted mass actions" were the eight (8) private respondents herein, teachers at the
Ramon Magsaysay High School, Manila, who had agreed to support the non-political demands of the MPSTA. 4
2. For failure to heed the return-to-work order, the CHR complainants (private respondents) were administratively charged on
the basis of the principal's report and given five (5) days to answer the charges. They were also preventively suspended for ninety
(90) days "pursuant to Section 41 of P.D. 807" and temporarily replaced (unmarked CHR Exhibits, Annexes F, G, H). An
investigation committee was consequently formed to hear the charges in accordance with P.D. 807. 5
3. In the administrative case docketed as Case No. DECS 90-082 in which CHR complainants Graciano Budoy, Jr., Julieta Babaran,
Luz del Castillo, Apolinario Esber were, among others, named respondents, 6
the latter filed separate answers,
opted for a formal investigation, and also moved "for suspension of the
administrative proceedings pending resolution by . . (the Supreme) Court of their
application for issuance of an injunctive writ/temporary restraining order." But
when their motion for suspension was denied by Order dated November 8, 1990 of
the Investigating Committee, which later also denied their motion for
reconsideration orally made at the hearing of November 14, 1990, "the
respondents led by their counsel staged a walkout signifying their intent to boycott
the entire proceedings." 7 The case eventually resulted in a Decision of Secretary
Cariño dated December 17, 1990, rendered after evaluation of the evidence as well
as the answers, affidavits and documents submitted by the respondents, decreeing
dismissal from the service of Apolinario Esber and the suspension for nine (9)
months of Babaran, Budoy and del Castillo. 8
4. In the meantime, the "MPSTA filed a petition for certiorari before the Regional Trial Court of Manila against petitioner (Cariño),
which was dismissed (unmarked CHR Exhibit, Annex I). Later, the MPSTA went to the Supreme Court (on certiorari, in an attempt
to nullify said dismissal, grounded on the) alleged violation of the striking teachers" right to due process and peaceable assembly
docketed as G.R. No. 95445, supra. The ACT also filed a similar petition before the Supreme Court . . . docketed as G.R. No.
95590." 9
Both petitions in this Court were filed in behalf of the teacher associations, a
few named individuals, and "other teacher-members so numerous similarly
situated" or "other similarly situated public school teachers too numerous to be
impleaded."
5. In the meantime, too, the respondent teachers submitted sworn statements
dated September 27, 1990 to the Commission on Human Rights to complain that
while they were participating in peaceful mass actions, they suddenly learned of
their replacements as teachers, allegedly without notice and consequently for
reasons completely unknown to them. 10
6. Their complaints — and those of other teachers also "ordered suspended by the . . . (DECS)," all numbering forty-two (42) —
were docketed as "Striking Teachers CHR Case No. 90775." In connection therewith the Commission scheduled a "dialogue" on
October 11, 1990, and sent a subpoena to Secretary Cariño requiring his attendance therein. 11
On the day of the "dialogue," although it said that it was "not certain whether he (Sec. Cariño) received the subpoena which was
served at his office, . . . (the) Commission, with the Chairman presiding, and Commissioners Hesiquio R. Mallilin and Narciso C.
Monteiro, proceeded to hear the case;" it heard the complainants' counsel (a) explain that his clients had been "denied due
process and suspended without formal notice, and unjustly, since they did not join the mass leave," and (b) expatiate on the
grievances which were "the cause of the mass leave of MPSTA teachers, (and) with which causes they (CHR complainants)
sympathize." 12 13
The Commission thereafter issued an Order reciting these facts and
making the following disposition:
To be properly apprised of the real facts of the case and be accordingly
guided in its investigation and resolution of the matter, considering that
these forty two teachers are now suspended and deprived of their wages,
which they need very badly, Secretary Isidro Cariño, of the Department of
Education, Culture and Sports, Dr. Erlinda Lolarga, school superintendent
of Manila and the Principal of Ramon Magsaysay High School, Manila, are
hereby enjoined to appear and enlighten the Commission en banc on
October 19, 1990 at 11:00 A.M. and to bring with them any and all
documents relevant to the allegations aforestated herein to assist the
Commission in this matter. Otherwise, the Commission will resolve the
complaint on the basis of complainants' evidence.
xxx xxx xxx
7. Through the Office of the Solicitor General, Secretary Cariño sought and was
granted leave to file a motion to dismiss the case. His motion to dismiss was
submitted on November 14, 1990 alleging as grounds therefor, "that the complaint
states no cause of action and that the CHR has no jurisdiction over the case." 14
8. Pending determination by the Commission of the motion to dismiss, judgments affecting the "striking teachers" were
promulgated in two (2) cases, as aforestated, viz.:
a) The Decision dated December l7, 1990 of Education Secretary Cariño in Case No. DECS 90-082, decreeing
dismissal from the service of Apolinario Esber and the suspension for nine (9) months of Babaran, Budoy and del
Castillo; 15 and
b) The joint Resolution of this Court dated August 6, 1991 in G.R. Nos. 95445 and 95590 dismissing the petitions
"without prejudice to any appeals, if still timely, that the individual petitioners may take to the Civil Service
Commission on the matters complained of," 16 and inter alia "ruling that it was prima facie lawful for petitioner
Cariño to issue return-to-work orders, file administrative charges against recalcitrants, preventively suspend them,
and issue decision on those charges." 17
9. In an Order dated December 28, 1990, respondent Commission denied Sec. Cariño's motion to dismiss and required him and
Superintendent Lolarga "to submit their counter-affidavits within ten (10) days . . . (after which) the Commission shall proceed to
hear and resolve the case on the merits with or without respondents counter affidavit." 18
It held that the "striking
teachers" "were denied due process of law; . . . they should not have been replaced
without a chance to reply to the administrative charges;" there had been a violation
of their civil and political rights which the Commission was empowered to
investigate; and while expressing its "utmost respect to the Supreme Court . . . the
facts before . . . (it) are different from those in the case decided by the Supreme
Court" (the reference being unmistakably to this Court's joint Resolution of August
6, 1991 in G.R. Nos. 95445 and 95590, supra).
It is to invalidate and set aside this Order of December 28, 1990 that the Solicitor
General, in behalf of petitioner Cariño, has commenced the present action
of certiorari and prohibition.
The Commission on Human Rights has made clear its position that it does not feel
bound by this Court's joint Resolution in G.R. Nos. 95445 and 95590, supra. It has
also made plain its intention "to hear and resolve the case (i.e., Striking Teachers
HRC Case No. 90-775) on the merits." It intends, in other words, to try and decide or
hear and determine, i.e., exercise jurisdiction over the following general issues:
1) whether or not the striking teachers were denied due process, and just cause
exists for the imposition of administrative disciplinary sanctions on them by their
superiors; and
2) whether or not the grievances which were "the cause of the mass leave of
MPSTA teachers, (and) with which causes they (CHR complainants) sympathize,"
justify their mass action or strike.
The Commission evidently intends to itself adjudicate, that is to say, determine with
character of finality and definiteness, the same issues which have been passed
upon and decided by the Secretary of Education, Culture & Sports, subject to appeal
to the Civil Service Commission, this Court having in fact, as aforementioned,
declared that the teachers affected may take appeals to the Civil Service
Commission on said matters, if still timely.

The threshold question is whether or not the Commission on Human Rights has the
power under the Constitution to do so; whether or not, like a court of justice, 19 or
even a quasi-judicial agency, 20 it has jurisdiction or adjudicatory powers over, or
the power to try and decide, or hear and determine, certain specific type of cases,
like alleged human rights violations involving civil or political rights.
The Court declares the Commission on Human Rights to have no such power; and
that it was not meant by the fundamental law to be another court or quasi-judicial
agency in this country, or duplicate much less take over the functions of the latter.
The most that may be conceded to the Commission in the way of adjudicative
power is that it may investigate, i.e., receive evidence and make findings of fact as
regards claimed human rights violations involving civil and political rights. But fact
finding is not adjudication, and cannot be likened to the judicial function of a court
of justice, or even a quasi-judicial agency or official. The function of receiving
evidence and ascertaining therefrom the facts of a controversy is not a judicial
function, properly speaking. To be considered such, the faculty of receiving
evidence and making factual conclusions in a controversy must be accompanied by
the authority of applying the law to those factual conclusions to the end that the
controversy may be decided or determined authoritatively, finally and definitively,
subject to such appeals or modes of review as may be provided by law. 21 This
function, to repeat, the Commission does not have. 22
The proposition is made clear by the constitutional provisions specifying the powers of the Commission on Human Rights.
The Commission was created by the 1987 Constitution as an independent office. 23
Upon its constitution, it
succeeded and superseded the Presidential Committee on Human Rights existing at
the time of the effectivity of the Constitution. 24 Its powers and functions are the
following 25
(1) Investigate, on its own or on complaint by any party, all forms of human rights violations involving civil and
political rights;
(2) Adopt its operational guidelines and rules of procedure, and cite for contempt for violations thereof in
accordance with the Rules of Court;
(3) Provide appropriate legal measures for the protection of human rights of all persons within the Philippines, as
well as Filipinos residing abroad, and provide for preventive measures and legal aid services to the underprivileged
whose human rights have been violated or need protection;
(4) Exercise visitorial powers over jails, prisons, or detention facilities;
(5) Establish a continuing program of research, education, and information to enhance respect for the primacy of
human rights;
(6) Recommend to the Congress effective measures to promote human rights and to provide for compensation to
victims of violations of human rights, or their families;
(7) Monitor the Philippine Government's compliance with international treaty obligations on human rights;
(8) Grant immunity from prosecution to any person whose testimony or whose possession of documents or other
evidence is necessary or convenient to determine the truth in any investigation conducted by it or under its
authority;
(9) Request the assistance of any department, bureau, office, or agency in the performance of its functions;
(10) Appoint its officers and employees in accordance with law; and
(11) Perform such other duties and functions as may be provided by law.
As should at once be observed, only the first of the enumerated powers and functions bears any resemblance to adjudication or
adjudgment. The Constitution clearly and categorically grants to the Commission the power to investigate all forms of human
rights violations involving civil and political rights. It can exercise that power on its own initiative or on complaint of any person. It
may exercise that power pursuant to such rules of procedure as it may adopt and, in cases of violations of said rules, cite for
contempt in accordance with the Rules of Court. In the course of any investigation conducted by it or under its authority, it may
grant immunity from prosecution to any person whose testimony or whose possession of documents or other evidence is
necessary or convenient to determine the truth. It may also request the assistance of any department, bureau, office, or agency
in the performance of its functions, in the conduct of its investigation or in extending such remedy as may be required by its
findings. 26
But it cannot try and decide cases (or hear and determine causes) as courts of justice, or even quasi-judicial bodies do. To
investigate is not to adjudicate or adjudge. Whether in the popular or the technical sense, these terms have well understood and
quite distinct meanings.

"Investigate," commonly understood, means to examine, explore, inquire or delve or probe into, research on, study. The
dictionary definition of "investigate" is "to observe or study closely: inquire into systematically. "to search or inquire into: . . . to
subject to an official probe . . .: to conduct an official inquiry." 27
The purpose of investigation, of course,
is to discover, to find out, to learn, obtain information. Nowhere included or
intimated is the notion of settling, deciding or resolving a controversy involved in
the facts inquired into by application of the law to the facts established by the
inquiry.
The legal meaning of "investigate" is essentially the same: "(t)o follow up step by
step by patient inquiry or observation. To trace or track; to search into; to examine
and inquire into with care and accuracy; to find out by careful inquisition;
examination; the taking of evidence; a legal inquiry;" 28 "to inquire; to make an
investigation," "investigation" being in turn describe as "(a)n administrative
function, the exercise of which ordinarily does not require a hearing. 2 Am J2d Adm
L Sec. 257; . . . an inquiry, judicial or otherwise, for the discovery and collection of
facts concerning a certain matter or matters." 29
"Adjudicate," commonly or popularly understood, means to adjudge, arbitrate, judge, decide, determine, resolve, rule on, settle.
The dictionary defines the term as "to settle finally (the rights and duties of the parties to a court case) on the merits of issues
raised: . . . to pass judgment on: settle judicially: . . . act as judge." 30
And "adjudge" means "to decide or
rule upon as a judge or with judicial or quasi-judicial powers: . . . to award or grant
judicially in a case of controversy . . . ." 31
In the legal sense, "adjudicate" means: "To settle in the exercise of judicial authority. To determine finally. Synonymous
with adjudge in its strictest sense;" and "adjudge" means: "To pass on judicially, to decide, settle or decree, or to sentence or
condemn. . . . Implies a judicial determination of a fact, and the entry of a judgment." 32
Hence it is that the Commission on Human Rights, having merely the power "to investigate," cannot and should not "try and
resolve on the merits" (adjudicate) the matters involved in Striking Teachers HRC Case No. 90-775, as it has announced it means
to do; and it cannot do so even if there be a claim that in the administrative disciplinary proceedings against the teachers in
question, initiated and conducted by the DECS, their human rights, or civil or political rights had been transgressed. More
particularly, the Commission has no power to "resolve on the merits" the question of (a) whether or not the mass concerted
actions engaged in by the teachers constitute and are prohibited or otherwise restricted by law; (b) whether or not the act of
carrying on and taking part in those actions, and the failure of the teachers to discontinue those actions, and return to their
classes despite the order to this effect by the Secretary of Education, constitute infractions of relevant rules and regulations
warranting administrative disciplinary sanctions, or are justified by the grievances complained of by them; and (c) what where
the particular acts done by each individual teacher and what sanctions, if any, may properly be imposed for said acts or
omissions.
These are matters undoubtedly and clearly within the original jurisdiction of the Secretary of Education, being within the scope of
the disciplinary powers granted to him under the Civil Service Law, and also, within the appellate jurisdiction of the Civil Service
Commission.
Indeed, the Secretary of Education has, as above narrated, already taken cognizance of the issues and resolved
them, 33
and it appears that appeals have been seasonably taken by the aggrieved
parties to the Civil Service Commission; and even this Court itself has had occasion
to pass upon said issues. 34
Now, it is quite obvious that whether or not the conclusions reached by the Secretary of Education in disciplinary cases are
correct and are adequately based on substantial evidence; whether or not the proceedings themselves are void or defective in
not having accorded the respondents due process; and whether or not the Secretary of Education had in truth committed
"human rights violations involving civil and political rights," are matters which may be passed upon and determined through a
motion for reconsideration addressed to the Secretary Education himself, and in the event of an adverse verdict, may be
reviewed by the Civil Service Commission and eventually the Supreme Court.
The Commission on Human Rights simply has no place in this scheme of things. It has no business intruding into the jurisdiction
and functions of the Education Secretary or the Civil Service Commission. It has no business going over the same ground
traversed by the latter and making its own judgment on the questions involved. This would accord success to what may well have
been the complaining teachers' strategy to abort, frustrate or negate the judgment of the Education Secretary in the
administrative cases against them which they anticipated would be adverse to them.
This cannot be done. It will not be permitted to be done.
In any event, the investigation by the Commission on Human Rights would serve no useful purpose. If its investigation should
result in conclusions contrary to those reached by Secretary Cariño, it would have no power anyway to reverse the Secretary's
conclusions. Reversal thereof can only by done by the Civil Service Commission and lastly by this Court. The only thing the
Commission can do, if it concludes that Secretary Cariño was in error, is to refer the matter to the appropriate Government
agency or tribunal for assistance; that would be the Civil Service Commission. 35
It cannot arrogate unto itself
the appellate jurisdiction of the Civil Service Commission.
WHEREFORE, the petition is granted; the Order of December 29, 1990 is ANNULLED
and SET ASIDE, and the respondent Commission on Human Rights and the Chairman
and Members thereof are prohibited "to hear and resolve the case (i.e., Striking
Teachers HRC Case No. 90-775) on the merits."
SO ORDERED.
G.R. No. 153310 March 2, 2004
MEGAWORLD GLOBUS ASIA, INC., petitioner,
vs.
DSM CONSTRUCTION AND DEVELOPMENT CORPORATION and PRUDENTIAL
GUARANTEE AND ASSURANCE, INC., respondents.
TINGA, J.:
Before this Court is a Petition for Review on Certiorari assailing the Decision dated
February 14, 2002, of the Court of Appeals in CA G.R. SP No. 67432,1 which affirmed
the Decision2 of the Construction Industry Arbitration Commission (CIAC) 3 dated
September 8, 2001, in CIAC Case No. 22-2000 finding petitioner Megaworld Globus
Asia, Inc., liable to DSM Construction in the amount of ₱62,760,558.49.
The antecedents are as follows:
Relative to the construction of a condominium project called "The Salcedo Park,"
located at H.V. dela Costa St., Salcedo Village, Makati City, the project owner,
Megaworld, entered into three separate contracts with DSM Construction, namely:
(1) Contract for Architectural Finishing Works; (2) Contract for Interior Finishing
Works; and (3) Contract for Supply and Installation of Kitchen Cabinets and Closets.
The total contract price, which was initially placed at ₱300 Million, was later
reduced to ₱240 Million when the items for kitchen cabinets and walk-in closets
were deleted.4 The contracts also contain a stipulation for Retention Money, which
is a portion of the total contract price (usually, as in this case, 10%) set aside by the
project owner from all approved billings and retained for a certain period to
guarantee the performance by the contractor of all corrective works during the
defect-liability period which, in this case, is twelve months from the issuance of
the Taking Over Certificate of Works.5
The Letter of Award for Architectural Finishing Works provides that the period for
commencement and completion shall be twelve months, from August 1, 1997 to
July 31, 1998. However, on February 21, 2000, representatives of both Megaworld
and DSM Construction entered into an Interim Agreement whereby they agreed on
a new schedule of the turnover of units from the 26th floor to the 40th floor, which
was the last of the contracted works.6 The consideration agreed upon in the Interim
Agreement was ₱53,000,000.00. Of this amount, ₱3,000,000.00 was to be released
immediately while five (5) equal installments of ₱7,000,000.00 were to be released
depending on the turn-over of units from the 26th floor to the 40th floor. The
remaining amount of ₱15,000,000.00 of the ₱53,000,000.00 consisted of half of the
retention money.7
Because of the differences that arose from the billings, DSM Construction filed on
August 21, 2002, a Complaint before the CIAC for compulsory arbitration, claiming
payment of ₱97,743,808.33 for the outstanding balance of the three construction
contracts, variation works, labor escalation, preliminaries loss and expense, earned
retention money, interests, and attorney’s fees.8 DSM Construction alleged that it
already commenced the finishing works on the existing 12 floors on August 1, 1997,
instead of waiting for the entire 40-floor structure to be completed. At one time,
DSM Construction worked with other contractors whose work often depended on,
interfered or conflicted with said contractors. Delay by a trade contractor would
start a chain reaction by delaying or putting off other works. 9
Interposing mainly the defense of delay in the turn-over of units and the poor
quality of work of DSM Construction, Megaworld filed its Answer and made a
counter-claim for loss of profits, liquidated damages, costs of take-over and
rectification works, administration expenses, interests, attorney’s fees and cost of
arbitration in the total amount of ₱85,869,870.28.10
Prudential Guarantee and Assurance, Inc. (PGAI), which issued a Performance
Bond to guarantee Megaworld’s contractual obligation on the project, was
impleaded by Megaworld as a third-party respondent.11
On March 28, 2001, the parties signed before the members of the Arbitral Tribunal
the Terms of Reference12 (TOR) where they setforth their admitted
facts,13 respective documentary evidence,14 summary of claims15 and issues to be
resolved by the tribunal.16 After presenting their evidence in the form of affidavits
of witnesses,17 the parties submitted their respective memoranda/draft decisions. 18
On October 19, 2001, the Arbitral Tribunal promulgated its Decision dated
September 28, 2001, awarding ₱62,760,558.49 to DSM Construction and
₱9,473,799.46 to Megaworld.19
Megaworld filed a Petition for Review under Rule 43 of the Rules of Civil Procedure
before the Court of Appeals. It faulted the Arbitral Tribunal for finding that DSM
Construction achieved a 95.56% level of accomplishment as of February 14, 2000;
for absolving DSM Corporation of the consequences of the alleged delay in the
performance of its work; and for ruling that DSM Construction had complied with
the contractual requirements for filing requests for extension. Megaworld likewise
questioned the sufficiency of evidence to justify the awards for liquidated damages;
the balance of the contract price; the balance of amounts payable on account of
the Interim Agreement of February 21, 2000; the amount of ₱6,596,675.55 for
variation orders; the amount of ₱29,380,902.35 as reimbursement for
preliminaries/loss and expense; the amount of ₱413,041.52 for labor escalation
costs; and the balance of the retention money in the amount of ₱14,700,000.00
despite its award of ₱11,820,000.00 under the February 21, 2000, Interim
Agreement. Finally, Megaworld claimed that the Arbitral Tribunal erred in denying
its claim for liquidated damages, expenses incurred for the cost of take-over work,
administrative expenses, and its recourse against PGAI and for limiting its recovery
for rectification work to only ₱9,197,863.55.20
On February 14, 2002, the Court of Appeals promulgated its Decision21 affirming
that of the Arbitral Tribunal. The court pointed out that only questions of law may
be raised before it on appeal from an award of the CIAC. 22 That pronouncement
notwithstanding, the Court of Appeals proceeded to review the decision of the
Arbitral Tribunal and found the same to be amply supported by evidence. 23
Megaworld sought reconsideration of the Court of Appeals’ Decision arguing,
among other things, that the appellate court ignored the ruling in Metro
Construction, Inc. v. Chatham Properties24 that the review of the CIAC award may
involve either questions of fact, law, or both fact and law.
The Court of Appeals denied the motion for reconsideration in
its Resolution25 dated April 25, 2002. While acknowledging that the findings of fact
of the CIAC may be questioned in line with Metro Construction,26 the appellate
court stressed that the tribunal’s decision is not devoid of factual or evidentiary
support.
Megaworld elevated the case to this Court through the present Petition, advancing
the following grounds, viz:
I Supreme Court." In Metro Construction, however, this Court held that, with the
THE COURT OF APPEALS IN EFFECT REFUSED TO HEED THE RULE LAID DOWN BY
THIS Honorable Court in the Metro Construction, INC. vs. Chatham properties, inc.
case when it dismissed mgai’s petition despite the grave questions of both fact and
law brought before it by the petitioner.
II
the finding of the appellate court that the decision was based on substantial
evidence adduced by both parties sans any review of the record or of attachments
of dsm is fatally wrong, such finding being merely an adoption of the tribunal’s
decision which, as earlier pointed out, was not supported by competent, credible
and admissible evidence.
III
the court of appeals seriously erred in giving blanket approval of all the unfounded
claims and conclusions of the ciac arbitral tribunal’s SEPTEMBER 28, 2001 decision
to the detriment of petitioner’s cardinal right to due process, particularly to its right
to administrative due process.
IV
the findings and conclusions made by a highly partisan ciac arbitral tribunal have no
basis on the evidence on record. hence, the exception to the rule that only
questions of law may be brought to the honorable court is applicable in the case AT
bar.27
Although Megaworld, at the outset,28 intimates that the case involves grave
questions of both fact and law, a cursory reading of the Petition reveals that, except
for the amorphous advertence to administrative due process, the alleged errors
fundamentally involve only questions of fact. Megaworld’s plea for the Court to
pass upon the findings of facts of the Arbitral Tribunal, which were upheld by the
appellate court, must perforce fail.
To jumpstart its bid, Megaworld exploits the Court of Appeals’ pronouncement in
the assailed decision that only questions of law may be raised before it from an
award of the CIAC. The appellate court did so, Megaworld continues, in evident
disregard of Metro Construction.29
Under Section 19 of Executive Order No. 1008,30 the CIAC’s arbitral award "shall be
final and inappealable except on questions of law which shall be appealable to the
modification of E.O. No. 1008 by subsequent laws and issuances, 31 decisions of the
CIAC may be appealed to the Court of Appeals not only on questions of law but also
on questions of fact and mixed questions of law and fact.
Of such subsequent laws and issuances, only Section 1,32 Rule 43 of the 1997 Rules
of Civil Procedure expressly mentions the CIAC. While an argument may be made
that procedural rules cannot modify substantive law, adding in support thereof that
Section 1, Rule 43 has increased the jurisdiction of the Court of Appeals by
expanding the scope of review of CIAC awards, or that it contravenes the rationale
for arbitration, extant from the record is the fact that no party raised such
argument. Consequently, the matter need not be delved into.
In any case, the attack against the merits of the Court of Appeals’ Decision must fail.
Although Metro Construction may have been unbeknownst to the appellate court
when it promulgated its Decision, the fact remains that, as noted therein,33 it
reviewed the findings of facts of the CIAC and ruled that the findings are amply 15, 1999 over the
supported by the evidence. Contract Price for
Architectural
The Court of Appeals is presumed to have reviewed the case based on Finishing Works.
the Petition and its annexes, and weighed them against the Comment of DSM
Construction and the Decision of the Arbitral Tribunal to arrive at the conclusion Kitchen Cabinets & Bedroom Closets:43
that the said Decision is based on substantial evidence. In administrative or quasi- The 9th Progress
judicial bodies like the CIAC, a fact may be established if supported by substantial Billing evaluated
evidence or that amount of relevant evidence which a reasonable mind might by DLS covering
accept as adequate to justify a conclusion.34 the period
December 1, 1999
The tenability of the assailed Decision is clear from the following discussion of the =
to December 9, Php26,228,091.7344Php28,556,915.1745
arguments raised by Megaworld before the Court of Appeals which significantly are 91.84%
1999 over the
the same arguments it has raised before this Court. contract price for
Kitchen Cabinet
Issue of Accomplishment Level and Bedroom
Closet.
Megaworld contested the finding of 95.56% level of accomplishment by the Arbitral
Interior Finishing Works:46
Tribunal, alleging that the receipts DSM Construction issued for payments under
the Interim Agreement show that the latter only achieved 90% accomplishment up The 13th Progress
to the 31st floor while the 32nd to the 34th floors were only 60% Billing evaluated
completed.35 Megaworld insisted, therefore, that the level of accomplishment was by DLS covering
nowhere near 90%. the period
January 8, 2000 to
=
DSM Construction countered that Megaworld, in claiming a level of February 7, 2000 Php49,383,114.6747Php50,685,416.5548
95.55%
accomplishment of only 90%, contradicted its own Project Manager, TCGI, 36 which for the Interior
came up with a different percentage of accomplishment that are notably higher Finishing Works
than Megaworld’s computation.37 over the contract
price for Interior
In resolving this issue, the Arbitral Tribunal relied on the computation of Davis Finishing Work.
Langdon & Seah (DLS), the project’s independent surveyor, 38 which found the level
of accomplishment as of February 14, 2000, to be 95.56%. DLS’s computation is Php213,658,888. Php26,228,091. Php49,383,114. 289,270,295.17=95
recited in Exhibit "NN",39 thus: 77 + 72 + 67 = .56%

Php223,456,756. Php Php50,685,416.

302,699,097.40
Architectural Finishing : 40 68 28,556,915.17 55

The 24th Progress

Billing evaluated
by DLS covering = Clearly, thus, CIAC’s finding that the level of accomplishment of DSM Construction
Php213,658,888.7741Php223,456,756.6842 as of February 12, 2002, stood at 95.56% was affirmed by the Court of Appeals
the period 95.62%
November 15, because it is supported by substantial evidence.
1999 to December
The Court of Appeals also noted that the Arbitral Tribunal did not give due course to
all of DSM Construction’s claims. Indeed, the Arbitral Tribunal rejected the
construction company’s demand for payment for subsequent works done after
February 12, 2000, because Exhibit "OO," on which DSM Construction’s demand
was based, does not bear any mark that it had been received by Megaworld. Thus,
the Arbitral Tribunal concluded that subsequent works up to September 22, 2000,
when DSM Construction supposedly stopped working on the project, had not been
established.49
This Court observes that between the two contrasting claims of Megaworld and
DSM Construction on the percentage of work accomplishment, the Arbitral Tribunal
instead accorded weight to the assessment of DLS which is the project surveyor.
Apart from being reasonable, DLS’s evaluation is impartial. Thus, as correctly
pointed out by the Arbitral Tribunal, DLS rejected DSM Construction’s 99%
accomplishment claim when it limited its evaluation to only 95.56%.
Issues of Delay and Liquidated Damages
Next, Megaworld attributed the delay in the completion of the construction project
solely to DSM Construction. The latter countered that among the causes of delay
was the lack of coordination among trade contractors and the absence of a general
contractor.50 Although the contract purportedly contains a provision for the
coordination of trade contractors, the lack of privity among them prevented
coordination such that DSM Construction could not require compliance on the part
of the other trade contractors.
The Arbitral Tribunal decided this question by turning to Section 2.01 of the General
Conditions of the Contract, which states:
2.01 SITE, ACCESS & WORKS
The Contractor shall accept the Site as found on the date for possession and at their
own expense clear the site of any debris which may have been left by the preceding
occupants/contractors.
The Arbitral Tribunal held that Section 2.01 presupposes that on the date of
possession by DSM Construction of the work premises, the preceding contractor
had already left the same.51 The tribunal explained that the delay incurred by other
trade contractors also resulted in the delay of the work of DSM Construction.
It also pointed out that under Section 5.3 (1)52 of the Interim
Agreement,53 Megaworld is required to complete and turn over to DSM
Construction preceding works for the latter to complete their works in accordance
with the Revised Work Schedule. Section 5.3 (1), the Arbitral Tribunal noted, even
allows DSM Construction to recover losses incurred on account of the standby time
of DSM’s personnel/manpower or workers mobilized while Megaworld is not ready
to turn over the preceding works. The Arbitral Tribunal further held that, in
accordance with Section 5.3 (2)54of the Interim Agreement, DSM Construction was
entitled to an extension of time corresponding to the number of days of delay
reckoned from the time the preceding work item or area should have been turned
over to DSM Construction. Consequently, such delay, which is not exclusively
imputable to DSM Construction, negates the claim for liquidated damages by
Megaworld.55
In affirming the Arbitral Tribunal’s disposition of the issues of delay and payment of
liquidated damages, the appellate court noted that the Arbitral Tribunal narrated
the claims and defenses of both DSM Construction and Megaworld before making
an evaluation thereof and arriving at its conclusion.56 Clearly, the evidence and
arguments were carefully weighed to justify the said disposition.
The Tribunal’s finding that the project had already been delayed even before DSM
Construction commenced its work is borne out by the evidence. In his letter, Exhibit
X-2,57 Project Management Consultant Eduardo C. Arrojado, conceded that the
previous contractors had delayed the project, at the same time faulting DSM
Construction for incurring its own delay. Furthermore, the work of DSM
Construction pertaining as it did to the architectural and interior finishing stages as
well as the supply and installation of kitchen cabinets and closets, obviously related
to the final details and completion stage of the project. Thus, commencement of its
task had to depend on the turn over of the complete work of the prior contractors.
Hence, the delay of the previous contractors resulted in the delay of DSM
Construction’s work.
Issues of the Contract Price Balance and Retention Money
Megaworld also questioned the Arbitral Tribunal’s awards of ₱7,129,825.19
corresponding to the balance of the contract price, and ₱11,820,000.00 pursuant to
the Interim Agreement.58 Megaworld alleged that DSM Construction was no longer
entitled to the balance of the contract price and the retention money after the
latter received payments pursuant to the Interim Agreement in the amounts of
₱5,444,553.18 for the 26th to the 28th floors, another ₱5,444,553.18 for the 29th to
the 31st floors at a 90% completion rate, and ₱4,161,818.18 for the 32nd to the
34thfloors which were 60% completed. Megaworld also contended that since it
spent more money to complete the scope of work of DSM Construction, the latter
was no longer entitled to any of the balance.
On the other hand, DSM Construction argued that the award was justified in view of
the failure of Megaworld to controvert the amount of ₱7,129,825.19 included in the
Account Overview of DLS. DSM Construction also emphasized that it was not
claiming the entire ₱53 Million under the Interim Agreement but only the amount
corresponding to the actual work done. Even based on DLS’s computation, a total of
₱11,820,000.00 of retention money is still unpaid out of the 50% agreed to be
released under the Interim Agreement (₱15,000,000.00 less ₱3,180,000.00
retention money or ₱11,820,000.00 for the paid billings).59
The Arbitral Tribunal ruled that the balance claimed under the three contracts was
based on what DSM Construction had actually accomplished less the payments it
had previously received. Considering that the remaining works which were
performed by another trade contractor, Deticio and Isabedra Builders, were paid
directly by Megaworld, no other cost for work accomplished in the Interim
Agreement is due DSM Construction except the retention money of
₱11,820,000.00.60
The Court of Appeals affirmed the award of the Arbitral Tribunal regarding the
balance of the contract price of ₱7,129,825.19 and the retention money of
₱11,820,000.00 to DSM Construction. The Court of Appeals noted that the Arbitral
Tribunal again narrated the claims and defenses of both DSM Construction and
Megaworld before arriving at its conclusion. The appellate court further stated that
the mere fact that the tribunal did not award the whole amount claimed by DSM
Construction (₱12,820,000.00) and instead awarded only ₱11,820,000.00 belies
Megaworld’s allegation that the tribunal adopted "hook, line and sinker" DSM
Construction’s claims.61
This Court finds the award of the balance of the contract price of ₱7,129,825.20
justified in view of DLS’ explanation in Exhibit MM-362 that the amount of
₱7,129,825.20 represented the unpaid billing for architectural, interior and kitchen
billings before Megaworld and DSM Construction drafted the Interim Agreement.
Issue of Variation Works
Megaworld also disputed before the Court of Appeals the ₱6,686,675.55 63 award by
the Arbitral Tribunal for variation works. Variation works consist of the addition,
omission or alteration to the kind, quality or quantity of the works. 64 DSM
Construction originally claimed a total of ₱26,208,639.00 for variation works done
but, of this claim, the Arbitral Tribunal only awarded ₱6,686,675.55 in line with the
evaluation of DLS.
Megaworld conceded that DSM Construction performed additional works to the
extent of ₱5,036,252.81. However, Megaworld claimed that since it incurred
expenses when it hired another trade contractor to take over the works left
uncompleted by DSM Construction, the latter lost its right to claim such amount
especially since DSM Construction did not comply with the documentation when
claiming variation works.65
DSM Construction asserted that the Arbitral Tribunal, in fact, should have awarded
₱26,208,639.00 instead of limiting the award to only ₱6,686,675.55 because it was
not even disputed that variation works were performed. It also contended that it
cannot be faulted for the lack of documentation because the fault lay on
Megaworld’s project manager who failed to forward the variation orders to DLS.66
The Arbitral Tribunal ruled in favor of DSM Construction, holding that there was
enough evidence to prove that the contractor made a request for change or
variation orders. The Arbitral Tribunal also found the testimony of Engineer
Eduardo C. Arrojado convincing, factual and balanced despite Megaworld’s attempt
to discredit him. However, while the amount claimed for variation works was
₱26,208,639.00, the Arbitral Tribunal limited the awarded to only
₱6,686,675.5567 since a closer scrutiny of the other items indicated that some
works were not performed.68
The appellate court upheld the award of the Arbitral Tribunal because the award
was based not only on the documentary exhibits prepared by DLS but on the
testimony of Engineer Eduardo C. Arrojado, as well.69
This Court is convinced that payments for variation works is due. Undoubtedly,
variation works were performed by DSM Construction. This was confirmed by
Engineer Eduardo C. Arrojado who testified that he recommended the payment for
substantial additional works to DSM Construction. He further stated that since time
was of the essence in the completion of the project, there were variation orders
which were performed without the prior approval of the owner. However, he
explained that this was a common construction practice. Finally, he stated that he
agreed with the evaluation of DLS.70
The testimony justified the Arbitral Tribunal’s reliance on the evaluation made by
DLS which limited the claim for variation works to ₱6,596,675.55.
Issue of Preliminaries/Loss and Expense
Megaworld also disputed the award of ₱29,380,902.35 for preliminaries/losses and
expense.
The provision for preliminaries/loss and expense in the contract assumes a direct
loss and/or expense incurred in the regular progress of work for which the
contractor would not be reimbursed under any other provision of the
contract.71 DSM Construction’s claim for preliminaries/loss and expense in the
amount of ₱36,603,192.82 covered the loss and expense incurred on payroll,
equipment rental, materials and site clearing on account of such factors as delay in
the execution of the works for causes not attributable to DSM Construction. 72
Megaworld refused to recognize DSM Construction’s claim because the latter
allegedly failed to comply with Clause 6.16 of the Conditions of Contract, which
imposes a two-month deadline for submission of claims for preliminaries reckoned
from "the happening of the event giving rise to the loss and expense."73 DSM
Construction, however, argued that the documentary evidence shows that out of
the four claims for preliminaries, only one (Exhibit MM-5with an evaluation of
₱17,552,722.47), covering the period August 1, 1998 to April 1999, was submitted
beyond the two-months requirement.74 DSM Construction also pointed out that the
two-month requirement for this claim was waived by Megaworld through DLS when
the latter recognized the validity of claims by coming up with an evaluation of
₱17,552,722.47 for the period covered in Exhibit MM-5.75
The Arbitral Tribunal ruled that DSM Construction was entitled to extended
preliminaries considering that delay was not attributable to DSM Construction. The
Arbitral Tribunal observed that Megaworld did not present evidence to refute the
claim for extended preliminaries which were previously evaluated by DLS. However,
after assessing the two previous evaluations by DLS, the tribunal ruled that the
claims for hauling and disposal and cleaning and clearing of debris should not be
included in the extended preliminaries. Hence, the Arbitral Tribunal reduced the
amount of ₱44,051.62 from the claim of ₱2,655,879.89 per Exhibit "MM-7," and
₱3,883,309.54 from the claim of ₱5,651,235.24 per Exhibit "MM-8," such amounts
being unnecessary.76
The appellate court affirmed the award, stressing the fact that the Arbitral Tribunal
denied some of the claims which it did not find valid.77
DSM Construction’s entitlement to the payment for preliminaries was explained by
Engineer Eduardo C. Arrojado to be the necessary result of the extension of the
contract between DSM Construction and Megaworld.78 Notably, majority of the
claims of DSM Construction was reduced by the Arbitral Tribunal on the basis
of Exhibit MM-479 or the Summary of Variation Order Status Report prepared by
DLS.
Although the Arbitral Tribunal ruled that DSM Construction was entitled to claim for
preliminaries, the award was not based on the claim of DSM Construction but on
the evaluation made by DLS.
The foregoing disquisition adequately shows that the evidence on record supports
the findings of facts of the Arbitral Tribunal on which the Court of Appeals based its
decision. In fact, although not all the exhibits in the Arbitral Tribunal were
presented before the Court of Appeals, the record of the appellate court contains
the operative facts and the substance of said exhibits, thus enabling the intelligent
disposition of the issues presented before it. This Court went over all the records,
including the exhibits, to ascertain whether the appellate court missed any crucial
point. It did not.
The alleged undue favor accorded by the Arbitral Tribunal to DSM Construction is
belied by the fact that the Arbitral Tribunal did not grant all of DSM Construction’s
claims. In majority of DSM Construction’s claims, the Arbitral Tribunal awarded
amounts lower than what DSM Construction demanded. The Arbitral Tribunal also
granted some of Megaworld’s claims.80
Neither did the Court of Appeals merely "swallow hook, line and sinker" the award
of the Arbitral Tribunal. While the appellate court affirmed the decision of the
Arbitral Tribunal, it also ruled in favor of Megaworld when it limited DSM
Construction’s lien to only six units instead of all the condominium units to which
DSM was entitled under the Contract, rationalizing that the ₱62 Million award can
be covered by the value of the six units of the condominium project. 81
Considering that the computations, as well as the propriety of the awards of the
Arbitral Tribunal, are unquestionably factual issues that have been discussed and
ruled upon by Arbitral Tribunal and affirmed by the Court of Appeals, we cannot
depart from such findings. Findings of fact of administrative agencies and quasi-
judicial bodies, which have acquired expertise because their jurisdiction is confined
to specific matters, are generally accorded not only respect, but finality when
affirmed by the Court of Appeals.82
Megaworld, however, adamantly contends that the present case constitutes an
exception to the above rule because: (1) there is grave abuse of discretion in the
appreciation of facts; (2) the judgment is premised on misapprehension of facts;
and, (3) the findings of fact of the Court of Appeals is premised on the supposed
absence of evidence and is contradicted by the evidence on record.83
We disagree. None of these flaws appear in this case. Grave abuse of discretion
means the capricious or whimsical exercise of judgment that is so patent and gross
as to amount to an evasion of positive duty or a virtual refusal to perform a duty
enjoined by law, or to act at all in contemplation of law, as where the power is
exercised in an arbitrary and despotic manner by reason of passion or hostility. 84 No
abuse of discretion was established by Megaworld. On the contrary, what is
apparent is Megaworld’s effort to attribute grave abuse of discretion to the Arbitral
Tribunal simply because of the unfavorable judgment against it. Megaworld’s
assertion that there was misapprehension of facts and that the evidence is
insufficient to support the decision is also untenable. The Decisions of the Arbitral
Tribunal and the Court of Appeals adequately explain the reasons therefor and are
supported by substantial evidence.

Likewise unmeritorious is Megaworld’s assertion that it was deprived of

administrative due process. The Arbitral Tribunal considered the arguments and the
evidence submitted by both parties. That it accorded greater weight to DSM
Construction’s evidence, by itself, does not constitute a denial of due process.

WHEREFORE, the Petition is DENIED. The Decision dated February 14, 2001, of the
Court of Appeals is AFFIRMED. The Temporary Restraining Order issued by this
Court on July 12, 2002, is hereby LIFTED. Costs against Petitioner.

SO ORDERED.
G.R. No. 148318 November 22, 2004
NATIONAL POWER CORPORATION, petitioner,
vs.
HON. ROSE MARIE ALONZO-LEGASTO, as Presiding Judge, RTC of Quezon City,
Branch 99, JOSE MARTINEZ, Deputy Sheriff, RTC of Quezon City, CARMELO V.
SISON, Chairman, Arbitration Board, and FIRST UNITED CONSTRUCTORS
CORPORATION, respondents.
TINGA, J.:
National Power Corporation (NPC) filed the instant Petition for Review1 dated July
19, 2001, assailing the Decision2of the Court of Appeals dated May 28, 2001 which
affirmed with modification the Order3 and Writ of Execution4respectively dated May
22, 2000 and June 9, 2000 issued by the Regional Trial Court. In its assailed Decision,
the appellate court declared respondent First United Constructors Corporation
(FUCC) entitled to just compensation for blasting works it undertook in relation to a
contract for the construction of power facilities it entered into with petitioner. The
Court of Appeals, however, deleted the award for attorney's fees having found no
basis therefor.
The facts culled from the Decision of the Court of Appeals are undisputed:
On April 14, 1992, NPC and FUCC entered into a contract for the
construction of power facilities (civil works) – Schedule 1 – 1x20 MW
Bacon-Manito II Modular Geothermal Power Plant (Cawayan area) and
Schedule 1A – 1x20 MW Bacon-Manito II Modular Geothermal Power Plant
(Botong area) in Bacon, Sorsogon (BACMAN II). The total contract price for
the two schedules is P108,493,966.30, broken down as follows:
SCHEDULE
1 – Cawayan area P 52,081,421.00
1A – Botong area P 56,412,545.30
P 108,493,966.30
Appended with the Contract is the contract price schedule which was
submitted by the respondent FUCC during the bidding. The price for
grading excavation was P76.00 per cubic meter.
Construction activities commenced in August 1992. In the latter part of
September 1992 and after excavating 5.0 meters above the plant
elevation, FUCC requested NPC that it be allowed to blast to the design
grade of 495 meters above sea level as its dozers and rippers could no
longer excavate. It further requested that it be paid P1,346.00 per cubic
meter similar to the rate of NPC's project in Palinpinon.
While blasting commenced on October 6, 1992, NPC and FUCC were
discussing the propriety of an extra work order and if such is in order, at
what price should FUCC be paid.
Sometime in March 1993, NPC Vice President for Engineering Construction,
Hector Campos, created a task force to review FUCC's blasting works. The
technical task force recommended that FUCC be paid P458.07 per cubic
meter as such being the price agreed upon by FUCC.
The matter was further referred to the Department of Public [W]orks and
Highways (DPWH), which in a letter dated May 19, 1993, recommended
the price range of P500.00 to P600.00 per cubic meter as reasonable. It
further opined that the price of P983.75 per cubic meter proposed by
Lauro R. Umali, Project Manager of BACMAN II was high. A copy of the
DPWH letter is attached as Annex "C", FUCC's Exhibit EEE-Arbitration.
In a letter dated June 28, 1993, FUCC formally informed NPC that it is
accepting the proposed price of P458.07 per cubic meter. A copy of the
said letter is attached as Annex "D", FUCC's Exhibit L Arbitration.
In the meantime, by March 1993, the works in Botong area were in
considerable delay. By May 1993, civil works in Botong were kept at a
minimum until on November 1, 1993, the entire operation in the area
completely ceased and FUCC abandoned the project.
Several written and verbal warnings were given by NPC to FUCC. On March
14, 1994, NPC's Board of Directors passed Resolution No. 94-63 approving
the recommendation of President Francisco L. Viray to take over the
contract. President Viray's recommendation to take over the project was
compelled by the need to stave-off huge pecuniary and non-monetary
losses, namely:
(a) Generation loss estimated to be at
P26,546,400/month;
 (b) Payment of steam penalties to PNOC-EDC the amount
estimated to be at P10,206,048.00/month;
(c) Payment of liquidated damages due to the standby of
electromechanical contractor;
(d) Loss of guaranteed protection (warranties) of all
delivered plant equipment and accessories as Mitsubishi
Corporation, electromechanical contractor, will not be
liable after six months of delivery.
To prevent NPC from taking over the project, on March 28, 1994, FUCC
filed an action for Specific Performance and Damages with Preliminary
Injunction and Temporary Restraining Order before Branch 99, Regional
Trial Court, Quezon City.
Under paragraph 19 of its Complaint, FUCC admitted that it agreed to pay
the price of P458.07 per cubic meter.
On April 5, 1994, Judge de Guzman issued a temporary restraining order
and on April 21, 1994, the trial court resolved to grant the application for
issuance of a writ of preliminary injunction.
On July 7, 1994, NPC filed a Petition for Certiorari with Prayer for
Temporary Restraining Order and Preliminary Injunction before the First
Division of the Court of Appeals asserting that no injunction may issue
against any government projects pursuant to Presidential Decree 1818.
On July 8, 1994, the Court of Appeals through then Associate Justice
Bernardo Pardo issued a temporary restraining order and on October 20,
1994, the said court rendered a Decision granting NPC's Petition for
Certiorari and setting aside the lower court's Order dated April 21, 1994
and the Writ of Preliminary Injunction dated May 5, 1994.
However, notwithstanding the dissolution by the Court of Appeals of the
said injunction, on July 15, 1995, FUCC filed a Complaint before the Office
of the Ombudsman against several NPC employees for alleged violation of
Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt
Practices Act. Together with the complaint was an Urgent Ex-Parte Motion
for the issuance of a cease and [d]esist [o]rder to restrain NPC and other
NPC officials involved in the BACMAN II project from canceling and/or from
taking over FUCC's contract for civil works of said project.
Then on November 16, 1994, FUCC filed before the Supreme Court a
Petition for Review assailing the Decision of the Court of [A]ppeals dated
October 20, 1994. In its Comment, NPC raised the issue that FUCC resorted
to forum shopping as it applied for a cease and desist order before the
National Ombudsman despite the dissolution of the injunction by the
Court of Appeals.
Pending the petition filed by FUCC before the Supreme Court, on April 20,
1995 the NPC and FUCC entered into a Compromise Agreement.
Under the Compromise Agreement, the parties agreed on the following:
1. Defendant shall process and pay the undisputed unpaid billings
of Plaintiff in connection with the entire project fifteen (15) days
after a reconciliation of accounts by both Plaintiff and Defendant
or thirty (30) days from the date of approval of this Compromise
Agreement by the Court whichever comes first. Both parties agree
to submit and include those accounts which could not be
reconciled among the issues to be arbitrated as hereunder
provided;
2. Plaintiff accepts and acknowledges that Defendant shall have
the right to proceed with the works by re-bidding or negotiating
the project immediately upon the signing of herein Compromise
Agreement;
3. This Compromise Agreement shall serve as the Supplemental
Agreement for payment of plaintiff's blasting works at the Botong
site;
4. Upon approval of this Compromise Agreement by the Court or
Plaintiff's receipt of payment of this undisputed unpaid billings
from Defendant whichever comes first, the parties shall
immediately file a Joint Manifestation and Motion for the
withdrawal of the following Plaintiff's petition from the Supreme
Court, Plaintiff's Complaint from the National Ombudsman, the
Complaint and Amended Complaint from the RTC, Br. 99 of
Quezon City;
5. Upon final resolution of the Arbitration, as hereunder
prescribed, the parties shall immediately execute the proper
documents mutually terminating Plaintiff's contract for the civil
works of the BACMAN II Project (Contract No. Sp90DLM-918 (I &
A);
6. Such mutual termination of Plaintiff's contract shall have the
following effects and/or consequences: (a) the construction works
of Plaintiff at the Kawayan and Bolong sites, at its present stage of
completion, shall be accepted and/or deemed to have been
accepted by defendant; (b) Plaintiff shall have no more obligation
to Defendant in respect of the BACMAN II Project except as
provided in clause (e) below; (c) Defendant shall release all
retention moneys of plaintiff within a maximum period of thirty
(30) days from the date of final Resolution of the Arbitration; (d)
no retention money shall thenceforth be withheld by Defendant
in its payment to Plaintiff under this Compromise Agreement, and
(e) Plaintiff shall put up a one-year guaranty bond for its
completed civil works at the Kawayan site, retroactive to the date
of actual use of the plant by defendant;
7. Plaintiff's blasting works claims and other unresolved claims, as
well as the claims of damages of both parties shall be settled
through a two stage process to wit:
STAGE 1
7.1 Plaintiff and Defendant shall execute and sign this
Compromise Agreement which they will submit for
approval by this Court. Under this Compromise
Agreement both parties agree that:
xxx xxx
STAGE 2
7.1 The parties shall submit for arbitration to settle: (a)
the price of blasting, (b) both parties' claims for damages,
delays, interests, and (c) all other unresolved claims of
both parties, including the exact volume of blasted rocks;
7.2 The arbitration shall be through a three-member
commission to be appointed by the Honorable Court.
Each party shall nominate one member. The Chairman of
the Arbitration Board shall be [a] person mutually
acceptable to both parties, preferably from the academe;
7.3 The parties shall likewise agree upon the terms under
which the arbitrable issues shall be referred to the
Arbitration Board. The terms of reference shall form part
of the Compromise Agreement and shall be submitted by
the parties to the Honorable Court within a period of
seven (7) days from the signing of the Compromise
Agreement;
7.4 The Arbitration Board shall have a non-extendible
period of three (3) months within which to complete the
arbitration process and submit its Decision to the
Honorable Court;
7.5 The parties agree that the Decision of the Arbitration
Board shall be final and executory;
7.6 By virtue of this Compromise Agreement, except as
herein provided, the parties shall mutually waive, forgo
and dismiss all of their other claims and/or counterclaim
in this case. Plaintiff and defendant warrant that after
approval by the Court of this Compromise Agreement
neither party shall file Criminal or Administrative cases or
suits against each other or its Board or member of its
officials on grounds arising from the case.
The Compromise Agreement was subsequently approved by the Court on
May 24, 1995.
The case was subsequently referred by the parties to the arbitration board
pursuant to their Compromise Agreement. On December 9, 1999 the
Arbitration Board rendered its ruling the dispositive portion of which
states:
WHEREFORE, claimant is hereby declared entitled to an award of
P118,681,328.28 as just compensation for blasting works, plus ten percent
(10%) thereof for attorney's fees and expenses of litigation.
Considering that payment in the total amount of P36,550,000.00 had
previously been made, respondent is hereby ordered to pay claimant the
remaining sum of P82,131,328.28 for attorney's fees and expenses of
litigation.
 Pursuant to the Compromise Agreement approved by this Honorable
Court, the parties have agreed that the decision of the Arbitration Board
shall be final and executory.
SO ORDERED.
On December 10, 1999 plaintiff FUCC filed a Motion for Execution while
defendant NPC filed a Motion to Vacate Award by the Arbitration Board on
December 20, 1999.
On May 22, 2000 Presiding Judge Rose Marie Alonzo Legasto issued an
order the dispositive portion of which states:
"WHEREFORE, the Arbitration Award issued by the Arbitration Board is
hereby APPROVED and the Motion for Execution filed by plaintiff hereby
GRANTED. The Motion to Vacate Award filed by defendant is hereby
DENIED for lack of merit.
Accordingly, let a writ of execution be issued to enforce the Arbitration
Award.
SO ORDERED."5 (Bracketed words supplied)
NPC went to the Court of Appeals on the lone issue of whether respondent judge
acted with grave abuse of discretion in issuing the Order dated May 22, 2000 and
directing the issuance of a Writ of Execution.
In its assailed Decision, the appellate court declared that the court a quo did not
commit grave abuse of discretion considering that the Arbitration Board acted
pursuant to its powers under the Compromise Agreement and that its award has
factual and legal bases.
The Court of Appeals gave primacy to the court-approved Compromise Agreement
entered into by the parties and concluded that they intended the decision of the
arbitration panel to be final and executory. Said the court:
For one, what the price agreed to be submitted for arbitration are pure
issues of fact (i.e., the price of blasting; both parties' claims for damages,
delay, interests and all other unresolved claims of both parties, including
the exact volume of blasted rocks). Also, the manner by which the
Arbitration Board was formed and the terms under which the arbitrable
issues were referred to said Board are specified in the agreement. Clearly,
the parties had left to the Arbitration Board the final adjudication of their
remaining claims and waived their right to question said Decision of the
Board. Hence, they agreed in clear and unequivocal terms in the
Compromise Agreement that said Decision would be immediately final and
executory. Plaintiff relied upon this stipulation in complying with its
various obligations under the agreement. To allow defendant to now go
back on its word and start questioning the Decision would be grossly unfair
considering that the latter was also a party to the Compromise Agreement
entered into part of which dealt with the creation of the Arbitration
Board.6
The appellate court likewise held that petitioner failed to present evidence to prove
its claim of bias and partiality on the part of the Chairman of the Arbitration Board,
Mr. Carmelo V. Sison (Mr. Sison).
Further, the Court of Appeals found that blasting is not part of the unit price for
grading and structural excavation provided for in the contract for the BACMAN II
Project, and that there was no perfected contract between the parties for an extra
work order for blasting. Nonetheless, since FUCC relied on the representation of
petitioner's officials that the extra work order would be submitted to its Board of
Directors for approval and that the blasting works would be paid, the Court of
Appeals ruled that FUCC is entitled to just compensation on grounds of equity and
promissory estoppel.
Anent the issue of just compensation, the appellate court took into account the
estimate prepared by a certain Mr. Lauro R. Umali (Mr. Umali), Project Manager of
the BACMAN II Project, which itemized the various costs involved in blasting works
and came up with P1,310.82 per cubic meter, consisting of the direct cost for
drilling, blasting excavation, stockpiling and hauling, and a 30% mark up for
overhead, contractor's tax and contingencies. This estimate was later changed to
P983.75 per cubic meter to which FUCC agreed. The Court of Appeals, however,
held that just compensation should cover only the direct costs plus 10% for
overhead expenses. Thus, it declared that the amount of P763.007 per cubic meter
is sufficient. Since the total volume of blasted rocks as computed by Dr. Benjamin
Buensuceso, Jr.8 of the U.P. College of Engineering is 97,032.16 cubic meters, FUCC
is entitled to the amount of P74,035,503.50 as just compensation.
Although the Court of Appeals adjudged FUCC entitled to interest, 9 the dispositive
portion of the assailed Decision10did not provide for the payment of interest.
Moreover, the award of attorney's fees was deleted as there was no legal and
factual ground for its imposition.
Petitioner, represented by the Office of the Solicitor General in the instant Petition,
rehashes its submissions before the Court of Appeals. It claims that the appellate
court failed to pass upon the following issues:
1. The Chairman of the Arbitration Board showed extreme bias in
prejudging the case.
2. The Chairman of the Arbitration Board greatly exceeded his powers
when he mediated for settlement in the court of arbitration proceedings.
3. The Chairman of the Arbitration Board committed serious irregularity in
hastily convening the Board in two days, which thereafter released its
report.
4. The Arbitration Board Committed manifest injustice prejudicial to
petitioner based on the following:
a. It rendered an award based on equity despite the mandatory
provision of the law.
b. The Board's decision to justify that equity applies herein
despite the fact that FUCC never submitted its own actual costs
for blasting and PHESCO, INC., the succeeding contractor, did not
employ blasting but used ordinary excavation method at P75.59
per cubic meter which is approximately the same unit price of
plaintiff (FUCC).
c. It gravely erred when the Board claimed that an award of just
compensation must be given to respondent FUCC for what it has
actually spent and yet instead of using as basis P458.07 which is
the price agreed upon by FUCC, it chose an estimate made by an
NPC employee.
d. It gravely erred when it relied heavily on the purported letter of
NPC Project Manager Lauro R. Umali, when the same has not
been identified nor were the handwritten entries in Annex ii
established to be made by him.
5. The Arbitration Board gravely erred in computing interest at 12% and
from the time of plaintiff's extrajudicial claim despite the fact that herein
case is an action for specific performance and not for payment of loan or
forbearance of money, and despite the fact that it has resolved that there
was no perfected contract and there was no bad faith on the part of
defendant.
6. On June 25, 2000, NPC discovered the Sub-Contract Agreement of
FUCC with a unit price of only P430/per cubic meter.11 [Emphasis in the
original]
Specifically, petitioner asserts that Mr. Sison exhibited bias and prejudgment when
he exhorted it to pay FUCC for the blasting works after concluding that the latter
was allowed to blast. Moreover, Mr. Sison allegedly attempted to mediate the
conflict between the parties in violation of Section 20,12 paragraph 2 of Republic Act
No. 876 (R.A. 876) otherwise known as the Arbitration Law. Petitioner also
questions the abrupt manner by which the decision of the Arbitration Board was
released.
Petitioner avers that FUCC's claim for blasting works was not approved by
authorized officials in accordance with Presidential Decree No. 1594 (P.D. 1594) and
its implementing rules which specifically require the approval of the extra work by
authorized officials before an extra work order may be issued in favor of the
contractor. Thus, it should not be held liable for the claim. If at all, only the erring
officials should be held liable. Further, FUCC did not present evidence to prove the
actual expenses it incurred for the blasting works. What the Arbitration Board relied
upon was the memorandum of Mr. Umali which was neither identified or
authenticated during the arbitration proceedings nor marked as evidence for FUCC.
Moreover, the figures indicated in Mr. Umali's memorandum were allegedly mere
estimates and were recommendatory at most.
Petitioner likewise claims that its succeeding contractor, Phesco, Inc. (Phesco), was
able to excavate the same rock formation without blasting.
Finally, it asserts that the award of P763.00 per cubic meter has no factual and legal
basis as the sub-contract between FUCC and its blasting sub-contractor, Dynamic
Blasting Specialists of the Philippines (Dynamic), was only P430.00 per cubic meter.
In its Comment13 dated October 15, 2001, FUCC points out that petitioner's
arguments are exactly the same as the ones it raised before the Arbitration Board,
the trial court and the Court of Appeals. Moreover, in the Compromise Agreement
between the parties, petitioner committed to abide by the decision of the
Arbitration Board. It should not now be allowed to question the decision.
FUCC likewise notes that Atty. Jose G. Samonte (Atty. Samonte), one of the
members of the Arbitration Board, was nominated by petitioner itself. If there was
any irregularity in its proceedings such as the bias and prejudgment petitioner
imputes upon Mr. Sison, Atty. Samonte would have complained. As it is, Atty.
Samonte concurred in the decision of the Arbitration Board and dissented only as to
the award of attorney's fees.
As regards the issue of interest, FUCC claims that the case involves forbearance of
money and not a claim for damages for breach of an obligation in which case
interest on the amount of damages awarded may be imposed at the rate of six
percent (6%) per annum.
Finally, FUCC asserts that its sub-contract agreement with Dynamic is not newly-
discovered evidence. Petitioner's lawyers allegedly had a copy of the sub-contract
in their possession. In any event, the unit price of P430.00 per cubic meter
appearing in the sub-contract represents only a fraction of the costs incurred by
FUCC for the blasting works.
Petitioner filed a Reply14 dated March 18, 2002 reiterating its earlier submissions.
The parties in the present case mutually agreed to submit to arbitration the
settlement of the price of blasting, the parties' claims for damages, delay and
interests and all other unresolved claims including the exact volume of blasted
rocks.15 They further mutually agreed that the decision of the Arbitration Board
shall be final and immediately executory.16
A stipulation submitting an ongoing dispute to arbitration is valid. As a rule, the
arbitrator's award cannot be set aside for mere errors of judgment either as to the
law or as to the facts. Courts are generally without power to amend or overrule
merely because of disagreement with matters of law or facts determined by the
arbitrators. They will not review the findings of law and fact contained in an award,
and will not undertake to substitute their judgment for that of the arbitrators. A
contrary rule would make an arbitration award the commencement, not the end, of
litigation. Errors of law and fact, or an erroneous decision on matters submitted to
the judgment of the arbitrators, are insufficient to invalidate an award fairly and
honestly made. Judicial review of an arbitration award is, thus, more limited than
judicial review of a trial.17
However, an arbitration award is not absolute and without exceptions. Where the
conditions described in Articles 2038, 2039 and 2040 of the Civil Code18 applicable
to both compromises and arbitrations are obtaining, the arbitrators' award may be
annulled or rescinded.19 Additionally, judicial review of an arbitration award is
warranted when the complaining party has presented proof of the existence of any
of the grounds for vacating, modifying or correcting an award outlined under
Sections 24 and 25 of R.A. 876, viz:
Section 24. Grounds for vacating an award. — In any of the following cases,
the court must make an order vacating the award upon the petition of any
party to the controversy when such party proves affirmatively that in the
arbitration proceedings:
(a) The award was procured by corruption, fraud, or other undue
means; or
(b) That there was evident partiality or corruption in the
arbitrators or any of them; or
(c) That the arbitrators were guilty of misconduct in refusing to
postpone the hearing upon sufficient cause shown, or in refusing
to hear evidence pertinent and material to the controversy; that
one or more of the arbitrators was disqualified to act as such
under section nine hereof, and willfully refrained from disclosing
such disqualifications or of any other misbehavior by which the
rights of any party have been materially prejudiced; or
(d) That the arbitrators exceeded their powers, or so imperfectly
executed them, that a mutual, final and definite award upon the
subject matter submitted to them was not made.
When an award is vacated, the court, in its discretion, may direct a new
hearing either before the same arbitrators or before a new arbitrator or
arbitrators to be chosen in the manner provided in the submission or
contract for the selection of the original arbitrator or arbitrators, and any
provision limiting the time in which the arbitrators may make a decision
shall be deemed applicable to the new arbitration to commence from the
date of the court's order.
Where the court vacates an award, costs not exceeding fifty pesos and
disbursements may be awarded to the prevailing party and the payment
thereof may be enforced in like manner as the payment of costs upon the
motion in an action.
Section 25. Grounds for modifying or correcting an award. — In any one of
the following cases, the court must make an order modifying or correcting
the award, upon the application of any party to the controversy which was
arbitrated:
 (a) Where there was an evident miscalculation of figures, or an
evident mistake in the description of any person, thing or
property referred to in the award; or
(b) Where the arbitrators have awarded upon a matter not
submitted to them, not affecting the merits of the decision upon
the matter submitted; or
(c) Where the award is imperfect in a matter of form not affecting
the merits of the controversy, and if it had been a commissioner's
report, the defect could have been amended or disregarded by
the court.
The order may modify and correct the award so as to effect the intent
thereof and promote justice between the parties.
In this case, petitioner does not specify which of the foregoing grounds it relies
upon for judicial review. Petitioner avers that "if and when the factual
circumstances referred to in the provisions aforementioned are present, judicial
review of the award is warranted."20 From its presentation of issues, however, it
appears that the alleged evident partiality of Mr. Sison is singled out as a ground to
vacate the board's decision.
We note, however, that the Court of Appeals found that petitioner did not present
any proof to back up its claim of evident partiality on the part of Mr. Sison. Its
averments to the effect that Mr. Sison was biased and had prejudged the case do
not suffice to establish evident partiality. Neither does the fact that a party was
disadvantaged by the decision of the arbitration committee prove evident
partiality.21
According to the appellate court, "[p]etitioner was never deprived of the right to
present evidence nor was there any showing that the Board showed signs of any
bias in favor of FUCC. As correctly found by the trial court, this Court cannot find its
way to support petitioner's contention that there was evident partiality in the
assailed Award of the Arbitrator in favor of the respondent because the conclusion
of the Board, which the Court found to be well-founded, is fully supported by
substantial evidence."22
There is no reason to depart from this conclusion.
However, we take exception to the arbitrators' determination that based on
promissory estoppel per se or alone, FUCC is entitled to just compensation for
blasting works for the reasons discussed hereunder.
Section 9 of P.D. No. 1594, entitled Prescribing Policies, Guidelines, Rules and
Regulations for Government Infrastructure Contracts, provides:
SECTION 9. Change Order and Extra Work Order.—A change order or extra
work order may be issued only for works necessary for the completion of
the project and, therefore, shall be within the general scope of the
contract as bid[ded] and awarded. All change orders and extra work orders
shall be subject to the approval of the Minister of Public Works,
Transportation and Communications, the Minister of Public Highways, or
the Minister of Energy, as the case may be.
The pertinent portions of the Implementing Rules and Regulations of P.D. 1594
provide:
CI - Contract Implementation:
These Provisions Refer to Activities During Project Construction, i.e., After
Contract Award Until Completion, Except as May Otherwise be Specifically
Referred to Provisions Under Section II. IB - Instructions to Bidders.
CI 1 - Variation Orders - Change Order/Extra Work Order/Supplemental
Agreement
4. An Extra Work Order may be issued by the implementing official to
cover the introduction of new work items after the same has been found
to strictly comply with Section CI-1-1 and approved by the appropriate
official if the amount of the Extra Work Order is within the limits of the
former's authority to approve original contracts and under the following
conditions:
a. Where there are additional works needed and necessary for the
completion, improvement or protection of the project which were not
included as items of work in the original contract.
b. Where there are subsurface or latent physical conditions at the site
differing materially from those indicated in the contract.
c. Where there are duly unknown physical conditions at the site of an
unusual nature differing materially from those ordinarily encountered and
generally recognized as inherent in the work or character provided for in
the contract.
d. Where there are duly approved construction drawings or any instruction
issued by the implementing office/agency during the term of contract
which involve extra cost.
… Order, Extra Work Order or Supplemental Agreement is justified and
6. A separate Supplemental Agreement may be entered into for all Change
Orders and Extra Work Orders if the aggregate amount exceeds 25% of the
escalated original contract price. All change orders/extra work orders
beyond 100% of the escalated original contract cost shall be subject to
public bidding except where the works involved are inseparable from the
original scope of the project in which case negotiation with the incumbent
contractor may be allowed, subject to approval by the appropriate
authorities.
7. Any Variation Order (Change Order, Extra Work Order or Supplemental
Agreement) shall be subject to the escalation formula used to adjust the
original contract price less the cost of mobilization. In claiming for any
Variation Order, the contractor shall, within seven (7) calendar days after
such work has been commenced or after the circumstances leading to such
condition(s) leading to the extra cost, and within 28 calendar days deliver a
written communication giving full and detailed particulars of any extra cost
in order that it may be investigated at that time. Failure to provide either
of such notices in the time stipulated shall constitute a waiver by the
contractor for any claim. The preparation and submission of Change
Orders, Extra Work Orders or Supplemental Agreements are as follows:
a. If the Project Engineer believes that a Change Order, Extra Work Order
or Supplemental Agreement should be issued, he shall prepare the
proposed Order or Supplemental Agreement accompanied with the
notices submitted by the contractor, the plans therefore, his computations
as to the quantities of the additional works involved per item indicating the
specific stations where such works are needed, the date of his inspections
and investigations thereon, and the log book thereof, and a detailed
estimate of the unit cost of such items of work, together with his
justifications for the need of such Change Order, Extra Work Order or
Supplemental Agreement, and shall submit the same to the Regional
Director of office/agency/corporation concerned.
b. The Regional Director concerned, upon receipt of the proposed Change
Order, Extra Work Order or Supplemental Agreement shall immediately
instruct the technical staff of the Region to conduct an on-the-spot
investigation to verify the need for the work to be prosecuted. A report of
such verification shall be submitted directly to the Regional Director
concerned.
c. The Regional Director concerned after being satisfied that such Change
necessary, shall review the estimated quantities and prices and forward
the proposal with the supporting documentation to the head of
office/agency/corporation for consideration.
d. If, after review of the plans, quantities and estimated unit cost of the
items of work involved, the proper office/agency/corporation committee
empowered to review and evaluate Change Orders, Extra Work Orders or
Supplemental Agreements recommends approval thereof, the head of
office/agency/corporation, believing the Change Order, Extra Work Order
or Supplemental Agreement to be in order, shall approve the same. The
limits of approving authority for any individual, and the aggregate of,
Change Orders, Extra Work Orders or Supplemental Agreements for any
project of the head of office/agency/corporation shall not be greater than
those granted for an original project.
CI 3 - Conditions under which Contractor is to Start Work under Variation
Orders and Receive Payments
1. Under no circumstances shall a contractor proceed to commence work
under any Change Order, Extra Work Order or Supplemental Agreement
unless it has been approved by the Secretary or his duly authorized
representative. Exceptions to the preceding rule are the following:
a. The Regional Director, or its equivalent position in
agencies/offices/corporations without plantilla position for the same, may,
subject to the availability of funds, authorize the immediate start of work
under any Change or Extra Work Order under any or all of the following
conditions:
(1) In the event of an emergency where the prosecution of the work is
urgent to avoid detriment to public service, or damage to life and/or
property; and/or
(2) When time is of the essence; provided, however, that such approval is
valid on work done up to the point where the cumulative increase in value
of work on the project which has not yet been duly fully approved does not
exceed five percent (5%) of the adjusted original contract price, or
P500,000 whichever is less; provided, further, that immediately after the
 start of work, the corresponding Change/Extra Work Order shall be
prepared and submitted for approval in accordance with the above rules
herein set. Payments for works satisfactorily accomplished on any
Change/Extra Work Order may be made only after approval of the same by
the Secretary or his duly authorized representative.
b. For a Change/Extra Work Order involving a cumulative amount
exceeding five percent (5%) of the original contract price or original
adjusted contract price no work thereon may be commenced unless said
Change/Extra Work Order has been approved by the Secretary or his duly
authorized representative. [Emphasis supplied]
It is petitioner's submission, and FUCC does not deny, that the claim for payment of
blasting works in Botong alone was approximately P170,000,000.00, a figure which
far exceeds the original contract price of P80,000,000.00 for two (2) project sites.
Under the foregoing implementing rules, for an extra work order which exceeds 5%
of the original contract price, no blasting work may be commenced without the
approval of the Secretary or his duly authorized representative. Moreover, the
procedure for the preparation and approval of the extra work order outlined under
Contract Implementation (CI) 1(7) above should have been complied with.
Accordingly, petitioner's officials should not have authorized the commencement of
blasting works nor should FUCC have proceeded with the same.
The following events, culled from the decision of the Arbitration Board and the
assailed Decision, are made the bases for the finding of promissory estoppel on the
part of petitioner:
1. After claimant [respondent herein] encountered what it claimed to be
massive hard rock formation (Testimony of witness Dumaliang, TSN, 28
October 1996, pp. 41-42; Testimony of witness Lataquin, 28 November
1996, pp. 2-3; 20-23; Exh. "JJJ" and sub-markings) and informed
respondent [petitioner herein] about it, respondent's own geologists went
to the Botong site to investigate and confirmed the rock formation and
recommended blasting (Cf. Memorandum of Mr. Petronilo E. Pana, Acting
Manager of the Geoscience Services Department and the report of the
geologists who conducted the site investigation; Exhs. "F" and "F-1").
2. Claimant asked for clearance to blast the rock formation to the design
grade (Letter dated 28 September 1992; Exh. "UU"). The engineers of
respondent at the project site advised claimant to proceed with its
suggested method of extraction (Order/Instruction given by Mr. Reuel R.
Declaro and Mr. Francis A. Paderna dated 29 September 1992; Exh. "C").
3. Claimant requested that the intended blasting works be confirmed as
extra work order by responsible officials of respondent directly involved in
the BACMAN II Project (i.e., then BACMAN II Project Manager, Mr. Lauro R.
Umali and Mr. Angelito G. Senga, Section Chief, Civil Engineering Design of
respondent's Design Department which bidded the project). These officials
issued verbal instructions to the effect: (a) that claimant could blast the
rock formation down to the design grade of 495 masl; (b) that said blasting
works would be an extra work order; and (c) that claimant would be paid
for said blasting works using the price per cubic meter for similar blasting
works at Palinpinon, or at P1,346.00 per cubic meter.
4. Claimant sent two (2) confirmatory letters to respondent, both
addressed to its President, one dated 30 September 1992, and sent
through Mr. Angelito Senga, Chief Civil Design – Thermal, the other dated
02 October 1992, and sent through Mr. Lauro R. Umali, Project Manager–
BacMan II (Exhs. "D" and "E"; Testimony of witness Dumaliang, TSN, 28
October 1996, pp. 43-49). The identical letters read:
We wish to confirm your instruction for us to proceed with the blasting of
the Botong Plant site to the design grade pending issuance of the relevant
variation order. This is to avoid delay in the implementation of this critical
project due to the urgent need to blast rocks on the plant site.
We are confirming further your statement that the said blasting works is
an extra work order and that we will be paid using the price established in
your Palinpinon contract with Phesco.
Thank you for your timely action and we look forward to the immediate
issuance of the extra work order.
We are now mobilizing equipment and manpower for the said work and
hope to start blasting next week.
5. Respondent received the letters but did not reply thereto nor
countermand the earlier instructions given to claimant to proceed with the
blasting works. The due execution and authenticity of these letters (Exhs.
"D-1" and "E-1") and the fact of receipt (Exhs. "D-2" and "E-2") were duly
proved by claimant (Testimony of witness Dumaliang, TSN, 28 October
1996, 43-49).
6. In mid-October 1992, three (3) Vice-Presidents of respondent visited the
project site and were informed of claimant's blasting activities. While
respondent claims that one of the Vice-Presidents, Mr. Rodrigo Falcon,
raised objections to claimant's blasting works as an extra work order, they
instructed claimant to speed up the works because of the power crisis then
hounding the country. Stipulation no. 24 of the Joint Stipulation of Facts of
the parties which reads: "24. In mid-October 1992, three (3) Vice-
Presidents of respondent, namely: Mr. Hector N. Campos, Sr., of
Engineering Construction, Mr. C.A. Pastoral of Engineering Design, and Mr.
Rodrigo P. Falcon, visited the project site and were likewise apprised of
claimant's blasting activities. They never complained about the blasting
works, much less ordered its cessation. In fact, no official of respondent
ever ordered that the blasting works be stopped."
7. After visiting Botong, Mr. Hector N. Campos, Sr., then Vice President of
Engineering Construction, instructed Mr. Fernando A. Magallanes then
Manager of the Luzon Engineering Projects Department, to evaluate
claimant's blasting works and to submit his recommendations on the
proper price therefor. In a memorandum dated 17 November 1992 (Exh.
"G" and sub-markings), Mr. Magallanes confirmed that claimant's blasting
works was an extra work order and recommended that it be paid at the
price for similar blasting works at Palinpinon, or at P1,346.00 per cubic
meter. Mr. Campos concurred with the findings and recommendations of
Mr. Magallanes and instructed Mr. Lauro R. Umali, then Project Manager
of BacMan II, to implement the same as shown by his instructions scribbled
on the memorandum.
8. Mr. Umali and the project team prepared proposed Extra Work Order
No. 2 – Blasting (Exh. "DDD" – Memorandum of Mr. Umali to Mr. Campos
dated 20 January 1993 forwarding proposed Extra Work Order No. 2),
recommending a price of P983.75 per cubic meter for claimant's blasting
works. Claimant agreed to this price (Testimony of witness Dumaliang, 7
November 1996, p. 48).
9. On 19 February 1993, claimant brought the matter of its unpaid blasting
works to the attention of the then NPC Chairman [also Secretary of the
Department of Energy then] Delfin L. Lazaro during a meeting with the
multi-sectoral task force monitoring the implementation of power plant
projects, who asked then NPC President Pablo B. Malixi what he was doing
about the problem. President Malixi thereafter convened respondent's
vice-presidents and ordered them to quickly document the variation order
and pay claimant. The vice-president, and specifically Mr. Campos, pledged
that the variation order for claimant's blasting works would be submitted
for the approval of the NPC Board during the first week of March 1993.
Claimant thereafter sent respondent a letter dated 22 February 1993 (Ex.
"K") to confirm this pledge (Testimony of witness Dumaliang, 7 November
1996, pp. 28-30).
10. Mr. Campos created a task force (i.e., the Technical Task Force on the
Study and Review of Extra Work Order No. 2; Exh. "FFF") to review
claimant's blasting works. After several meetings with the task force,
claimant agreed to the lower price of P458.07 per cubic meter, in exchange
for quick payment (Testimony of witness Dumaliang, 7 November 1996, p.
30).
11. However, no variation order was issued and no payment came,
although it appears from two (2) radiograms sent by Mr. Campos to Mr.
Paderna at the project site that the variation order was being processed
and that payment to claimant was forthcoming (Exhs. "AAA" and "BBB").
12. Respondent asked the Department of Public Works and Highways
(DPWH) about the standard prices for blasting in the projects of the DPWH.
The DPWH officially replied to respondent's query in a letter dated 19 May
1993 but the task force still failed to seek Board approval for claimant's
variation order. The task force eventually recommended that the issue of
grading excavation and structural excavation and the unit prices therefor
be brought into voluntary arbitration (Testimony of witness Dumaliang, 7
November 1996, pp. 30-57).
13. Claimant thereafter saw Mr. Francisco L. Viray, the new NPC President,
who proposed that claimant accept the price of P458.07 per cubic meter
for its blasting works with the balance of its claim to be the subject of
arbitration. Claimant accepted the offer and sent the letter dated 28
September 1993 (Exh. "O") to formalize said acceptance. However, no
variation order was issued and the promised payment never came.
(Testimony of witness Dumaliang, 7 November 1996, p. 58).
14. After some time, claimant met Mr. Viray on 19 October 1993 at the
project site, and with some NPC officers in attendance, particularly Mr.
Gilberto A. Pastoral, Vice-President for Engineering Design, who was
instructed by Mr. Viray to prepare the necessary memorandum (i.e., that
claimant would be paid P458.07 per cubic meter with the balance of its
claim to be the subject of arbitration) for the approval of the NPC Board.
Claimant formalized what transpired during this meeting in its letter to Mr.
Pastoral dated 22 October 1993 (Exhibit "R"). But no action was taken by
Mr. Pastoral and no variation order was issued by respondent (Testimony
of witness Dumaliang, 7 November 1996, pp. 57-58).23 [Emphasis supplied
and bracketed words]
Promissory estoppel "may arise from the making of a promise, even though without
consideration, if it was intended that the promise should be relied upon and in fact
it was relied upon, and if a refusal to enforce it would be virtually to sanction the
perpetration of fraud or would result in other injustice."24 Promissory estoppel
presupposes the existence of a promise on the part of one against whom estoppel
is claimed. The promise must be plain and unambiguous and sufficiently specific so
that the court can understand the obligation assumed and enforce the promise
according to its terms.25
In the present case, the foregoing events clearly evince that the promise that the
blasting works would be paid was predicated on the approval of the extra work
order by petitioner's Board. Even FUCC acknowledged that the blasting works
should be an extra work order and requested that the extra work order be
confirmed as such and approved by the appropriate officials. Notably, even as the
extra work order allegedly promised to it was not yet forthcoming, FUCC
commenced blasting.
The alleged promise to pay was therefore conditional and up to this point,
promissory estoppel cannot be established as the basis of petitioner's liability
especially in light of P.D. 1594 and its implementing rules of which both parties are
presumed to have knowledge. In Mendoza v. Court of Appeals, supra, we ruled that
"[a] cause of action for promissory estoppel does not lie where an alleged oral
promise was conditional, so that reliance upon it was not reasonable. It does not
operate to create liability where it does not otherwise exist."
Petitioner's argument that it is not bound by the acts of its officials who acted
beyond the scope of their authority in allowing the blasting works is correct.
Petitioner is a government agency with a juridical personality separate and distinct
from the government. It is not a mere agency of the government but a corporate
entity performing proprietary functions. It has its own assets and liabilities and
exercises corporate powers, including the power to enter into all contracts, through
its Board of Directors.
In this case, petitioner's officials exceeded the scope of their authority when they
authorized FUCC to commence blasting works without an extra work order properly
approved in accordance with P.D. 1594. Their acts cannot bind petitioner unless it
has ratified such acts or is estopped from disclaiming them. 26
However, the Compromise Agreement entered into by the parties, petitioner being
represented by its President, Mr. Guido Alfredo A. Delgado, acting pursuant to its
Board Resolution No. 95-54 dated April 3, 1995, is a confirmatory act signifying
petitioner's ratification of all the prior acts of its officers. Significantly, the parties
agreed that "[t]his Compromise Agreement shall serve as the Supplemental
Agreement for the payment of plaintiff's blasting works at the Botong site"27 in
accordance with CI 1(6) afore-quoted. In other words, it is primarily by the force of
this Compromise Agreement that the Court is constrained to declare FUCC entitled
to payment for the blasting works it undertook.
Moreover, since the blasting works were already rendered by FUCC and accepted
by petitioner and in the absence of proof that the blasting was done gratuitously, it
is but equitable that petitioner should make compensation therefor, pursuant to
the principle that no one should be permitted to enrich himself at the expense of
another.28
This brings us to the issue of just compensation.
The parties proposed in the terms of reference jointly submitted to the Arbitration
Board that should FUCC be adjudged entitled to just compensation for its blasting
works, the price therefor should be determined based on the payment for blasting
works in similar projects of FUCC and the amount it paid to its blasting
subcontractor.29 They agreed further that "the price of the blasting at the Botong
site . . . shall range from Defendant's position of P76.00 per cubic meter as per
contract to a maximum of P1,144.00"30
Petitioner contends that the Arbitration Board, trial court and the appellate court
unduly relied on the memorandum of Mr. Umali which was allegedly not marked as
an exhibit. We note, however, that this memorandum actually forms part of the
record of the case as Exhibit "DDD."31 Moreover, both the Arbitration Board and the
Court of Appeals found that Mr. Umali's proposal is the best evidence on record as
it is supported by detailed cost estimates that will serve as basis to determine just
compensation.
While the Arbitration Board found that FUCC did not present evidence showing the
amount it paid to its blasting sub-contractor, it did present testimony to the effect
that it incurred other costs and expenses on top of the actual blasting cost. Hence,
the amount of P430.00 per cubic meter indicated in FUCC's Contract of Agreement
with Dynamic is not controlling.
Moreover, FUCC presented evidence showing that in two (2) other projects where
blasting works were undertaken, petitioner paid the contractors P1,346 per cubic
meter for blasting and disposal of solid rocks in the Palinpinon project and
P1,144.51 per cubic meter for rock excavation in the Hermosa Balintawak project.
Besides, while petitioner claims that in a contract with Wilper Construction for the
construction of the Tayabas sub-station, the price agreed for blasting was only
P96.13, petitioner itself did not present evidence in support of this claim. 32
Parenthetically, the point raised by petitioner that its subsequent contractor,
Phesco, did not undertake blasting works in excavating the same rock formation is
extraneous and irrelevant. The fact is that petitioner allowed FUCC to blast and
undertook to pay for the blasting works.
At this point, we hearken to the rule that the findings of the Arbitration Board,
affirmed by the trial court and the Court of Appeals and supported as they are by
substantial evidence, should be accorded not only respect but
finality.33 Accordingly, the amount of P763.00 per cubic meter fixed by the
Arbitration Board and affirmed by the appellate court as just compensation should
stand.
As regards the issue of interest, while the appellate court declared in the body of its
Decision "that interest which would represent the cost of the money spent be
imposed on the money actually spent by claimant for the blasting works," 34 there is
no pronouncement as to the payment of interest in the dispositive portion of the
Decision even as it specifically deleted the award of attorney's fees.
Despite its knowledge of the appellate court's omission, FUCC did not file a motion
for reconsideration or appeal from its Decision. In failing to do so, FUCC allowed the
Decision to become final as to it.
In Edwards v. Arce,35 we ruled that in a case decided by a court, the true judgment
of legal effect is that entered by the clerk of said court pursuant to the dispositive
part of its decision. The only portion of the decision that may be the subject of
execution is that which is ordained or decreed in the dispositive portion. Whatever
may be found in the body of the decision can only be considered as part of the
reasons or conclusions of the court and serve only as guides to determine the ratio
decidendi.36
Even so, the Court allows a judgment which had become final and executory to be
clarified when there is an ambiguity caused by an omission or mistake in the
dispositive portion of the decision.37 In Reinsurance Company of the Orient, Inc. v.
Court of Appeals,38 we held:
In Republic Surety and Insurance Company, Inc. v. Intermediate Appellate
Court, the Court applying the above doctrine said:
"xxx We clarify, in other words, what we did affirm. What is involved here
is not what is ordinarily regarded as a clerical error in the dispositive part
of the decision of the Court of First Instance, which type of error is perhaps
best typified by an error in arithmetical computation. At the same time,
what is involved here is not a correction of an erroneous judgment or
dispositive portion of a judgment. What we believe is involved here is in
the nature of an inadvertent omission on the part of the Court of First
Instance (which should have been noticed by private respondent's counsel
who had prepared the complaint), of what might be described as a logical
follow-through of something set forth both in the body of the decision and
in the dispositive portion thereof: the inevitable follow-through, or
translation into, operational or behavioral terms, of the annulment of the
Deed of Sale with Assumption of Mortgage, from which petitioners' title or
claim of title embodied in TCT 133153 flows." (Italics supplied)39
In this case, the omission of the award of interest was obviously inadvertent.
Correction is therefore in order. However, we do not agree with the Arbitration
Board that the interest should be computed at 12%. Since the case does not involve
a loan or forbearance of money, goods or credit and court judgments thereon, the
interest due shall be computed at 6% per annum computed from the time the claim
was made in 1992 as determined by the Arbitration Board and in accordance with
Articles 2209 and 1169 of the Civil Code. The actual base for the computation of
legal interest shall be on the amount finally adjudged.40 Further, when the judgment
awarding a sum of money becomes final and executory, the rate of legal interest
shall be 12% per annum from such finality until its satisfaction, this interim period
being deemed to be by then an equivalent to a forbearance of credit. 41
WHEREFORE, the petition is GRANTED in part. The appealed decision is MODIFIED
in that the amount of P74,035,503.50 shall earn legal interest of six percent (6%)
from 1992. A twelve percent (12%) interest, in lieu of six percent (6%), shall be
imposed on such amount upon finality of this decision until the payment thereof.
SO ORDERED.
G.R. No. 77372 April 29, 1988
LUPO L. LUPANGCO, RAYMOND S. MANGKAL, NORMAN A. MESINA, ALEXANDER
R. REGUYAL, JOCELYN P. CATAPANG, ENRICO V. REGALADO, JEROME O. ARCEGA,
ERNESTOC. BLAS, JR., ELPEDIO M. ALMAZAN, KARL CAESAR R.
RIMANDO, petitioner,
vs.
COURT OF APPEALS and PROFESSIONAL REGULATION COMMISSION, respondent.
Balgos & Perez Law Offices for petitioners.
The Solicitor General for respondents.
GANCAYCO, J.:
Is the Regional Trial Court of the same category as the Professional Regulation
Commission so that it cannot pass upon the validity of the administrative acts of the
latter? Can this Commission lawfully prohibit the examiness from attending review
classes, receiving handout materials, tips, or the like three (3) days before the date
of the examination? Theses are the issues presented to the court by this petition for
certiorari to review the decision of the Court of Appeals promulagated on January
13, 1987, in CA-G.R. SP No. 10598, * declaring null and void the other dated Ocober
21, 1986 issued by the Regional Trial Court of Manila, Branch 32 in Civil Case No. 86-
37950 entitled " Lupo L. Lupangco, et al. vs. Professional Regulation Commission."
The records shows the following undisputed facts:
On or about October 6, 1986, herein respondent Professional Regulation
Commission (PRC) issued Resolution No. 105 as parts of its "Additional Instructions
to Examiness," to all those applying for admission to take the licensure
examinations in accountancy. The resolution embodied the following pertinent
provisions:
No examinee shall attend any review class, briefing, conference or
the like conducted by, or shall receive any hand-out, review
material, or any tip from any school, college or university, or any
review center or the like or any reviewer, lecturer, instructor
official or employee of any of the aforementioned or similars
institutions during the three days immediately proceeding every
examination day including examination day.
Any examinee violating this instruction shall be subject to the
sanctions prescribed by Sec. 8, Art. III of the Rules and Regulations
of the Commission. 1
On October 16, 1986, herein petitioners, all reviewees preparing to take the
licensure examinations in accountancy schedule on October 25 and November 2 of
the same year, filed on their own behalf of all others similarly situated like them,
with the Regional Trial Court of Manila, Branch XXXII, a complaint for injuction with
a prayer with the issuance of a writ of a preliminary injunction against respondent
PRC to restrain the latter from enforcing the above-mentioned resolution and to
declare the same unconstitution.
Respondent PRC filed a motion to dismiss on October 21, 1987 on the ground that
the lower court had no jurisdiction to review and to enjoin the enforcement of its
resolution. In an Order of October 21, 1987, the lower court declared that it had
jurisdiction to try the case and enjoined the respondent commission from enforcing
and giving effect to Resolution No. 105 which it found to be unconstitutional.
Not satisfied therewith, respondent PRC, on November 10, 1986, filed with the
Court of Appeals a petition for the nullification of the above Order of the lower
court. Said petiton was granted in the Decision of the Court of Appeals
promulagated on January 13, 1987, to wit:
WHEREFORE, finding the petition meritorious the same is hereby
GRANTED and the other dated October 21, 1986 issued by
respondent court is declared null and void. The respondent court
is further directed to dismiss with prejudice Civil Case No. 86-
37950 for want of jurisdiction over the subject matter thereof. No
cost in this instance.
SO ORDERED. 2
Hence, this petition.
The Court of Appeals, in deciding that the Regional Trial Court of Manila had no
jurisdiction to entertain the case and to enjoin the enforcement of the Resolution
No. 105, stated as its basis its conclusion that the Professional Regulation
Commission and the Regional Trial Court are co-equal bodies. Thus it held —
That the petitioner Professional Regulatory Commission is at least
a co-equal body with the Regional Trial Court is beyond question,
and co-equal bodies have no power to control each other or
interfere with each other's acts. 3
To strenghten its position, the Court of Appeals relied heavily on National
Electrification Administration vs. Mendoza, 4 which cites Pineda vs. Lantin 5 and
Philippine Pacific Fishing, Inc. vs. Luna, 6 where this Court held that a Court of First
Instance cannot interfere with the orders of the Securities and Exchange
Commission, the two being co-equal bodies.
After a close scrutiny of the facts and the record of this case,
We rule in favor of the petitioner.
The cases cited by respondent court are not in point. It is glaringly apparent that the
reason why this Court ruled that the Court of First Instance could not interfere with
the orders of the Securities and Exchange Commission was that this was so
provided for by the law. In Pineda vs. Lantin, We explained that whenever a party is
aggrieved by or disagree with an order or ruling of the Securities and Exchange
Commission, he cannot seek relief from courts of general jurisdiction since under
the Rules of Court and Commonwealth Act No. 83, as amended by Republic Act No.
635, creating and setting forth the powers and functions of the old Securities and
Exchange Commission, his remedy is to go the Supreme Court on a petition for
review. Likewise, in Philippine Pacific Fishing Co., Inc. vs. Luna,it was stressed that if
an order of the Securities and Exchange Commission is erroneous, the appropriate
remedy take is first, within the Commission itself, then, to the Supreme Court as
mandated in Presidential Decree No. 902-A, the law creating the new Securities and
Exchange Commission. Nowhere in the said cases was it held that a Court of First
Instance has no jurisdiction over all other government agencies. On the contrary,
the ruling was specifically limited to the Securities and Exchange Commission.
The respondent court erred when it place the Securities and Exchange Commission
and the Professional Regulation Commsision in the same category. As alraedy
mentioned, with respect to the Securities and Exchange Commission, the laws cited
explicitly provide with the procedure that need be taken when one is aggrieved by
its order or ruling. Upon the other hand, there is no law providing for the next
course of action for a party who wants to question a ruling or order of the
Professional Regulation Commission. Unlike Commonwealth Act No. 83 and
Presidential Decree No. 902-A, there is no provision in Presidential Decree No. 223,
creating the Professional Regulation Commission, that orders or resolutions of the
Commission are appealable either to the Court of Appeals or to theSupreme Court.
Consequently, Civil Case No. 86-37950, which was filed in order to enjoin the
enforcement of a resolution of the respondent Professional Regulation Commission
alleged to be unconstitutional, should fall within the general jurisdiction of the
Court of First Instance, now the Regional Trial Court. 7
What is clear from Presidential Decree No. 223 is that the Professional Regulation
Commission is attached to the Office of the President for general direction and
coordination. 8 Well settled in our jurisprudence is the view that even acts of the
Office of the President may be reviewed by the Court of First Instance (now the
Regional Trial Court). In Medalla vs. Sayo, 9 this rule was thoroughly propounded
on, to wit:
In so far as jurisdiction of the Court below to review by certiorari
decisions and/or resolutions of the Civil Service Commission and
of the residential Executive Asssistant is concerned, there should
be no question but that the power of judicial review should be
upheld. The following rulings buttress this conclusion:
The objection to a judicial review of a
Presidential act arises from a failure to
recognize the most important principle in our
system of government, i.e., the separation of
powers into three co-equal departments, the
executives, the legislative and the judicial, each
supreme within its own assigned powers and
duties. When a presidential act is challenged
before the courts of justice, it is not to be
implied therefrom that the Executive is being
made subject and subordinate to the courts. The
legality of his acts are under judicial review, not
because the Executive is inferior to the courts,
but because the law is above the Chief Executive
himself, and the courts seek only to interpret,
apply or implement it (the law). A judicial review
of the President's decision on a case of an
employee decided by the Civil Service Board of
Appeals should be viewed in this light and the
bringing of the case to the Courts should be
governed by the same principles as govern the
jucucial review of all administrative acts of all
administrative officers. 10
Republic vs. Presiding Judge, CFI of Lanao del Norte, Br. II, 11 is another case in point.
Here, "the Executive Office"' of the Department of Education and Culture issued
Memorandum Order No. 93 under the authority of then Secretary of Education
Juan Manuel. As in this case, a complaint for injunction was filed with the Court of
First Instance of Lanao del Norte because, allegedly, the enforcement of the circular
would impair some contracts already entered into by public school teachers. It was
the contention of petitioner therein that "the Court of First Instance is not
empowered to amend, reverse and modify what is otherwise the clear and explicit
provision of the memorandum circular issued by the Executive Office which has the
force and effect of law." In resolving the issue, We held:
... We definitely state that respondent Court lawfully acquired
jurisdiction in Civil Case No. II-240 (8) because the plaintiff therein
asked the lower court for relief, in the form of injunction, in
defense of a legal right (freedom to enter into contracts) . . . . .
Hence there is a clear infringement of private respondent's
constitutional right to enter into agreements not contrary to law,
which might run the risk of being violated by the threatened
implementation of Executive Office Memorandum Circular No. 93,
dated February 5, 1968, which prohibits, with certain exceptions,
cashiers and disbursing officers from honoring special powers of
attorney executed by the payee employees. The respondent Court
is not only right but duty bound to take cognizance of cases of this
nature wherein a constitutional and statutory right is allegedly
infringed by the administrative action of a government office.
Courts of first Instance have original jurisdiction over all civil
actions in which the subject of the litigation is not capable of
pecuniary estimation (Sec. 44, Republic Act 296, as
amended). 12 (Emphasis supplied.)
In San Miguel Corporation vs. Avelino, 13 We ruled that a judge of the Court of First
Instance has the authority to decide on the validity of a city tax ordinance even
after its validity had been contested before the Secretary of Justice and an opinion
thereon had been rendered.
In view of the foregoing, We find no cogent reason why Resolution No. 105, issued
by the respondent Professional Regulation Commission, should be exempted from
the general jurisdiction of the Regional Trial Court.
Respondent PRC, on the other hand, contends that under Section 9, paragraph 3 of
B.P. Blg. 129, it is the Court of Appeals which has jurisdiction over the case. The said
law provides:
SEC. 9. Jurisdiction. — The Intermediate Appellate Court shall
exercise:
xxx xxx xxx
(3) Exclusive appellate jurisdiction over all final judgments,
decisions, resolutions, orders, or awards of Regional Trial Courts
and quasi-judicial agencies, instrumentalities, boards or
commissions, except those falling within the appellate jurisdiction
of the Supreme Court in accordance with the Constitution, the
provisions of this Act, and of subparagraph (1) of the third
paragraph and subparagraph (4) of the fourth paragraph of
Section 17 of the Judiciary Act of 1948.
The contention is devoid of merit.
In order to invoke the exclusive appellate jurisdiction of the Court of Appeals as
provided for in Section 9, paragraph 3 of B.P. Blg. 129, there has to be a final order
or ruling which resulted from proceedings wherein the administrative body involved
exercised its quasi-judicial functions. In Black's Law Dictionary, quasi-judicial is
defined as a term applied to the action, discretion, etc., of public administrative
officers or bodies required to investigate facts, or ascertain the existence of facts,
hold hearings, and draw conclusions from them, as a basis for their official action,
and to exercise discretion of a judicial nature. To expound thereon, quasi-
judicial adjudication would mean a determination of rights, privileges and duties
resulting in a decision or order which applies to a specific situation . 14This does not
cover rules and regulations of general applicability issued by the administrative
body to implement its purely administrative policies and functions like Resolution
No. 105 which was adopted by the respondent PRC as a measure to preserve the
integrity of licensure examinations.
The above rule was adhered to in Filipinas Engineering and Machine Shop vs.
Ferrer. 15 In this case, the issue presented was whether or not the Court of First
Instance had jurisdiction over a case involving an order of the Commission on
Elections awarding a contract to a private party which originated from an invitation
to bid. The said issue came about because under the laws then in force, final
awards, judgments, decisions or orders of the Commission on Elections fall within
the exclusive jurisdiction of the Supreme Court by way of certiorari. Hence, it has
been consistently held that "it is the Supreme Court, not the Court of First Instance,
which has exclusive jurisdiction to review on certiorari final decisions, orders, or
rulings of the Commission on Elections relative to the conduct of elections and the
enforcement of election laws." 16
As to whether or not the Court of First Instance had jurisdiction in saidcase, We
said:
We are however, far from convinced that an order of the
COMELEC awarding a contract to a private party, as a result of its
 choice among various proposals submitted in response to its
invitation to bid comes within the purview of a "final order" which
is exclusively and directly appealable to this court on certiorari.
What is contemplated by the term "final orders, rulings and
decisions, of the COMELEC reviewable by certiorari by the
Supreme Court as provided by law are those rendered in actions
or proceedings before the COMELEC and taken cognizance of by
the said body in the exercise of its adjudicatory or quasi-judicial
powers. (Emphasis supplied.)
xxx xxx xxx
We agree with petitioner's contention that the order of the
Commission granting the award to a bidder is not an order
rendered in a legal controversy before it wherein the parties filed
their respective pleadings and presented evidence after which the
questioned order was issued; and that this order of the
commission was issued pursuant to its authority to enter into
contracts in relation to election purposes. In short, the COMELEC
resolution awarding the contract in favor of Acme was not issued
pursuant to its quasi-judicial functions but merely as an incident of
its inherent administrative functions over the conduct of elections,
and hence, the said resolution may not be deemed as a "final
order reviewable by certiorari by the Supreme Court. Being non-
judicial in character, no contempt order may be imposed by the
COMELEC from said order, and no direct and exclusive appeal by
certiorari to this Tribunal lie from such order. Any question arising
from said order may be well taken in an ordinary civil action
before the trial courts. (Emphasis supplied.) 17
One other case that should be mentioned in this regard is Salud vs. Central Bank of
the Philippines. 18 Here, petitioner Central Bank, like respondent in this case, argued
that under Section 9, paragraph 3 of B.P. Blg. 129, orders of the Monetary Board are
appealable only to the Intermediate Appellate Court. Thus:
The Central Bank and its Liquidator also postulate, for the very
first time, that the Monetary Board is among the "quasi-judicial ...
boards" whose judgments are within the exclusive appellate
jurisdiction of the IAC; hence, it is only said Court, "to the
exclusion of the Regional Trial Courts," that may review the
Monetary Board's resolutions. 19
Anent the posture of the Central Bank, We made the following pronouncement:
The contention is utterly devoid of merit. The IAC has no appellate
jurisdiction over resolution or orders of the Monetary Board. No
law prescribes any mode of appeal from the Monetary Board to
the IAC. 20
In view of the foregoing, We hold that the Regional Trial Court has jurisdiction to
entertain Civil Case No. 86-37950 and enjoin the respondent PRC from enforcing its
resolution.
Although We have finally settled the issue of jurisdiction, We find it imperative to
decide once and for all the validity of Resolution No. 105 so as to provide the much
awaited relief to those who are and will be affected by it.
Of course, We realize that the questioned resolution was adopted for a
commendable purpose which is "to preserve the integrity and purity of the
licensure examinations." However, its good aim cannot be a cloak to conceal its
constitutional infirmities. On its face, it can be readily seen that it is unreasonable in
that an examinee cannot even attend any review class, briefing, conference or the
like, or receive any hand-out, review material, or any tip from any school, collge or
university, or any review center or the like or any reviewer, lecturer, instructor,
official or employee of any of the aforementioned or similar institutions . ... 21
The unreasonableness is more obvious in that one who is caught committing the
prohibited acts even without any ill motives will be barred from taking future
examinations conducted by the respondent PRC. Furthermore, it is inconceivable
how the Commission can manage to have a watchful eye on each and every
examinee during the three days before the examination period.
It is an aixiom in administrative law that administrative authorities should not act
arbitrarily and capriciously in the issuance of rules and regulations. To be valid, such
rules and regulations must be reasonable and fairly adapted to the end in view. If
shown to bear no reasonable relation to the purposes for which they are authorized
to be issued, then they must be held to be invalid. 22
Resolution No. 105 is not only unreasonable and arbitrary, it also infringes on the
examinees' right to liberty guaranteed by the Constitution. Respondent PRC has no
authority to dictate on the reviewees as to how they should prepare themselves for
the licensure examinations. They cannot be restrained from taking all the lawful
steps needed to assure the fulfillment of their ambition to become public
accountants. They have every right to make use of their faculties in attaining
success in their endeavors. They should be allowed to enjoy their freedom to
acquire useful knowledge that will promote their personal growth. As defined in a
decision of the United States Supreme Court:
 The term "liberty" means more than mere freedom from physical
restraint or the bounds of a prison. It means freedom to go where
one may choose and to act in such a manner not inconsistent with
the equal rights of others, as his judgment may dictate for the
promotion of his happiness, to pursue such callings and vocations
as may be most suitable to develop his capacities, and giv to them
their highest enjoyment. 23
In the light of the above, We hereby REVERSE and SET ASIDE, the decision of the
Court of Appeals in CA-G.R. SP No. 10591 and another judgment is hereby rendered
declaring Resolution No. 105 null and void and of no force and effect for being
unconstitutional. This decision is immediately executory. No costs.
SO ORDERED.

Another evident objection to Resolution No. 105 is that it violates the academic
freedom of the schools concerned. Respondent PRC cannot interfere with the
conduct of review that review schools and centers believe would best enable their
enrolees to meet the standards required before becoming a full fledged public
accountant. Unless the means or methods of instruction are clearly found to be
inefficient, impractical, or riddled with corruption, review schools and centers may
not be stopped from helping out their students. At this juncture, We call attention
to Our pronouncement in Garcia vs. The Faculty Admission Committee, Loyola
School of Theology, 24 regarding academic freedom to wit:

... It would follow then that the school or college itself is

possessed of such a right. It decides for itself its aims and
objectives and how best to attain them. It is free from outside
coercion or interference save possibly when the overriding public
welfare calls for some restraint. It has a wide sphere of autonomy
certainly extending to the choice of students. This constitutional
provision is not to be construed in a niggardly manner or in a
grudging fashion.

Needless to say, the enforcement of Resolution No. 105 is not a guarantee that the
alleged leakages in the licensure examinations will be eradicated or at least
minimized. Making the examinees suffer by depriving them of legitimate means of
review or preparation on those last three precious days-when they should be
refreshing themselves with all that they have learned in the review classes and
preparing their mental and psychological make-up for the examination day itself-
would be like uprooting the tree to get ride of a rotten branch. What is needed to
be done by the respondent is to find out the source of such leakages and stop it
right there. If corrupt officials or personnel should be terminated from their loss,
then so be it. Fixers or swindlers should be flushed out. Strict guidelines to be
observed by examiners should be set up and if violations are committed, then
licenses should be suspended or revoked. These are all within the powers of the
respondent commission as provided for in Presidential Decree No. 223. But by all
means the right and freedom of the examinees to avail of all legitimate means to
prepare for the examinations should not be curtailed.
G.R. No. 73123 September 2, 1991
IN RE: PETITION FOR DECLARATION OF INSOLVENCY OF [A] FILAND
MANUFACTURING AND ESTATE DEVELOPMENT COMPANY; [B] TOP
CONSTRUCTION ENTERPRISES, INC. AND [C] SPOUSES EMILIO CHING AND INAI
TEH; EMILIO CHING, petitioner, LAND BANK OF THE PHILIPPINES, oppositor. LAND
BANK OF THE PHILIPPINES, petitioner,
vs.
HON. DIONISIO N. CAPISTRANO, JUDGE OF THE REGIONAL TRIAL COURT OF PASAY
CITY, EMILIO CHING AND FILAND MANUFACTURING AND ESTATE DEVELOPMENT
CO., INC., respondents.
Lily K. Gruba and Florencio S. Jimenez for Land Bank of the Philippines.
FERNAN, C.J.:
Assailed in this petition for review on certiorari is the jurisdiction of the Regional
Trial Court (RTC) of Pasay City over a petition for declaration of insolvency of two
(2) private corporations.
The antecedent facts are undisputed:
On September 19, 1980, private respondents Filand Manufacturing and Estate
Development Co., Inc. (hereafter, Filand Manufacturing) and Emilio Ching obtained
from petitioner Land Bank of the Philippines a loan in the amount of Ten Million
Pesos (P10,000,000.00). Private respondents having failed to pay the loan on its due
date, petitioner instituted before the RTC of Manila a complaint for recovery
thereof, docketed as Civil Case No. 0184-P.
During the pendency of the collection suit on December 29, 1984, private
respondents Filand Manufacturing, Emilio Ching and his spouse Inai Teh and Top
Construction Enterprises, Inc., thru Emilio Ching, filed before the respondent RTC of
Pasay City a petition docketed as Special Proceedings No. 3232P for declaration of
insolvency. Cited as ground therefor was their inability to pay the various debts and
liabilities incurred by them, either jointly or solidarily or guaranteed by one for the
other, in the course of their businesses, such inability being due to business
reserves brought about by the fire on January 2, 1984 which gutted the old Holiday
Plaza Building then owned and operated by Filand Manufacturing, as well as the
economic crisis which gripped the country following the assassination of former
Senator Benigno S. Aquino in 1983.1
Acting on said petition, respondent court on January 29, 1985 issued an Order of
Adjudication declaring private respondents insolvent pursuant to Section 18 of the
Insolvency Law (Act No. 1956). The Sheriff of Pasay City was "directed to take
possession of, and safely keep, until the appointment of a receiver or assignee, all
the deeds, vouchers, books of account, papers, notes, bonds, bills and securities of
(therein) petitioners, and all the real and personal properties, estates and effects of
the same petitioners, except such as may, by law, be exempt from execution."
Respondent court set "March 25, 1985 at 9:00 A.M. in its premises ... as the date of
the meeting of the creditors of the petitioners for them to choose an
assignee/assignees of the estates of the petitioners."2
Petitioner bank moved for a reconsideration of the Order of Adjudication on two (2)
grounds, namely: (1) that the court has no jurisdiction over the subject matter of
the petition insofar as petitioning corporations are concerned; and (2) the petition
is defective in form and substance.3 After an exchange of pleadings between
petitioner and private respondents, respondent court issued on July 19, 1985 an
Order upholding its jurisdiction over the petition and appointing petitioner bank as
the assignee for and in behalf of all the creditors without bond, thus:
WHEREFORE, all motions seeking to have this Court make a declaration
that it has no jurisdiction over the above-entitled proceeding are hereby
DENIED, and the Land Bank of the Philippines is appointed as the assignee
for and in behalf of all the creditors of the petitioners, without bond, to
which assignee the Clerk of Court, thru the Branch Sheriff, shall deliver any
and all real and personal properties, estates and effects, as well as the
pertinent papers and all deeds, vouchers, books of accounts, papers,
notes, bonds, bills and securities taken by him pursuant to the order of this
Court of January 29, 1985.
The assignee is hereby ordered to comply with the time limit provided for
in Sec. 43 of Act 1956, and for this purpose, hereby sets his report for
hearing on October 29, 1985, at 9:00 A.M.
SO ORDERED.4
Petitioner bank declined the appointment and the City Treasurer of Pasay City,
being the second biggest creditor of private respondents, was appointed in its stead
Petitioner bank then filed a Notice of Appeal and a Record on Appeal on August 19,
1985, on the basis of which the respondent court forwarded the records of the case
directly to this Court.
By resolution dated September 23, 1985, the Court resolved to "REQUIRE the
Branch Clerk of Court of the (respondent court) to EXPLAIN why he forwarded to
this Court the aforesaid records when the mode of seeking review by this Court of a
lower court's judgment under R.A. 5440 is by petition for review on certiorari; and
the Presiding Judge of said trial court is also directed to EXPLAIN why he accepted
and approved the forwarding to this Court of the aforesaid records, both within ten
(10) days from notice hereof." Petitioner bank and/or counsel were also "REQUIRED
to EXPLAIN within ten (10) days from notice ..., since they failed to pay timely the
docket and legal research fund fees and to file timely a petition for review on
certiorari under R.A. 5440 why the judgment sought to be reviewed should not be
now deemed final and executory and the records returned for execution of
judgment".5 Upon submission of the required explanations, the Court on December
4, 1985 resolved to require the petitioner bank to file a petition for review on
certiorari and to pay the docket and legal research fund fees, both within a non-
extendible period of ten (10) days from notice. 6 This Order was seasonably
complied with.
After the private respondents had submitted their comment on the petition,
petitioner bank filed on March 24, 1986 a "Manifestation with motion for issuance
of writ of preliminary injunction" informing the Court that on March 3, 1986, the
respondent court rendered a decision in Special Proceedings No. 3232-P, providing
in its dispositive portion as follows:
WHEREFORE, judgment is hereby rendered, as follows:
1. Petitioners Filand Manufacturing & Estate Development Co., Inc., and
Top Construction Enterprises, Inc., are declared by this Court as insolvent
and, pursuant to Sec. 52 of Act 1956, as amended, their properties and
assets shall be distributed to the creditors in the proceeding with respect
to the appointment of the City Treasurer of Pasay City as receiver of their
estates and effects. However, they are not discharged from their liabilities
in accordance with Sec. 52 of Act 1956, as amended.
2. Petitioners spouses Emilio Ching and Inai Teh are likewise declared
insolvent and their application for discharge is hereby approved, and they
are hereby ordered discharged and released from all claims, debts,
liabilities and demands, whether actual or contingent, and whether
personally or as guarantors or in a joint and solidary capacity, with respect
to the obligations set forth in the schedule and inventory of accounts due
and payable, Annex 'A' of the petition, as well as with respect to the
obligations and creditors listed in the manifestation of April 29, 1985, and
the supplemental manifestation dated May 22, 1985, in the above-entitled
proceedings.
The other aspect of the above-entitled proceedings as regards the receiver
and all incidents and matters in connection with his functions and duties
are hereby considered as mere interlocutory matters in the process of
winding up this proceeding.
SO ORDERED.7
Acting on said manifestation and motion, the Court on April 14, 1986 issued a
temporary restraining order enjoining the respondent court from enforcing its
decision of March 3, 1986.8 The temporary restraining order was however lifted
insofar as private respondents spouses Emilio Ching and Inai Teh were concerned,
the latter being natural persons over whom the jurisdiction of the respondent court
is not being questioned.9
In its petition, given due course by the Court per resolution dated January 28, 1987,
petitioner bank advances the argument that it is the Securities and Exchange
Commission (SEC), rather than the Regional Trial Court (RTC) which has jurisdiction
over the petition for declaration of insolvency filed by private respondent
corporations. This theory is allegedly anchored on specific provisions of Presidential
Decree No. 902-A, as amended, namely: Sections 3, 5(d) and 6(c) and (d), which
petitioner bank construes as having repealed the Insolvency Law (Act 1956), which
confers jurisdiction over insolvency proceedings on the regular courts. Private
respondents maintain the opposite view, contending simply that a petition for
declaration of insolvency is not one of those cases enumerated under Section 5,
P.D. No. 902-A, as amended, over which the SEC has original and exclusive
jurisdiction.
In view of the far reaching importance of the issue presented before the Court,
both from a legal and economic standpoint, we resolved to implead the SEC as a
party to this case and to require it to inform the Court of its practice regarding
insolvency proceedings.10 The SEC thru the Solicitor General, filed its memorandum
on December 13, 1989.
After deliberating on the SEC's memorandum, the Court resolved to set the case for
hearing on May 14, 1990 at 10:00 o'clock in the morning. A senior and
knowledgeable officer of the SEC was requested to "appear and inform the Court of
the law and practice actually applied and followed by the SEC in respect of
suspension of payments by, and voluntary and involuntary insolvencies of
Philippine corporations . ..." Former SEC Chairman Julito Sulit, Jr. was
appointed amicus curiae and was requested to appear at the hearing in that
capacity.11
Before addressing the principal issue in the instant petition, the Court notes with
dismay that the petitioner and the lower court appear to be still in the dark as to
the proper mode of appeal to this Court. Hence, for their elucidation as well as the
others similarly misinformed, we deem it proper to quote the following resolution
dated March 1, 1990 of the Court en banc in UDK 9748, "Murillo v. Consul":
R.A. No. 5440 changed the mode of appeal from courts of first instance
(now Regional Trial Courts) to the Supreme Court in cases involving only
questions of law, or the constitutionality or validity of any treaty, law,
ordinance, etc. or the legality of any tax, impost, assessment or toll, etc., or
the jurisdiction of any inferior court, from ordinary appeal — i.e., by notice
of appeal, record on appeal and appeal bond, under Rule 41— to appeal
by certiorari, under Rule 45.
xxx xxx xxx
At present then, except in criminal cases where the penalty imposed is life
imprisonment or reclusion perpetua, there is no way by which judgments
of regional trial courts may be appealed to this Court except by petition for
review on certiorari in accordance with Rule 45 of the Rules of Court, in
relation to Section 17 of the Judiciary Act of 1948, as amended. The
proposition is clearly stated in the Interim Rules: 'Appeals to the Supreme
Court shall be taken by petition for certiorari which shall be governed by
Rule 45 of the Rules of Court.
xxx xxx xxx
... To repeat, appeals to this Court cannot now be made by petition for
review or by notice of appeal (and, in certain instances, by record on
appeal), but only by petition for review on certiorari under Rule 45. As was
stressed by this Court as early as 1980 in Buenbrazo v. Marave, 101 SCRA
848, all the members of the bench and bar are charged with knowledge,
not only that since the enactment of Republic Act No. 6031 in 1969,' 'the
review of the decision of the Court of First Instance in a case exclusively
cognizable by the inferior court ... cannot be made in an ordinary appeal or
by record on appeal but also that 'appeal by record on appeal to the
Supreme Court under Rule 42 of the Rules of Court was abolished by
Republic Act No. 5440 which, as already stated, took effect on September
9, 1968.' Similarly, in Santos, Jr. v. C.A., 152 SCRA 378, this Court declared
that 'Republic Act No. 5440 had long superseded Rule 41 and Section 1,
Rule 122 of the Rules of Court on direct appeals from the court of first
instance to the Supreme Court in civil and criminal cases,' ... and that
'direct appeals to this Court from the trial court on questions of law had to
be through the filing of a petition for review on certiorari, wherein this
Court could either give due course to the proposed appeal or deny it
outright to prevent the clogging of its docket with unmeritorious and
dilatory appeals.
Going now to the issue of jurisdiction raised in this petition and considering the
arguments proferred by the parties' respective counsel, the view spoused by
the amicus curiae as well as the submissions of the SEC thru the Office of the
Solicitor General and its Assistant Executive Director, we find for private
respondents.
Under Act 1956, otherwise known as the Insolvency Law, jurisdiction over
proceedings for suspension of payments, voluntary and involuntary insolvency is
exclusively vested in the regular courts. However, P.D. No. 1758 issued in 1981
added to the exclusive and original jurisdiction of the SEC defined and delineated in
Section 5 of P.D. 902-A,12the following:
d) Petitions of corporations, partnerships or associations to be declared in
the state of suspension of payments in cases where the corporation,
partnership or association possesses sufficient property to cover all its
debts but foresees the impossibility of meeting them when they
respectively fall due or in cases where the corporation, partnership or
association has no sufficient assets to cover its liabilities, but is under the
management of a Rehabilitation Receiver or Management Committee
created pursuant to this Decree.
It is petitioner's contention that said additional par. (d) effectively repealed the
Insolvency Law so as to transfer and confer upon the SEC jurisdiction theretofore
enjoyed by the regular courts over proceedings for suspension of payments and
voluntary and involuntary insolvency. We do not share such interpretation.
The SEC like any other administrative body, is a tribunal of limited jurisdiction and
as such, could wield only such powers as are specifically granted to it by its enabling
statute.13 Its jurisdiction should be interpreted in strictissimi juris.14
Section 5, par. (d) should be construed as vesting upon the SEC original and
exclusive jurisdiction only over petitions to be declared in a state of suspension of
payments, which may either be: (a) a simple petition for suspension of payments
based on the provisions of the Insolvency Law, or (b) a similar petition accompanied
by a prayer for the creation/appointment of a management committee and/or
rehabilitation receiver based on the provisions of P.D. No. 902-A. Said provision
cannot be stretched to include petitions for insolvency. The reason is that under
said Section 5, par. (d) above-quoted, the jurisdiction of the SEC over cases where
the corporation, partnership or association has no sufficient assets to cover its
liabilities, (and therefore insolvent) is qualified by the conjunctive phrase "but is
under the management of a Rehabilitation Receiver or Management Committee
created pursuant to this Decree." This qualification effectively circumscribes the
jurisdiction of the SEC over insolvent corporations, partnerships and associations,
and consequently, over proceedings for the declaration of insolvency. It
demonstrates beyond doubt that jurisdiction over insolvency proceedings pertains
neither in the first instance nor exclusively to the SEC but only in continuation of or
as an incident to the exercise of its jurisdiction over petitions to be declared in a
state of suspension of payments wherein the petitioning corporation, partnership
or association had previously been placed under a rehabilitation receiver or
management committee by the SEC itself.
Viewed differently, where the petition filed is one for declaration of a state of
suspension of payments due to a recognition of the inability to pay one's debts and
liabilities, and where the petitioning corporation either: (a) has sufficient property
to cover all its debts but foresees the impossibility of meeting them when they fall
due (solvent but illiquid or (b) has no sufficient property (insolvent) but is under the
management of a rehabilitation receiver or a management committee, the
applicable law is P.D. No. 902-A pursuant to Sec. 5 par. (d) thereof. However, if the
petitioning corporation has no sufficient assets to cover its liabilities and is not
under a rehabilitation receiver or a management committee created under P.D. No.
902-A and does not seek merely to have the payments of its debts suspended, but
seeks a declaration of insolvency, as in this case, the applicable law is Act 1956 on
voluntary insolvency, specifically section 14 thereof, which provides:
Sec. 14. — An insolvent debtor, owing debts exceeding in amount the sum
of one thousand pesos, may apply to be discharged from his debts and
liabilities by petition to the Court of First Instance of the province or city in
which he has resided for six month next preceding the filing of such
petition. In his petition, he shall set forth his place of residence, the period
of his residence therein immediately prior to filing said petition, his
inability to pay all his debts in full, his willingness to surrender all his
property, estate, and effects not exempt from execution for the benefit of
his creditors, and an application to be adjudged an insolvent. He shall
annex to his petition a schedule and inventory in the form hereinafter
provided. The filing of such petition shall be an act of insolvency.
Neither could the grant of additional powers to SEC under Section 6(c) and (d) of
P.D. No. 902- A, as amended, be construed as vesting upon it exclusive and original
jurisdiction over insolvency proceedings. The pertinent provisions read:
SEC. 6. In order to effectively exercise such jurisdiction, the Commission
shall possess the following powers:
xxx xxx xxx
c) To appoint one or more receivers of the property, real and personal,
which is the subject of the action pending before the Commission in
accordance with the pertinent provisions of the Rules of Court in such
other cases whenever necessary to preserve the rights of the parties-
litigants to and/or protect the interest of the investing public and
creditors; Provided, however, that the Commission may, in appropriate
cases, appoint a rehabilitation receiver of corporations, partnerships or
other associations not supervised or regulated by other government
agencies who shall have, in addition to the powers of a regular receiver
under the provisions of the Rules of Court, such functions and powers as
are provided for in the succeeding paragraph (d) hereof; Provided, further
that the Commission may appoint a rehabilitation receiver of corporations,
partnerships or other nations supervised or regulated by other
government agencies, such as banks and insurance companies, upon
request of the government agency concerned; Provided, finally that upon
appointment of a management committee, rehabilitation receiver, board
or body pursuant to this Decree, all actions for claims against corporations,
partnerships or nations under management or receivership pending before
any court, tribunal, board or body shall be suspended accordingly.
d) To create and appoint a management committee, board, or body upon
petition or motu proprio to undertake the management of corporations,
partnerships or other associations not supervised or regulated by other
government agencies in appropriate cases when there is imminent danger
of dissipation, loss, wastage or destruction of assets or other properties or
paralization of business operations of such corporations or entities which
may be prejudicial to the interest of minority stockholders, parties-litigants
or the general public; Provided, further, that the Commission may create
or appoint a management committee, board or body to undertake the
management of corporations, partnerships or other associations
supervised or regulated by other government agencies, such as banks and
insurance companies, upon request of the government agency concerned.
The management committee or rehabilitation receiver, board or body shall
have the power to take custody of, and control over, all the existing assets
and property of such entities under management; to evaluate the existing
assets and liabilities, earnings and operations of such corporations,
partnerships or other associations, to determine the best way to wage and
protect the interest of the investors and creditors; to study, review and
evaluate the feasibility of continuing operations and restructure and
rehabilitate such entities if determined to be feasible by the Commission. It
 shall report and be responsible to the Commission until dissolved by order WHEREFORE, the instant petition for review on certiorari is DENIED. The temporary
of the Commission: Provided, however, that the Commission may, on the restraining order issued on April 14, 1986 is LIFTED. No pronouncement as to costs.
basis of the findings and recommendation of the management committee,
or rehabilitation receiver, board or body, or on its own findings, determine SO ORDERED.
that the continuance in business of such corporation or entity would not
be feasible or profitable nor work to the best interest of the stockholders,
parties-litigants, creditors, or the general public, order the dissolution of
such corporation entity and its remaining assets liquidated accordingly.

The management committee or rehabilitation receiver, board or body may

overrule or revoke the actions of the previous management and board of
directors of the entity or entities under management notwithstanding any
provision of law, articles of incorporation or by-laws to the contrary.

The management committee, or rehabilitation receiver, board or body

shall not be subject to any action, claim or demand for, or in connection
with any act done or omitted to be done by it in good faith in the exercise
of its functions, or in connection with the exercise of its powers herein
conferred.

As declared by the law itself, these are merely ancillary powers to enable the SEC to
effectively exercise its jurisdiction. These additional ancillary powers can be
exercised only in connection with an action pending before the SEC and therefore
had to be viewed in relation to Section 5 which defines the SEC's original and
exclusive jurisdiction. Section 6 does not enlarge or add to the exclusive and original
jurisdiction of the SEC as particularly enumerated under Section 5 of said
Presidential Decree, as amended.

A well-recognized rule in statutory construction is that repeals by implication are

not favored and will not be so declared unless it be manifest that the legislature so
intended.15 When statutes are in pari material they should be construed together.
In construing them the old statutes relating to the same subject matter should be
compared with the new provisions and if possible by reasonable construction, both
should be so construed that effect may be given to every provision of each. 16

Construing P.D. 902-A, as amended, in relation to Act 1956, we rule that insofar as
petitions for declaration of insolvency of private corporations are concerned, it is
the regular court that has exclusive and original jurisdiction thereon. The SEC may
entertain such petitions only as an incident of and in continuation of its already
acquired jurisdiction over petitions to be declared in the state of suspension of
payments in the two (2) cases provided in Section 5 (d) of P.D. 902-A, as amended.

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

ALFREDO L. AZARCON, petitioner, vs. SANDIGANBAYAN, PEOPLE OF THE
PHILIPPINES and JOSE C. BATAUSA, respondents.
DECISION
PANGANIBAN, J.:
Does the Sandiganbayan have jurisdiction over a private individual who is
charged with malversation of public funds as a principal after the said individual had
been designated by the Bureau of Internal Revenue as a custodian of distrained
property? Did such accused become a public officer and therefore subject to the
graft courts jurisdiction as a consequence of such designation by the BIR?
These are the main questions in the instant petition for review of respondent
Sandiganbayans Decision[1] in Criminal Case No. 14260 promulgated on March 8,
1994, convicting petitioner of malversation of public funds and property, and
Resolution[2] dated June 20, 1994, denying his motion for new trial or
reconsideration thereof.
The Facts
Petitioner Alfredo Azarcon owned and operated an earth-moving business,
hauling dirt and ore.[3] His services were contracted by the Paper Industries
Corporation of the Philippines (PICOP) at its concession in Mangagoy, Surigao del
Sur. Occasionally, he engaged the services of sub-contractors like Jaime Ancla
whose trucks were left at the formers premises.[4] From this set of circumstances
arose the present controversy.
x x x It appears that on May 25, 1983, a Warrant of Distraint of Personal Property
was issued by the Main Office of the Bureau of Internal Revenue (BIR) addressed to
the Regional Director (Jose Batausa) or his authorized representative of Revenue
Region 10, Butuan City commanding the latter to distraint the goods, chattels or
effects and other personal property of Jaime Ancla, a sub-contractor of accused
Azarcon and, a delinquent taxpayer. The Warrant of Garnishment was issued to
accused Alfredo Azarcon ordering him to transfer, surrender, transmit and/or remit
to BIR the property in his possession owned by taxpayer Ancla. The Warrant of
Garnishment was received by accused Azarcon on June 17, 1985.[5]
Petitioner Azarcon, in signing the Receipt for Goods, Articles, and Things
Seized Under Authority of the National Internal Revenue, assumed the undertakings
specified in the receipt the contents of which are reproduced as follows:
(I), the undersigned, hereby acknowledge to have received from Amadeo V. San
Diego, an Internal Revenue Officer, Bureau of Internal Revenue of the Philippines,
the following described goods, articles, and things:
Kind of property --- Isuzu dump truck
Motor number --- E120-229598
Chassis No. --- SPZU50-1772440
Number of CXL --- 6
Color --- Blue
Owned By --- Mr. Jaime Ancla
the same having been this day seized and left in (my) possession pending
investigation by the Commissioner of Internal Revenue or his duly authorized
representative. (I) further promise that (I) will faithfully keep, preserve, and, to the
best of (my) ability, protect said goods, articles, and things seized from defacement,
demarcation, leakage, loss, or destruction in any manner; that (I) will neither alter
nor remove, nor permit others to alter or remove or dispose of the same in any
manner without the express authority of the Commissioner of Internal Revenue;
and that (I) will produce and deliver all of said goods, articles, and things upon the
order of any court of the Philippines, or upon demand of the Commissioner of
Internal Revenue or any authorized officer or agent of the Bureau of Internal
Revenue.[6]
Subsequently, Alfredo Azarcon wrote a letter dated November 21, 1985 to the
BIRs Regional Director for Revenue Region 10 B, Butuan City stating that
x x x while I have made representations to retain possession of the property and
signed a receipt of the same, it appears now that Mr. Jaime Ancla intends to cease
his operations with us. This is evidenced by the fact that sometime in August, 1985
he surreptitiously withdrew his equipment from my custody. x x x In this
connection, may I therefore formally inform you that it is my desire to immediately
relinquish whatever responsibilities I have over the above-mentioned property by
virtue of the receipt I have signed. This cancellation shall take effect immediately. x
x x .[7]
Incidentally, the petitioner reported the taking of the truck to the security manager
of PICOP, Mr. Delfin Panelo, and requested him to prevent this truck from being
taken out of the PICOP concession. By the time the order to bar the trucks exit was
given, however, it was too late.[8]
Regional Director Batausa responded in a letter dated May 27, 1986, to wit:
An analysis of the documents executed by you reveals that while you are (sic) in
possession of the dump truck owned by JAIME ANCLA, you voluntarily assumed the
liabilities of safekeeping and preserving the unit in behalf of the Bureau of Internal
Revenue. This is clearly indicated in the provisions of the Warrant of Garnishment
which you have signed, obliged and committed to surrender and transfer to this
office. Your failure therefore, to observe said provisions does not relieve you of
your responsibility.[9]
Thereafter, the Sandiganbayan found that
On 11 June 1986, Mrs. Marilyn T. Calo, Revenue Document Processor of Revenue
Region 10 B, Butuan City, sent a progress report to the Chief of the Collection
Branch of the surreptitious taking of the dump truck and that Ancla was renting out
the truck to a certain contractor by the name of Oscar Cueva at PICOP (Paper
Industries Corporation of the Philippines, the same company which engaged
petitioners earth moving services), Mangagoy, Surigao del Sur. She also suggested
that if the report were true, a warrant of garnishment be reissued against Mr.
Cueva for whatever amount of rental is due from Ancla until such time as the latters
tax liabilities shall be deemed satisfied. x x x However, instead of doing so, Director
Batausa filed a letter-complaint against the (herein Petitioner) and Ancla on 22
January 1988, or after more than one year had elapsed from the time of Mrs. Calos
report.[10]
Provincial Fiscal Pretextato Montenegro forwarded the records of the
complaint x x x to the Office of the Tanodbayan on May 18, 1988. He was deputized
Tanodbayan prosecutor and granted authority to conduct preliminary investigation
on August 22, 1988, in a letter by Special Prosecutor Raul Gonzales approved by
Ombudsman (Tanodbayan) Conrado Vasquez.[11]
Along with his co-accused Jaime Ancla, petitioner Azarcon was charged before
the Sandiganbayan with the crime of malversation of public funds or property
under Article 217 in relation to Article 222 of the Revised Penal Code (RPC) in the
following Information[12]filed on January 12, 1990, by Special Prosecution Officer
Victor Pascual:
That on or about June 17, 1985, in the Municipality of Bislig, Province of Surigao del
Sur, Philippines, and within the jurisdiction of this Honorable Court, accused Alfredo
L. Azarcon, a private individual but who, in his capacity as depository/administrator
of property seized or deposited by the Bureau of Internal Revenue, having
voluntarily offered himself to act as custodian of one Isuzu Dumptruck (sic) with
Motor No. E120-22958, Chasis No. SPZU 50-1772440, and number CXL-6 and was
authorized to be such under the authority of the Bureau of Internal Revenue, has
become a responsible and accountable officer and said motor vehicle having been
seized from Jaime C. Ancla in satisfaction of his tax liability in the total sum of
EIGHTY THOUSAND EIGHT HUNDRED THIRTY ONE PESOS and 59/100 (P80,831.59)
became a public property and the value thereof as public fund, with grave abuse of
confidence and conspiring and confederating with said Jaime C. Ancla, likewise, a
private individual, did then and there wilfully, (sic) unlawfully and feloniously
misappropriate, misapply and convert to his personal use and benefit the
aforementioned motor vehicle or the value thereof in the aforestated amount, by
then and there allowing accused Jaime C. Ancla to remove, retrieve, withdraw and
tow away the said Isuzu Dumptruck (sic) with the authority, consent and knowledge
of the Bureau of Internal Revenue, Butuan City, to the damage and prejudice of the
government in the amount of P80,831.59 in a form of unsatisfied tax liability.
CONTRARY TO LAW.
The petitioner filed a motion for reinvestigation before the Sandiganbayan on
May 14, 1991, alleging that: (1) the petitioner never appeared in the preliminary
investigation; and (2) the petitioner was not a public officer, hence a doubt exists as
to why he was being charged with malversation under Article 217 of the Revised
Penal Code.[13] The Sandiganbayan granted the motion for reinvestigation on May
22, 1991.[14] After the reinvestigation, Special Prosecution Officer Roger Berbano,
Sr., recommended the withdrawal of the information [15] but was overruled by the
Ombudsman.[16]
A motion to dismiss was filed by petitioner on March 25, 1992 on the ground
that the Sandiganbayan did not have jurisdiction over the person of the petitioner
since he was not a public officer.[17] On May 18, 1992, the Sandiganbayan denied
the motion.[18]
When the prosecution finished presenting its evidence, the petitioner then
filed a motion for leave to file demurrer to evidence which was denied on
November 16, 1992, for being without merit.[19] The petitioner then commenced
and finished presenting his evidence on February 15, 1993.
The Respondent Courts Decision
On March 8, 1994, respondent Sandiganbayan [20] rendered a Decision,[21] the
dispositive portion of which reads:
WHEREFORE, the Court finds accused Alfredo Azarcon y Leva GUILTY beyond
reasonable doubt as principal of Malversation of Public Funds defined and
penalized under Article 217 in relation to Article 222 of the Revised Penal Code and,
applying the Indeterminate Sentence Law, and in view of the mitigating
circumstance of voluntary surrender, the Court hereby sentences the accused to
suffer the penalty of imprisonment ranging from TEN (10) YEARS and ONE (1) DAY
of prision mayor in its maximum period to SEVENTEEN (17) YEARS, FOUR (4)
MONTHS and ONE (1) DAY of Reclusion Temporal.To indemnify the Bureau of
Internal Revenue the amount of P80,831.59; to pay a fine in the same amount
without subsidiary imprisonment in case of insolvency; to suffer special perpetual
disqualification; and, to pay the costs.
Considering that accused Jaime Ancla has not yet been brought within the
jurisdiction of this Court up to this date, let this case be archived as against him
without prejudice to its revival in the event of his arrest or voluntary submission to
the jurisdiction of this Court.
SO ORDERED.
Petitioner, through new counsel,[22] filed a motion for new trial or
reconsideration on March 23, 1994, which was denied by the Sandiganbayan in its
Resolution[23] dated December 2, 1994.
Hence, this petition.
The Issues
The petitioner submits the following reasons for the reversal of the
Sandiganbayans assailed Decision and Resolution:
I. The Sandiganbayan does not have jurisdiction over crimes committed
solely by private individuals.
II. In any event, even assuming arguendo that the appointment of a
private individual as a custodian or a depositary of distrained property
is sufficient to convert such individual into a public officer, the
petitioner cannot still be considered a public officer because:
[A]
There is no provision in the National Internal Revenue Code which authorizes the
Bureau of Internal Revenue to constitute private individuals as depositaries of
distrained properties.
[B]
His appointment as a depositary was not by virtue of a direct provision of law, or by
election or by appointment by a competent authority.
III. No proof was presented during trial to prove that the distrained vehicle was
actually owned by the accused Jaime Ancla; consequently, the governments right to
the subject property has not been established.
IV. The procedure provided for in the National Internal Revenue Code concerning
the disposition of distrained property was not followed by the B.I.R., hence the
distraint of personal property belonging to Jaime C. Ancla and found allegedly to be
in the possession of the petitioner is therefore invalid.
V. The B.I.R. has only itself to blame for not promptly selling the distrained property
of accused Jaime C. Ancla in order to realize the amount of back taxes owed by
Jaime C. Ancla to the Bureau.[24]
In fine, the fundamental issue is whether the Sandiganbayan had jurisdiction
over the subject matter of the controversy. Corollary to this is the question of
whether petitioner can be considered a public officer by reason of his being
designated by the Bureau of Internal Revenue as a depositary of distrained
property.
The Courts Ruling
The petition is meritorious.
Jurisdiction of the Sandiganbayan
It is hornbook doctrine that in order (to) ascertain whether a court has
jurisdiction or not, the provisions of the law should be inquired
into.[25] Furthermore, the jurisdiction of the court must appear clearly from the
statute law or it will not be held to exist. It cannot be presumed or implied.[26] And
for this purpose in criminal cases, the jurisdiction of a court is determined by the
law at the time of commencement of the action.[27]
In this case, the action was instituted with the filing of this information on
January 12, 1990; hence, the applicable statutory provisions are those of P.D. No.
1606, as amended by P.D. No. 1861 on March 23, 1983, but prior to their
amendment by R.A. No. 7975 on May 16, 1995. At that time, Section 4 of P.D. No.
1606 provided that:
SEC. 4. Jurisdiction. -- The Sandiganbayan shall exercise:
(a) Exclusive original jurisdiction in all cases involving:
(1) Violations of Republic Act No. 3019, as amended, otherwise known as the Anti-
Graft and Corrupt Practices Act, Republic Act No. 1379, and Chapter II, Section 2,
Title VII of the Revised Penal Code;
(2) Other offenses or felonies committed by public officers and employees in
relation to their office, including those employed in government-owned or
controlled corporations, whether simple or complexed with other crimes, where
the penalty prescribed by law is higher than prision correccional or imprisonment
for six (6) years, or a fine of P6,000.00: PROVIDED, HOWEVER, that offenses or
felonies mentioned in this paragraph where the penalty prescribed by law does not
exceed prision correccional or imprisonment for six (6) years or a fine of P6,000.00
shall be tried by the proper Regional Trial Court, Metropolitan Trial Court, Municipal
Trial Court and Municipal Circuit Trial Court.
xxxxxxxxx
In case private individuals are charged as co-principals, accomplices or accessories
with the public officers or employees, including those employed in government-
owned or controlled corporations, they shall be tried jointly with said public officers
and employees.
x x x x x x x x x.
The foregoing provisions unequivocally specify the only instances when the
Sandiganbayan will have jurisdiction over a private individual, i.e. when the
complaint charges the private individual either as a co-principal, accomplice or
accessory of a public officer or employee who has been charged with a crime within
its jurisdiction.
Azarcon: A Public Officer or A Private Individual?
The Information does not charge petitioner Azarcon of being a co-principal,
accomplice or accessory to a public officer committing an offense under the
Sandiganbayans jurisdiction.Thus, unless petitioner be proven a public officer, the
Sandiganbayan will have no jurisdiction over the crime charged. Article 203 of the
RPC determines who are public officers:
Who are public officers. -- For the purpose of applying the provisions of this and the
preceding titles of the book, any person who, by direct provision of the law, popular
election, popular election or appointment by competent authority, shall take part in
the performance of public functions in the Government of the Philippine Islands, or
shall perform in said Government or in any of its branches public duties as an
employee, agent, or subordinate official, of any rank or classes, shall be deemed to
be a public officer.
Thus,
(to) be a public officer, one must be --
(1) Taking part in the performance of public functions in the government, or
Performing in said Government or any of its branches public duties as an employee,
agent, or subordinate official, of any rank or class; and
(2) That his authority to take part in the performance of public functions or to
perform public duties must be --
a. by direct provision of the law, or
b. by popular election, or
c. by appointment by competent authority.[28]
Granting arguendo that the petitioner, in signing the receipt for the truck
constructively distrained by the BIR, commenced to take part in an activity
constituting public functions, he obviously may not be deemed authorized by
popular election. The next logical query is whether petitioners designation by the
BIR as a custodian of distrained property qualifies as appointment by direct
provision of law, or by competent authority.[29] We answer in the negative.
The Solicitor General contends that the BIR, in effecting constructive distraint
over the truck allegedly owned by Jaime Ancla, and in requiring the petitioner
Alfredo Azarcon who was in possession thereof to sign a pro forma receipt for it,
effectively designated petitioner a depositary and, hence, citing U.S. vs.
Rastrollo,[30] a public officer.[31] This is based on the theory that
(t)he power to designate a private person who has actual possession of a distrained
property as a depository of distrained property is necessarily implied in the BIRs
power to place the property of a delinquent tax payer (sic) in distraint as provided
for under Sections 206, 207 and 208 (formerly Sections 303, 304 and 305) of the
National Internal Revenue Code, (NIRC) x x x.[32]
We disagree. The case of U.S. vs. Rastrollo is not applicable to the case before
us simply because the facts therein are not identical, similar or analogous to those
obtaining here. While the cited case involved a judicial deposit of the proceeds of
the sale of attached property in the hands of the debtor, the case at bench dealt
with the BIRs administrative act of effecting constructive distraint over alleged
property of taxpayer Ancla in relation to his back taxes, property which was
received by petitioner Azarcon. In the cited case, it was clearly within the scope of
that courts jurisdiction and judicial power to constitute the judicial deposit and give
the depositary a character equivalent to that of a public official. [33] However, in the insular, provincial or municipal funds, revenues, or property and to any
instant case, while the BIR had authority to require petitioner Azarcon to sign a administrator or depository of funds or property attached, seized or deposited by
receipt for the distrained truck, the NIRC did not grant it power to appoint Azarcon public authority, even if such property belongs to a private individual.
a public officer.
Legislative intent is determined principally from the language of a
It is axiomatic in our constitutional framework, which mandates a limited
statute. Where the language of a statute is clear and unambiguous, the law is
government, that its branches and administrative agencies exercise only that power
applied according to its express terms, and interpretation would be resorted to only
delegated to them as defined either in the Constitution or in legislation or in
where a literal interpretation would be either impossible or absurd or would lead to
both.[34] Thus, although the appointing power is the exclusive prerogative of the
an injustice.[42] This is particularly observed in the interpretation of penal statutes
President, x x x[35] the quantum of powers possessed by an administrative agency
which must be construed with such strictness as to carefully safeguard the rights of
forming part of the executive branch will still be limited to that conferred expressly
the defendant x x x.[43] The language of the foregoing provision is clear. A private
or by necessary or fair implication in its enabling act. Hence, (a)n administrative
individual who has in his charge any of the public funds or property enumerated
officer, it has been held, has only such powers as are expressly granted to him and
therein and commits any of the acts defined in any of the provisions of Chapter
those necessarily implied in the exercise thereof.[36] Corollarily, implied powers are
Four, Title Seven of the RPC, should likewise be penalized with the same penalty
those which are necessarily included in, and are therefore of lesser degree than the
meted to erring public officers. Nowhere in this provision is it expressed or implied
power granted. It cannot extend to other matters not embraced therein, nor are
that a private individual falling under said Article 222 is to be deemed a public
not incidental thereto.[37] For to so extend the statutory grant of power would be an
officer.
encroachment on powers expressly lodged in Congress by our Constitution. [38] It is
true that Sec. 206 of the NIRC, as pointed out by the prosecution, authorizes the BIR After a thorough review of the case at bench, the Court thus finds petitioner
to effect a constructive distraint by requiring any person to preserve a distrained Alfredo Azarcon and his co-accused Jaime Ancla to be both private individuals
property, thus: erroneously charged before and convicted by Respondent Sandiganbayan which
had no jurisdiction over them. The Sandiganbayans taking cognizance of this case is
xxxxxxxxx
of no moment since (j)urisdiction cannot be conferred by x x x erroneous belief of
the court that it had jurisdiction.[44] As aptly and correctly stated by the petitioner in
The constructive distraint of personal property shall be effected by requiring
his memorandum:
the taxpayer or any person having possession or control of such property to
sign a receipt covering the property distrained and obligate himself to
From the foregoing discussion, it is evident that the petitioner did not cease to be a
preserve the same intact and unaltered and not to dispose of the same in any
private individual when he agreed to act as depositary of the garnished dump
manner whatever without the express authority of the Commissioner.
truck. Therefore, when the information charged him and Jaime Ancla before the
Sandiganbayan for malversation of public funds or property, the prosecution was in
xxxxxxxxx
fact charging two private individuals without any public officer being similarly
However, we find no provision in the NIRC constituting such person a public charged as a co-conspirator. Consequently, the Sandiganbayan had no jurisdiction
officer by reason of such requirement. The BIRs power authorizing a private over the controversy and therefore all the proceedings taken below as well as the
individual to act as a depositary cannot be stretched to include the power to Decision rendered by Respondent Sandiganbayan, are null and void for lack of
appoint him as a public officer. The prosecution argues that Article 222 of the jurisdiction.[45]
Revised Penal Code x x x defines the individuals covered by the term officers under
Article 217[39] x x x of the same Code.[40] And accordingly, since Azarcon became a WHEREFORE, the questioned Resolution and Decision of the Sandiganbayan
depository of the truck seized by the BIR he also became a public officer who can be are hereby SET ASIDE and declared NULL and VOID for lack of jurisdiction. No costs.
prosecuted under Article 217 x x x.[41]
SO ORDERED.
The Court is not persuaded. Article 222 of the RPC reads:

Officers included in the preceding provisions. -- The provisions of this chapter shall
G.R. No. L-25133 September 28, 1968
apply to private individuals who, in any capacity whatever, have charge of any
S/SGT. JOSE SANTIAGO, petitioner-appellant,
vs.
LT. COL. CELSO ALIKPALA, ET AL., respondents-appellees.
Floro A. Sarmiento and Noe Maines for petitioner-appellant.
Cuadrato Palma and the Office of the Solicitor General for respondents-appellees.
FERNANDO, J.:
The validity of a court-martial proceeding was challenged in the lower court on due
process grounds to show lack of jurisdiction. Petitioner, a sergeant in the Philippine
Army and the accused in a court-martial proceeding, through a writ of certiorari and
prohibition, filed on April 17, 1963, with the lower court, sought to restrain
respondents, the officers, constituting the court-martial, that was then in the
process of trying petitioner for alleged violation of two provisions of the Articles of
War, from continuing with the proceedings on the ground of its being without
jurisdiction. There was likewise a plea for a restraining order, during the pendency
of his petition, but it was unsuccessful.
No response, either way, was deemed necessary by the then Presiding Judge of the
lower court, now Justice Nicasio Yatco of the Court of Appeals, as petitioner had, in
the meanwhile, been convicted by the court-martial. The lower court verdict,
rendered on September 16, 1963, was one of dismissal, as in its opinion, "this case
had already become moot and academic ... ."
An appeal was taken to us, the same due process objections being raised. We think
that the question before us is of such import and significance that an easy
avoidance through the technicality of the "moot and academic" approach hardly
recommends itself. For reasons to be more fully set forth, we find that such court-
martial was not lawfully convened, and, consequently, devoid of jurisdiction.
Accordingly, we reverse the lower court.
There was a stipulation of facts submitted to the lower court on July 10, 1963, to
the following effect: "That the arraignment of the petitioner on December 17, 1962
was for the purpose of avoiding prescription pursuant to Article of War 38 of one of
the offenses with which the accused is charged since, as charged, same was
allegedly committed on or about December 18, 1960; That prior to the said
arraignment, no written summons or subpoena was issued addressed to the
petitioner or his counsel, informing them of said arraignment; That instead of said
written summons or subpoena Col. Eladio Samson, Constabulary Staff Judge
Advocate called up First Sergeant Manuel Soriano at the Headquarters II Philippine
Constabulary Zone, Camp Vicente Lim, Canlubang, Laguna on December 16, 1962 by
telephone with instructions to send the petitioner to HPC, Camp Crame, Quezon
City, under escort, for arraignment and only for arraignment; That upon arrival in
HPC, the petitioner was directed to proceed to the PC Officer's Clubhouse, where a
General Court-Martial composed of the respondents, created to try the case of
'People vs. Capt. Egmidio Jose, for violation of Articles of War 96 and 97', pursuant
to paragraph 10, Special Order No. 14, Headquarters Philippine Constabulary, dated
18 July 1962, ..., was to resume, as scheduled, the trial of 'People vs. Pfc.
Numeriano Ohagan, for violation of Articles of War 64, 85, and 97'; That it was only
at the time (December 17, 1962) that petitioner learned that he will be arraigned
for alleged violation of Articles of War 85 and 97, after being informed by one of the
respondents, Capt. Cuadrato Palma as Trial Judge Advocate why he was there; That
prior to that arraignment on December 17, 1962 there was no special order
published by the Headquarters Philippine Constabulary creating or directing the
General Court-Martial composed of the respondents to arraign and try the case
against the petitioner, there however was already an existing court trying another
case; That the respondents relied on the first indorsement of the Acting Adjutant
General, HPC, Camp Crame, Quezon City, dated December 14, 1962 and addressed
to the Trial Judge Advocate of the General Court-martial ... directing the said Trial
Judge Advocate to refer the case against petitioner to the above-mentioned court,
...; That the above paragraph 10, Special Order No. 14 dated 18 July 1962, does not
contain the phrase 'and such other cases which may be referred to it,' but however
said orders were amended only on 8 January 1963, to include such phrase, ... ." 1
It was further stipulated that petitioner's counsel did object to his arraignment
asserting that a general court-martial then convened was without jurisdiction, as
there was no special order designating respondents to compose a general court-
martial for the purpose of trying petitioner, as petitioner was not furnished a copy
of the charge sheet prior to his arraignment as required in the Manual for Court-
Martial, except on the very day thereof, and as there was no written summons or
subpoena served on either the petitioner, as accused, or the counsel. Respondents,
acting as the general court-martial, overruled the above objections, and the Trial
Judge Advocate was then ordered to proceed to read the charges and specifications
against petitioner over the vigorous objections of counsel. It was shown, likewise, in
the stipulation of facts, that the case, having been postponed to February 21, 1963,
petitioner's counsel had in the meanwhile complained to the Chief of Constabulary
against the proceedings on the ground of its nullity, and sought to have
respondents restrained from continuing with the trial of petitioner due to such lack
of jurisdiction but the Chief of Constabulary ruled that he could not act on such
complaint until the records of the trial were forwarded to him for review. With such
a ruling, and with the denial of two other motions by petitioner upon the court-
martial being convened anew on February 21, 1963, one to invalidate his
arraignment on December 17, 1962, and the other to quash the complaint based on
the denial of due process and lack of jurisdiction, the present petition
for certiorari and prohibition was filed with the lower court. 2
As above noted, the lower court dismissed the petition due to its belief that,
petitioner having been convicted in the meanwhile, there being no restraining
order, the matter had become moot and academic. As was set forth earlier, we
differ, the alleged lack of jurisdiction being too serious a matter to be thus
summarily ignored.
The firm insistence on the part of petitioner that the general court-martial lacks
jurisdiction on due process grounds, cannot escape notice. The basic objection was
the absence of a special order "designating respondents to compose a general
court-martial to convene and try the case of petitioner; ... ." It was expressly
stipulated that the respondents were convened to try the case of a certain Capt.
Egmidio Jose and not that filed against petitioner. As a matter of fact, the opening
paragraph of the stipulation of facts made clear that he was arraigned on December
17, 1962 by respondents as a general court-martial appointed precisely to try the
above Capt. Jose solely "for the purpose of avoiding prescription pursuant to Article
of War 38 of one of the offenses with which the accused is charged ... ."
Is such a departure from what the law and regulations 3 prescribe offensive to the
due process clause? If it were, then petitioner should be sustained in his plea for a
writ of certiorari and prohibition, as clearly the denial of the constitutional right
would oust respondents of jurisdiction, even on the assumption that they were
vested with it originally. Our decisions to that effect are impressive for their
unanimity.
In Harden v. The Director of Prisons, 4 Justice Tuason, speaking for the Court,
explicitly announced that "deprivation of any fundamental or constitutional rights"
justify a proceeding for habeas corpus on the ground of lack of jurisdiction. Abriol v.
Homeres 5 is even more categorical. In that case, the action of a lower court,
denying the accused the opportunity to present proof for his defense, his motion
for dismissal failing, was held by this Court as a deprivation of his right to due
process. As was made clear by the opinion of Justice Ozaeta: "No court of justice
under our system of government has the power to deprive him of that right. If the
accused does not waive his right to be heard but on the contrary — as in the instant
case — invokes the right, and the court denies it to him, that court no longer has
jurisdiction to proceed; it has no power to sentence the accused without hearing
him in his defense; and the sentence thus pronounced is void and may be
collaterally attacked in a habeas corpus proceeding." 6
A recent decision rendered barely a month ago, in Chavez v. Court of Appeals, 7 is
even more in point. Here, again, habeas corpus was relied upon by petitioner whose
constitutional rights were not respected, but, in addition, the special civil actions
of certiorari and mandamus were likewise availed of, in view of such consequent
lack of jurisdiction. The stress though in the opinion of Justice Sanchez was
on habeas corpus. Thus: "The course which petitioner takes is correct. Habeas
corpus is a high prerogative writ. It is traditionally considered as an exceptional
remedy to release a person whose liberty is illegally restrained such as when the
accused's constitutional rights are disregarded. Such defect results in the absence
or loss of jurisdiction and therefore invalidates the trial and the consequent
conviction of the accused whose fundamental right was violated. That void
judgment of conviction may be challenged by collateral attack, which precisely is
the function of habeas corpus. This writ may issue even if another remedy which is
less effective may be availed of by the defendant."
The due process concept rightfully referred to as "a vital and living force in our
jurisprudence" calls for respect and deference, otherwise the governmental action
taken suffers from a fatal infirmity. As was so aptly expressed by the then Justice,
now Chief Justice, Concepcion: "... acts of Congress, as well as those of the
Executive, can deny due process only under pain of nullity, and judicial proceedings
suffering from the same flaw are subject to the same sanction, any statutory
provision to the contrary notwithstanding." 8
The crucial question, then, is whether such failure to comply with the dictates of
the applicable law insofar as convening a valid court martial is concerned, amounts
to a denial of due process. We hold that it does. There is such a denial not only
under the broad standard which delimits the scope and reach of the due process
requirement, but also under one of the specific elements of procedural due
process.
It is to be admitted that there is no controlling and precise definition of due process
which, at the most furnishes a standard to which governmental action should
conform in order to impress with the stamp of validity any deprivation of life,
liberty or property. A recent decision of this Court, in Ermita-Malate Hotel v. Mayor
of Manila 9 treated the matter thus: "It is responsiveness to the supremacy of
reason, obedience to the dictates of justice. Negatively put, arbitrariness is ruled
out and unfairness avoided. To satisfy the due process requirement, official action,
to paraphrase Cardozo, must not outrun the bounds of reason and result in sheer
oppression. Due process is thus hostile to any official action marred by lack of
reasonableness. Correctly has it been identified as freedom from arbitrariness. It is
the embodiment of the sporting idea of fair play. It exacts fealty 'to those strivings
for justice' and judges the act of officialdom of whatever branch 'in the light of
reason drawn from considerations of fairness that reflect [democratic] traditions of
legal and political thought.'"
Nor is such a reliance on the broad reach of due process the sole ground on which
the lack of jurisdiction of the court-martial convened in this case could be
predicated. Recently, stress was laid anew by us on the first requirement of
procedural due process, namely, the existence of the court or tribunal clothed with respondents as a court-martial and perpetually restraining them from taking any
judicial, or quasi-judicial, power to hear and determine the matter before it. 10 This further action on the matter. Without pronouncement as to costs.
is a requirement that goes back to Banco Español-Filipino v. Palanca, a decision
rendered half a century ago. 11 Concepcion, C.J., Reyes, J.B.L., Makalintal, Sanchez, Angeles and Capistrano, JJ.,
concur.
There is the express admission in the statement of facts that respondents, as a Dizon and Zaldivar, JJ., are on leave.
court-martial, were not convened to try petitioner but someone else, the action
taken against petitioner being induced solely by a desire to avoid the effects of
prescription; it would follow then that the absence of a competent court or tribunal
is most marked and undeniable. Such a denial of due process is therefore fatal to its
assumed authority to try petitioner. The writ of certiorari and prohibition should
have been granted and the lower court, to repeat, ought not to have dismissed his
petition summarily.

The significance of such insistence on a faithful compliance with the regular

procedure of convening court-martials in accordance with law cannot be over-
emphasized. As was pointed out by Justice Tuason in Ruffy v. The Chief of Staff,
Philippine Army: 12 "Courts-martial are agencies of executive character, and one of
the authorities for the ordering of courts-martial has been held to be attached to
the constitutional functions of the President as Commander-in-Chief, independently
of legislation. (Winthrop's Military Law and Precedents, 2d Edition, p. 49.) Unlike
courts of law, they are not a portion of the judiciary." Further on, his opinion
continues: "Not belonging to the judicial branch of the government, it follows that
courts-martial must pertain to the executive department; and they are in fact
simply instrumentalities of the executive power, provided by Congress for the
President as Commander-in-Chief, to aid him in properly commanding the army and
navy and enforcing discipline therein, and utilized under his orders or those of his
authorized military representatives." 13

It is even more indispensable, therefore, that such quasi-judicial agencies, clothed

with the solemn responsibility of depriving members of the Armed Forces of their
liberties, even of their lives, as a matter of fact, should be held all the more strictly
bound to manifest fidelity to the fundamental concept of fairness and the
avoidance of arbitrariness for which due process stands as a living vital principle. If
it were otherwise, then, abuses, even if not intended, might creep in, and the
safeguards so carefully thrown about the freedom of an individual, ignored or
disregarded. Against such an eventuality, the vigilance of the judiciary furnishes a
shield. That is one of its grave responsibilities. Such a trust must be lived up to; such
a task cannot be left undone.

WHEREFORE, the order of respondent Court of September 6, 1963, dismissing the

petition for certiorari and prohibition is reversed, and the writ of certiorari and G.R. No. L-19180 October 31, 1963
prohibition granted, annulling the proceedings as well as the decision rendered by
NATIONAL DEVELOPMENT COMPANY, ET AL., petitioners-appellees,
vs.
THE COLLECTOR OF CUSTOMS OF MANILA, respondent-appellant.
Ross, Selph and Carrascoso for petitioners-appellees.
Office of the Solicitor General for respondent-appellant.
BAUTISTA ANGELO, J.:
The National Development Company which is engaged in the shipping business
under the name of "Philippine National Lines" is the owner of steamship "S.S. Doña
Nati" whose local agent in Manila is A. V. Rocha. On August 4, 1960, the Collector of
Customs sent a notice to C.F. Sharp & Company as alleged operator of the vessel
informing it that said vessel was apprehended and found to have committed a
violation of the customs laws and regulations in that it carried an unmanifested
cargo consisting of one RCA Victor TV set 21" in violation of Section 2521 of the
Tariff and Customs Code. Inserted in said notice is a note of the following tenor:
"The above article was being carried away by Dr. Basilio de Leon y Mendez, official
doctor of M/S "Doña Nati" who readily admitted ownership of the same." C.F. Sharp
& Company was given 48 hours to show cause why no administrative fine should be
imposed upon it for said violation.
C.F. Sharp & Company, not being the agent or operator of the vessel, referred the
notice to A. V. Rocha, the agent and operator thereof, who on August 8, 1960,
answered the notice stating, among other things, that the television set referred to
therein was not a cargo of the vessel and, therefore, was not required by law to be
manifested. Rocha stated further: "If this explanation is not sufficient, we request
that this case be set for investigation and hearing in order to enable the vessel to be
informed of the evidence against it to sustain the charge and to present evidence in
its defense."
The Collector of Customs replied to Rocha on August 9, 1960 stating that the
television set in question was a cargo on board the vessel and that he does not find
his explanation satisfactory enough to exempt the vessel from liability for violating
Section 2521 of the Tariff and Customs Code. In said letter, the collector imposed a
fine of P5,000.00 on the vessel and ordered payment thereof within 48 hours with a
threat that he will deny clearance to said vessel and will issue a warrant of seizure
and detention against it if the fine is not paid.
And considering that the Collector of Customs has exceeded his jurisdiction or
committed a grave abuse of discretion in imposing the fine of P5,000.00 on the
vessel without the benefit of an investigation or hearing as requested by A. V.
Rocha, the National Development Company, as owner of the vessel, as well as A. V.
Rocha as agent and operator thereof, filed the instant special civil action of
certiorari with preliminary injunction before the Court of First Instance of Manila
against the official abovementioned. The court, finding the petition for injunction
sufficient in form and substance, issued ex parte the writ prayed for upon the filing
of a bond in the amount of P5,00.00.
Respondent set up the following special defenses: (1) the court a quo has no
jurisdiction to act on matters arising from violations of the Customs Law, but the
Court of Tax Appeals; (2) assuming that it has, petitioners have not exhausted all
available administrative remedies, one of which is to appeal to the Commissioner of
Customs; (3) the requirements of administrative due process have already been
complied with in that the written notice given by respondent to petitioner Rocha
clearly specified the nature of the violation complained of and that the defense set
up by Rocha constitute merely a legal issue which does not require further
investigation; and (4) the investigation conducted by the customs authorities
showed that the television set in question was unloaded by the ship's doctor
without going thru the custom house as required by law and was not declared
either in the ship's manifest or in the crew declaration list.
On the basis of the stipulation of facts submitted by the parties, the court a
quo rendered decision setting aside the ruling of respondent which imposes a fine
of P5,000.00 on the vessel Doña Nati payable within 48 hours from receipt thereof.
The court stated that said ruling appears to be unjust and arbitrary because the
party affected has not been accorded the investigation it requested from the
Collector of Customs.
Respondent interposed the present appeal.
When the customs authorities found that the vessel Doña Nati carried on board an
unmanifested cargo consisting of one RCA Victor TV set 21" in violation of Section
2521 of the Tariff and Customs Code, respondent sent a written notice to C. F.
Sharp & Company, believing it to be the operator or agent of the vessel, and when
the latter referred the notice to A. V. Rocha, the real operator of the vessel, for such
step as he may deem necessary to be taken the latter answered the letter stating
that the television set was not cargo and so was not required by law to be
manifested, and he added to his answer the following: "If this explanation is not
sufficient, we request that this case be set for investigation and hearing in order to
enable the vessel to be informed of the evidence against it to sustain the charge
and to present evidence in its defense. "Respondent, however, replied to this letter
saying that said television was a cargo within the meaning of the law and so he does
not find his explanation satisfactory and then and there imposed on the vessel a
fine of P5,00.00. Respondent even went further. He ordered that said fine be paid
within 48 hours from receipt with a threat that the vessel would be denied
clearance and a warrant of seizure would be issued if the fine will not be paid.
Considering this to be a grave abuse of discretion, petitioners commenced the
present action for certiorari before the court a quo.
We find this action proper for it really appears that petitioner Rocha was not given
an opportunity to prove that the television set complained of is not a cargo that
needs to be manifested as required by Section 2521 of the Tariff and Customs Code.
Under said section, in order that an imported article or merchandise may be
considered a cargo that should be manifested it is first necessary that it be so
established for the reason that there are other effects that a vessel may carry that
are excluded from the requirement of the law, among which are the personal
effects of the members of the crew. The fact that the set in question was claimed
by the customs authorities not to be within the exception does not automatically
make the vessel liable. It is still necessary that the vessel, its owner or operator, be
given a chance to show otherwise. This is precisely what petitioner Rocha has
requested in his letter. Not only was he denied this chance, but respondent
collector immediately imposed upon the vessel the huge fine of P5,000.00. This is a
denial of the elementary rule of due process.
True it is that the proceedings before the Collector of Customs insofar as the
determination of any act or irregularity that may involve a violation of any customs
law or regulation is concerned, or of any act arising under the Tariff and Customs
Code, are not judicial in character, but merely administrative, where the rules of
procedure are generally disregarded, but even in the administrative proceedings
due process should be observed because that is a right enshrined in our
Constitution. The right to due process is not merely statutory. It is a constitutional
right. Indeed, our Constitution provides that "No person shall be deprived of life,
liberty, or property without due process of law", which clause epitomize the
principle of justice which hears before it condemns, which proceeds upon inquiry
and renders judgment only after trial. That this principle applies with equal force to
administrative proceedings was well elaborated upon by this Court in the Ang Tibay
case as follows:
... The fact, however, that the Court of Industrial Relations may be said to
be free from the rigidity of certain procedural requirements does not mean
that it can, in justiciable case coming before it, entirely ignore or disregard
the fundamental and essential requirements of due process in trials and
investigations of an administrative character.
... There are cardinal primary rights which must be respected even in
proceedings of this character. The first of these rights is the right to a
hearing, which includes the right of the party interested or affected to
present his own case and submit evidence in support thereof. Not only
must the party be given an opportunity to present his case and to adduce
evidence tending to establish the rights which he asserts but the
tribunal must consider the evidence presented. While the duty to
deliberate does not impose the obligation to decide right, it does imply a
necessity which cannot be disregarded, namely, that of having something
to support its decision. No only must there be some evidence to support a
finding or conclusion, but the evidence must be substantial. The decision
must be rendered on the evidence presented at the hearing, or at least
contained in the record and disclosed to the parties affected. The Court of
Industrial Relations or any of its judges, therefore, must act on its or his
own independent consideration of the law and facts of the controversy,
and not simply accept the views of a subordinate in arriving at a decision.
The Court of Industrial Relations should, in all controversial questions,
render its decision in such a manner that the parties to the proceeding can
know the various issues involved, and the reason for the decision
rendered. The performance of this duty is inseparable from the authority
conferred upon it. (Ang Tibay, et al. v. The Court of Industrial Relations, et
al., 40 O.G., No. 11, Supp. p. 29).
There is, therefore, no point in the contention that the court a quo has no
jurisdiction over the present case because what is here involved is not whether the
imposition of the fine by the Collector of Customs on the operator of the ship is
correct or not but whether he acted properly in imposing said fine without first
giving the operator an opportunity to be heard. Here we said that he acted
improvidently and so the action taken against him is in accordance with Rule 67 of
our Rules of Court.
Another point raised is that petitioners have brought this action prematurely for
they have not yet exhausted all the administrative remedies available to them, one
of which is to appeal the ruling to the Commissioner of Customs. This may be true,
but such step we do not consider a plain, speedy or adequate remedy in the
ordinary course of law as would prevent petitioners from taking the present action,
for it is undisputed that respondent collector has acted in utter disregard of the
principle of due process.
WHEREFORE, the decision appealed from is affirmed. No costs.
G.R. No. 110379 November 28, 1997
HON. ARMAND FABELLA, in his capacity as SECRETARY OF THE DEPARTMENT OF
EDUCATION, CULTURE AND SPORTS; John Doe (not his real name), in his capacity
as REGIONAL DIRECTOR, DECS-NCR; DR. BIENVENIDO ICASIANO, in his capacity as
the SUPERINTENDENT OF THE QUEZON CITY SCHOOLS DIVISION; ALMA BELLA O.
BAUTISTA, AURORA C. VALENZUELA and TERESITA V. DIMAGMALIW, petitioners,
vs.
THE COURT OF APPEALS, ROSARITO A. SEPTIMO, ERLINDA B. DE LEON, CLARISSA
T. DIMAANO, WILFREDO N. BACANI, MARINA R. VIVAR, VICTORIA S. UBALDO,
JENNIE L. DOGWE, NORMA L. RONGCALES, EDITA C. SEPTIMO, TERESITA E.
EVANGELISTA, CATALINA R. FRAGANTE, REBECCA D. BAGDOG, MARILYNNA C. KU,
MARRISA M. SAMSON, HENEDINA B. CARILLO, NICASIO C. BRAVO, RUTH F.
LACANILAO, MIRASOL C. BALIGOD, FELISA S. VILLACRUEL, MA. VIOLETA
ELIZABETH Y. HERNANDEZ, ANTONIO C. OCAMPO, ADRIANO S. VALENCIA and
ELEUTERIO S. VARGAS, respondents.
PANGANIBAN, J.:
Due process of law requires notice and hearing. Hearing, on the other hand,
presupposes a competent and impartial tribunal. The right to be heard and,
ultimately, the right to due process of law lose meaning in the absence of an
independent, competent and impartial tribunal.
Statement of the Case
This principium is explained by this Court as it resolves this petition for review
on certiorari assailing the May 21, 1993 Decision 1 of the Court of Appeals 2 in CA-
G.R.. SP No. 29107 which affirmed the trial court's decision, 3 as follows:
WHEREFORE, the decision appealed from is AFFIRMED and the
appeal is DISMISSED.
The Hon. Armand Fabella is hereby ORDERED substituted as
respondent-appellant in place of former Secretary Isidro Cariño
and henceforth this fact should be reflected in the title of this
case.
SO ORDERED.4
The Antecedent Facts
The facts, as found by Respondent Court, are as follows:
On September 17, 1990, then DECS Secretary Cariño issued a
return-to-work order to all public school teachers who had
participated in walk-outs and strikes on various dates during the
period September 26, 1990 to October 18, 1990. The mass action
had been staged to demand payment of 13th month differentials,
clothing allowances and passage of a debt-cap bill in Congress,
among other things.
On October 18, 1990, Secretary Cariño filed administrative cases
against herein petitioner-appellees, who are teachers of the
Mandaluyong High School. The charge sheets required petitioner-
appellees to explain in writing why they should not be punished
for having taken part in the mass action in violation of civil service
laws and regulations, to wit:
1. grave misconduct;
2. gross neglect of duty;
3. gross violation of Civil
Service Law and rules on
reasonable office regulations;
4. refusal to perform official
duty;
5. conduct prejudicial to the
best interest of the service.
6. absence without leave
(AWOL)
At the same time, Secretary Cariño ordered petitioner-appellee to
be placed under preventive suspension.
The charges were subsequently amended by John Doe (not his
real name)on November 7, 1990 to include the specific dates
when petitioner-appellees allegedly took part in the strike.
Administrative hearings started on December 20, 1990.
Petitioner-appellees' counsel objected to the procedure adopted
by the committee and demanded that he be furnished a copy of
the guidelines adopted by the committee for the investigation
and imposition of penalties. As he received no response from the
committee, counsel walked out. Later, however, counsel, was able
to obtain a copy of the guidelines.
On April 10, 1991, the teachers filed a an injunctive suit (Civil Case
No. 60675) with the Regional Trial Court in Quezon City, charging
the committee appointed by Secretary Cariño with fraud and
deceit and praying that it be stopped from further investigating
them and from rendering any decision in the administrative case.
However, the trial court denied them a restraining order.
They then amended their complaint and made it one
for certiorari and mandamus. They alleged that the investigating
committee was acting with grave abuse of discretion because its
guidelines for investigation place the burden of proof on them by
requiring them to prove their innocence instead of requiring
Secretary Cariño and his staff to adduce evidence to prove the
charges against the teachers.
On May 30, 1991, petitioner-appellee Adriano S. Valencia of the
Ramon Magsaysay High School filed a motion to intervene,
alleging that he was in the same situation as petitioners since he
had likewise been charged and preventively suspended by
respondent-appellant Cariño for the same grounds as the other
petitioner-appellees and made to shoulder the burden of proving
his innocence under the committee's guidelines. The trial court
granted his motion on June 3, 1991 and allowed him to intervene.
On June 11, 1991, the Solicitor General answered the petitioner
for certiorari and mandamus in behalf of respondent DECS
Secretary. In the main he contended that, in accordance with the
doctrine of primary resort, the trial court should not interfere in
the administrative proceedings.
The Solicitor General also asked the trial court to reconsider its
order of June 3, 1991, allowing petitioner-appellee Adriano S.
Valencia to intervene in the case.
Meanwhile, the DECS investigating committee rendered a
decision on August 6, 1991, finding the petitioner-appellees guilty,
as charged and ordering their immediate dismissal.
On August 15, 1991, the trial court dismissed the petition
for certiorari and mandamus for lack of merit. Petitioner-
appellees moved for a reconsideration, but their motion was
denied on September 11, 1991.
The teachers then filed a petition for certiorari with the Supreme
Court which, on February 18, 1992, issued a resolution en
banc declaring void the trial court's order of dismissal and
reinstating petitioner-appellees' action, even as it ordered the
latter's reinstatement pending decision of their case.
Accordingly, on March 25, 1992, the trial court set the case for
hearing. June 8, 1992, it issued a pre-trial order which reads:
As prayed for by Solicitor Bernard Hernandez,
let this case be set for pre-trial conference on
June 17, 1992 at 1:30 p.m., so as to expedite the
proceedings hereof. In which case, DECS
Secretary Isidro Cariño, as the principal
respondent, is hereby ordered to PERSONALLY
APPEAR before this Court on said date and time,
with a warning that should he fail to show up on
said date, the Court will declare him as IN
DEFAULT. Stated otherwise, for the said Pre-
Trial Conference, the Court will not recognize
any representative of his.
By agreement of the parties, the trial conference was reset on
June 26, 1992. However, Secretary Cariño failed to appear in court
on the date set. It was explained that he had to attend a
conference in Maragondon, Cavite. Instead, he was represented
by Atty. Reno Capinpin, while the other respondents were
represented by Atty. Jocelyn Pili. But the court just the same
declared them as in default. The Solicitor General moved for a
reconsideration, reiterating that Cariño could not personally come
on June 26, 1992 because of prior commitment in Cavite. It was
pointed out that Cariño was represented by Atty. Reno Capinpin,
while the other respondents were represented by Atty. Jocelyn
Pili, both of the DECS-NCR and that both had special powers of
attorney. But the Solicitor General's motion for reconsideration
was denied by the trial court. In its order of July 15, 1992, the
court stated:
 The "Motion For Reconsideration" dated July 3,
1992 filed by the respondents thru counsel, is
hereby DENIED for lack of merit. It appears too
obvious that respondents simply did not want to
comply with the lawful orders of the Court.
The respondents having lost their standing in
Court, the "Manifestation and Motion," dated
July 3, 1992 filed by the Office of the Solicitor
General is hereby DENIED due course.
SO ORDERED.
On July 3, 1992, the Solicitor General informed the trial court that
Cariño had ceased to be DECS Secretary and asked for his
substitution. But the court failed to act on his motion.
The hearing of the case was thereafter conducted ex parte with
only the teachers allowed to present their evidence.
On August 10, 1992, the trial court rendered a decision, in which it
stated:
The Court is in full accord with petitioners' contention that Rep.
Act No. 4670 otherwise known as the "Magna Carta for Public
School Teachers" is the primary law that governs the conduct of
investigation in administrative cases filed against public school
teachers, with Pres. Decree No. 807 as its supplemental law.
Respondents erred in believing and contending that Rep. Act No.
4670 has already been superseded by the applicable provisions of
Pres. Decree No. 807 and Exec. Order No. 292. Under the Rules of
Statutory Construction, a special law, Rep. Act. No. 4670 in the
case at bar, is not regarded as having been replaced by a general
law, Pres. Decree No. 807, unless the intent to repeal or alter the
same is manifest. A perusal of Pres. Decree No. 807 reveals no
such intention exists, hence, Rep. Act No. 4670 stands. In the
event that there is conflict between a special and a general law,
the former shall prevail since it evidences the legislator's intent
more clearly than that of the general statute and must be taken as
an exception to the General Act. The provision of Rep. Act No.
4670 therefore prevails over Pres. Decree No. 807 in the
composition and selection of the members of the investigating
committee. Consequently, the committee tasked to investigate
the charges filed against petitioners was illegally constituted, their
composition and appointment being violative of Sec. 9 of Rep. Act
No. 4670 hence all acts done by said body possess no legal color
whatsoever.
Anent petitioners' claim that their dismissal was effected without
any formal investigation, the Court, after consideration of the
circumstances surrounding the case, finds such claim meritorious.
Although it cannot be gain said that respondents have a cause of
action against the petitioner, the same is not sufficient reason to
detract from the necessity of basic fair play. The manner of
dismissal of the teachers is tainted with illegality. It is a dismissal
without due process. While there was a semblance of
investigation conducted by the respondents their intention to
dismiss petitioners was already manifest when it adopted a
procedure provided for by law, by shifting the burden of proof to
the petitioners, knowing fully well that the teachers would
boycott the proceedings thereby giving them cause to render
judgment ex-parte.
The DISMISSAL therefore of the teachers is not justified, it being
arbitrary and violative of the teacher's right to due process. Due
process must be observed in dismissing the teachers because it
affects not only their position but also their means of livelihood.
WHEREFORE, premises considered, the present petition is hereby
GRANTED and all the questioned orders/decisions of the
respondents are hereby declared NULL and VOID and are hereby
SET ASIDE.
The reinstatement of the petitioners to their former positions
without loss of seniority and promotional rights is hereby
ORDERED.
The payment, if any, of all the petitioners' back salaries,
allowances, bonuses, and other benefits and emoluments which
may have accrued to them during the entire period of their
preventive suspension and/or dismissal from the service is hereby
likewise ORDERED.
SO ORDERED.5
From this adverse decision of the trial court; former DECS Secretary Isidro Cariño
filed an appeal with the Court of Appeals raising the following grounds:
I. The trial court seriously
erred in declaring appellants
as in default.
II. The trial court seriously
erred in not ordering the
proper substitution of parties.
III. The trial court seriously
erred in holding that R.A. No.
4670, otherwise known as
"Magna Carta for Public
School Teachers", should
govern the conduct of the
investigation conducted.
IV. The trial court seriously
erred in ruling that the
dismissal of the teachers are
without due process. 6
As mentioned earlier, the Court of Appeals affirmed the RTC decision, holding in the
main that private respondents were denied due process in the administrative
proceedings instituted against them.
Hence, this petition for review.7
The Issues
Before us, petitioners raise the following issues:
I government employees to organize is limited only to the
Whether or not Respondent Court of Appeals committed grave
abuse of discretion in holding in effect that private respondents
were denied due process of law.
II
Whether or not Respondent Court of Appeals seriously erred and
committed grave abuse of discretion in applying strictly the
provision of R.A. No. 4670 in the composition of the investigating
committee.
III
Whether or not Respondent Court of Appeals committed grave
abuse of discretion in dismissing the appeal and in affirming the
trial court's decision. 8
These issues, all closely related, boil down to a single question: whether private
respondents were denied due process of law.
The Court's Ruling
The petition is bereft of merit. We agree with the Court of Appeals that private
respondents were denied due process of law.
Denial of Due Process
At the outset, we must stress that we are tasked only to determine whether or not
due process of law was observed in the administrative proceedings against herein
private respondents. We note the Solicitor General's extensive disquisition that
government employees do not have the right to strike. 9 On this point, the Court, in
the case of Bangalisan vs. Court of Appeals, 10 has recently pronounced, through
Mr. Justice Florenz D. Regalado:
It is the settled rule in this jurisdiction that employees in the
public service may not engage in strikes. While the Constitution
recognizes the right of government employees to organize, they
are prohibited from staging strikes, demonstrations mass leaves,
walk-outs and other forms of mass action which will result in
temporary stoppage or disruption of public services. The right of
formation of unions or associations, without including the right to
strike.
More recently, in Jacinto vs. Court of Appeals, 11 the Court explained the
schoolteachers' right to peaceful assembly vis-a-vis their right to mass protest:
 Moreover, the petitioners here, except Merlinda Jacinto, were not The legislature enacted a special law, RA 4670 known as the Magna Carta for Public
penalized for the exercise of their right to assemble peacefully School Teachers, which specifically covers administrative proceedings involving
and to petition the government for a redress of grievances. public schoolteachers. Section 9 of said law expressly provides that the committee
Rather, the Civil Service Commission found them guilty of conduct to hear public schoolteachers' administrative cases should be composed of the
prejudicial to the best interest of the service for having absented school superintendent of the division as chairman, a representative of the local or
themselves without proper authority, from their schools during any existing provincial or national teachers' organization and a supervisor of the
regular school days, in order to participate in the mass protest, division. The pertinent provisions of RA 4670 read:
their absence ineluctably resulting in the non-holding of classes
and in the deprivation of students of education, for which they Sec. 8. Safeguards in Disciplinary Procedure. — Every teacher shall
were responsible. Had petitioners availed themselves of their free enjoy equitable safeguards at each stage of any disciplinary
time — recess, after classes, weekends or holidays — to procedure and shall have:
dramatize their grievances and to dialogue with the proper
authorities within the bounds of law, no one — not the DECS, the a: the right to be informed, in writing, of the
CSC or even this Court — could have held them liable for the valid charges;
exercise of their constitutionally guaranteed rights. As it was, the
temporary stoppage of classes resulting from their activity
b. the right to full access to the evidence in the
necessarily disrupted public services, the very evil sought to be
case;
forestalled by the prohibition against strikes by government
workers. Their act by its nature was enjoined by the Civil Service
c. the right to defend himself and to be
law, rules and regulations, for which they must, therefore, be
defended by a representative of his choice
made answerable. 12
and/or by his organization, adequate time being
given to the teacher for the preparation of his
In the present case, however, the issue is not whether the private respondents
defense; and
engaged in any prohibited activity which may warrant the imposition of disciplinary
sanctions against them as a result of administrative proceedings. As already
d. the right to appeal to clearly designated
observed, the resolution of this case revolves around the question of due process of
authorities. No publicity shall be given to any
law, not on the right of government workers to strike. The issue is not whether
disciplinary action being taken against a teacher
private respondents may be punished for engaging in a prohibited action but
during the pendency of his case.
whether, in the course of the investigation of the alleged proscribed activity, their
right to due process has been violated. In short, before they can be investigated and
meted out any penalty, due process must first be observed. Sec. 9. Administrative Charges. — Administrative charges against
teacher shall be heard initially by a committee composed of the
corresponding School Superintendent of the Division or a duly
In administrative proceedings, due process has been recognized to include the
authorized representative who would at least have the rank of a
following: (1) the right to actual or constructive notice of the institution of
division supervisor, where the teacher belongs, as chairman, a
proceedings which may affect a respondent's legal rights; (2) a real opportunity to
representative of the local or, in its absence, any existing
be heard personally or with the assistance of counsel, to present witnesses and
provincial or national teacher's organization and a supervisor of
evidence in one's favor, and to defend one's rights; (3) a tribunal vested with
the Division, the last two to be designated by the Director of
competent jurisdiction and so constituted as to afford a person charged
Public Schools. The committee shall submit its findings, and
administratively a reasonable guarantee of honesty as well as impartiality; and (4) a
recommendations to the Director of Public Schools within thirty
finding by said tribunal which is supported by substantial evidence submitted for
days from the termination of the hearings: Provided, however,
consideration during the hearing or contained in the records or made known to the
That where the school superintended is the complainant or an
parties affected. 13
interested party, all the members of the committee shall be
appointed by the Secretary of Education.
The foregoing provisions implement the Declaration of Policy of the statute; that is,
to promote the "terms of employment and career prospects" of schoolteachers.
In the present case, the various committees formed by DECS to hear the
administrative charges against private respondents did not include "a
representative of the local or, in its absence, any existing provincial or national
teacher's organization" as required by Section 9 of RA 4670. Accordingly, these
committees were deemed to have no competent jurisdiction. Thus, all proceedings
undertaken by them were necessarily void. They could not provide any basis for the
suspension or dismissal of private respondents. The inclusion of a representative of
a teachers' organization in these committees was indispensable to ensure an
impartial tribunal. It was this requirement that would have given substance and
meaning to the right to be heard. Indeed, in any proceeding, the essence of
procedural due process is embodied in the basic requirement of notice and
a real opportunity to be heard. 14
Petitioners argue that the DECS complied with Section 9 of RA 4670, because "all
the teachers who were members of the various committees are members of either
the Quezon City Secondary Teachers Federation or the Quezon City Elementary
Teachers Federation" 15 and are deemed to be the representatives of a teachers'
organization as required by Section 9 of RA 4670.
We disagree. Mere membership of said teachers in their respective teachers'
organizations does not ipso factomake them authorized representatives of such
organizations as contemplated by Section 9 of RA 4670. Under this section, the
teachers' organization possesses the right to indicate its choice of representative to
be included by the DECS in the investigating committee. Such right to designate
cannot be usurped by the secretary of education or the director of public schools or
their underlings. In the instant case, there is no dispute that none of the teachers
appointed by the DECS as members of its investigating committee was ever
designated or authorized by a teachers' organization as its representative in said
committee.
Contrary to petitioners' asseverations, 16 RA 4670 is applicable to this case. It has
not been expressly repealed by the general law PD 807, which was enacted later,
nor has it been shown to be inconsistent with the latter. It is a fundamental rule of
statutory construction that "repeals by implication are not favor. An implied repeal
will not be allowed unless it is convincingly and unambiguously demonstrated that
the two laws are so clearly repugnant and patently inconsistent that they cannot
co-exist. This is based on the rationale that the will of the legislature cannot be
overturned by the judicial function of construction and interpretation. Courts
cannot take the place of Congress in repealing statutes. Their function is to try to
harmonize, as much as possible, seeming conflicts in the laws and resolve doubts in
favor of their validity and co-existence." 17 Thus, a subsequent general law does not
repeal a prior special law, "unless the intent to repeal or alter is manifest, although
the terms of the general law are broad enough to include the cases embraced in the
special law." 18
The aforementioned Section 9 of RA 4670, therefore, reflects the legislative intent
to impose a standard and a separate set of procedural requirements in connection
with administrative proceedings involving public schoolteachers. Clearly, private
respondents' right to due process of law requires compliance with these
requirements laid down by RA 4670. Verba legis non est recedendum.
Hence, Respondent Court of Appeals, through Mr. Justice Vicente V. Mendoza who
is now a member of this Court, perceptively and correctly stated:
Respondent-appellants argue that the Magna Carta has been
superseded by the Civil Service Decree (P.D. No. 807) and that
pursuant to the latter law the head of a department, like the DECS
secretary, or a regional director, like the respondent-appellant
John Doe (not his real name), can file administrative charges
against a subordinate, investigate him and take disciplinary action
against him if warranted by his findings. Respondent-appellants
cite in support of their argument the following provisions of the
Civil Service Decree (P.D. No. 807).
Sec. 37. Disciplinary Jurisdiction. —
xxx xxx xxx
b) The heads of departments, agencies and
instrumentalities. . . shall have jurisdiction to
investigate and decide matters involving
disciplinary action against officers and
employees under their jurisdiction. . . .
Sec. 38. Procedure in Administrative Cases
Against Non-Presidential Appointees. —
a) Administrative Proceedings may be
commenced against a subordinate officer or the
employee by the head of department or officer
of equivalent rank, or head of local government,
or chiefs of agencies, or regional directors, or
 upon sworn, written complaint of any other
persons.
There is really no repugnance between the Civil Service Decree
and the Magna Carta for Public School Teachers. Although the
Civil Service Decree gives the head of department or the regional
director jurisdiction to investigate and decide disciplinary matters,
the fact is that such power is exercised through committees. In
cases involving public school teachers, the Magna Carta provides
that the committee be constituted as follows:
Sec. 9. Administrative Charges. —
Administrative charges against a teacher shall
be heard initially by a committee composed of
the corresponding School Superintendent of the
Division or a duly authorized representative who
would at least have the rank of a division
supervisor, where the teacher belongs, as
chairman, a representative of the local or, in its
absence, any existing provincial or national
teacher's organization and a supervisor of the
Division, the last two to be designated by the
Director of Public Schools. The committee shall
submit its findings, and recommendations to the
Director of Public Schools within thirty days
from the termination of the hearings: Provided,
however, that where the school superintendent
is the complainant or an interested party, all the
members of the committee shall be appointed
by the Secretary of Education.
Indeed, in the case at bar, neither the DECS [s]ecretary nor the
DECS-NCR regional director personally conducted the
investigation but entrusted it to a committee composed of a
division supervisor, secondly and elementary school teachers, and
consultants. But there was no representative of a teachers
organization. This is a serious flaw in the composition of the
committee because the provision for the representation of a
teachers organization is intended by law for the protection of the
rights of teachers facing administrative charges.
There is thus nothing in the Magna Carta that is in any way
inconsistent with the Civil Service Decree insofar as procedures
for investigation is concerned. To the contrary, the Civil Service
Decree, [S]ec. 38(b) affirms the Magna Carta by providing that the
respondent in an administrative case may ask for a "formal
investigation," which was what the teachers did in this case by
questioning the absence of a representative of a teachers
organization in the investigating committee.
The administrative committee considered the teachers to have
waived their right to a hearing after the latter's counsel walked
out of the preliminary hearing. The committee should not have
made such a ruling because the walk out was staged in protest
against the procedures of the committee and its refusal to give
the teachers' counsel a copy of the guidelines. The committee
concluded its investigation and ordered the dismissal of the
teachers without giving the teachers the right to full access of the
evidence against them and the opportunity to defend themselves.
Its predisposition to find petitioner-appellees guilty of the charges
was in fact noted by the Supreme Court when in its resolution in
G.R. No. 101943 (Rosario Septimo v. Judge Martin Villarama, Jr.) it
stated:
The facts and issues in this case are similar to
the facts and issues in Hon. Isidro Cariño, et al.
v. Hon. Carlos C. Ofilada, et al. G.R. No. 100206,
August 22, 1961.
As in the Cariño v. Ofilada case, the officials of
the Department of Culture and Education are
predisposed to summarily hold the petitioners
guilty of the charges against them. In fact, in this
case Secretary Cariño, without awaiting formal
administrative procedures and on the basis of
reports and "implied admissions" found the
petitioners guilty as charged and dismissed
them from the service in separate decisions
dated May 16, 1997 and August 6, 1991. The
teachers went to court. The Court dismissed the
case. 19
Furthermore, this Court sees no valid reason to disregard the factual findings and
conclusions of the Court of Appeals. It is not our function "to assess and evaluate all
over again the evidence, testimonial and documentary, adduced by the parties
particularly where, such as here, the findings of both the trial court and the
appellate court coincide." 20

It is as clear as day to us that the Court of Appeals committed to reversible error in

affirming the trial court's decision setting aside the questioned orders of
petitioners; and ordering the unqualified reinstatement of private respondents and
the payment of them of salaries, allowances, bonuses and other benefits
that accrued to their benefit during the entire duration of their suspension or
dismissal. 21 Because the administrative proceedings involved in this case are void,
no delinquency or misconduct may be imputed to private respondents. Moreover,
the suspension or dismissal meted on them is baseless. Private respondents should,
as a consequence, be reinstated 22 and awarded all monetary benefits that may
have accrued to them during the period of their unjustified suspension or
dismissal. 23 This Court will never countenance a denial of the fundamental right to
due process, which is a cornerstone of our legal system.

WHEREFORE, premises considered, the petition is hereby DENIED for its utter
failure to show any reversible error on the part of the Court of Appeals. The assailed
Decision is thus AFFIRMED.

SO ORDERED.
G.R. No. 89687 September 26, 1990
MARIA B. LUPO, petitioner,
vs
ADMINISTRATIVE ACTION BOARD (AAB) (Department of Transportation &
Communications Republic of the Philippines) and JUSTICE ONOFRE A.
VILLALUZ, respondents.
Baga, Castronuevo, Balitaan & Associates for petitioner.
PARAS, J.:
In this petition for prohibition, petitioner seeks the issuance of an order or writ of
prohibition which would direct public respondents Administrative Action Board and
Chairman Onofre A. Villaluz to permanently desist from assuming jurisdiction over
Adm. Case No. AAB-034-88 until the same is finally disposed of by the Telecoms
Office, Region V at Legaspi City and to refrain from issuing orders setting the
aforecited case for hearing.
on which the Telecom Office was to be constructed. This inquiry of Ignacio B.
Arroyo was dismissed for lack of merit on September 16, 1987.
It appears that the basis for the complaint of Fructuoso Arroyo from whom Ignacio
sought assistance was petitioner's exclusion of certain names of newly hired
employees in Region V who appeared related to certain ranking officials of the
region, for the purpose of keeping under wraps the appointment of said employees
from Ignacio Arroyo who had previously complained of the alleged illegal
termination of his niece Nenita A. Noceda. Petitioner had to falsify the list which
she submitted in compliance with Regional Director Morante's Confidential
Memorandum to the alleged prejudice of Noceda and for the purpose of protecting
her future interest in the sense that those excluded (who should have been
included) were close relatives of ranking officials of the Telecommunications Office
of Region V. Telecom Investigator Florencio Calapano, acting on the unverified
complaint of Fructuoso Arroyo, conducted an informal fact-finding inquiry and
came out with a Memorandum recommending that petitioner be sternly warned
that a repetition of a similar offense in the future would be dealt with more
drastically and that the case should be considered closed.

Based solely on the aforesaid Memorandum, the Secretary of the Department of

Petitioner substantially assails the Resolution dated September 30, 1988 of then
Transportation and Communications handed down a Resolution on September 30,
Secretary Rainerio O. Reyes of the Department of Transportation and
1988 finding petitioner "guilty as charged" and suspending her for one year and
Communications which suspended her for one year and disqualified her for
disqualify her for promotion for a period of one year. Petitioner moved for
promotion for a period of one year and also, the Order of July 5, 1989 of Chairman
reconsideration of the resolution but the same was denied. She thus appealed the
Onofre A. Villaluz of the Administrative Action Board of said department which set
resolution and order of denial of the motion for reconsideration to the Civil Service
Adm. Case No. AAB-034-88 for trial.
Commission for review, anchoring her appeal on lack of due process in the
proceedings.
The prefatory facts are:
On March 2, 1989 the Civil Service Commission, thru its Merit Systems Board, issued
On November 5, 1987, Fructuoso B. Arroyo, OIC/CDO, Message Center and then
the Order setting aside the resolution of the Department of Transportation and
CDO of Telecom Office stationed at Buhi, Camarines Sur, filed a complaint for
Communications and remanding the case to the Telecom Office of Region V for
Dishonesty Thru Falsification (Multiple) of Official Documents against Maria B. Lupo,
further investigation to conform with the procedural requirements of due process.
herein petitioner, as Chief of Personnel Section, Telecom Office, Region V at Legaspi
City. The complaint was based on the alleged exclusion of several names from the
Instead of complying with the above order, respondent Chairman Villaluz of the
Certification (on the list of employees) submitted by petitioner in compliance with a
AAB issued the Order of July 5, 1989 setting the case for trial on August 3, 1989.
Confidential Memorandum of Director Claro Morante.

On August 2, 1989, petitioner filed a Manifestation and Motion informing

The aforesaid complaint was actually triggered off by the inquiry of Ignacio B.
respondent Villaluz that no formal charge had been instituted by the
Arroyo, brother of complainant Fructuoso B. Arroyo, into the alleged illegal
Telecommunications Office against her and respondents, therefore, had no
termination of the former's niece, Nenita Arroyo Noceda, as a daily wage clerk at
jurisdiction over the case. Respondents denied said manifestation and motion for
Buhi Telecom Exchange in Camarines Sur, in violation of a contract previously
lack of merit in the Order of August 7, 1989 and again set the case for hearing on
entered into between a certain Gloria D. Palermo, lot donor and former Bureau
August 23, 1989.
Director Ceferino S. Carreon, donee of the lot. The lot is located at Sta. Clara, Buhi
Hence, this petition.
Petitioner avers that respondent AAB never acquired jurisdiction over Adm. Case
No. AAB-034-88 because of the absence of a formal charge against her and that the
proceedings conducted by Regional Investigator Florencio Calapano was a mere
fact-finding inquiry.
Respondent Chairman of the AAB however, contends that the Order of the Merit
Systems Board of the Civil Service Commission was rendered without lawful
authority since petitioner's appeal to said Board was filed when the assailed
resolution had already become final and executory; that the Board, not having
acquired jurisdiction to entertain the appeal for having been filed beyond the
reglementary period could not have legally rendered its decision in the said
administrative case. Likewise, respondents claim that Regional Office No. V could no
longer take cognizance of the case as per order of the Merit Systems Board for the
reason that the decision had already become final and executory.
Complaints against employees, like petitioner herein, who belong to the Civil
Service Career System are still governed by P.D. No. 807. This mandate of P.D. No.
807 has been recognized and implemented by respondent Administrative Action
Board when it declared in Office Order No. 88-318 dated July 1, 1988 that the Board
shall observe the pertinent civil service rules and policies designed to expedite
action on cases referred to it. (Emphasis supplied)
The pertinent provisions of the aforecited Civil Service Law read as follows:
SECTION 37. Disciplinary Jurisdiction. — (a) The Commission shall
decide upon appeal all administrative disciplinary cases involving
the imposition of a penalty of suspension for more than thirty
days, or fine in an amount, exceeding thirty days' salary, demotion
in rank or salary or transfer, removal or dismissal from office. A
complaint may be filed directly with the Commission by a private
citizen against a government official or employee in which case it
may hear any department or agency or and decide the case or it
may deputize official or group of officials to conduct the
investigation. The results of the investigation shall be submitted
to the Commission with recommendation as to the penalty to be
imposed or other action to be taken.
(b) The heads of departments, agencies and instrumentalities,
provinces, cities and municipalities shall have jurisdiction to
investigate and decide matters involving disciplinary action
against officers and employees under their jurisdiction. Their
decisions shall be final in case the penalty imposed is suspension
for not more than thirty days or fine in an amount not exceeding
thirty days' salary. In case the decision rendered by a bureau or
office head is appealable to the Commission, the same may be
initially appealed to the department and finally to the Commission
and pending appeal, the same shall be executory except when the
penalty is removal, in which case the same shall be executory only
after confirmation by the department head.
(c) An investigation may be entrusted to regional director or
similar officials who shall make the necessary report and
recommendation to the chief of bureau or office or department
within the period specified in Paragraph (d) of the following
Section.
(d) An appeal shall not stop the decision from being executory,
and in case the penalty is suspension or removal, the respondent
shall be considered as having been under preventive suspension
during the pendency of the appeal in the event he wins an appeal.
SEC. 38. Procedure in Administrative Cases Against Non-
Presidential Appointees. — a) Administrative proceedings may be
commenced against a subordinate officer or employee by the
head of department or office of equivalent rank, or head of local
government, or chiefs of agencies, or regional directors, or upon
sworn, written complaint of any other persons.
(b) In the case of a complaint filed by any other persons, the
complainant shall submit sworn statements covering his
testimony and those of his witnesses together with his
documentary evidence. If on the basis of such papers a prima
facie case is found not to exist, the disciplining authority shall
dismiss the case. If a prima facie case exist, he shall notify the
respondent in writing, of the charges against the latter, to which
shall be attached copies of the complaint, sworn statements and
other documents submitted, and the respondent shall be allowed
not less than seventy-two hours after receipt of the complaint to
answer the charges in writing under oath, together with
supporting sworn statements and documents, in which he shall
indicate whether or not he elects a formal investigation if his
answer is not considered satisfactory. If the answer is found
satisfactory, the disciplining authority shall dismiss the case.
 (c) Although a respondent does not request a formal
investigation, one shall nevertheless be conducted when from the
allegations of the complaint and the answer of the respondent,
including the supporting documents, the merits of the case
cannot be decided judiciously without conducting such an
investigation. . . .
Petitioner's contentions appear meritorious.
It should be noted that under Section 37 (b) as aforequoted, the decisions of heads
of departments become final only in cases where the penalty imposed is suspension
for not more than thirty (30) days or fine in an amount not exceeding thirty (30)
days' salary. In the case, therefore, of petitioner who had been made to suffer the
penalty of suspension for one (1) year, such penalty should not have been
implemented without the appeal to the Civil Service Commission for proper review.
Notably, paragraph (a) of the above Section explicitly provides that the Commission
shall decide upon appeal all administrative disciplinary cases involving the
imposition of a penalty of suspension for more than 30 days, or fine in an amount
exceeding 30 days' salary. Clearly, the enforcement of the penalty imposed upon
petitioner under the resolution of the Secretary of the Department of
Transportation and Communications was premature.
From the very start, the basis upon which this case was investigated had been
defective and irregular. For, the letter-complaint of Fructuoso Arroyo was not
verified and yet, the same was haphazardly made the basis of the informal inquiry.
It should be stressed that par. (a) of Sec. 38 mandates that administrative
proceedings may be commenced against an employee by the head of the
department or office of equivalent rank or upon sworn written complaint of any
other person. It should also be noted that under paragraph (b) of said Section, a
respondent is given the option to elect a formal investigation of the charge against
him if his answer is not found satisfactory. In the case of petitioner, it appears that
when her answer to the unverified complaint was found unsatisfactory, she was
never given a chance to decide whether or not to submit herself to a formal
investigation.
The Memorandum of Telecom Investigator Calapano to the Regional Director is
merely recommendatory since it was only the outcome of a fact finding
investigation based on the unverified complaint. Note that the informal
investigation was only an inquiry into the alleged dishonest acts of petitioner in
which case, the Memorandum could not be made as the basis for any final
resolution of the case. The legal and proper procedure should have been for the
Regional Director of Region V, the alter ego of the department secretary to initiate
the formal complaint on the basis of the results of the inquiry of the Telecom
Investigator. Instead of observing the mandatory rules on formal investigations as
prescibed by PD No. 807, the DOTC Secretary cut corners and apparently railroaded
this case by rendering the assailed resolution.
Even the Telecom Investigator did not know what he was doing. He exceeded his
authority by imposing in the Memorandum a penalty in the form of a warning to
petitioner. His job was limited to an inquiry into the facts and a determination on
whether or not a prima facie case existed. His findings were merely preparatory to
the filing of the necessary formal administrative case by the Regional Director.
It should be noted with alarm that the Telecom Director who was supposed to
review the findings of the Telecom Investigator merely affixed his approval within
the Memorandum (p. 7 of Memorandum), thus obviously indicating that he never
reviewed the merits of the case.
It appears highly irregular that Asst. Secretary Sibal of the DOTC, in his letter dated
August 2, 1989 to Chairman Villaluz of the Administrative Action Board, informed
the latter that his Office did not file any administrative complaint against petitioner
nor had it filed a formal charge against her for whatever administrative offense.
Note that even with this letter, Chairman Villaluz proceeded to order the hearing of
this case. This is a clear indication that for lack of coordination among the DOTC
authorities and the Regional Office, the mandatory requirements of due process to
which petitioner was entitled were irreverently ignored.
Thus, in the case of Jose Rizal College v. National Labor Relations Commission (G.R.
No. 65482, December 1, 1987) this Court reiterated the "cardinal primary"
requirements of due process in administrative proceedings and these are: (1) the
right to a hearing which includes, the right to present one's case and submit
evidence in support thereof; (2) the tribunal must consider the evidence presented;
(3) the decision must have something to support itself, (4) the evidence must be
substantial, and substantial evidence means such evidence as a reasonable mind
must accept as adequate to support a conclusion; (5) the decision must be based on
the evidence presented at the hearing, or at least contained in the record and
disclosed to the parties affected; (6) the tribunal or body or any of its judges must
act on its or his own independent consideration of the law and facts of the
controversy, and not simply accept the views of a subordinate; (7) the board or
body should in all controversial questions, render its decision in such manner that
the parties to the proceeding can know the various issues involved, and the reason
for the decision rendered. (Emphasis supplied)
Evidently, respondents denied petitioner her right to a formal and full-blown
administrative proceedings which she never had.
WHEREFORE, the Resolution dated September 30, 1988 of the Secretary of the
Department of Transportation and Communications and the proceedings before the
Administrative Action Board are hereby declared NULL and VOID. The Secretary of
the DOTC is hereby directed to restore to petitioner's record of service the period
which she served under suspension and to delete from her personnel file the period
within which she was disqualified for promotion.

SO ORDERED.
G.R. No. 93868 February 19, 1991
ARDELIZA MEDENILLA, petitioner,
vs.
CIVIL SERVICE COMMISSION, AMPARO DELLOSA, ROSALINDA JURIA and MARITA
BURDEOS,respondents.
GUTIERREZ, JR., J.:
This is a petition seeking the annulment of the resolutions issued by the Civil Service
Commission which disapproved the appointment of the petitioner to the position of
Supervising Human Manpower Development Officer.
Petitioner Ardeliza Medenilla was a contractual employee of the Department of
Public Works and Highways (DPWH) occupying the position of Public Relations
Officer II.
In 1987, Medenilla was detailed as Technical Assistant in the Office of the Assistant
Secretary for Administration and Manpower Management.
Pursuant to Executive Order No. 124 dated January 30, 1987, a reorganization
ensued within the DPWH and all the positions therein were abolished. A revised
staffing pattern together with the guidelines on the selection and placement of
personnel was issued.
Included in the revised staffing pattern is the contested position of Supervising
Human Resource Development Officer.
On January 2, 1989, the petitioner was appointed to the disputed position.
On January 27, 1989, respondents Amparo Dellosa, Rosalinda Juria and Marita
Burdeos together with Matilde Angeles, Catalina Espinas, Alicia Nercelles and
Ramon Racela, all of whom are employees in the Human Resource Training and
Material Development Division, Administrative and Manpower Management
Service of the DPWH, jointly lodged a protest before the DPWH task force on
reorganization contesting the appointment of the petitioner to the position.
The protestants alleged that since they are next-in-rank employees, one of them
should have been appointed to the said position.
On August 2, 1989, the task force on reorganization dismissed the protest. The
dispositive portion of its decision reads as follows:
Premises considered, the Task Force on Reorganization Appeals finds the
instant protest of Matilde Angeles, et al. without merit and hereby
recommends to the Honorable Secretary that the appointment of Ardeliza
Medenilla to the contested position of Supervising Human Resource
Development Officer be upheld. (Rollo, p. 26)
Not satisfied, the private respondents appealed the decision to the Civil Service
Commission. The Commission found:
On the onset, it appears that protestee Medenilla does not possess the
required qualifications for the position. . . . Moreover, her eligibility is PD
907, being a cum laude graduate. Let it be considered appropriate only for
appointment to "second level positions" which require the application of
knowledge and skills within the appointee's field of study. (Rollo, p. 28-29)
xxx xxx xxx
Further, it also appears that Medenilla is a contractual employee assigned
or detailed with the Office of the Assistant Secretary for Administrations
and Manpower Management (the appointing authority) as Public Relations
Officer II, while protestants are all permanent employee of the Division
(Human Resources Planning) where the vancancy exist.
Indeed, RA 6656 does not preclude the appointment of contractuals to a
new staffing pattern, however, in the presence and availability of qualified
permanent next-in-rank employees in the organization, the latter has to be
preferred, unless a contractual employee possesses superior qualifications
that could justify her appointment. However, in this case, we see no
superior qualifications or any special reasons for preferring Medenilla over
the protestants. (Rollo, p. 29)
We find merit in the protest. While as earlier mentioned, the appointing
authority is given the wide latitude of discretion, to sustain the
appointment of Medenilla may give the appointing power unnecessary
opportunities to act capriciously and thus thwart the natural and
reasonable expectation of the officer next-in-rank to any vacant position,
to be promoted to it As held in Millares v. Subido, G.R. No. L-23281,
promulgated August 10, 1967, the Supreme Court held:
We, therefore, hold that in the event of there occurring a vacancy, the
officer next-in-rank must, as far as practicable and as the appointing
authority sees it in his best judgment and estimation, be promoted . . . and
that it is only in cases of promotion, where an employee other than the
 ranking one is promoted, is the appointing power under duty to give
"special reason or reasons" for his action . . . .
Again, the special reasons advanced by the appointing authority in this
case is (sic) not enough. Considering further that appointee is not meeting
the minimum qualification standards set by his own office, she could not
be said to possess far superior qualification than those permanent next-in-
rank employees of the Department. (Rollo, pp. 30-31)
Thus, on February 28, 1990, the Commission promulgated the assailed resolution,
the dispositive portion of which reads:
WHEREFORE, foregoing premises considered, the Commission resolved to
disapprove the promotional appointment of Ardeliza Medenilla to the
position of Supervising Human Manpower Development Officer.
Accordingly, the appointing authority may choose from among protestants
Amparo Dellosa, Marita Burdeos and Rosalinda Juria who to promote to
the said position. The Civil Service Field Office is directed to implement this
resolution accordingly." (Rollo, p. 31)
The petitioner on March 23, 1990 filed a motion for reconsideration of the
resolution. On May 30, 1990 a supplement to the Motion for Reconsideration was
also filed. However, prior thereto, the Commission on May 23, 1990 denied the
petitioner's motion for reconsideration. The pertinent portions of the denial are:
xxx xxx xxx
2. Experience of Medenilla
Medenilla alleges that the Commission failed to appreciate her 3 years and
8 months of experience directly relevant to Human Resource
Development. Looking more deeply into her experience as reflected in her
CS Form 212, we could not distinguish her experience directly relevant to
the field of Human Resource Development. The certification of a certain
Elvira H. Villania stated her duties in the Guthrie-Jensen Consultants, Inc. in
her one (1) year and (7) months as Research and Publication Officer of
working included "providing research assistance to our Management
Consultants in drawing up performance appraisal system, merit promotion
system and conducting development for our client-companies."
Notwithstanding, assuming that her 1 year and 7 months experience in the
company is relevant, yet, compared to the experience of the protestants in
the field of Human Resource Development, said experience is obviously
outweighed. There is no dispute that Medenilla has experience as a
Researcher but said experience is basically on the field of journalism and
information. (Rollo, p. 35)
xxx xxx xxx
4. Education background and eligibility of Medenilla.
. . . Notwithstanding, we are inclined to reconsider our position that the
educational background is not relevant. AB may therefore be taken as a
relevant degree for purposes of qualifying to the position. As such, her PD
907 eligibility may be considered appropriate." (Rollo, p. 37)
xxx xxx xxx
Granting for the sake of argument that the DPWH adhered to its rules
relative to reorganization, is at this point, no longer material and
controlling. What is now the issue is whether Medenilla indeed possesses
superior qualifications over any of the protestants. (Rollo, p. 38)
xxx xxx xxx
The edge of 1.30% of Medenilla over Dellosa cannot be considered by this
Commission significant enough to presume and declare that Medenilla
possesses far superior qualifications over the protestant and to warrant
the appointment of a contractual employee over a permanent employee of
the Department. (Rollo, p. 39)
Hence, this petition.
The petitioner interposes the following grounds:
I
The resolutions were issued by the Respondent Commission, without
giving notice to the petitioner of the existence of an appeal filed before the
CSC, thereby denying the petitioner due process of law.
II
The Civil Service Commission committed grave abuse of discretion
amounting to lack of jurisdiction in disapproving the appointment of the
petitioner. Its function, is limited only to determine whether the appointee
 possesses the appropriate civil service eligibility and not whether another
is more qualified than the petitioner.
Without giving due course to the petition, the Court on July 10, 1990, issued a
temporary restraining order enjoining the Commission from implementing the
assailed resolutions.
Anent the first ground, the petitioner contends that she was not notified by the Civil
Service Commission of the existence of the appeal before it. The resolutions,
therefore, were allegedly issued in violation of the petitioner's constitutionally
guaranteed due process of law.
The public respondent, on the other hand, advances the argument that what due
process abhors is not lack of previous notice but the absolute lack of opportunity to
be heard. Since the petitioner filed a motion for reconsideration, she cannot now
complain that she was deprived of due process.
The public respondent views it otherwise. The Civil Service Commission asserts that
being the Central Personnel Agency of the Government, it is the final arbiter on civil
service matters.
The Commission alleges, that, pursuant to RA 6656, the Commission is authorized
to act on appeals by aggrieved employees in the course of reorganization and,
therefore, it has the power to reverse or modify any decision brought before it on
appeal.
The petitioner's second contention is impressed with merit.
The qualification standards for the contested position are as follows:
EDUCATION EXPERIENCE CIVIL SERVICE
REQUIREMENT REQUIREMENT ELIGIBILITY

The petitioner's first contention is without merit. Bachelor's degree 2 years of Manpower-Youth

"Due process of law implies the right of the person affected thereby to be present relevant to the job experience in Development
before the tribunal which pronounces judgment upon the question of life, liberty,
and property in its most comprehensive sense; to be heard,by testimony or
with at least human resource Officer
otherwise, and to have the right of controverting, by proof, every material fact
which bears on the question of the light in the matter involved." (Black's Law
9 units in post development Manpower
Dictionary, 4th Edition, p. 590)

Development
The essence of due process is the opportunity to be heard. The presence of a party
is not always the cornerstone of due process. (Asprec v. Itchon, 16 SCRA 921 [1966];
Auyong Hian v. Court of Tax Appeals, 59 SCRA 110 [1974]; Assistant Executive Officer
Secretary for Legal Affairs of the Office of the President of the Philippines v. Court
of Appeals, G.R. No. 76761, January 9, 1989). What the law prohibits is not the Relevant RA
absence of previous notice but the absolute absence thereof and lack of
opportunity to be heard. (Tajonero v. Lamarosa, 110 SCRA 438 [1981]) 1080

In the case at bar, any defect was cured by the filing of a motion for Relevant
reconsideration. (see De Leon v. Comelec, 129 SCRA 117 [1984])
Second Level
The second contention of the petitioner alleges that the Commission acted with
grave abuse of discretion in disapproving her appointment. Eligibility

Career Service
 (Professional)
First Grade
Supervisor
It is not disputed that the petitioner possesses the appropriate civil service eligibility
and requisite educational background. The public respondent itself, in its resolution
dated May 23, 1990, considered the petitioner's PD No. 907 eligibility appropriate
for the position. (Rollo, p. 37)
The controversy then centers on the experience of the petitioner.
The Commission contends that the experience of Medenilla is basically in the field
of journalism and not in Human Resource Development. The Commission also
alleges that since the petitioner is merely a contractual employee, in the absence of
superior qualifications, the private respondents must be preferred not only for the
reason that they are permanent career service employees but most especially
because they are next-in-rank to the disputed position.
She was rated and ranked number one in the Trainor's Training Program
(120 hours) conducted for the DPWH by the Phil-Tao, Inc., a private firm.
Ms. Dellosa was ranked number 7, Mrs. Juria was ranked number 10; Mrs.
Burdeos did not attend the seminar. This training program was undertaken
to strengthen the capabilities of HRD personnel, and to make them more
effective in the discharge of their functions.
She is a recipient of a special commendation, given by Executive Director
Remedios I. Rikken of the National Commission in the Role of Filipino
Woman, for her efficiency and exemplary performance as a facilitator in
the conduct of the workshops during the Second Congress of Women in
Government. (Letter of Ms. Rikken addressed to Sec. Estuar attached as
ANNEX "B".).
She obtained in her on-going MBA studies at the De La Salle University,
which she pursued as an entrance scholar, the highest grade of 4.0,
equivalent to "Excellent" in 2 HRD related subjects –– Organizational
Management –– which call for the integration of concepts with concrete
experience.

She participated in the preparation and dissemination of the corporate

In support of its argument, the Commission cited in the disputed resolution, the
planning processes installed and institutionalized in the DPWH. Corporate
case of Millares v. Subido, 20 SCRA 954 where this Court held:
Planning was introduced by Secretary Fiorello R. Estuar and is now being
implemented in all government offices as instructed by the President.
. . . A vacant position shall be filled by promotion of the ranking officer or
employee. And only where, for special reason or reasons of which the
She conducted orientation/reorientation courses in DPWH Regional Offices
affected officer or employee will be notified, this mode of recruitment on
on (a) Management By Objectives and Results Evaluation, the Performance
selection cannot be observed, that the position may be filled by transfer,
Appraisal System, and (b) a specifically designed Performance Appraisal
or re-employment, or by getting from the certified list of appropriate
System for DPWH District Engineers and Division Chiefs, being officially
eligibles, in that order.
used by the DPWH.
Finally, the public respondent advances the view that, since the Revised
She participated in the conceptualizing and drafting of the Department
Administrative Code of 1987 now provides that the Commission shall "take
Order on the DPWH Incentives and Awards System, set up in compliance
appropriate action on all appointment" its authority, therefore, is no longer limited
with RA No. 6713." (Rollo, p. 63)
to the mere approval or disapproval of appointments submitted to it.

The public respondent failed to consider that the petitioner, in her one year and
A careful review of the records of the case, will reveal that the petitioner possesses
seven months experience with Guthrie-Jensen was engaged in research relating to
the requisite experience for the contested position.
performance appraisal systems and merit promotion systems which duties are all
related to Human Resource Development.
The petitioner, not only was a cum laude graduate from the University of the
Philippines, she has also acquired plenty of experience in the field of Human
Precisely, it was because of her experience with Guthrie-Jensen that the petitioner
Resource Development, to wit:
was detailed from January 1987 until December 1988 in the Office of the Assistant
Secretary for Administration and Manpower Management, where she was asked to
assist in human resource planning.
The rejoinder filed during the proceedings before the Commission, by the Assistant
Secretary for Administrative and Manpower Management, Carolina Mangawang, is
very revealing. The disputed position requires of the holder of the office, skills in
human resource developmental planning, research and statistics. The petitioner
possesses these skills in more than appropriate quantities.
The argument of the public respondent that the petitioner must possess superior
qualifications in order to be preferred over the private respondents deserves no
credit.
It can be readily seen that the petitioner possesses superior qualifications. As earlier
stated, she is a cum laude graduate of the University of the Philippines. She was
ranked No. 1 in the department wide training program handled by a private firm.
Two of the respondents were ranked way below while a third did not even
participate. She was commended for exemplary performance as facilitator during
the Second Congress of Women in Government. She received the highest grades
from De la Salle University in her MBA studies. She helped draft the human
resource program for the entire DPWH. Inspire of her being a new employee, she
was assigned to conduct seminars on Performance Appraisal Systems and on
Management by Objectives and Results for the DPWH. She was precisely drafted
from a private firm to assist in human resource planning for the DPWH. Her work is
apparently highly satisfactory as the top administrators of the DPWH not only
appointed her but have asked the respondent Commission to validate the
appointment.
The respondents rely on Section 4 of R.A. 6656, which reads:
xxx xxx xxx
Sec. 4. Officers and employees holding permanent appointments shall be
given preference for appointment to new positions in the approved
staffing pattern comparable to their former positions or if there are not
enough comparable positions, to position next lower in rank.
Undoubtedly, old employees should be considered first. But it does not necessarily
follow that they should then automatically be appointed.
The preference given to permanent employees assumes that employees working in
a Department for longer periods have gained not only superior skills but also
greater dedication to the public service. This is not always true and the law,
moreover, does not preclude the infusion of new blood, younger dynamism, or
necessary talents into the government service. If, after considering all the current
employees, the Department Secretary cannot find among them the person he
needs to revive a moribund office or to upgrade second rate performance, there is
nothing in the Civil Service Law to prevent him from reaching out to other
Departments or to the private sector provided all his acts are bona fide for the best
interest of the public service and the person chosen has the needed qualifications.
In the present case, there is no indication that the petitioner was chosen for any
other reason except to bring in a talented person with the necessary eligibilities and
qualifications for important assignments in the Department.
The reason behind P.D. No. 907 (which grants civil service eligibility to college
graduates with at least cum laudehonors) of attracting honor graduates into the
public service would be negated if they always have to start as Clerk I and wait for
hundreds of deadwood above them to first go into retirement before they can hope
for significant and fulfilling assignments.
The Commission's reliance on the dictum in Millares v. Subido, 20 SCRA 954 [19671
is misplaced. The ruling in Millares has already been superseded by later decisions.
We have already held in cases subsequent to Millares that the next-in-rank rule is
not absolute; it only applies in cases of promotion (see Pineda v. Claudio, 28 SCRA
34 [19691). And even in promotions, it can be disregarded for sound reasons made
known to the next-in-rank. The appointing authority, under the Civil Service Law, is
allowed to fill vacancies by promotion, transfer of present employees,
reinstatement, reemployment, and appointment of outsiders who have appropriate
civil service eligibility, not necessarily in that order. (see Pineda v. Claudio, supra;
Luego v. Civil Service Commission, 143 SCRA 327 [1986]) There is no legal fiat that a
vacancy must be filled only by promotion; the appointing authority is given wide
discretion to fill a vacancy from among the several alternatives provided for by law.
In this case, the contested position was created in the course of
reorganization.1âwphi1 The position appears to be a new one. The applicability,
therefore, of the next-in-rank rule does not come in clearly. Besides, as earlier
stated, said rule is not absolute. There are valid exceptions.
Granting for the sake of argument that the case involves a promotional
appointment, the next-in-rank rule must give way to the exigencies of the public
service. The intent of the Civil Service Laws not merely to bestow upon permanent
employees the advantage arising from their long employment but most specially, it
is to foster a more efficient public service. Any other factor must, therefore, yield to
the demand for an effective government, which necessarily entails the appointment
of competent, qualified and proficient personnel. The deliberation of this Court in
the case of Aguilar v. Nieva, Jr., 40 SCRA 113 [19711 is illuminating, to wit:
 xxx xxx xxx WHEREFORE, the petition is hereby GRANTED. The resolutions issued by the Civil
Service Commission dated February 28, 1990 and May 23, 1990 are SET ASIDE. The
. . . It is not enough that an aspirant is qualified and eligible or that he is restraining order issued by this Court on July 10, 1990 is made permanent.
next-in-rank or in line for promotion, albeit by passive prescription. It is just
necessary, in order for public administration to be dynamic and responsive SO ORDERED.
to the needs of the times, that the local executive be allowed the choice of
men of its confidence,provided they are qualified and eligible, who in his
best estimation are possessed of the requisite reputation, integrity,
knowledgeability, energy and judgment. (Emphasis supplied, p. 121)

The point raised by the public respondent that, pursuant to the Revised
Administrative Code of 1987, it is authorized to revoke appointments, must
necessarily fail.

We have already ruled on several occasions that when the appointee is qualified,
the Civil Service Commission has no choice but to attest to the appointment. It is
not within its prerogative to revoke an appointee on the ground that substituting its
judgment for that of the appointing power, another person has better qualifications
for the job.

Once the function is discharged, the participation of the Civil Service Commission in
the appointment process ceases. The only purpose of attestation is to determine
whether the appointee possesses the requisite civil service eligibility, no more than
that is left for the Civil Service Commission to do. (see Luego v. CSC, 143 SCRA 327
[1986]; Central Bank of the Philippines v. CSC, 171 SCRA 744 [1989]; Secretary Oscar
Orbos v. CSC, G.R. No. 92561, September 12, 1990; Gaspar v. CSC, G.R. No. 90799,
October 18, 1990).

The rationale of this doctrine is that the power of appointment is essentially

discretionary. The discretion to be granted to the appointing authority, if not
plenary must at least be sufficient.

After all, not only is the appointing authority the officer primarily responsible for
the administration of the office but he is also in the best position to determine who
among the prospective appointees can efficiently discharge the functions of the
position (see Villegas v. Subido, 30 SCRA 498 [1969]). As between the Commission
which only looks into paper qualifications and the appointing authority who views
not only the listed qualifications but also the prospective appointees themselves,
the work to be accomplished, the objectives of the Department, etc., the Court
sustains the Department Head.
G.R. No. 126625 September 18, 1997
KANLAON CONSTRUCTION ENTERPRISES CO., INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, 5TH DIVISION, and BENJAMIN
RELUYA, JR., EDGARDO GENAYAS, ERNESTO CANETE, PROTACIO ROSALES,
NESTOR BENOYA, RODOLFO GONGOB, DARIO BINOYA, BENJAMIN BASMAYOR,
ABELARDO SACURA, FLORENCIO SACURA, ISABELO MIRA, NEMESIO LACAR,
JOSEPH CABIGKIS, RODRIGO CILLON, VIRGILIO QUIZON, GUARINO EVANGELISTA,
ALEJANDRO GATA, BENEDICTO CALAGO, NILO GATA, DIONISIO PERMACIO,
JUANITO SALUD, ADOR RIMPO, FELIPE ORAEZ, JULIETO TEJADA, TEOTIMO LACIO,
ONOFRE QUIZON, RUDY ALVAREZ, CRESENCIO FLORES, ALFREDO PERMACIO,
CRESENCIO ALVIAR, HERNANI SURILLA, DIOSDADO SOLON, CENON ALBURO,
ZACARIAS ORTIZ, EUSEBIO BUSTILLO, GREGORIO BAGO, JERRY VARGAS, EDUARDO
BUENO, PASCUAL HUDAYA, ROGELIO NIETES, and REYNALDO
NIETES, respondents.
PUNO, J.:
In this petition for certiorari, petitioner Kanlaon Construction Enterprises Co., Inc.
seeks to annul the decision of respondent National Labor Relations Commission,
Fifth Division and remand the cases to the Arbitration Branch for a retrial on the
merits.
Petitioner is a domestic corporation engaged in the construction business
nationwide with principal office at No. 11 Yakan St., La Vista Subdivision, Quezon
City. In 1988, petitioner was contracted by the National Steel Corporation to
construct residential houses for its plant employees in Steeltown, Sta. Elena, Iligan
City. Private respondents were hired by petitioner as laborers in the project and
worked under the supervision of Engineers Paulino Estacio and Mario Dulatre. In
1989, the project neared its completion and petitioner started terminating the
services of private respondents and its other employees.
In 1990, private respondents filed separate complaints against petitioner before
Sub-Regional Arbitration Branch XII, Iligan City. Numbering forty-one (41) in all, they
claimed that petitioner paid them wages below the minimum and sought payment
of their salary differentials and thirteenth-month pay. Engineers Estacio and Dulatre
were named co-respondents.
Some of the cases were assigned to Labor Arbiter Guardson A. Siao while the others
were assigned to Labor Arbiter Nicodemus G. Palangan. Summonses and notices of
preliminary conference were issued and served on the two engineers and petitioner
through Engineer Estacio. The preliminary conferences before the labor arbiters
were attended by Engineers Estacio and Dulatre and private respondents. At the
conference of June 11, 1990 before Arbiter Siao, Engineer Estacio admitted
petitioner's liability to private respondents and agreed to pay their wage
differentials and thirteenth-month pay on June 19, 1990. As a result of this
agreement, Engineer Estacio allegedly waived petitioner's right to file its position
paper.1 Private respondents declared that they, too, were dispensing with their
position papers and were adopting their complaints as their position paper. 2
On June 19, 1990, Engineer Estacio appeared but requested for another week to
settle the claims. Labor Arbiter Siao denied this request. On June 21, 1990, Arbiter
Siao issued an order granting the complaint and directing petitioner to pay private
respondents' claims. Arbiter Siao held:
xxx xxx xxx
Considering the length of time that has elapsed since these cases were
filed, and what the complainants might think as to how this branch
operates and/or conducts its proceedings as they are now restless, this
Arbiter has no other alternative or recourse but to order the respondent to
pay the claims of the complainants, subject of course to the computation
of the Fiscal Examiner II of this Branch pursuant to the oral manifestation
of respondent. The Supreme Court ruled: "Contracts though orally made
are binding on the parties." (Lao Sok v. Sabaysabay, 138 SCRA 134).
Similarly, this Branch would present in passing that "a court cannot decide
a case without facts either admitted or agreed upon by the parties or
proved by evidence." (Yu Chin Piao v. Lim Tuaco, 33 Phil. 92; Benedicto v.
Yulo, 26 Phil. 160)
WHEREFORE, premises considered, the respondent is hereby ordered to
pay the individual claims of the above-named complainants representing
their wage differentials within ten (10) days from receipt of this order.
The Fiscal Examiner II of this Branch is likewise hereby ordered to compute
the individual claims of the herein complainants.
SO ORDERED.3
On June 29, 1990, Arbiter Palangan issued a similar order, thus:
When the above-entitled cases were called for hearing on June 19, 1990 at
10:00 a.m. respondent thru their representative manifested that they were
 willing to pay the claims of the complainants and promised to pay the
same on June 28, 1990 at 10:30 a.m.
However, when these cases were called purposely to materialize the
promise of the respondent, the latter failed to appear without any valid
reason.
Considering therefore that the respondent has already admitted the claims
of the complainants, we believe that the issues raised herein have become
moot and academic.
WHEREFORE premises considered, the above-entitled cases are hereby
ordered Closed and Terminated, however, the respondent is hereby
ordered to pay the complainants their differential pay and 13th-month pay
within a period of ten (10) days from receipt hereof based on the
employment record on file with the respondent.
SO ORDERED.4
Petitioner appealed to respondent National Labor Relations Commission. It alleged
that it was denied due process and that Engineers Estacio and Dulatre had no
authority to represent and bind petitioner. Petitioner's appeal was filed by one Atty.
Arthur Abundiente.
In a decision dated April 27, 1992, respondent Commission affirmed the orders of
the Arbiters.
Petitioner interposed this petition alleging that the decision of respondent
Commission was rendered without jurisdiction and in grave abuse of discretion.
Petitioner claims that:
I the case personally by the bailiff or duly authorized public officer within
THE QUESTIONED DECISION RENDERED BY THE HONORABLE COMMISSION
IS A NULLITY, IT HAVING BEEN ISSUED WITHOUT JURISDICTION;
II
PUBLIC RESPONDENT NATIONAL LABOR RELATIONS COMMISSION
GRAVELY ABUSED ITS DISCRETION IN ARBITRARILY, CAPRICIOUSLY AND
WHIMSICALLY MAKING THE FOLLOWING CONCLUSIONS BASED NOT ON
FACTS AND BUT ON SPECULATION, SURMISE AND EVIDENCE CONJECTURE:
A. Petitioner was deprived of the constitutional right to
due process of law when it was adjudged by the NLRC
liable without trial on the merits and without its
knowledge;
B. The NLRC erroneously, patently and unreasonably
interpreted the principle that the NLRC and its
Arbitration Branch are not strictly bound by the rules of
evidence;
C. There is no legal nor actual basis in the NLRC's ruling
that petitioner is already in estoppel to disclaim the
authority of its alleged representatives.
D. The NLRC committed manifest error in relying merely
on private, respondents' unsubstantiated complaints to
hold petitioner liable for damages.5
In brief, petitioner alleges that the decisions of the labor arbiters and respondent
Commission are void for the following reasons: (1) there was no valid service of
summons; (2) Engineers Estacio and Dulatre and Atty. Abundiente had no authority
to appear and represent petitioner at the hearings before the arbiters and on
appeal to respondent Commission; (3) the decisions of the arbiters and respondent
Commission are based on unsubstantiated and self-serving evidence and were
rendered in violation of petitioner's right to due process.
Service of summons in cases filed before the labor arbiters is governed by Sections
4 and 5 of Rule IV of the New Rules of Procedure of the NLRC. They provide:
Sec. 4. Service of Notices and Resolutions. — (a) Notices or summons and
copies of orders, resolutions or decisions shall be served on the parties to
three (3) days from receipt thereof or by registered mail; Provided that
where a party is represented by counsel or authorized representative,
service shall be made on such counsel or authorized
representative;provided further that in cases of decision and final awards,
copies thereof shall be served on both the parties and their counsel;
provided finally, that in case where the parties are so numerous, service
shall be made on counsel and upon such number of complainants as may
be practicable, which shall be considered substantial compliance with
Article 224 (a) of the Labor Code, as amended.
xxx xxx xxx
 Sec. 5. Proof and completeness of service. — The return is prima
facie proof of the facts indicated therein. Service by registered mail is
complete upon receipt by the addressee or his agent. . . .
Under the NLRC Rules of Procedure, summons on the respondent shall be served
personally or by registered mail on the party himself. If the party is represented by
counsel or any other authorized representative or agent, summons shall be served
on such person.
It has been established that petitioner is a private domestic corporation with
principal address in Quezon City. The complaints against petitioner were filed in
Iligan City and summonses therefor served on Engineer Estacio in Iligan City. The
question now is whether Engineer Estacio was an agent and authorized
representative of petitioner.
To determine the scope or meaning of the term "authorized representative" or
"agent" of parties on whom summons may be served, the provisions of the Revised
Rules of Court may be resorted to.6
Under the Revised Rules of Court,7 service upon a private domestic corporation or
partnership must be made upon its officers, such as the president, manager,
secretary, cashier, agent, or any of its directors. These persons are deemed so
integrated with the corporation that they know their responsibilities and
immediately discern what to do with any legal papers served on them.8
In the case at bar, Engineer Estacio, assisted by Engineer Dulatre, managed and
supervised the construction project.9 According to the Solicitor General and private
respondents, Engineer Estacio attended to the project in Iligan City and supervised
the work of the employees thereat. As manager, he had sufficient responsibility and
discretion to realize the importance of the legal papers served on him and to relay
the same to the president or other responsible officer of petitioner. Summons for
petitioner was therefore validly served on him.
Engineer Estacio's appearance before the labor arbiters and his promise to settle
the claims of private respondents is another matter.
The general rule is that only lawyers are allowed to appear before the labor arbiter
and respondent Commission in cases before them. The Labor Code and the New
Rules of Procedure of the NLRC, nonetheless, lists three (3) exceptions to the
rule, viz:
Sec. 6. Appearances. — . . . .
A non-lawyer may appear before the Commission or any Labor Arbiter only
if:
(a) he represents himself as party to the case;
(b) he represents the organization or its members, provided that he shall
be made to present written proof that he is properly authorized; or
(c) he is a duly-accredited member of any legal aid office duly recognized
by the Department of Justice or the Integrated Bar of the Philippines in
cases referred thereto by the latter. . . .10
A non-lawyer may appear before the labor arbiters and the NLRC only if: (a) he
represents himself as a party to the case; (b) he represents an organization or its
members, with written authorization from them: or (c) he is a duly-accredited
member of any legal aid office duly recognized by the Department of Justice or the
Integrated Bar of the Philippines in cases referred to by the latter. 11
Engineers Estacio and Dulatre were not lawyers. Neither were they duly-accredited
members of a legal aid office. Their appearance before the labor arbiters in their
capacity as parties to the cases was authorized under the first exception to the rule.
However, their appearance on behalf of petitioner required written proof of
authorization. It was incumbent upon the arbiters to ascertain this authority
especially since both engineers were named co-respondents in the cases before the
arbiters. Absent this authority, whatever statements and declarations Engineer
Estacio made before the arbiters could not bind petitioner.
The appearance of Atty. Arthur Abundiente in the cases appealed to respondent
Commission did not cure Engineer Estacio's representation. Atty. Abundiente, in the
first place, had no authority to appear before the respondent Commission. The
appellants' brief he filed was verified by him, not by petitioner.12 Moreover,
respondent Commission did not delve into the merits of Atty. Abundiente's appeal
and determine whether Engineer Estacio was duly authorized to make such
promise. It dismissed the appeal on the ground that notices were served on
petitioner and that the latter was estopped from denying its promise to pay.
Nevertheless, even assuming that Engineer Estacio and Atty. Abundiente were
authorized to appear as representatives of petitioner, they could bind the latter
only in procedural matters before the arbiters and respondent Commission.
Petitioner's liability arose from Engineer Estacio's alleged promise to pay. A promise
to pay amounts to an offer to compromise and requires a special power of attorney
or the express consent of petitioner. The authority to compromise cannot be lightly
presumed and should be duly established by evidence.13 This is explicit from Section
7 of Rule III of the NLRC Rules of Procedure, viz:
Sec. 7. Authority to bind party. — Attorneys and other representatives of
parties shall have authority to bind their clients in all matters of procedure;
but they cannot, without a special power of attorney or express consent,
enter into a compromise agreement with the opposing party in full or
partial discharge of a client's claim.
The promise to pay allegedly made by Engineer Estacio was made at the preliminary
conference and constituted an offer to settle the case amicably. The promise to pay
could not be presumed to be a single unilateral act, contrary to the claim of the
Solicitor General.14 A defendant's promise to pay and settle the plaintiff's claims
ordinarily requires a reciprocal obligation from the plaintiff to withdraw the
complaint and discharge the defendant from liability.15 In effect, the offer to pay
was an offer to compromise the cases.
In civil cases, an offer to compromise is not an admission of any liability, and is not
admissible in evidence against the offeror.16 If this rule were otherwise, no attempt
to settle litigation could safely be made.17 Settlement of disputes by way of
compromise is an accepted and desirable practice in courts of law and
administrative tribunals.18 In fact, the Labor Code mandates the labor arbiter to
exert all efforts to enable the parties to arrive at an amicable settlement of the
dispute within his jurisdiction on or before the first hearing. 19
Clearly, respondent Commission gravely abused its discretion in affirming the
decisions of the labor arbiters which were not only based on unauthorized
representations, but were also made in violation of petitioner's right to due
process.
Section 3 of Rule V of the NLRC Rules of Procedure provides:
Sec. 3. Submission of Position Papers/Memorandum. — Should the parties
fail to agree upon an amicable settlement, in whole or in part, during the
conferences, the Labor Arbiter shall issue an order stating therein the
matters taken up and agreed upon during the conferences and directing
the parties to simultaneously file their respective verified position papers
xxx xxx xxx
After petitioner's alleged representative failed to pay the workers' claims as
promised, Labor Arbiters Siao and Palangan did not order the parties to file their
respective position papers. The arbiters forthwith rendered a decision on the merits
without at least requiring private respondents to substantiate their complaints. The
parties may have earlier waived their right to file position papers but petitioner's
waiver was made by Engineer Estacio on the premise that petitioner shall have paid
and settled the claims of private respondents at the scheduled conference. Since
petitioner reneged on its "promise," there was a failure to settle the case amicably.
This should have prompted the arbiters to order the parties to file their position
papers.
Article 221 of the Labor Code mandates that in cases before labor arbiters and
respondent Commission, they "shall use every and all reasonable means to
ascertain the facts in each case speedily and objectively and without regard to
technicalities of law or procedure, all in the interest of due process." The rule that
respondent Commission and the Labor Arbiters are not bound by technical rules of
evidence and procedure should not be interpreted so as to dispense with the
fundamental and essential right of due process. 20 And this right is satisfied, at the
very least, 'when the parties are given the opportunity to submit position
papers.21 Labor Arbiters Siao and Palangan erred in dispensing with this
requirement.
Indeed, the labor arbiters and the NLRC must not, at the expense of due process, be
the first to arbitrarily disregard specific provisions of the Rules which are precisely
intended to assist the parties in obtaining the just, expeditious and inexpensive
settlement of labor disputes.22
IN VIEW WHEREOF, the petition for certiorari is granted. The decision of the
National Labor Relations Commission, Fifth Division, is annulled and set aside and
the case is remanded to the Regional Arbitration Branch, Iligan City for further
proceedings.
SO ORDERED.
G.R. No. 110571 March 10, 1994
FIRST LEPANTO CERAMICS, INC., petitioner,
vs.
THE COURT OF APPEALS and MARIWASA MANUFACTURING, INC., respondents.
Castillo, Laman, Tan & Pantaleon for petitioner.
De Borja, Medialdea, Ata, Bello, Guevarra & Serapio for private respondent.
NOCON, J.:
Brought to fore in this petition for certiorari and prohibition with application for
preliminary injunction is the novel question of where and in what manner appeals
from decisions of the Board of Investments (BOI) should be filed. A thorough
scrutiny of the conflicting provisions of Batas Pambansa Bilang 129, otherwise
known as the "Judiciary Reorganization Act of 1980," Executive Order No. 226, also
known as the Omnibus Investments Code of 1987 and Supreme Court Circular No.
1-91 is, thus, called for.
Briefly, this question of law arose when BOI, in its decision dated December 10,
1992 in BOI Case No. 92-005 granted petitioner First Lepanto Ceramics, Inc.'s
application to amend its BOI certificate of registration by changing the scope of its
registered product from "glazed floor tiles" to "ceramic tiles." Eventually, oppositor
Mariwasa filed a motion for reconsideration of the said BOI decision while
oppositor Fil-Hispano Ceramics, Inc. did not move to reconsider the same nor
appeal therefrom. Soon rebuffed in its bid for reconsideration, Mariwasa filed a
petition for review with respondent Court of Appeals pursuant to Circular 1-91.
Acting on the petition, respondent court required the BOI and petitioner to
comment on Mariwasa's petition and to show cause why no injunction should issue.
On February 17, 1993, respondent court temporarily restrained the BOI from
implementing its decision. This temporary restraining order lapsed by its own terms
on March 9, 1993, twenty (20) days after its issuance, without respondent court
issuing any preliminary injunction.
On February 24, 1993, petitioner filed a "Motion to Dismiss Petition and to Lift
Restraining Order" on the ground that respondent court has no appellate
jurisdiction over BOI Case No. 92-005, the same being exclusively vested with the
Supreme Court pursuant to Article 82 of the Omnibus Investments Code of 1987.
On May 25, 1993, respondent court denied petitioner's motion to dismiss, the
dispositive portion of which reads as follows:
WHEREFORE, private respondent's motion to dismiss the petition
is hereby DENIED, for lack of merit.
Private respondent is hereby given an inextendible period of ten
(10) days from receipt hereof within which to file its comment to
the petition.1
Upon receipt of a copy of the above resolution on June 4, 1993, petitioner decided
not to file any motion for reconsideration as the question involved is essentially
legal in nature and immediately filed a petition for certiorariand prohibition before
this Court.
Petitioner posits the view that respondent court acted without or in excess of its
jurisdiction in issuing the questioned resolution of May 25, 1993, for the following
reasons:
I. Respondent court has no jurisdiction to entertain Mariwasa's
appeal from the BOI's decision in BOI Case No. 92-005, which has
become final.
II. The appellate jurisdiction conferred by statute upon this
Honorable Court cannot be amended or superseded by Circular
No. 1-91.2
Petitioner then concludes that:
III. Mariwasa has lost it right to appeal . . . in this case.3
Petitioner argues that the Judiciary Reorganization Act of 1980 or Batas Pambansa
Bilang 129 and Circular 1-91, "Prescribing the Rules Governing Appeals to the Court
of Appeals from a Final Order or Decision of the Court of Tax Appeals and Quasi-
Judicial Agencies" cannot be the basis of Mariwasa's appeal to respondent court
because the procedure for appeal laid down therein runs contrary to Article 82 of
E.O. 226, which provides that appeals from decisions or orders of the BOI shall be
filed directly with this Court, to wit:
Judicial relief. — All orders or decisions of the Board
(of Investments) in cases involving the provisions of this Code
shall immediately be executory. No appeal from the order or
decision of the Board by the party adversely affected shall stay
such an order or decision; Provided, that all appeals shall be filed
 directly with the Supreme Court within thirty (30) days from
receipt of the order or decision.
On the other hand, Mariwasa maintains that whatever "obvious inconsistency" or
"irreconcilable repugnancy" there may have been between B.P. 129 and Article 82
of E.O. 226 on the question of venue for appeal has already been resolved by
Circular 1-91 of the Supreme Court, which was promulgated on February 27, 1991
or four (4) years after E.O. 226 was enacted.
Sections 1, 2 and 3 of Circular 1-91, is herein quoted below:
1. Scope. — These rules shall apply to appeals from final orders or
decisions of the Court of Tax Appeals. They shall also apply to
appeals from final orders or decisions of any quasi-judicial agency
from which an appeal is now allowed by statute to the Court of
Appeals or the Supreme Court. Among these agencies are the
Securities and Exchange Commission, Land Registration Authority,
Social Security Commission, Civil Aeronautics Board, Bureau of
Patents, Trademarks and Technology Transfer, National
Electrification Administration, Energy Regulatory Board, National
Telecommunications Commission, Secretary of Agrarian Reform
and Special Agrarian Courts under RA 6657, Government Service
Insurance System, Employees Compensation Commission,
Agricultural Inventions Board, Insurance Commission and
Philippine Atomic Energy Commission.
2. Cases not covered. — These rules shall not apply to decisions
and interlocutory orders of the National Labor Relations
Commission or the Secretary of Labor and Employment under the
Labor Code of the Philippines, the Central Board of Assessment
Appeals, and other quasi-judicial agencies from which no appeal
to the courts is prescribed or allowed by statute.
3. Who may appeal and where to appeal. — The appeal of a party
affected by a final order, decision, or judgment of the Court of Tax
Appeals or of a quasi-judicial agency shall be taken to the Court of
Appeals within the period and in the manner herein provided,
whether the appeal involves questions of fact or of law or mixed
questions of fact and law. From final judgments or decisions of
the Court of Appeals, the aggrieved party may appeal by certiorari
to the Supreme Court as provided in Rule 45 of the Rules of Court.
It may be called that Section 9(3) of B.P. 129 vests appellate jurisdiction over all
final judgments, decisions, resolutions, orders or awards of quasi-judicial agencies
on the Court of Appeals, to wit:
(3) Exclusive appellate jurisdiction over all final judgments,
decisions, resolutions, orders, awards of Regional Trial Courts and
quasi-judicial agencies, instrumentalities, boards or commissions,
except those falling within the appellate jurisdiction of the
Supreme Court in accordance with the Constitution, the
provisions of this Act, and of subparagraph (1) of the third
paragraph and subparagraph (4) of the fourth paragraph of
Section 17 of the Judiciary Act of 1948.
The Intermediate Appellate Court shall have the power to try
cases and conduct hearings, receive evidence and perform any
and all acts necessary to resolve factual issues raised in cases
falling within its original and appellate jurisdiction, including the
power to grant and conduct new trials or further proceedings.
These provisions shall not apply to decisions and interlocutory
orders issued under the Labor Code of the Philippines and by the
Central Board of Assessment Appeals.
Clearly evident in the aforequoted provision of B.P. 129 is the laudable objective of
providing a uniform procedure of appeal from decisions of all quasi-judicial agencies
for the benefit of the bench and the bar. Equally laudable is the twin objective of
B.P. 129 of unclogging the docket of this Court to enable it to attend to more
important tasks, which in the words of Dean Vicente G. Sinco, as quoted in our
decision in Conde v. Intermediate Appellate Court4 is "less concerned with the
decisions of cases that begin and end with the transient rights and obligations of
particular individuals but is more intertwined with the direction of national policies,
momentous economic and social problems, the delimitation of governmental
authority and its impact upon fundamental rights.
In Development Bank of the Philippines vs. Court of Appeals,5 this Court noted that
B.P. 129 did not deal only with "changes in the rules on procedures" and that not
only was the Court of Appeals reorganized, but its jurisdiction and powers were also
broadened by Section 9 thereof. Explaining the changes, this Court said:
. . . Its original jurisdiction to issue writs of mandamus,
prohibition, certiorari and habeas corpus, which theretofore could
be exercised only in aid of its appellate jurisdiction, was expanded
by (1) extending it so as to include the writ of quo warranto, and
 also (2) empowering it to issue all said extraordinary writs
"whether or not in aid of its appellate jurisdiction." Its appellate
jurisdiction was also extended to cover not only final judgments of
Regional Trial Courts, but also "all final judgments, decisions,
resolutions, orders or awards of . . . quasi-judicial agencies,
instrumentalities, boards or commissions, except those falling
within the appellate jurisdiction of the Supreme Court in
accordance with the Constitution, the provisions of this Act, and
of sub-paragraph (1) of the third paragraph and subparagraph (4)
of the fourth paragraph of Section 17 of the Judiciary Act of
1948," it being noteworthy in this connection that the text of the
law is broad and comprehensive, and the explicitly stated
exceptions have no reference whatever to the Court of Tax
Appeals. Indeed, the intention to expand the original and
appellate jurisdiction of the Court of Appeals over quasi-judicial
agencies, instrumentalities, boards, or commissions, is further
stressed by the last paragraph of Section 9 which excludes from
its provisions, only the "decisions and interlocutory orders issued
under the Labor Code of the Philippines and by the Central Board
of Assessment Appeals."6
However, it cannot be denied that the lawmaking system of the country is far from
perfect. During the transitional period after the country emerged from the Marcos
regime, the lawmaking power was lodged on the Executive Department. The
obvious lack of deliberation in the drafting of our laws could perhaps explain the
deviation of some of our laws from the goal of uniform procedure which B.P. 129
sought to promote.
In exempli gratia, Executive Order No. 226 or the Omnibus Investments Code of
1987 provides that all appeals shall be filed directly with the Supreme Court within
thirty (30) days from receipt of the order or decision.
Noteworthy is the fact that presently, the Supreme Court entertains ordinary
appeals only from decisions of the Regional Trial Courts in criminal cases where the
penalty imposed is reclusion perpetua or higher. Judgments of regional trial courts
may be appealed to the Supreme Court only by petition for review
on certiorari within fifteen (15) days from notice of judgment in accordance with
Rule 45 of the Rules of Court in relation to Section 17 of the Judiciary Act of 1948, as
amended, this being the clear intendment of the provision of the Interim Rules that
"(a)ppeals to the Supreme Court shall be taken by petition for certiorari which shall
be governed by Rule 45 of the Rules of Court." Thus, the right of appeal provided in
E.O. 226 within thirty (30) days from receipt of the order or decision is clearly not in
consonance with the present procedure before this Court. Only decisions, orders or
rulings of a Constitutional Commission (Civil Service Commission, Commission on
Elections or Commission on Audit), may be brought to the Supreme Court on
original petitions for certiorari under Rule 65 by the aggrieved party within thirty
(30) days form receipt of a copy thereof.7
Under this contextual backdrop, this Court, pursuant to its Constitutional power
under Section 5(5), Article VIII of the 1987 Constitution to promulgate rules
concerning pleading, practice and procedure in all courts, and by way of
implementation of B.P. 129, issued Circular 1-91 prescribing the rules governing
appeals to the Court of Appeals from final orders or decisions of the Court of Tax
Appeals and quasi-judicial agencies to eliminate unnecessary contradictions and
confusing rules of procedure.
Contrary to petitioner's contention, although a circular is not strictly a statute or
law, it has, however, the force and effect of law according to settled
jurisprudence.8 In Inciong v. de Guia,9 a circular of this Court was treated as law. In
adopting the recommendation of the Investigating Judge to impose a sanction on a
judge who violated Circular No. 7 of this Court dated
September 23, 1974, as amended by Circular No. 3 dated April 24, 1975 and Circular
No. 20 dated October 4, 1979, requiring raffling of cases, this Court quoted the
ratiocination of the Investigating Judge, brushing aside the contention of
respondent judge that assigning cases instead of raffling is a common practice and
holding that respondent could not go against the circular of this Court until it is
repealed or otherwise modified, as "(L)aws are repealed only by subsequent ones,
and their violation or non-observance shall not be excused by disuse, or customs or
practice to the contrary."10
The argument that Article 82 of E.O. 226 cannot be validly repealed by Circular 1-91
because the former grants a substantive right which, under the Constitution cannot
be modified, diminished or increased by this Court in the exercise of its rule-making
powers is not entirely defensible as it seems. Respondent correctly argued that
Article 82 of E.O. 226 grants the right of appeal from decisions or final orders of the
BOI and in granting such right, it also provided where and in what manner such
appeal can be brought. These latter portions simply deal with procedural aspects
which this Court has the power to regulate by virtue of its constitutional rule-
making powers.
The case of Bustos v. Lucero11 distinguished between rights created by a substantive
law and those arising from procedural law:
Substantive law creates substantive rights . . . . Substantive rights
is a term which includes those rights which one enjoys under the
legal system prior to the disturbance of normal relations (60 C.J.,
 980). Substantive law is that part of the law which creates, defines WHEREFORE, in view of the foregoing reasons, the instant petition for certiorari and
and regulates rights, or which regulates rights and duties which prohibition with application for temporary restraining order and preliminary
give rise to a cause of action, as oppossed to adjective or remedial injunction is hereby DISMISSED for lack of merit. The Temporary Restraining Order
law, which prescribes the method of enforcing rights or obtains a issued on July 19, 1993 is hereby LIFTED.
redress for their invasion.12
SO ORDERED.
Indeed, the question of where and in what manner appeals from decisions of the
BOI should be brought pertains only to procedure or the method of enforcing the
substantive right to appeal granted by E.O. 226. In other words, the right to appeal
from decisions or final orders of the BOI under E.O. 226 remains and continues to
be respected. Circular 1-91 simply transferred the venue of appeals from decisions
of this agency to respondent Court of Appeals and provided a different period of
appeal, i.e., fifteen (15) days from notice. It did not make an incursion into the
substantive right to appeal.

The fact that BOI is not expressly included in the list of quasi-judicial agencies found
in the third sentence of Section 1 of Circular 1-91 does not mean that said circular
does not apply to appeals from final orders or decision of the BOI. The second
sentence of Section 1 thereof expressly states that "(T)hey shall also apply to
appeals from final orders or decisions of any quasi-judicial agency from which an
appeal is now allowed by statute to the Court of Appeals or the Supreme Court."
E.O. 266 is one such statute. Besides, the enumeration is preceded by the words
"(A)mong these agencies are . . . ," strongly implying that there are other quasi-
judicial agencies which are covered by the Circular but which have not been
expressly listed therein. More importantly, BOI does not fall within the purview of
the exclusions listed in Section 2 of the circular. Only the following final decisions
and interlocutory orders are expressly excluded from the circular, namely, those of:
(1) the National Labor Relations Commission; (2) the Secretary of Labor and
Employment; (3) the Central Board of Assessment Appeals and (4) other quasi-
judicial agencies from which no appeal to the courts is prescribed or allowed by
statute. Since in DBP v. CA13 we upheld the appellate jurisdiction of the Court of
Appeals over the Court of Tax Appeals despite the fact that the same is not among
the agencies reorganized by B.P. 129, on the ground that B.P. 129 is broad and
comprehensive, there is no reason why BOI should be excluded from
Circular 1-91, which is but implementary of said law.

Clearly, Circular 1-91 effectively repealed or superseded Article 82 of E.O. 226

insofar as the manner and method of enforcing the right to appeal from decisions
of the BOI are concerned. Appeals from decisions of the BOI, which by statute was
previously allowed to be filed directly with the Supreme Court, should now be
brought to the Court of Appeals.
A.M. No. MTJ-02-1404 December 14, 2004 263-C) for being frivolous and filed out of time. In that same Order, Judge Basilla
likewise required herein respondents to explain in writing why they should not be
EXEC. JUDGE HENRY B. BASILLA, complainant, dealt with administratively. In full, said Order reads:
vs.
JUDGE AMADO L. BECAMON, Clerk of Court LOLITA DELOS REYES and Junior ORDER
Process Server EDDIE DELOS REYES, MCTC, Placer-Esperanza-Cawayan,
Masbate, respondents. After considering the following facts in the record:

1. Judgment of the court a quo dated January 15, 1999 (mailed to

RESOLUTION counsels only on March 2, 1999) was received by defendants-
appellants thru counsel on March 12, 1999 (p. 369, rec.);
GARCIA, J.:
2. Motion for reconsideration of the decision by defendants-
Under consideration is the sworn letter-complaint[1] (with enclosures) dated appellants thru counsel was filed with the court a quo on March
December 6, 2000 filed with the Office of the Court Administrator by herein 15, 1999 by registered mail (p. 371, registry receipt, rec.);
complainant, Executive Judge Henry B. Basilla, of the Regional Trial Court, Branch
49, Cataingan, Masbate against herein respondents, namely: Judge Amado L. 3. Order of the court a quo dated May 7, 1999 denying the motion
Becamon of the Municipal Circuit Trial Court (MCTC) of Placer-Esperanza-Cawayan, for reconsideration (p. 381, rec.);
Masbate; his clerk of court Lolita delos Reyes; and process server Eddie delos
Reyes, charging them with gross neglect of duty and/or grave misconduct, gross 4. Motion for execution of judgment dated September 9, 1999
ignorance of the law and violation of Canon 3 of the Code of Judicial Conduct on the filed with the court a quo on September 14, 1999 (rec.);
part of respondent judge, relative to Civil Case No. 288 (MCTC Case No. 263-C),
entitled Visitacion Mahusay vda. de Du vs. Benjamin Du, et al., an action for
5. Order dated February 14, 2000 of the court a quo denying
recovery of possession and ownership of land.
motion for execution of judgment and granting defendants fifteen
(15) days to appeal (p. 400, rec.);
In an earlier administrative case filed by the same complainant against the three (3)
herein respondents, priorly docketed as A.M. No. MTJ-02-1438, entitled Exec.
6. Notice of appeal filed with the court a quo on November 3,
Judge Henry B. Basilia[2] vs. Judge Amado L. Becamon, Clerk of Court Lolita delos
1999 (p. 412, rec.);
Reyes and Process Server Eddie delos Reyes, this Court, in an en banc Resolution
promulgated on January 22, 2004 (420 SCRA 608), found respondent Judge Amado
L. Becamon liable for gross ignorance of the law and procedure and imposed upon 7. Appeal fee paid after four (4) months on March 14, 2000 (p.
427, rec.); and
him a fine in the amount of P21,000, while his co-respondents therein, Lolita delos
Reyes and Eddie delos Reyes, were found guilty of simple neglect of duty and were
each fined in the amount equivalent to one month and one day of their respective 8. Order of the court a quo dated March 14, 2000 approving the
salaries. appeal. (p. 429, rec.)

A close examination of A.M. No. MTJ-02-1438 and the present case, A.M. No. MTJ- the court hereby resolved to dismiss the appeal for being filed out
02-1404, reveals that the latter case presents the same matter and raises the same of time and frivolous.
issues as that of the earlier administrative case. Hereunder is our comparative study
anent the complaint in both cases: The court has observed that:

A.M. No. MTJ-02- 1438 arose from an Order dated April 5, 2000 issued by Executive 1. Judge Amado L. Becamon, Mrs. Lolita delos Reyes and Mr.
Judge Henry B. Basilla dismissing the appeal in Civil Case No. 288 (MCTC Case No. Eddie delos Reyes released the decision only after one month and
 a half (1 1/2) (p. 365, registry receipt, rec.) and the order dated
May 7, 1999 denying the motion for reconsideration only after
five (5) months (p. 381, registry receipt, rec.);
2. Judge Amado L. Becamon extended the period of appeal fixed
by the Rules (p. 400, rec.);
3. The court still received the appeal fee on March 14, 2000
despite the lapse of the period of appeal (p. 427, rec.); and
4. Judge Amado L. Becamon still approved the appeal despite the
lapse of the period of appeal (p. 429, rec.).
And, considering the gross irregularity in the record, Judge Amado L.
Becamon, Mrs. Lolita delos Reyes, Clerk of Court II, and Eddie delos Reyes,
Process Server, of the 4th MCTC of Placer-Cawayan-Esperanza, Masbate are
hereby ordered to explain in writing within ten (10) days from notice why
they should not be dealt with administratively for grave misconduct,
ignorance of law and dishonesty.
Furnish a copy of this order to Honorable Court Administrator for his
information.
So ordered.
On the other hand, the present case - A.M. No. MTJ-02-1404 - stemmed from a
sworn letter-complaint of the same complainant against the very same respondents
addressed to then Court Administrator Alfredo L. Benipayo. In said sworn letter-
complaint, Judge Henry B. Basilla averred:
In compliance with your letter dated October 25, 2000, I, in my capacity as
Executive Judge, after a careful study of the record in Civil Case No. 288
(MCTC Case No. 263-C) entitled "Visitacion Mahusay vda. de Du, Plaintiff
vs. Benjamin Du, et al., Defendants for Recovery of Possession and
Ownership of Land", hereby formally charge administratively Judge Amado
L. Becamon, Mrs. Lolita delos Reyes, Clerk of Court II and Mr. Eddie delos
Reyes, Junior Process Server, of MCTC of Placer-Cawayan-Esperanza,
Masbate, for Gross Neglect of Duty and/or Grave Misconduct, for
Ignorance of Law and for violation of Canon 3 of the Code of Judicial
Clear it is from the above that both A.M. No. MTJ-02-1438 and the instant
Conduct of 1989 (specially for Judge Amado L. Becamon) --- committed by
administrative case - A.M. No. MTJ-02-1404 - refer to the same subject matter,
freezing and delaying the release of the decision and the order denying to
raise the same issues and involve the same parties.
reconsider it, for one and a half months and five months, respectively, and
extending the period of appeal fixed by the rules, and for receiving the
appeal fee and after which approving the appeal despite the time to do so
had long elapsed.
Attached herewith are the following documents:
1.) Annex "A" – Order dated April 5, 2000;
2.) Annex "B" – Judgment of the court a quo dated January 15,
1999 (mailed to counsel only on March 2, 1999, p. 365, registry
receipt, rec.) was received by defendants-appellants thru counsel
on March 12, 1999 (p. 369, rec.);
3.) Annex "C" – Motion for Reconsideration of the decision by
defendants-appellants thru counsel was filed with the
court a quo on March 15, 1999 by registered mail (p. 371, registry
receipt, rec.);
4.) Annex "D" – Order of the court a quo dated May 7, 1999
denying the motion for reconsideration (p. 381, registry receipt,
rec.);
5.) Annex "E" – Motion for execution of judgment dated
September 9, 1999 filed with the court a quo on September 14,
1999 (rec.);
6.) Annex "F" – Order dated February 14, 2000 of the court a
quo denying motion for execution of judgment and granting
defendants fifteen (15) days to appeal (p. 400, rec.);
6.) Annex "G" – Notice of appeal filed with the court a quo on
November 3, 1999 (p. 412, rec.);
8.) Annex "H" – Appeal fee paid after four (4) months on March
14, 2000 (p. 427, rec.);
9.) Annex "I" – Order of the court a quo dated March 14, 2000
approving the appeal (p. 429, rec.).
Applying the principle of res judicata or bar by prior judgment, the present Meanwhile, on December 6, 2000, Executive Judge Henry B. Basilla, in compliance
administrative case becomes dismissible. Section 47, Rule 39 of the Rules of Court with then Court Administrator Alfredo L. Benipayo’s letter dated October 25, 2000,
enunciates the rule of res judicata or bar by prior judgment, thus: filed his sworn letter-complaint formally charging herein respondents for the same
irregularities committed by them relative to the same MCTC Case No. 263-C. Later,
SEC. 47. Effect of judgments or final orders. - The effect of a judgment or in his January 16, 2002 Report, the incumbent Court Administrator, Presbitero J.
final order rendered by a court of the Philippines, having jurisdiction to Velasco, Jr., recommended the re-docketing of the present complaint as a regular
pronounce the judgment or final order, may be as follows: administrative matter. And, in our Resolution dated February 27, 2002, we adopted
said recommendation and thus docketed that very same letter-complaint as A.M.
xxx xxx xxx No. MTJ-02-1404. This explain why two (2) administrative cases, having identical
subject matter, cause of action and involving the same parties existed.
(b) In other cases, the judgment or final order is, with respect to the
matter directly adjudged or as to any other matter that could have been WHEREFORE, the instant administrative complaint is DISMISSED for being a mere
raised in relation thereto, conclusive between the parties and their duplication of the complaint in A.M. No. MTJ-02-1438 which, to stress, was already
successors-in-interest by title subsequent to the commencement of the resolved by this Court in its en banc Resolution promulgated on January 22, 2004
action or special proceeding, litigating for the same thing and under the (420 SCRA 608).
same title and in the same capacity;
SO ORDERED.
Under the said doctrine, a matter that has been adjudicated by a court of
competent jurisdiction must be deemed to have been finally and conclusively
settled if it arises in any subsequent litigation between the same parties and for the
same cause.3 It provides that [a] final judgment on the merits rendered by a court of
competent jurisdiction is conclusive as to the rights of the parties and their privies;
and constitutes an absolute bar to subsequent actions involving the same claim,
demand, or cause of action.4 Res judicata is based on the ground that the party to
be affected, or some other with whom he is in privity, has litigated the same matter
in the former action in a court of competent jurisdiction, and should not be
permitted to litigate it again.5

This principle frees the parties from undergoing all over again the rigors of
unnecessary suits and repetitious trials. At the same time, it prevents the clogging
of court dockets. Equally important, res judicata stabilizes rights and promotes the
rule of law.6

The records reveal that the two (2) administrative cases stemmed from the same
factual circumstances between the same parties. The earlier administrative case
(A.M. No. MTJ-02-1438) which was already terminated in our en bancResolution of
January 22, 2004, arose when the OCA was furnished with a copy of the order dated
April 5, 2000 issued by complainant Judge Henry B. Basilla. Complete record of
MCTC Case No. 263-C was also transmitted to the said office, and, after evaluating G.R. No. 162784 June 22, 2007
the matter, Deputy Court Administrator Jose P. Perez, in his Report dated April 19,
2002, recommended that the same be re-docketed as a regular administrative NATIONAL HOUSING AUTHORITY, petitioner,
matter, which recommendation was adopted by this Court in its Resolution of July vs.
10, 2002, and accordingly had the matter docketed as A.M. No. MTJ-02-1438.
SEGUNDA ALMEIDA, COURT OF APPEALS, and RTC of SAN PEDRO, LAGUNA, BR.
31, respondents.
DECISION
PUNO, C.J.:
This is a Petition for Review on Certiorari under Rule 45 filed by the National
Housing Authority (NHA) against the Court of Appeals, the Regional Trial Court of
San Pedro Laguna, Branch 31, and private respondent Segunda Almeida.
On June 28, 1959, the Land Tenure Administration (LTA) awarded to Margarita
Herrera several portions of land which are part of the Tunasan Estate in San Pedro,
Laguna. The award is evidenced by an Agreement to Sell No. 3787.1 By virtue of
Republic Act No. 3488, the LTA was succeeded by the Department of Agrarian
Reform (DAR). On July 31, 1975, the DAR was succeeded by the NHA by virtue of
Presidential Decree No. 757.2 NHA as the successor agency of LTA is the petitioner
in this case.
The records show that Margarita Herrera had two children: Beatriz Herrera-
Mercado (the mother of private respondent) and Francisca Herrera. Beatriz
Herrera-Mercado predeceased her mother and left heirs.
Margarita Herrera passed away on October 27, 1971.3
On August 22, 1974, Francisca Herrera, the remaining child of the late Margarita
Herrera executed a Deed of Self-Adjudication claiming that she is the only
remaining relative, being the sole surviving daughter of the deceased. She also
claimed to be the exclusive legal heir of the late Margarita Herrera.
The Deed of Self-Adjudication was based on a Sinumpaang Salaysay dated October
7, 1960, allegedly executed by Margarita Herrera. The pertinent portions of which
are as follows:
SINUMPAANG SALAYSAY
SA SINO MAN KINAUUKULAN;
Akong si MARGARITA HERRERA, Filipina, may 83 taong gulang, balo,
kasalukuyang naninirahan at tumatanggap ng sulat sa Nayon ng San
Vicente, San Pedro Laguna, sa ilalim ng panunumpa ay malaya at kusang
loob kong isinasaysay at pinagtitibay itong mga sumusunod:
1. Na ako ay may tinatangkilik na isang lagay na lupang tirikan (SOLAR),
tumatayo sa Nayon ng San Vicente, San Pedro, Laguna, mayroong PITONG
DAAN AT PITUMPU'T ISANG (771) METRONG PARISUKAT ang laki, humigit
kumulang, at makikilala sa tawag na Lote 17, Bloke 55, at pag-aari ng Land
Tenure Administration;
2. Na ang nasabing lote ay aking binibile, sa pamamagitan ng paghuhulog
sa Land Tenure Administration, at noong ika 30 ng Julio, 1959, ang
Kasunduang sa Pagbibile (AGREEMENT TO SELL No. 3787) ay ginawa at
pinagtibay sa Lungsod ng Maynila, sa harap ng Notario Publico na si G. Jose
C. Tolosa, at lumalabas sa kaniyang Libro Notarial bilang Documento No.
13, Pagina No. 4; Libro No. IV, Serie ng 1959;
3. Na dahilan sa ako'y matanda na at walang ano mang hanap buhay, ako
ay nakatira at pinagsisilbihan nang aking anak na si Francisca Herrera, at
ang tinitirikan o solar na nasasabi sa unahan ay binabayaran ng kaniyang
sariling cuarta sa Land Tenure Administration;
4. Na alang-alang sa nasasaysay sa unahan nito, sakaling ako'y bawian na
ng Dios ng aking buhay, ang lupang nasasabi sa unahan ay aking
ipinagkakaloob sa nasabi kong anak na FRANCISCA HERRERA, Filipina, nasa
katamtamang gulang, kasal kay Macario Berroya, kasalukuyang
naninirahan at tumatanggap ng sulat sa Nayong ng San Vicente, San Pedro
Laguna, o sa kaniyang mga tagapagmana at;
5. Na HINIHILING KO sa sino man kinauukulan, na sakaling ako nga ay
bawian na ng Dios ng aking buhay ay KILALANIN, IGALANG at PAGTIBAYIN
ang nilalaman sa pangalan ng aking anak na si Francisca Herrera ang loteng
nasasabi sa unahan.
SA KATUNAYAN NG LAHAT, ako ay nag-didiit ng hinlalaki ng kanan kong
kamay sa ibaba nito at sa kaliwang gilid ng unang dahon, dito sa Lungsod
ng Maynila, ngayong ika 7 ng Octubre, 1960. 4
The said document was signed by two witnesses and notarized. The witnesses
signed at the left-hand side of both pages of the document with the said document
having 2 pages in total. Margarita Herrera placed her thumbmark 5above her name
in the second page and at the left-hand margin of the first page of the document.
The surviving heirs of Beatriz Herrera-Mercado filed a case for annulment of the
Deed of Self-Adjudication before the then Court of First Instance of Laguna, Branch
1 in Binan, Laguna (now, Regional Trial Court Branch 25). The case for annulment
was docketed as Civil Case No. B-1263.6
On December 29, 1980, a Decision in Civil Case No. B-1263 (questioning the Deed of
Self-Adjudication) was rendered and the deed was declared null and void. 7
During trial on the merits of the case assailing the Deed of Self-Adjudication,
Francisca Herrera filed an application with the NHA to purchase the same lots
submitting therewith a copy of the "Sinumpaang Salaysay" executed by her mother.
Private respondent Almeida, as heir of Beatriz Herrera-Mercado, protested the
application.
In a Resolution8 dated February 5, 1986, the NHA granted the application made by
Francisca Herrera, holding that:
From the evidence of the parties and the records of the lots in question,
we gathered the following facts: the lots in question are portions of the lot
awarded and sold to the late Margarita Herrera on July 28, 1959 by the
defunct Land Tenure Administration; protestant is the daughter of the late
Beatriz Herrera Mercado who was the sister of the protestee; protestee
and Beatriz are children of the late Margarita Herrera; Beatriz was the
transferee from Margarita of Lot Nos. 45, 46, 47, 48 and 49, Block 50; one
of the lots transferred to Beatriz, e.g. Lot 47, with an area of 148 square
meters is in the name of the protestant; protestant occupied the lots in
question with the permission of the protestee; protestee is a resident of
the Tunasan Homesite since birth; protestee was born on the lots in
question; protestee left the place only after marriage but resided in a lot
situated in the same Tunasan Homesite; her (protestee) son Roberto
Herrera has been occupying the lots in question; he has been there even
before the death of the late Margarita Herrera; on October 7, 1960,
Margarita Herrera executed a "Sinumpaang Salaysay" whereby she
waived or transferred all her rights and interest over the lots in question
in favor of the protestee; and protestee had paid the lots in question in full
on March 8, 1966 with the defunct Land Tenure Administration.
This Office finds that protestee has a better preferential right to purchase the lots in
question.9
Private respondent Almeida appealed to the Office of the President. 10 The NHA
Resolution was affirmed by the Office of the President in a Decision dated January
23, 1987.11
On February 1, 1987, Francisca Herrera died. Her heirs executed an extrajudicial
settlement of her estate which they submitted to the NHA. Said transfer of rights
was approved by the NHA.12 The NHA executed several deeds of sale in favor of the
heirs of Francisca Herrera and titles were issued in their favor.13 Thereafter, the
heirs of Francisca Herrera directed Segunda Mercado-Almeida to leave the
premises that she was occupying.
Feeling aggrieved by the decision of the Office of the President and the resolution
of the NHA, private respondent Segunda Mercado-Almeida sought the cancellation
of the titles issued in favor of the heirs of Francisca. She filed a Complaint on
February 8, 1988, for "Nullification of Government Lot's Award," with the Regional
Trial Court of San Pedro, Laguna, Branch 31.
In her complaint, private respondent Almeida invoked her forty-year occupation of
the disputed properties, and re-raised the fact that Francisca Herrera's declaration
of self-adjudication has been adjudged as a nullity because the other heirs were
disregarded. The defendant heirs of Francisca Herrera alleged that the complaint
was barred by laches and that the decision of the Office of the President was
already final and executory.14 They also contended that the transfer of purchase of
the subject lots is perfectly valid as the same was supported by a consideration and
that Francisca Herrera paid for the property with the use of her own
money.15 Further, they argued that plaintiff's occupation of the property was by
mere tolerance and that they had been paying taxes thereon.16
The Regional Trial Court issued an Order dated June 14, 1988 dismissing the case for
lack of jurisdiction.17 The Court of Appeals in a Decision dated June 26, 1989
reversed and held that the Regional Trial Court had jurisdiction to hear and decide
the case involving "title and possession to real property within its
jurisdiction."18 The case was then remanded for further proceedings on the merits.
A pre-trial was set after which trial ensued.
On March 9, 1998, the Regional Trial Court rendered a Decision setting aside the
resolution of the NHA and the decision of the Office of the President awarding the
subject lots in favor of Francisca Herrera. It declared the deeds of sale executed by
NHA in favor of Herrera's heirs null and void. The Register of Deeds of Laguna,
Calamba Branch was ordered to cancel the Transfer Certificate of Title issued.
Attorney's fees were also awarded to private respondent.
The Regional Trial Court ruled that the "Sinumpaang Salaysay" was not an
assignment of rights but a disposition of property which shall take effect upon
death. It then held that the said document must first be submitted to probate
before it can transfer property.
Both the NHA and the heirs of Francisca Herrera filed their respective motions for
reconsideration which were both denied on July 21, 1998 for lack of merit. They
both appealed to the Court of Appeals. The brief for the heirs of Francisca Herrera
was denied admission by the appellate court in a Resolution dated June 14, 2002
for being a "carbon copy" of the brief submitted by the NHA and for being filed
seventy-nine (79) days late.
On August 28, 2003, the Court of Appeals affirmed the decision of the Regional Trial
Court, viz:
There is no dispute that the right to repurchase the subject lots was
awarded to Margarita Herrera in 1959. There is also no dispute that
Margarita executed a "Sinumpaang Salaysay" on October 7, 1960.
Defendant NHA claims that the "Sinumpaang Salaysay" is, in effect, a
waiver or transfer of rights and interest over the subject lots in favor of
Francisca Herrera. This Court is disposed to believe otherwise. After a
perusal of the "Sinumpaang Salaysay" of Margarita Herrera, it can be
ascertained from its wordings taken in their ordinary and grammatical
sense that the document is a simple disposition of her estate to take effect
after her death. Clearly the Court finds that the "Sinumpaang Salaysay" is a
will of Margarita Herrera. Evidently, if the intention of Margarita Herrera
was to merely assign her right over the lots to her daughter Francisca
Herrera, she should have given her "Sinumpaang Salaysay" to the
defendant NHA or to Francisca Herrera for submission to the defendant
NHA after the full payment of the purchase price of the lots or even prior
thereto but she did not. Hence it is apparent that she intended the
"Sinumpaang Salaysay" to be her last will and not an assignment of rights
as what the NHA in its resolution would want to make it appear. The
intention of Margarita Herrera was shared no less by Francisca Herrera
who after the former's demise executed on August 22, 1974 a Deed of Self-
Adjudication claiming that she is her sole and legal heir. It was only when
said deed was questioned in court by the surviving heirs of Margarita
Herrera's other daughter, Beatriz Mercado, that Francisca Herrera filed an
application to purchase the subject lots and presented the "Sinumpaang
Salaysay" stating that it is a deed of assignment of rights.19
The Court of Appeals ruled that the NHA acted arbitrarily in awarding the lots to the
heirs of Francisca Herrera. It upheld the trial court ruling that the "Sinumpaang
Salaysay" was not an assignment of rights but one that involved disposition of
property which shall take effect upon death. The issue of whether it was a valid will
must first be determined by probate.
Petitioner NHA elevated the case to this Court.
Petitioner NHA raised the following issues:
A. WHETHER OR NOT THE RESOLUTION OF THE NHA AND THE DECISION OF
THE OFFICE OF THE PRESIDENT HAVE ATTAINED FINALITY, AND IF SO,
WHETHER OR NOT THE PRINCIPLE OF ADMINISTRATIVE RES
JUDICATA BARS THE COURT FROM FURTHER DETERMINING WHO
BETWEEN THE PARTIES HAS PREFERENTIAL RIGHTS FOR AWARD OVER THE
SUBJECT LOTS;
B. WHETHER OR NOT THE COURT HAS JURISDICTION TO MAKE THE
AWARD ON THE SUBJECT LOTS; AND
C. WHETHER OR NOT THE AWARD OF THE SUBJECT LOTS BY THE NHA IS
ARBITRARY.
We rule for the respondents.
Res judicata is a concept applied in review of lower court decisions in accordance
with the hierarchy of courts. But jurisprudence has also recognized the rule of
administrative res judicata: "the rule which forbids the reopening of a matter once
judicially determined by competent authority applies as well to the judicial and
quasi-judicial facts of public, executive or administrative officers and boards acting
within their jurisdiction as to the judgments of courts having general judicial powers
. . . It has been declared that whenever final adjudication of persons invested with
power to decide on the property and rights of the citizen is examinable by the
Supreme Court, upon a writ of error or a certiorari, such final adjudication may be
pleaded as res judicata."20 To be sure, early jurisprudence were already mindful
that the doctrine of res judicata cannot be said to apply exclusively to decisions
rendered by what are usually understood as courts without unreasonably
circumscribing the scope thereof and that the more equitable attitude is to allow
extension of the defense to decisions of bodies upon whom judicial powers have
been conferred.
In Ipekdjian Merchandising Co., Inc. v. Court of Tax Appeals,21 the Court held that
the rule prescribing that "administrative orders cannot be enforced in the courts in
the absence of an express statutory provision for that purpose" was relaxed in favor
of quasi-judicial agencies.
In fine, it should be remembered that quasi-judicial powers will always be subject to
true judicial power—that which is held by the courts. Quasi-judicial power is
defined as that power of adjudication of an administrative agency for the
"formulation of a final order."22 This function applies to the actions, discretion and
similar acts of public administrative officers or bodies who are required to
investigate facts, or ascertain the existence of facts, hold hearings, and draw
conclusions from them, as a basis for their official action and to exercise discretion
of a judicial nature.23 However, administrative agencies are not considered courts,
in their strict sense. The doctrine of separation of powers reposes the three great
powers into its three (3) branches—the legislative, the executive, and the judiciary.
Each department is co-equal and coordinate, and supreme in its own sphere.
Accordingly, the executive department may not, by its own fiat, impose the
judgment of one of its agencies, upon the judiciary. Indeed, under the expanded
jurisdiction of the Supreme Court, it is empowered to "determine whether or not
there has been grave abuse of discretion amounting to lack or excess of jurisdiction
on the part of any branch or instrumentality of the Government." 24 Courts have an
expanded role under the 1987 Constitution in the resolution of societal conflicts
under the grave abuse clause of Article VIII which includes that duty to check
whether the other branches of government committed an act that falls under the
category of grave abuse of discretion amounting to lack or excess of jurisdiction.25
Next, petitioner cites Batas Pambansa Blg. 129 or the Judiciary Reorganization Act
of 198026 where it is therein provided that the Intermediate Appellate Court (now,
Court of Appeals) shall exercise the "exclusive appellate jurisdiction over all final
judgments, decisions, resolutions, orders or awards, of the Regional Trial Courts and
Quasi-Judicial agencies, instrumentalities, boards or commissions, except those
falling within the jurisdiction of the Supreme Court in accordance with the
Constitution…"27 and contends that the Regional Trial Court has no jurisdiction to
rule over awards made by the NHA.
Well-within its jurisdiction, the Court of Appeals, in its decision of August 28, 2003,
already ruled that the issue of the trial court's authority to hear and decide the
instant case has already been settled in the decision of the Court of Appeals dated
June 26, 1989 (which has become final and executory on August 20, 1989 as per
entry of judgment dated October 10, 1989).28 We find no reason to disturb this
ruling. Courts are duty-bound to put an end to controversies. The system of judicial
review should not be misused and abused to evade the operation of a final and
executory judgment.29 The appellate court's decision becomes the law of the case
which must be adhered to by the parties by reason of policy.30
Next, petitioner NHA contends that its resolution was grounded on meritorious
grounds when it considered the application for the purchase of lots. Petitioner
argues that it was the daughter Francisca Herrera who filed her application on the
subject lot; that it considered the respective application and inquired whether she
had all the qualifications and none of the disqualifications of a possible awardee. It
is the position of the petitioner that private respondent possessed all the
qualifications and none of the disqualifications for lot award and hence the award
was not done arbitrarily.
The petitioner further argues that assuming that the "Sinumpaang Salaysay" was a
will, it could not bind the NHA.31That, "insofar as [the] NHA is concerned, it is an
evidence that the subject lots were indeed transferred by Margarita Herrera, the
original awardee, to Francisca Herrera was then applying to purchase the same
before it."32
We are not impressed. When the petitioner received the "Sinumpaang Salaysay," it
should have noted that the effectivity of the said document commences at the time
of death of the author of the instrument; in her words "sakaling ako'y bawian na ng
Dios ng aking buhay…" Hence, in such period, all the interests of the person should
cease to be hers and shall be in the possession of her estate until they are
transferred to her heirs by virtue of Article 774 of the Civil Code which provides
that:
Art. 774. Succession is a mode of acquisition by virtue of which the
property, rights and obligations to the extent of the value of the
inheritance, of a person are transmitted through his death to another or
others either by his will or by operation of law.33
By considering the document, petitioner NHA should have noted that the original
applicant has already passed away. Margarita Herrera passed away on October 27,
1971.34 The NHA issued its resolution35 on February 5, 1986. The NHA gave due
course to the application made by Francisca Herrera without considering that the
initial applicant's death would transfer all her property, rights and obligations to the
estate including whatever interest she has or may have had over the disputed
properties. To the extent of the interest that the original owner had over the
property, the same should go to her estate. Margarita Herrera had an interest in
the property and that interest should go to her estate upon her demise so as to be
able to properly distribute them later to her heirs—in accordance with a will or by
operation of law.
The death of Margarita Herrera does not extinguish her interest over the property.
Margarita Herrera had an existing Contract to Sell36 with NHA as the seller. Upon
Margarita Herrera's demise, this Contract to Sell was neither nullified nor revoked.
This Contract to Sell was an obligation on both parties—Margarita Herrera and
NHA. Obligations are transmissible.37 Margarita Herrera's obligation to pay became
transmissible at the time of her death either by will or by operation of law.
If we sustain the position of the NHA that this document is not a will, then the
interests of the decedent should transfer by virtue of an operation of law and not
by virtue of a resolution by the NHA. For as it stands, NHA cannot make another
contract to sell to other parties of a property already initially paid for by the
decedent. Such would be an act contrary to the law on succession and the law on
sales and obligations.38

When the original buyer died, the NHA should have considered the estate of the
decedent as the next "person"39likely to stand in to fulfill the obligation to pay the
rest of the purchase price. The opposition of other heirs to the repurchase by
Francisca Herrera should have put the NHA on guard as to the award of the lots.
Further, the Decision in the said Civil Case No. B-1263 (questioning the Deed of Self-
Adjudication) which rendered the deed therein null and void 40 should have alerted
the NHA that there are other heirs to the interests and properties of the decedent
who may claim the property after a testate or intestate proceeding is concluded.
The NHA therefore acted arbitrarily in the award of the lots.

We need not delve into the validity of the will. The issue is for the probate court to
determine. We affirm the Court of Appeals and the Regional Trial Court which
noted that it has an element of testamentary disposition where (1) it devolved and
transferred property; (2) the effect of which shall transpire upon the death of the
instrument maker.41

IN VIEW WHEREOF, the petition of the National Housing Authority is DENIED. The
decision of the Court of Appeals in CA-G.R. No. 68370 dated August 28, 2003,
affirming the decision of the Regional Trial Court of San Pedro, Laguna in Civil Case
No. B-2780 dated March 9, 1998, is hereby AFFIRMED.

No cost.

SO ORDERED.
G.R. No. 170672 August 14, 2009 reported to be involved in the incident. Petitioner agreed but suddenly sped up his
vehicle and proceeded to his residence. P/Supt. Doria and his companions chased
JUDGE FELIMON ABELITA III, Petitioner, petitioner. Upon reaching petitioner’s residence, they caught up with petitioner as
vs. he was about to run towards his house. The police officers saw a gun in the front
P/SUPT. GERMAN B. DORIA and SPO3 CESAR RAMIREZ, Respondents. seat of the vehicle beside the driver’s seat as petitioner opened the door. They also
saw a shotgun at the back of the driver’s seat. The police officers confiscated the
DECISION firearms and arrested petitioner. P/Supt. Doria alleged that his men also arrested
other persons who were identified to be with petitioner during the shooting
incident. Petitioner was charged with illegal possession of firearms and frustrated
CARPIO, J.:
murder. An administrative case was also filed against petitioner before this Court. 4
The Case
The Decision of the Trial Court
Before the Court is a petition for review1 assailing the 10 July 2004 Decision2 and 18
In its 10 July 2004 Decision, the trial court dismissed petitioner’s complaint.
October 2004 Order3 of the Regional Trial Court of Quezon City, Branch 217 (trial
court), in Civil Case No. Q-98-33442 for Damages.
The trial court found that petitioner was at the scene of the shooting incident in
Barangay Nursery. The trial court ruled that the police officers who conducted the
The Antecedent Facts
search were of the belief, based on reasonable grounds, that petitioner was
involved in the incident and that the firearm used in the commission of the offense
Judge Felimon Abelita III (petitioner) filed a complaint for Damages under Articles
was in his possession. The trial court ruled that petitioner’s warrantless arrest and
32(4) and (9) of the Civil Code against P/Supt. German B. Doria (P/Supt. Doria) and
the warrantless seizure of the firearms were valid and legal. The trial court gave
SPO3 Cesar Ramirez (SPO3 Ramirez). Petitioner alleged in his complaint that on 24
more credence to the testimonies of respondents who were presumed to have
March 1996, at around 12 noon, he and his wife were on their way to their house in
performed their duties in accordance with law. The trial court rejected petitioner’s
Bagumbayan, Masbate, Masbate when P/Supt. Doria and SPO3 Ramirez
claim of frame-up as weak and insufficient to overthrow the positive testimonies of
(respondents), accompanied by 10 unidentified police officers, requested them to
the police officers who conducted the arrest and the incidental search. The trial
proceed to the Provincial PNP Headquarters at Camp Boni Serrano, Masbate,
court
Masbate. Petitioner was suspicious of the request and told respondents that he
would proceed to the PNP Headquarters after he had brought his wife home.
concluded that petitioner’s claim for damages under Article 32 of the Civil Code is
Petitioner alleged that when he parked his car in front of their house, SPO3 Ramirez
not warranted under the circumstances.
grabbed him, forcibly took the key to his Totoya Lite Ace van, barged into the
vehicle, and conducted a search without a warrant. The search resulted to the
seizure of a licensed shotgun. Petitioner presented the shotgun’s license to Petitioner filed a motion for reconsideration.
respondents. Thereafter, SPO3 Ramirez continued his search and then produced a
.45 caliber pistol which he allegedly found inside the vehicle. Respondents arrested In its 18 October 2004 Order, the trial court denied the motion.
petitioner and detained him, without any appropriate charge, at the PNP special
detention cell. Hence, the petition before this Court.

P/Supt. Doria alleged that his office received a telephone call from a relative of Rosa The Issues
Sia about a shooting incident in Barangay Nursery. He dispatched a team headed by
SPO3 Ramirez to investigate the incident. SPO3 Ramirez later reported that a The issues in this case are the following:
certain William Sia was wounded while petitioner, who was implicated in the
incident, and his wife just left the place of the incident. P/Supt. Doria looked for 1. Whether the warrantless arrest and warrantless search and seizure were
petitioner and when he found him, he informed him of the incident report. P/Supt. illegal under Section 5, Rule 113 of the 1985 Rules on Criminal Procedure;
Doria requested petitioner to go with him to the police headquarters as he was
 2. Whether respondents are civilly liable for damages under Articles 32(4)
and (9) of the Civil Code; and
3. Whether the findings in the administrative case against petitioner are
conclusive in this case.
The Ruling of this Court
The petition has no merit.
Application of Section 5, Rule 113 of the
1985 Rules on Criminal Procedure
Petitioner alleges that his arrest and the search were unlawful under Section 5, Rule
113 of the 1985 Rules on Criminal Procedure. Petitioner alleges that for the
warrantless arrest to be lawful, the arresting officer must have personal knowledge
of facts that the person to be arrested has committed, is actually committing, or is
attempting to commit an offense. Petitioner alleges that the alleged shooting
incident was just relayed to the arresting officers, and thus they have no personal
knowledge of facts as required by the Rules.
We do not agree.
Section 5, Rule 113 of the 1985 Rules on Criminal Procedure states:
Sec. 5. Arrest without warrant; when lawful. ¾ A peace officer or a private person
may, without a warrant, arrest a person:
(a) When, in his presence, the person to be arrested has committed, is
actually committing, or is attempting to commit an offense;
(b) When an offense has in fact just been committed and he has personal
knowledge of facts indicating that the person to be arrested has
committed it; and
(c) When the person to be arrested is a prisoner who has escaped from a
penal establishment or place where he is serving final judgment or
temporarily confined while his case is pending, or has escaped while being
transferred from one confinement to another.
For the warrantless arrest under this Rule to be valid, two requisites must concur:
(1) the offender has just committed an offense; and (2) the arresting peace officer
or private person has personal knowledge of facts indicating that the person to be
arrested has committed it.5
Personal knowledge of facts must be based on probable cause, which means an
actual belief or reasonable grounds of suspicion.6 The grounds of suspicion are
reasonable when, in the absence of actual belief of the arresting officers, the
suspicion that the person to be arrested is probably guilty of committing the
offense is based on actual facts, i.e., supported by circumstances sufficiently strong
in themselves to create the probable cause of guilt of the person to be arrested. 7 A
reasonable suspicion, therefore, must be founded on probable cause, coupled with
good faith on the part of the peace officers making the arrest. 8
Section 5, Rule 113 of the 1985 Rules on Criminal Procedure does not require the
arresting officers to personally witness the commission of the offense with their
own eyes. In this case, P/Supt. Doria received a report about the alleged shooting
incident. SPO3 Ramirez investigated the report and learned from witnesses that
petitioner was involved in the incident. They were able to track down petitioner,
but when invited to the police headquarters to shed light on the incident, petitioner
initially agreed then sped up his vehicle, prompting the police authorities to give
chase. Petitioner’s act of trying to get away, coupled with the incident report which
they investigated, is enough to raise a reasonable suspicion on the part of the police
authorities as to the existence of probable cause.
Plain View Doctrine
The seizure of the firearms was justified under the plain view doctrine.
Under the plain view doctrine, objects falling in the plain view of an officer who has
a right to be in the position to have that view are subject to seizure and may be
presented as evidence.9 The plain view doctrine applies when the following
requisites concur: (1) the law enforcement officer in search of the evidence has a
prior justification for an intrusion or is in a position from which he can view a
particular area; (2) the discovery of the evidence in plain view is inadvertent; and
(3) it is immediately apparent to the officer that the item he observes may be
evidence of a crime, contraband or otherwise subject to seizure.10
In this case, the police authorities were in the area because that was where they
caught up with petitioner after the chase. They saw the firearms inside the vehicle
when petitioner opened the door. Since a shooting incident just took place and it
was reported that petitioner was involved in the incident, it was apparent to the
police officers that the firearms may be evidence of a crime. Hence, they were
justified in seizing the firearms.
Civil Liability Under Article 32 of the Civil Code
Petitioner alleges that respondents are civilly liable under paragraphs (4) and (9) of
Article 32 of the Civil Code.
Paragraphs (4) and (9) of Article 32 of the Civil Code respectively state:
Art. 32. Any public officer or employee, or any private individual, who directly or
indirectly obstructs, defeats, violates or in any manner impedes or impairs any of
the following rights and liberties of another person shall be liable to the latter for
damages:
xxxx
(4) Freedom from arbitrary or illegal detention;
xxxx
(9) The right to be secure in one’s person, house, papers, and effects against
unreasonable searches and seizures;
xxxx
In this case, it was established that petitioner was lawfully arrested without a
warrant and that firearms were validly seized from his possession. The trial court
found that petitioner was charged with illegal possession of firearms and frustrated
murder. We agree with the trial court in rejecting petitioner’s allegation that he was
merely framed-up. We also agree with the trial court that respondents were
presumed to be performing their duties in accordance with law. Hence,
respondents should not be held civilly liable for their actions.
Res Judicata Does Not Apply
Respondents raise the defense of res judicata against petitioner’s claim for
damages.
Res judicata has two aspects: bar by prior judgment and conclusiveness of judgment
provided under Section 47(b) and (c), Rule 39, respectively, of the 1997 Rules of
Civil Procedure11 which provide:
Sec. 47. Effect of judgments or final orders. The effect of a judgment or final order
rendered by a court of the Philippines, having jurisdiction to pronounce the
judgment or final order, may be as follows:
xxx
(b) In other cases, the judgment or final order is, with respect to the
matter directly adjudged or as to any other matter that could have been
raised in relation thereto, conclusive between the parties and their
successors in interest by title subsequent to the commencement of the
action or special proceeding, litigating for the same thing and under the
same title and in the same capacity; and
(c) In any other litigation between the same parties or their successors in
interest, that only is deemed to have been adjudged in a former judgment
or final order which appears upon its face to have been so adjudged, or
which was actually and necessarily included therein or necessary thereto.
Bar by prior judgment and conclusiveness of judgment differ as follows:
There is "bar by prior judgment" when, as between the first case where the
judgment was rendered and the second case that is sought to be barred, there is
identity of parties, subject matter, and causes of action. In this instance, the
judgment in the first case constitutes an absolute bar to the second action.
Otherwise put, the judgment or decree of the court of competent jurisdiction on
the merits concludes the litigation between the parties, as well as their privies, and
constitutes a bar to a new action or suit involving the same cause of action before
the same or other tribunal.1avvphi1
But where there is identity of parties in the first and second cases, but no identity of
causes of action, the first judgment is conclusive only as to those matters actually
and directly controverted and determined and not as to matters merely involved
therein. This is the concept of res judicata known as "conclusiveness of judgment."
Stated differently, any right, fact or matter in issue directly adjudicated or
necessarily involved in the determination of an action before a competent court in
which judgment is rendered on the merits is conclusively settled by the judgment
therein and cannot again be litigated between the parties and their privies whether
or not the claim, demand, purpose, or subject matter of the two actions is the
same.12
For res judicata to apply, the following requisites must be present:
(a) the former judgment or order must be final;
 (b) it must be a judgment or order on the merits, that is, it was rendered
after a consideration of the evidence or stipulations submitted by the
parties at the trial of the case;

(c) it must have been rendered by a court having jurisdiction over the
subject matter and the parties; and

(d) there must be, between the first and second actions, identity of parties,
of subject matter, and of cause of action; this requisite is satisfied if the
two actions are substantially between the same parties.13

While the present case and the administrative case are based on the same essential
facts and circumstances, the doctrine of res judicata will not apply. An
administrative case deals with the administrative liability which may be incurred by
the respondent for the commission of the acts complained of. 14 The case before us
deals with the civil liability for damages of the police authorities. There is no
identity of causes of action in the cases. While identity of causes of action is not
required in the application of res judicata in the concept of conclusiveness of
judgment,15 it is required that there must always be identity of parties in the first
and second cases.

There is no identity of parties between the present case and the administrative
case. The administrative case was filed by Benjamin Sia Lao (Sia Lao) against
petitioner. Sia Lao is not a party to this case. Respondents in the present case were
not parties to the administrative case between Sia Lao and petitioner. In the
present case, petitioner is the complainant against respondents. Hence, while res
judicata is not a defense to petitioner’s complaint for damages, respondents
nevertheless cannot be held liable for damages as discussed above.

WHEREFORE, we DENY the petition. We AFFIRM the 10 July 2004 Decision and 18
October 2004 Order of the Regional Trial Court of Quezon City, Branch 217, in Civil
Case No. Q-98-33442.

SO ORDERED.
G.R. No. 135808 October 6, 2008
SECURITIES AND EXCHANGE COMMISSION, petitioner,
vs.
INTERPORT RESOURCES CORPORATION, MANUEL S. RECTO, RENE S. VILLARICA,
PELAGIO RICALDE, ANTONIO REINA, FRANCISCO ANONUEVO, JOSEPH SY and
SANTIAGO TANCHAN, JR., respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
assailing the Decision,1 dated 20 August 1998, rendered by the Court of Appeals in
C.A.-G.R. SP No. 37036, enjoining petitioner Securities and Exchange Commission
(SEC) from taking cognizance of or initiating any action against the respondent
corporation Interport Resources Corporation (IRC) and members of its board of
directors, respondents Manuel S. Recto, Rene S. Villarica, Pelagio Ricalde, Antonio
Reina, Francisco Anonuevo, Joseph Sy and Santiago Tanchan, Jr., with respect to
Sections 8, 30 and 36 of the Revised Securities Act. In the same Decision of the
appellate court, all the proceedings taken against the respondents, including the
assailed SEC Omnibus Orders of 25 January 1995 and 30 March 1995, were declared
void.
The antecedent facts of the present case are as follows.
On 6 August 1994, the Board of Directors of IRC approved a Memorandum of
Agreement with Ganda Holdings Berhad (GHB). Under the Memorandum of
Agreement, IRC acquired 100% or the entire capital stock of Ganda Energy Holdings,
Inc. (GEHI),2 which would own and operate a 102 megawatt (MW) gas turbine
power-generating barge. The agreement also stipulates that GEHI would assume a
five-year power purchase contract with National Power Corporation. At that time,
GEHI's power-generating barge was 97% complete and would go on-line by mid-
September of 1994. In exchange, IRC will issue to GHB 55% of the expanded capital
stock of IRC amounting to 40.88 billion shares which had a total par value
of P488.44 million.3
On the side, IRC would acquire 67% of the entire capital stock of Philippine Racing
Club, Inc. (PRCI). PRCI owns 25.724 hectares of real estate property in Makati.
Under the Agreement, GHB, a member of the Westmont Group of Companies in
Malaysia, shall extend or arrange a loan required to pay for the proposed
acquisition by IRC of PRCI.4
IRC alleged that on 8 August 1994, a press release announcing the approval of the
agreement was sent through facsimile transmission to the Philippine Stock
Exchange and the SEC, but that the facsimile machine of the SEC could not receive
it. Upon the advice of the SEC, the IRC sent the press release on the morning of 9
August 1994.5
The SEC averred that it received reports that IRC failed to make timely public
disclosures of its negotiations with GHB and that some of its directors, respondents
herein, heavily traded IRC shares utilizing this material insider information. On 16
August 1994, the SEC Chairman issued a directive requiring IRC to submit to the SEC
a copy of its aforesaid Memorandum of Agreement with GHB. The SEC Chairman
further directed all principal officers of IRC to appear at a hearing before the
Brokers and Exchanges Department (BED) of the SEC to explain IRC's failure to
immediately disclose the information as required by the Rules on Disclosure of
Material Facts.6
In compliance with the SEC Chairman's directive, the IRC sent a letter dated 16
August 1994 to the SEC, attaching thereto copies of the Memorandum of
Agreement. Its directors, Manuel Recto, Rene Villarica and Pelagio Ricalde, also
appeared before the SEC on 22 August 1994 to explain IRC's alleged failure to
immediately disclose material information as required under the Rules on
Disclosure of Material Facts.7
On 19 September 1994, the SEC Chairman issued an Order finding that IRC violated
the Rules on Disclosure of Material Facts, in connection with the Old Securities Act
of 1936, when it failed to make timely disclosure of its negotiations with GHB. In
addition, the SEC pronounced that some of the officers and directors of IRC entered
into transactions involving IRC shares in violation of Section 30, in relation to
Section 36, of the Revised Securities Act.8
Respondents filed an Omnibus Motion, dated 21 September 1994, which was
superseded by an Amended Omnibus Motion, filed on 18 October 1994, alleging
that the SEC had no authority to investigate the subject matter, since under Section
8 of Presidential Decree No. 902-A,9 as amended by Presidential Decree No. 1758,
jurisdiction was conferred upon the Prosecution and Enforcement Department
(PED) of the SEC. Respondents also claimed that the SEC violated their right to due
process when it ordered that the respondents appear before the SEC and "show
cause why no administrative, civil or criminal sanctions should be imposed on
them," and, thus, shifted the burden of proof to the respondents. Lastly, they
sought to have their cases tried jointly given the identical factual situations
surrounding the alleged violation committed by the respondents. 10
Respondents also filed a Motion for Continuance of Proceedings on 24 October
1994, wherein they moved for discontinuance of the investigations and the
proceedings before the SEC until the undue publicity had abated and the
investigating officials had become reasonably free from prejudice and public
pressure.11
No formal hearings were conducted in connection with the aforementioned
motions, but on 25 January 1995, the SEC issued an Omnibus Order which thus
disposed of the same in this wise:12
WHEREFORE, premised on the foregoing considerations, the Commission
resolves and hereby rules:
1. To create a special investigating panel to hear and decide the instant
case in accordance with the Rules of Practice and Procedure Before the
Prosecution and Enforcement Department (PED), Securities and Exchange
Commission, to be composed of Attys. James K. Abugan, Medardo Devera
(Prosecution and Enforcement Department), and Jose Aquino (Brokers and
Exchanges Department), which is hereby directed to expeditiously resolve
the case by conducting continuous hearings, if possible.
2. To recall the show cause orders dated September 19, 1994 requiring the
respondents to appear and show cause why no administrative, civil or
criminal sanctions should be imposed on them.
3. To deny the Motion for Continuance for lack of merit.
Respondents filed an Omnibus Motion for Partial Reconsideration,13 questioning
the creation of the special investigating panel to hear the case and the denial of the
Motion for Continuance. The SEC denied reconsideration in its Omnibus Order
dated 30 March 1995.14
The respondents filed a petition before the Court of Appeals docketed as C.A.-G.R.
SP No. 37036, questioning the Omnibus Orders dated 25 January 1995 and 30
March 1995.15 During the proceedings before the Court of Appeals, respondents
filed a Supplemental Motion16 dated 16 May 1995, wherein they prayed for the
issuance of a writ of preliminary injunction enjoining the SEC and its agents from
investigating and proceeding with the hearing of the case against respondents
herein. On 5 May 1995, the Court of Appeals granted their motion and issued a writ
of preliminary injunction, which effectively enjoined the SEC from filing any
criminal, civil or administrative case against the respondents herein. 17
On 23 October 1995, the SEC filed a Motion for Leave to Quash SEC Omnibus Orders
so that the case may be investigated by the PED in accordance with the SEC Rules
and Presidential Decree No. 902-A, and not by the special body whose creation the
SEC had earlier ordered.18
The Court of Appeals promulgated a Decision19 on 20 August 1998. It determined
that there were no implementing rules and regulations regarding disclosure, insider
trading, or any of the provisions of the Revised Securities Acts which the
respondents allegedly violated. The Court of Appeals likewise noted that it found no
statutory authority for the SEC to initiate and file any suit for civil liability under
Sections 8, 30 and 36 of the Revised Securities Act. Thus, it ruled that no civil,
criminal or administrative proceedings may possibly be held against the
respondents without violating their rights to due process and equal protection. It
further resolved that absent any implementing rules, the SEC cannot be allowed to
quash the assailed Omnibus Orders for the sole purpose of re-filing the same case
against the respondents.20
The Court of Appeals further decided that the Rules of Practice and Procedure
Before the PED, which took effect on 14 April 1990, did not comply with the
statutory requirements contained in the Administrative Code of 1997. Section 8,
Rule V of the Rules of Practice and Procedure Before the PED affords a party the
right to be present but without the right to cross-examine witnesses presented
against him, in violation of Section 12(3), Chapter 3, Book VII of the Administrative
Code. 21
In the dispositive portion of its Decision, dated 20 August 1998, the Court of
Appeals ruled that22:
WHEREFORE, [herein petitioner SEC's] Motion for Leave to Quash SEC
Omnibus Orders is hereby DENIED. The petition for certiorari, prohibition
and mandamus is GRANTED. Consequently, all proceedings taken against
[herein respondents] in this case, including the Omnibus Orders of January
25, 1995 and March 30, 1995 are declared null and void. The writ of
preliminary injunction is hereby made permanent and, accordingly, [SEC]
is hereby prohibited from taking cognizance or initiating any action, be
they civil, criminal, or administrative against [respondents] with respect to
Sections 8 (Procedure for Registration), 30 (Insider's duty to disclose when
trading) and 36 (Directors, Officers and Principal Stockholders) in relation
to Sections 46 (Administrative sanctions) 56 (Penalties) 44 (Liabilities of
Controlling persons) and 45 (Investigations, injunctions and prosecution of
offenses) of the Revised Securities Act and Section 144 (Violations of the
Code) of the Corporation Code. (Emphasis provided.)
The SEC filed a Motion for Reconsideration, which the Court of Appeals denied in a
Resolution23 issued on 30 September 1998.
Hence, the present petition, which relies on the following grounds24:
I I. Sctions 8, 30 and 36 of the Revised Securities Act do not require the enactment
THE COURT OF APPEALS ERRED WHEN IT DENIED PETITIONER'S MOTION
FOR LEAVE TO QUASH THE ASSAILED SEC OMNIBUS ORDERS DATED
JANUARY 25 AND MARCH 30, 1995.
II
THE COURT OF APPEALS ERRED WHEN IT RULED THAT THERE IS NO
STATUTORY AUTHORITY WHATSOEVER FOR PETITIONER SEC TO INITIATE
AND FILE ANY SUIT BE THEY CIVIL, CRIMINAL OR ADMINISTRATIVE
AGAINST RESPONDENT CORPORATION AND ITS DIRECTORS WITH RESPECT
TO SECTION 30 (INSIDER'S DUTY TO DISCOLSED [sic] WHEN TRADING) AND
36 (DIRECTORS OFFICERS AND PRINCIPAL STOCKHOLDERS) OF THE REVISED
SECURITIES ACT; AND
III
THE COURT OF APPEALS ERRED WHEN IT RULED THAT RULES OF PRACTICE
AND PROSECUTION BEFORE THE PED AND THE SICD RULES OF PROCEDURE
ON ADMINISTRATIVE ACTIONS/PROCEEDINGS25 ARE INVALID AS THEY FAIL
TO COMPLY WITH THE STATUTORY REQUIREMENTS CONTAINED IN THE
ADMINISTRATIVE CODE OF 1987.
The petition is impressed with merit.
Before discussing the merits of this case, it should be noted that while this case was
pending in this Court, Republic Act No. 8799, otherwise known as the Securities
Regulation Code, took effect on 8 August 2000. Section 8 of Presidential Decree No.
902-A, as amended, which created the PED, was already repealed as provided for in
Section 76 of the Securities Regulation Code:
SEC. 76. Repealing Clause. - The Revised Securities Act (Batas Pambansa
Blg. 178), as amended, in its entirety, and Sections 2, 4 and 8 of
Presidential Decree 902-A, as amended, are hereby repealed. All other
laws, orders, rules and regulations, or parts thereof, inconsistent with any
provision of this Code are hereby repealed or modified accordingly.
Thus, under the new law, the PED has been abolished, and the Securities Regulation
Code has taken the place of the Revised Securities Act.
The Court now proceeds with a discussion of the present case.
of implementing rules to make them binding and effective.
The Court of Appeals ruled that absent any implementing rules for Sections 8, 30
and 36 of the Revised Securities Act, no civil, criminal or administrative actions can
possibly be had against the respondents without violating their right to due process
and equal protection, citing as its basis the case Yick Wo v. Hopkins.26 This is
untenable.
In the absence of any constitutional or statutory infirmity, which may concern
Sections 30 and 36 of the Revised Securities Act, this Court upholds these provisions
as legal and binding. It is well settled that every law has in its favor the presumption
of validity. Unless and until a specific provision of the law is declared invalid and
unconstitutional, the same is valid and binding for all intents and purposes.27 The
mere absence of implementing rules cannot effectively invalidate provisions of law,
where a reasonable construction that will support the law may be given. In People
v. Rosenthal,28 this Court ruled that:
In this connection we cannot pretermit reference to the rule that
"legislation should not be held invalid on the ground of uncertainty if
susceptible of any reasonable construction that will support and give it
effect. An Act will not be declared inoperative and ineffectual on the
ground that it furnishes no adequate means to secure the purpose for
which it is passed, if men of common sense and reason can devise and
provide the means, and all the instrumentalities necessary for its execution
are within the reach of those intrusted therewith." (25 R.C.L., pp. 810, 811)
In Garcia v. Executive Secretary,29 the Court underlined the importance of the
presumption of validity of laws and the careful consideration with which the
judiciary strikes down as invalid acts of the legislature:
The policy of the courts is to avoid ruling on constitutional questions and
to presume that the acts of the political departments are valid in the
absence of a clear and unmistakable showing to the contrary. To doubt is
to sustain. This presumption is based on the doctrine of separation of
powers which enjoins upon each department a becoming respect for the
acts of the other departments. The theory is that as the joint act of
Congress and the President of the Philippines, a law has been carefully
 studied and determined to be in accordance with the fundamental law
before it was finally enacted.
The necessity for vesting administrative authorities with power to make rules and
regulations is based on the impracticability of lawmakers' providing general
regulations for various and varying details of management.30 To rule that the
absence of implementing rules can render ineffective an act of Congress, such as
the Revised Securities Act, would empower the administrative bodies to defeat the
legislative will by delaying the implementing rules. To assert that a law is less than a
law, because it is made to depend on a future event or act, is to rob the Legislature
of the power to act wisely for the public welfare whenever a law is passed relating
to a state of affairs not yet developed, or to things future and impossible to fully
know.31 It is well established that administrative authorities have the power to
promulgate rules and regulations to implement a given statute and to effectuate its
policies, provided such rules and regulations conform to the terms and standards
prescribed by the statute as well as purport to carry into effect its general policies.
Nevertheless, it is undisputable that the rules and regulations cannot assert for
themselves a more extensive prerogative or deviate from the mandate of the
statute.32 Moreover, where the statute contains sufficient standards and an
unmistakable intent, as in the case of Sections 30 and 36 of the Revised Securities
Act, there should be no impediment to its implementation.
The reliance placed by the Court of Appeals in Yick Wo v. Hopkins33 shows a glaring
error. In the cited case, this Court found unconstitutional an ordinance which gave
the board of supervisors authority to refuse permission to carry on laundries
located in buildings that were not made of brick and stone, because it violated the
equal protection clause and was highly discriminatory and hostile to Chinese
residents and not because the standards provided therein were vague or
ambiguous.
This Court does not discern any vagueness or ambiguity in Sections 30 and 36 of
the Revised Securities Act, such that the acts proscribed and/or required would not
be understood by a person of ordinary intelligence.
Section 30 of the Revised Securities Act
Section 30 of the Revised Securities Act reads:
Sec. 30. Insider's duty to disclose when trading. - (a) It shall be unlawful
for an insider to sell or buy a security of the issuer, if he knows a fact of
special significance with respect to the issuer or the security that is not
generally available, unless (1) the insider proves that the fact is generally
available or (2) if the other party to the transaction (or his agent) is
identified, (a) the insider proves that the other party knows it, or (b) that
other party in fact knows it from the insider or otherwise.
(b) "Insider" means (1) the issuer, (2) a director or officer of, or a person
controlling, controlled by, or under common control with, the issuer, (3) a
person whose relationship or former relationship to the issuer gives or
gave him access to a fact of special significance about the issuer or the
security that is not generally available, or (4) a person who learns such a
fact from any of the foregoing insiders as defined in this subsection, with
knowledge that the person from whom he learns the fact is such an
insider.
(c) A fact is "of special significance" if (a) in addition to being material it
would be likely, on being made generally available, to affect the market
price of a security to a significant extent, or (b) a reasonable person would
consider it especially important under the circumstances in determining his
course of action in the light of such factors as the degree of its specificity,
the extent of its difference from information generally available previously,
and its nature and reliability.
(d) This section shall apply to an insider as defined in subsection (b) (3)
hereof only to the extent that he knows of a fact of special significance by
virtue of his being an insider.
The provision explains in simple terms that the insider's misuse of nonpublic and
undisclosed information is the gravamen of illegal conduct. The intent of the law is
the protection of investors against fraud, committed when an insider, using secret
information, takes advantage of an uninformed investor. Insiders are obligated to
disclose material information to the other party or abstain from trading the shares
of his corporation. This duty to disclose or abstain is based on two factors: first, the
existence of a relationship giving access, directly or indirectly, to information
intended to be available only for a corporate purpose and not for the personal
benefit of anyone; and second, the inherent unfairness involved when a party takes
advantage of such information knowing it is unavailable to those with whom he is
dealing.34
In the United States (U.S.), the obligation to disclose or abstain has been
traditionally imposed on corporate "insiders," particularly officers, directors, or
controlling stockholders, but that definition has since been expanded.35The term
"insiders" now includes persons whose relationship or former relationship to the
issuer gives or gave them access to a fact of special significance about the issuer or
the security that is not generally available, and one who learns such a fact from an
insider knowing that the person from whom he learns the fact is such an insider.
Insiders have the duty to disclose material facts which are known to them by virtue
of their position but which are not known to persons with whom they deal and
which, if known, would affect their investment judgment. In some cases, however,
there may be valid corporate reasons for the nondisclosure of material information.
Where such reasons exist, an issuer's decision not to make any public disclosures is
not ordinarily considered as a violation of insider trading. At the same time, the
undisclosed information should not be improperly used for non-corporate
purposes, particularly to disadvantage other persons with whom an insider might
transact, and therefore the insider must abstain from entering into transactions
involving such securities.36
Respondents further aver that under Section 30 of the Revised Securities Act, the
SEC still needed to define the following terms: "material fact," "reasonable
person," "nature and reliability" and "generally available." 37 In determining
whether or not these terms are vague, these terms must be evaluated in the
context of Section 30 of the Revised Securties Act. To fully understand how the
terms were used in the aforementioned provision, a discussion of what the law
recognizes as a fact of special significance is required, since the duty to disclose
such fact or to abstain from any transaction is imposed on the insider only in
connection with a fact of special significance.
Under the law, what is required to be disclosed is a fact of "special
significance" which may be (a) a material fact which would be likely, on being made
generally available, to affect the market price of a security to a significant extent, or
(b) one which a reasonable person would consider especially important in
determining his course of action with regard to the shares of stock.
(a) Material Fact - The concept of a "material fact" is not a new one. As early as
1973, the Rules Requiring Disclosure of Material Facts by Corporations Whose
Securities Are Listed In Any Stock Exchange or Registered/Licensed Under the
Securities Act, issued by the SEC on 29 January 1973, explained that "[a] fact is
material if it induces or tends to induce or otherwise affect the sale or purchase of
its securities." Thus, Section 30 of the Revised Securities Act provides that if a fact
affects the sale or purchase of securities, as well as its price, then the insider would
be required to disclose such information to the other party to the transaction
involving the securities. This is the first definition given to a "fact of special
significance."
(b.1) Reasonable Person - The second definition given to a fact of special
significance involves the judgment of a "reasonable person." Contrary to the
allegations of the respondents, a "reasonable person" is not a problematic legal
concept that needs to be clarified for the purpose of giving effect to a statute;
rather, it is the standard on which most of our legal doctrines stand. The doctrine
on negligence uses the discretion of the "reasonable man" as the standard. 38 A
purchaser in good faith must also take into account facts which put a "reasonable
man" on his guard.39 In addition, it is the belief of the reasonable and prudent man
that an offense was committed that sets the criteria for probable cause for a
warrant of arrest.40 This Court, in such cases, differentiated the reasonable and
prudent man from "a person with training in the law such as a prosecutor or a
judge," and identified him as "the average man on the street," who weighs facts
and circumstances without resorting to the calibrations of our technical rules of
evidence of which his knowledge is nil. Rather, he relies on the calculus of common
sense of which all reasonable men have in abundance.41 In the same vein, the U.S.
Supreme Court similarly determined its standards by the actual significance in the
deliberations of a "reasonable investor," when it ruled in TSC Industries, Inc. v.
Northway, Inc.,42 that the determination of materiality "requires delicate
assessments of the inferences a ‘reasonable shareholder' would draw from a given
set of facts and the significance of those inferences to him."
(b.2) Nature and Reliability - The factors affecting the second definition of a "fact of
special significance," which is of such importance that it is expected to affect the
judgment of a reasonable man, were substantially lifted from a test of materiality
pronounced in the case In the Matter of Investors Management Co., Inc.43:
Among the factors to be considered in determining whether information is
material under this test are the degree of its specificity, the extent to
which it differs from information previously publicly disseminated, and its
reliability in light of its nature and source and the circumstances under
which it was received.
It can be deduced from the foregoing that the "nature and reliability" of a
significant fact in determining the course of action a reasonable person takes
regarding securities must be clearly viewed in connection with the particular
circumstances of a case. To enumerate all circumstances that would render the
"nature and reliability" of a fact to be of special significance is close to impossible.
Nevertheless, the proper adjudicative body would undoubtedly be able to
determine if facts of a certain "nature and reliability" can influence a reasonable
person's decision to retain, sell or buy securities, and thereafter explain and justify
its factual findings in its decision.
(c) Materiality Concept - A discussion of the "materiality concept" would be
relevant to both a material fact which would affect the market price of a security to
a significant extent and/or a fact which a reasonable person would consider in
determining his or her cause of action with regard to the shares of stock.
Significantly, what is referred to in our laws as a fact of special significance is
referred to in the U.S. as the "materiality concept" and the latter is similarly not
provided with a precise definition. In Basic v. Levinson,44 the U.S. Supreme Court
cautioned against confining materiality to a rigid formula, stating thus:
A bright-line rule indeed is easier to follow than a standard that requires
the exercise of judgment in the light of all the circumstances. But ease of
application alone is not an excuse for ignoring the purposes of the
Securities Act and Congress' policy decisions. Any approach that designates
a single fact or occurrence as always determinative of an inherently fact-
specific finding such as materiality, must necessarily be overinclusive or
underinclusive.
Moreover, materiality "will depend at any given time upon a balancing of both the
indicated probability that the event will occur and the anticipated magnitude of the
event in light of the totality of the company activity."45 In drafting the Securities Act
of 1934, the U.S. Congress put emphasis on the limitations to the definition of
materiality:
Although the Committee believes that ideally it would be desirable to have
absolute certainty in the application of the materiality concept, it is its
view that such a goal is illusory and unrealistic. The materiality concept is
judgmental in nature and it is not possible to translate this into a
numerical formula. The Committee's advice to the [SEC] is to avoid this
quest for certainty and to continue consideration of materiality on a
case-by-case basis as disclosure problems are identified." House
Committee on Interstate and Foreign Commerce, Report of the Advisory
Committee on Corporate Disclosure to the Securities and Exchange
Commission, 95th Cong., 1st Sess., 327 (Comm.Print 1977). (Emphasis
provided.)46
(d) Generally Available - Section 30 of the Revised Securities Act allows the insider
the defense that in a transaction of securities, where the insider is in possession of
facts of special significance, such information is "generally available" to the public.
Whether information found in a newspaper, a specialized magazine, or any
cyberspace media be sufficient for the term "generally available" is a matter which
may be adjudged given the particular circumstances of the case. The standards
cannot remain at a standstill. A medium, which is widely used today was, at some
previous point in time, inaccessible to most. Furthermore, it would be difficult to
approximate how the rules may be applied to the instant case, where investigation
has not even been started. Respondents failed to allege that the negotiations of
their agreement with GHB were made known to the public through any form of
media for there to be a proper appreciation of the issue presented.
Section 36(a) of the Revised Securities Act
As regards Section 36(a) of the Revised Securities Act, respondents claim that the
term "beneficial ownership" is vague and that it requires implementing rules to give
effect to the law. Section 36(a) of the Revised Securities Act is a straightforward
provision that imposes upon (1) a beneficial owner of more than ten percent of any
class of any equity security or (2) a director or any officer of the issuer of such
security, the obligation to submit a statement indicating his or her ownership of the
issuer's securities and such changes in his or her ownership thereof. The said
provision reads:
Sec. 36. Directors, officers and principal stockholders. - (a) Every person
who is directly or indirectly the beneficial owner of more than ten per
centum of any [class] of any equity security which is registered pursuant to
this Act, or who is [a] director or an officer of the issuer of such security,
shall file, at the time of the registration of such security on a securities
exchange or by the effective date of a registration statement or within ten
days after he becomes such a beneficial owner, director or officer, a
statement with the Commission and, if such security is registered on a
securities exchange, also with the exchange, of the amount of all equity
securities of such issuer of which he is the beneficial owner, and within ten
days after the close of each calendar month thereafter, if there has been a
change in such ownership during such month, shall file with the
Commission, and if such security is registered on a securities exchange,
shall also file with the exchange, a statement indicating his ownership at
the close of the calendar month and such changes in his ownership as have
occurred during such calendar month. (Emphasis provided.)
Section 36(a) refers to the "beneficial owner." Beneficial owner has been defined in
the following manner:
[F]irst, to indicate the interest of a beneficiary in trust property (also called
"equitable ownership"); and second, to refer to the power of a corporate
shareholder to buy or sell the shares, though the shareholder is not
registered in the corporation's books as the owner. Usually, beneficial
ownership is distinguished from naked ownership, which is the enjoyment
of all the benefits and privileges of ownership, as against possession of the
bare title to property.47
Even assuming that the term "beneficial ownership" was vague, it would not affect
respondents' case, where the respondents are directors and/or officers of the
corporation, who are specifically required to comply with the reportorial
requirements under Section 36(a) of the Revised Securities Act. The validity of a
statute may be contested only by one who will sustain a direct injury as a result of
its enforcement.48
Sections 30 and 36 of the Revised Securities Act were enacted to promote full
disclosure in the securities market and prevent unscrupulous individuals, who by
their positions obtain non-public information, from taking advantage of an
uninformed public. No individual would invest in a market which can be
manipulated by a limited number of corporate insiders. Such reaction would stifle,
if not stunt, the growth of the securities market. To avert the occurrence of such an
event, Section 30 of the Revised Securities Act prevented the unfair use of non-
public information in securities transactions, while Section 36 allowed the SEC to
monitor the transactions entered into by corporate officers and directors as regards
the securities of their companies.
In the case In the Matter of Investor's Management Co.,49 it was cautioned that "the
broad language of the anti-fraud provisions," which include the provisions on
insider trading, should not be "circumscribed by fine distinctions and rigid
classifications." The ambit of anti-fraud provisions is necessarily broad so as to
embrace the infinite variety of deceptive conduct.50
In Tatad v. Secretary of Department of Energy,51 this Court brushed aside a
contention, similar to that made by the respondents in this case, that certain words
or phrases used in a statute do not set determinate standards, declaring that:
Petitioners contend that the words "as far as practicable," "declining" and
"stable" should have been defined in R.A. No. 8180 as they do not set
determinate and determinable standards. This stubborn submission
deserves scant consideration. The dictionary meanings of these words are
well settled and cannot confuse men of reasonable intelligence. x x x. The
fear of petitioners that these words will result in the exercise of executive
discretion that will run riot is thus groundless. To be sure, the Court has
sustained the validity of similar, if not more general standards in other
cases.
Among the words or phrases that this Court upheld as valid standards were
"simplicity and dignity,"52 "public interest,"53 and "interests of law and order."54
The Revised Securities Act was approved on 23 February 1982. The fact that the Full
Disclosure Rules were promulgated by the SEC only on 24 July 1996 does not render
ineffective in the meantime Section 36 of the Revised Securities Act. It is already
unequivocal that the Revised Securities Act requires full disclosure and the Full
Disclosure Rules were issued to make the enforcement of the law more consistent,
efficient and effective. It is equally reasonable to state that the disclosure forms
later provided by the SEC, do not, in any way imply that no compliance was
required before the forms were provided. The effectivity of a statute which imposes
reportorial requirements cannot be suspended by the issuance of specified forms,
especially where compliance therewith may be made even without such forms. The
forms merely made more efficient the processing of requirements already
identified by the statute.
For the same reason, the Court of Appeals made an evident mistake when it ruled
that no civil, criminal or administrative actions can possibly be had against the
respondents in connection with Sections 8, 30 and 36 of the Revised Securities Act
due to the absence of implementing rules. These provisions are sufficiently clear
and complete by themselves. Their requirements are specifically set out, and the
acts which are enjoined are determinable. In particular, Section 855 of the Revised
Securities Act is a straightforward enumeration of the procedure for the registration
of securities and the particular matters which need to be reported in the
registration statement thereof. The Decision, dated 20 August 1998, provides no
valid reason to exempt the respondent IRC from such requirements. The lack of
implementing rules cannot suspend the effectivity of these provisions. Thus, this
Court cannot find any cogent reason to prevent the SEC from exercising its
authority to investigate respondents for violation of Section 8 of the Revised
Securities Act.
II. The right to cross-examination is not absolute and cannot be demanded during
investigative proceedings before the PED.
In its assailed Decision dated 20 August 1998, the Court of Appeals pronounced that
the PED Rules of Practice and Procedure was invalid since Section 8, Rule
V56 thereof failed to provide for the parties' right to cross-examination, in violation
of the Administrative Code of 1987 particularly Section 12(3), Chapter 3, Book VII
thereof. This ruling is incorrect.
Firstly, Section 4, Rule I of the PED Rules of Practice and Procedure, categorically
stated that the proceedings before the PED are summary in nature:
Section 4. Nature of Proceedings - Subject to the requirements of due
process, proceedings before the "PED" shall be summary in nature not
necessarily adhering to or following the technical rules of evidence
obtaining in the courts of law. The Rules of Court may apply in said
proceedings in suppletory character whenever practicable.
Rule V of the PED Rules of Practice and Procedure further specified that:
Section 5. Submission of Documents - During the preliminary
conference/hearing, or immediately thereafter, the Hearing Officer may
require the parties to simultaneously submit their respective verified
position papers accompanied by all supporting documents and the
 affidavits of their witnesses, if any which shall take the place of their direct
testimony. The parties shall furnish each other with copies of the position
papers together with the supporting affidavits and documents submitted
by them.
Section 6. Determination of necessity of hearing. - Immediately after the
submission by the parties of their position papers and supporting
documents, the Hearing Officer shall determine whether there is a need
for a formal hearing. At this stage, he may, in his discretion, and for the
purpose of making such determination, elicit pertinent facts or
information, including documentary evidence, if any, from any party or
witness to complete, as far as possible, the facts of the case. Facts or
information so elicited may serve as basis for his clarification or
simplifications of the issues in the case. Admissions and stipulation of facts
to abbreviate the proceedings shall be encouraged.
Section 7. Disposition of Case. If the Hearing Officer finds no necessity of
further hearing after the parties have submitted their position papers and
supporting documents, he shall so inform the parties stating the reasons
therefor and shall ask them to acknowledge the fact that they were so
informed by signing the minutes of the hearing and the case shall be
deemed submitted for resolution.
As such, the PED Rules provided that the Hearing Officer may require the parties to
submit their respective verified position papers, together with all supporting
documents and affidavits of witnesses. A formal hearing was not mandatory; it was
within the discretion of the Hearing Officer to determine whether there was a need
for a formal hearing. Since, according to the foregoing rules, the holding of a
hearing before the PED is discretionary, then the right to cross-examination could
not have been demanded by either party.
Secondly, it must be pointed out that Chapter 3, Book VII of the Administrative
Code, entitled "Adjudication," does not affect the investigatory functions of the
agencies. The law creating the PED, Section 8 of Presidential Decree No. 902-A, as
amended, defines the authority granted to the PED, thus:
SEC. 8. The Prosecution and Enforcement Department shall have, subject
to the Commission's control and supervision, the exclusive authority to
investigate, on complaint or motu proprio, any act or omission of the
Board of Directors/Trustees of corporations, or of partnerships, or of other
associations, or of their stockholders, officers or partners, including any
fraudulent devices, schemes or representations, in violation of any law or
rules and regulations administered and enforced by the Commission; to
file and prosecute in accordance with law and rules and regulations issued
by the Commission and in appropriate cases, the corresponding criminal or
civil case before the Commission or the proper court or body upon prima
facie finding of violation of any laws or rules and regulations administered
and enforced by the Commission; and to perform such other powers and
functions as may be provided by law or duly delegated to it by the
Commission. (Emphasis provided.)
The law creating PED empowers it to investigate violations of the rules and
regulations promulgated by the SEC and to file and prosecute such cases. It fails to
mention any adjudicatory functions insofar as the PED is concerned. Thus, the PED
Rules of Practice and Procedure need not comply with the provisions of the
Administrative Code on adjudication, particularly Section 12(3), Chapter 3, Book VII.
In Cariño v. Commission on Human Rights,57 this Court sets out the distinction
between investigative and adjudicative functions, thus:
"Investigate," commonly understood, means to examine, explore, inquire
or delve or probe into, research on, study. The dictionary definition of
"investigate" is "to observe or study closely; inquire into systematically: "to
search or inquire into" xx to subject to an official probe xx: to conduct an
official inquiry." The purpose of an investigation, of course is to discover,
to find out, to learn, obtain information. Nowhere included or intimated is
the notion of settling, deciding or resolving a controversy involved in the
facts inquired into by application of the law to the facts established by the
inquiry.
The legal meaning of "investigate" is essentially the same: "(t)o follow up
step by step by patient inquiry or observation. To trace or track; to search
into; to examine and inquire into with care and accuracy; to find out by
careful inquisition; examination; the taking of evidence; a legal inquiry;"
"to inquire; to make an investigation," "investigation" being in turn
described as "(a)n administrative function, the exercise of which ordinarily
does not require a hearing. 2 Am J2d Adm L Sec. 257; xx an inquiry, judicial
or otherwise, for the discovery and collection of facts concerning a certain
matter or matters."
"Adjudicate," commonly or popularly understood, means to adjudge,
arbitrate, judge, decide, determine, resolve, rule on, settle. The dictionary
defines the term as "to settle finally (the rights and duties of parties to a
court case) on the merits of issues raised: xx to pass judgment on: settle
judicially: xx act as judge." And "adjudge" means "to decide or rule upon as
 a judge or with judicial or quasi-judicial powers: xx to award or grant
judicially in a case of controversy x x x."
In a legal sense, "adjudicate" means: "To settle in the exercise of judicial authority.
To determine finally. Synonymous with adjudge in its strictest sense;" and
"adjudge" means: "To pass on judicially, to decide, settle, or decree, or to sentence
or condemn. x x x Implies a judicial determination of a fact, and the entry of a
judgment."
There is no merit to the respondent's averment that the sections under Chapter 3,
Book VII of the Administrative Code, do not distinguish between investigative and
adjudicatory functions. Chapter 3, Book VII of the Administrative Code, is
unequivocally entitled "Adjudication."
Respondents insist that the PED performs adjudicative functions, as enumerated
under Section 1(h) and (j), Rule II; and Section 2(4), Rule VII of the PED Rules of
Practice and Procedure:
Section 1. Authority of the Prosecution and Enforcement Department -
Pursuant to Presidential Decree No. 902-A, as amended by Presidential
Decree No. 1758, the Prosecution and Enforcement Department is
primarily charged with the following:
xxxx
(h) Suspends or revokes, after proper notice and hearing in accordance
with these Rules, the franchise or certificate of registration of
corporations, partnerships or associations, upon any of the following
grounds:
1. Fraud in procuring its certificate of registration;
2. Serious misrepresentation as to what the corporation can do or is doing
to the great prejudice of or damage to the general public;
3. Refusal to comply or defiance of any lawful order of the Commission
restraining commission of acts which would amount to a grave violation of
its franchise;
xxxx
(j) Imposes charges, fines and fees, which by law, it is authorized to collect;
xxxx
Section 2. Powers of the Hearing Officer. The Hearing Officer shall have the
following powers:
xxxx
4. To cite and/or declare any person in direct or indirect contempt in
accordance with pertinent provisions of the Rules of Court.
Even assuming that these are adjudicative functions, the PED, in the instant case,
exercised its investigative powers; thus, respondents do not have the requisite
standing to assail the validity of the rules on adjudication. A valid source of a statute
or a rule can only be contested by one who will sustain a direct injury as a result of
its enforcement.58 In the instant case, respondents are only being investigated by
the PED for their alleged failure to disclose their negotiations with GHB and the
transactions entered into by its directors involving IRC shares. The respondents
have not shown themselves to be under any imminent danger of sustaining any
personal injury attributable to the exercise of adjudicative functions by the SEC.
They are not being or about to be subjected by the PED to charges, fees or fines; to
citations for contempt; or to the cancellation of their certificate of registration
under Section 1(h), Rule II of the PED Rules of Practice and Procedure.
To repeat, the only powers which the PED was likely to exercise over the
respondents were investigative in nature, to wit:
Section 1. Authority of the Prosecution and Enforcement Department -
Pursuant to Presidential Decree No. 902-A, as amended by Presidential
Decree No. 1758, the Prosecution and Enforcement Department is
primarily charged with the following:
xxxx
b. Initiates proper investigation of corporations and partnerships or
persons, their books, records and other properties and assets, involving
their business transactions, in coordination with the operating department
involved;
xxxx
 e. Files and prosecutes civil or criminal cases before the Commission and
other courts of justice involving violations of laws and decrees enforced by
the Commission and the rules and regulations promulgated thereunder;
f. Prosecutes erring directors, officers and stockholders of corporations
and partnerships, commercial paper issuers or persons in accordance with
the pertinent rules on procedures;
The authority granted to the PED under Section 1(b), (e), and (f), Rule II of the PED
Rules of Practice and Procedure, need not comply with Section 12, Chapter 3, Rule
VII of the Administrative Code, which affects only the adjudicatory functions of
administrative bodies. Thus, the PED would still be able to investigate the
respondents under its rules for their alleged failure to disclose their negotiations
with GHB and the transactions entered into by its directors involving IRC shares.
This is not to say that administrative bodies performing adjudicative functions are
required to strictly comply with the requirements of Chapter 3, Rule VII of the
Administrative Code, particularly, the right to cross-examination. It should be noted
that under Section 2.2 of Executive Order No. 26, issued on 7 October 1992,
abbreviated proceedings are prescribed in the disposition of administrative cases:
2. Abbreviation of Proceedings. All administrative agencies are hereby
directed to adopt and include in their respective Rules of Procedure the
following provisions:
xxxx
2.2 Rules adopting, unless otherwise provided by special laws and without
prejudice to Section 12, Chapter 3, Book VII of the Administrative Code of
1987, the mandatory use of affidavits in lieu of direct testimonies and the
preferred use of depositions whenever practicable and convenient.
As a consequence, in proceedings before administrative or quasi-judicial bodies,
such as the National Labor Relations Commission and the Philippine Overseas
Employment Agency, created under laws which authorize summary proceedings,
decisions may be reached on the basis of position papers or other documentary
evidence only. They are not bound by technical rules of procedure and
evidence. 59 In fact, the hearings before such agencies do not connote full
adversarial proceedings.60 Thus, it is not necessary for the rules to require affiants
to appear and testify and to be cross-examined by the counsel of the adverse party.
To require otherwise would negate the summary nature of the administrative or
quasi-judicial proceedings.61 In Atlas Consolidated Mining and Development
Corporation v. Factoran, Jr.,62 this Court stated that:
[I]t is sufficient that administrative findings of fact are supported by
evidence, or negatively stated, it is sufficient that findings of fact are not
shown to be unsupported by evidence. Substantial evidence is all that is
needed to support an administrative finding of fact, and substantial
evidence is "such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion."
In order to comply with the requirements of due process, what is required, among
other things, is that every litigant be given reasonable opportunity to appear and
defend his right and to introduce relevant evidence in his favor. 63
III. The Securities Regulations Code did not repeal Sections 8, 30 and 36 of the
Revised Securities Act since said provisions were reenacted in the new law.
The Securities Regulations Code absolutely repealed the Revised Securities Act.
While the absolute repeal of a law generally deprives a court of its authority to
penalize the person charged with the violation of the old law prior to its appeal, an
exception to this rule comes about when the repealing law punishes the act
previously penalized under the old law. The Court, in Benedicto v. Court of Appeals,
sets down the rules in such instances:64
As a rule, an absolute repeal of a penal law has the effect of depriving the
court of its authority to punish a person charged with violation of the old
law prior to its repeal. This is because an unqualified repeal of a penal law
constitutes a legislative act of rendering legal what had been previously
declared as illegal, such that the offense no longer exists and it is as if the
person who committed it never did so. There are, however, exceptions to
the rule. One is the inclusion of a saving clause in the repealing statute that
provides that the repeal shall have no effect on pending actions.
Another exception is where the repealing act reenacts the former statute
and punishes the act previously penalized under the old law. In such
instance, the act committed before the reenactment continues to be an
offense in the statute books and pending cases are not affected, regardless
of whether the new penalty to be imposed is more favorable to the
accused. (Emphasis provided.)
In the present case, a criminal case may still be filed against the respondents
despite the repeal, since Sections 8, 65 12,66 26,67 2768 and 2369 of the Securities
Regulations Code impose duties that are substantially similar to Sections 8, 30 and
36 of the repealed Revised Securities Act.
Section 8 of the Revised Securities Act, which previously provided for the
registration of securities and the information that needs to be included in the
registration statements, was expanded under Section 12, in connection with Section
8 of the Securities Regulations Code. Further details of the information required to
be disclosed by the registrant are explained in the Amended Implementing Rules
and Regulations of the Securities Regulations Code, issued on 30 December 2003,
particularly Sections 8 and 12 thereof.
Section 30 of the Revised Securities Act has been reenacted as Section 27 of the
Securities Regulations Code, still penalizing an insider's misuse of material and non-
public information about the issuer, for the purpose of protecting public investors.
Section 26 of the Securities Regulations Code even widens the coverage of
punishable acts, which intend to defraud public investors through various devices,
misinformation and omissions.
Section 23 of the Securities Regulations Code was practically lifted from Section
36(a) of the Revised Securities Act. Both provisions impose upon (1) a beneficial
owner of more than ten percent of any class of any equity security or (2) a director
or any officer of the issuer of such security, the obligation to submit a statement
indicating his or her ownership of the issuer's securities and such changes in his or
her ownership thereof.
Clearly, the legislature had not intended to deprive the courts of their authority to
punish a person charged with violation of the old law that was repealed; in this
case, the Revised Securities Act.
IV. The SEC retained the jurisdiction to investigate violations of the Revised
Securities Act, reenacted in the Securities Regulations Code, despite the abolition
of the PED.
Section 53 of the Securities Regulations Code clearly provides that criminal
complaints for violations of rules and regulations enforced or administered by the
SEC shall be referred to the Department of Justice (DOJ) for preliminary
investigation, while the SEC nevertheless retains limited investigatory
powers.70 Additionally, the SEC may still impose the appropriate administrative
sanctions under Section 54 of the aforementioned law. 71
In Morato v. Court of Appeals,72 the cases therein were still pending before the PED
for investigation and the SEC for resolution when the Securities Regulations Code
was enacted. The case before the SEC involved an intra-corporate dispute, while the
subject matter of the other case investigated by the PED involved the schemes,
devices, and violations of pertinent rules and laws of the company's board of
directors. The enactment of the Securities Regulations Code did not result in the
dismissal of the cases; rather, this Court ordered the transfer of one case to the
proper regional trial court and the SEC to continue with the investigation of the
other case.
The case at bar is comparable to the aforecited case. In this case, the SEC already
commenced the investigative proceedings against respondents as early as 1994.
Respondents were called to appear before the SEC and explain their failure to
disclose pertinent information on 14 August 1994. Thereafter, the SEC Chairman,
having already made initial findings that respondents failed to make timely
disclosures of their negotiations with GHB, ordered a special investigating panel to
hear the case. The investigative proceedings were interrupted only by the writ of
preliminary injunction issued by the Court of Appeals, which became permanent by
virtue of the Decision, dated 20 August 1998, in C.A.-G.R. SP No. 37036. During the
pendency of this case, the Securities Regulations Code repealed the Revised
Securities Act. As in Morato v. Court of Appeals, the repeal cannot deprive SEC of its
jurisdiction to continue investigating the case; or the regional trial court, to hear
any case which may later be filed against the respondents.
V. The instant case has not yet prescribed.
Respondents have taken the position that this case is moot and academic, since any
criminal complaint that may be filed against them resulting from the SEC's
investigation of this case has already prescribed.73 They point out that the
prescription period applicable to offenses punished under special laws, such as
violations of the Revised Securities Act, is twelve years under Section 1 of Act No.
3326, as amended by Act No. 3585 and Act No. 3763, entitled "An Act to Establish
Periods of Prescription for Violations Penalized by Special Acts and Municipal
Ordinances and to Provide When Prescription Shall Begin to Act."74 Since the
offense was committed in 1994, they reasoned that prescription set in as early as
2006 and rendered this case moot. Such position, however, is incongruent with the
factual circumstances of this case, as well as the applicable laws and jurisprudence.
It is an established doctrine that a preliminary investigation interrupts the
prescription period.75 A preliminary investigation is essentially a determination
whether an offense has been committed, and whether there is probable cause for
the accused to have committed an offense:
A preliminary investigation is merely inquisitorial, and it is often the only
means of discovering the persons who may be reasonably charged with a
crime, to enable the fiscal to prepare the complaint or information. It is not
a trial of the case on the merits and has no purpose except that of
determining whether a crime has been committed or whether there is
probable cause to believe that the accused is guilty thereof. 76
Under Section 45 of the Revised Securities Act, which is entitled Investigations,
Injunctions and Prosecution of Offenses, the Securities Exchange Commission (SEC)
has the authority to "make such investigations as it deems necessary to determine
whether any person has violated or is about to violate any provision of this Act
XXX." After a finding that a person has violated the Revised Securities Act, the SEC
may refer the case to the DOJ for preliminary investigation and prosecution.
While the SEC investigation serves the same purpose and entails substantially
similar duties as the preliminary investigation conducted by the DOJ, this process
cannot simply be disregarded. In Baviera v. Paglinawan,77 this Court enunciated that
a criminal complaint is first filed with the SEC, which determines the existence of
probable cause, before a preliminary investigation can be commenced by the DOJ.
In the aforecited case, the complaint filed directly with the DOJ was dismissed on
the ground that it should have been filed first with the SEC. Similarly, the offense
was a violation of the Securities Regulations Code, wherein the procedure for
criminal prosecution was reproduced from Section 45 of the Revised Securities
Act. 78 This Court affirmed the dismissal, which it explained thus:
The Court of Appeals held that under the above provision, a criminal
complaint for violation of any law or rule administered by the SEC must
first be filed with the latter. If the Commission finds that there is probable
cause, then it should refer the case to the DOJ. Since petitioner failed to
comply with the foregoing procedural requirement, the DOJ did not
gravely abuse its discretion in dismissing his complaint in I.S. No. 2004-229.
A criminal charge for violation of the Securities Regulation Code is a
specialized dispute. Hence, it must first be referred to an administrative
agency of special competence, i.e., the SEC. Under the doctrine of primary
jurisdiction, courts will not determine a controversy involving a question
within the jurisdiction of the administrative tribunal, where the question
demands the exercise of sound administrative discretion requiring the
specialized knowledge and expertise of said administrative tribunal to
determine technical and intricate matters of fact. The Securities Regulation
Code is a special law. Its enforcement is particularly vested in the SEC.
Hence, all complaints for any violation of the Code and its implementing
rules and regulations should be filed with the SEC. Where the complaint is
criminal in nature, the SEC shall indorse the complaint to the DOJ for
preliminary investigation and prosecution as provided in Section 53.1
earlier quoted.
We thus agree with the Court of Appeals that petitioner committed a fatal
procedural lapse when he filed his criminal complaint directly with the
DOJ. Verily, no grave abuse of discretion can be ascribed to the DOJ in
dismissing petitioner's complaint.
The said case puts in perspective the nature of the investigation undertaken by the
SEC, which is a requisite before a criminal case may be referred to the DOJ. The
Court declared that it is imperative that the criminal prosecution be initiated before
the SEC, the administrative agency with the special competence.
It should be noted that the SEC started investigative proceedings against the
respondents as early as 1994. This investigation effectively interrupted the
prescription period. However, said proceedings were disrupted by a preliminary
injunction issued by the Court of Appeals on 5 May 1995, which effectively enjoined
the SEC from filing any criminal, civil, or administrative case against the respondents
herein.79 Thereafter, on 20 August 1998, the appellate court issued the assailed
Decision in C.A. G.R. SP. No. 37036 ordering that the writ of injunction be made
permanent and prohibiting the SEC from taking cognizance of and initiating any
action against herein respondents. The SEC was bound to comply with the
aforementioned writ of preliminary injunction and writ of injunction issued by the
Court of Appeals enjoining it from continuing with the investigation of respondents
for 12 years. Any deviation by the SEC from the injunctive writs would be sufficient
ground for contempt. Moreover, any step the SEC takes in defiance of such orders
will be considered void for having been taken against an order issued by a court of
competent jurisdiction.
An investigation of the case by any other administrative or judicial body would
likewise be impossible pending the injunctive writs issued by the Court of Appeals.
Given the ruling of this Court in Baviera v. Paglinawan,80 the DOJ itself could not
have taken cognizance of the case and conducted its preliminary investigation
without a prior determination of probable cause by the SEC. Thus, even presuming
that the DOJ was not enjoined by the Court of Appeals from conducting a
preliminary investigation, any preliminary investigation conducted by the DOJ
would have been a futile effort since the SEC had only started with its investigation
when respondents themselves applied for and were granted an injunction by the
Court of Appeals.
Moreover, the DOJ could not have conducted a preliminary investigation or filed a
criminal case against the respondents during the time that issues on the effectivity
of Sections 8, 30 and 36 of the Revised Securities Act and the PED Rules of Practice
and Procedure were still pending before the Court of Appeals. After the Court of
Appeals declared the aforementioned statutory and regulatory provisions invalid
and, thus, no civil, criminal or administrative case may be filed against the
respondents for violations thereof, the DOJ would have been at a loss, as there was
no statutory provision which respondents could be accused of violating.
Accordingly, it is only after this Court corrects the erroneous ruling of the Court of
Appeals in its Decision dated 20 August 1998 that either the SEC or DOJ may
properly conduct any kind of investigation against the respondents for violations of
Sections 8, 30 and 36 of the Revised Securities Act. Until then, the prescription
period is deemed interrupted.
To reiterate, the SEC must first conduct its investigations and make a finding of
probable cause in accordance with the doctrine pronounced in Baviera v.
Paglinawan.81 In this case, the DOJ was precluded from initiating a preliminary
investigation since the SEC was halted by the Court of Appeals from continuing with
its investigation. Such a situation leaves the prosecution of the case at a standstill,
and neither the SEC nor the DOJ can conduct any investigation against the
respondents, who, in the first place, sought the injunction to prevent their
prosecution. All that the SEC could do in order to break the impasse was to have the
Decision of the Court of Appeals overturned, as it had done at the earliest
opportunity in this case. Therefore, the period during which the SEC was prevented
from continuing with its investigation should not be counted against it. The law on
the prescription period was never intended to put the prosecuting bodies in an
impossible bind in which the prosecution of a case would be placed way beyond
their control; for even if they avail themselves of the proper remedy, they would
still be barred from investigating and prosecuting the case.
Indubitably, the prescription period is interrupted by commencing the proceedings
for the prosecution of the accused. In criminal cases, this is accomplished by
initiating the preliminary investigation. The prosecution of offenses punishable
under the Revised Securities Act and the Securities Regulations Code is initiated by
the filing of a complaint with the SEC or by an investigation conducted by the
SEC motu proprio. Only after a finding of probable cause is made by the SEC can the
DOJ instigate a preliminary investigation. Thus, the investigation that was
commenced by the SEC in 1995, soon after it discovered the questionable acts of
the respondents, effectively interrupted the prescription period. Given the nature
and purpose of the investigation conducted by the SEC, which is equivalent to the
preliminary investigation conducted by the DOJ in criminal cases, such investigation
would surely interrupt the prescription period.
VI. The Court of Appeals was justified in denying SEC's Motion for Leave to Quash
SEC Omnibus Orders dated 23 October 1995.
The SEC avers that the Court of Appeals erred when it denied its Motion for Leave
to Quash SEC Omnibus Orders, dated 23 October 1995, in the light of its admission
that the PED had the sole authority to investigate the present case. On this matter,
this Court cannot agree with the SEC.
In the assailed decision, the Court of Appeals denied the SEC's Motion for Leave to
Quash SEC Omnibus Orders, since it found other issues that were more important
than whether or not the PED was the proper body to investigate the matter. Its
refusal was premised on its earlier finding that no criminal, civil, or administrative
case may be filed against the respondents under Sections 8, 30 and 36 of the
Revised Securities Act, due to the absence of any implementing rules and
regulations. Moreover, the validity of the PED Rules on Practice and Procedure was
also raised as an issue. The Court of Appeals, thus, reasoned that if the quashal of
the orders was granted, then it would be deprived of the opportunity to determine
the validity of the aforementioned rules and statutory provisions. In addition, the
SEC would merely pursue the same case without the Court of Appeals having
determined whether or not it may do so in accordance with due process
requirements. Absent a determination of whether the SEC may file a case against
the respondents based on the assailed provisions of the Revised Securities Act, it
would have been improper for the Court of Appeals to grant the SEC's Motion for
Leave to Quash SEC Omnibus Orders.
In all, this Court rules that no implementing rules were needed to render effective
Sections 8, 30 and 36 of the Revised Securities Act; nor was the PED Rules of
Practice and Procedure invalid, prior to the enactment of the Securities Regulations
Code, for failure to provide parties with the right to cross-examine the witnesses
presented against them. Thus, the respondents may be investigated by the
appropriate authority under the proper rules of procedure of the Securities
Regulations Code for violations of Sections 8, 30, and 36 of the Revised Securities
Act.82
IN VIEW OF THE FOREGOING, the instant Petition is GRANTED. This Court hereby
REVERSES the assailed Decision of the Court of Appeals promulgated on 20 August
1998 in CA-G.R. SP No. 37036 and LIFTS the permanent injunction issued pursuant
thereto. This Court further DECLARES that the investigation of the respondents for
violations of Sections 8, 30 and 36 of the Revised Securities Act may be undertaken
by the proper authorities in accordance with the Securities Regulations Code. No
costs.
SO ORDERED.
G.R. No. L-19850 January 30, 1964
VIGAN ELECTRIC LIGHT COMPANY, INC., petitioner,
vs.
THE PUBLIC SERVICE COMMISSION, respondent.
Raymundo A. Armovit for petitioner.
Federico S. Arlos and P. H. del Pilar for respondent.
CONCEPCION, J.:
This is an original action for certiorari to annul an order of respondent Public Service
Commission. Upon the filing of the petition and the submission and approval of the
corresponding bond, we issued a writ of injunction restraining said respondent from
enforcing the order complained of Republic Act No. 316, approved on June 19,
1948, granted petitioner Vigan Electric Light Company, Inc., a franchise to construct,
maintain and operate an electric light, heat and/or power plant for the purpose of
generating and distributing light, heat and/or power, for sale within the limits of
several municipalities of the province of Ilocos Sur. Accordingly, petitioner secured
from respondent on May 31, 1950, a certificate of public convenience to render
electric light, heat and/or power services in said municipalities and to charge its
customers and/or consumers the following rates:
FLAT RATE
1 — 20 watt bulb per month ............................................................
1 — 25 watt bulb per month ............................................................
1 — 40 watt bulb per month ............................................................
1 — 50 watt bulb per month ............................................................
1 — 60 watt bulb per month ............................................................
1 — 75 watt bulb per month ............................................................
1 — 80 watt bulb per month ............................................................
1 — 100 watt bulb per month
............................................................
1 — 150 watt bulb per month
............................................................
1 — 200 watt bulb per month
17.00
............................................................
METER RATE
For the first 15
For the first 15 Kw. hrs. ............................................................ P0.40
For the next 35 Kw. hrs. ............................................................ .30
For the next 50 Kw. hrs. ............................................................ .25
For all over 100 Kw. hrs. ............................................................ .20
Minimum Charge: P6.00 per month for connection of 200 watts
or less; plus P0.01 per watt per month for connection in excess
of 200 watts.
TEMPORARY RATE
P0.01 per watt per night.
On May 22, 1957, petitioner, acting with respondent's approval, entered into a
contract for the purchase of electric power and energy from the National Power
P2.30 Corporation, for resale, in the course of the business of said petitioner, to its
customers, to whom, in fact, petitioner resold said electric power and energy, in
3.00 accordance with the above schedule of rates. About five (5) years later, or on
January 16, 1962, respondent advised petitioner of a conference to be held on
4.50 February 12, 1962 for the purpose of revising its authorized rates. Soon thereafter,
petitioner received a letter of respondent informing the former of an alleged letter-
5.50
petition of "Congressman Floro Crisologo and 107 alleged residents of Vigan Ilocos
6.50 Sur", charging the following:
7.50 We also denounce the sale of TWO THOUSAND (2,000) ELECTRIC METERS
in blackmarket by the Vigan Electric Light Company to Avegon Co., as
8.00
anomalous and illegal. Said electric meters were imported from Japan by
the Vigan Electric Light Company in behalf of the consumers of electric
9.00 current from said electric company. The Vigan Electric Light Company has
commercialized these privilege which property belong to the people.
13.00
 We also report that the electric meters in Vigan used by the consumers
had been installed in bad faith and they register excessive rates much
more than the actual consumption.1äwphï1.ñët
and directing the petitioner to comment on these charges. In reply to said
communications, petitioner's counsel wrote to respondent, on February 1, 1962, a
letter asking that the conference scheduled for February 12 be postponed to March
12, and another letter stating inter alia:
In connection therewith, please be informed that my client, the Vigan
Electric Light Co., Inc., has not had any dealing with the Avegon Co., Inc.,
relative to the 2,000 electric meter mentioned in the petition. Attached
hereto as Annex "1" and made an integral part thereof is a certification to
that effect by Avegon Co., Inc.
Furthermore, as counsel for Vigan Electric Light Co., Inc., I wish to inform
this Honorable Commission that the charge that said company installed the
electric meters in bad faith and that said meters registered excessive rates
could have no valid basis because all of these meters have been inspected
checked, tested and sealed by your office.
On March 15, 1962, petitioner received a communication form the General Auditing
Office notifying him that one Mr. Cesar A. Damole had "been instructed to make an
audit and examination of the books and other records of account" of said
petitioner, "under the provisions of Commonwealth Act No. 325 and in accordance
with the request of the Public Service Commission contained in its letter dated
March 12, 1962", and directing petitioner to cooperate with said Mr. Damole "for
the successful accomplishment of his work". Subsequently, respondent issued
a subpoena duces tecum requiring petitioner to produce before the former, during
a conference scheduled for April 10, 1962, certain books of account and financial
statements specified in said process. On the date last mentioned petitioner moved
to quash the subpoena duces tecum. The motion was not acted upon in said
conference of April 10, 1962. However, it was then decided that the next
conference be held on April 30, 1962, which was later postponed to May 21, 1962.
When petitioner's representatives appeared before respondent, on the date last
mentioned, they were advised by the latter that the scheduled conference had
been cancelled, that the petition to quash the subpoena duces tecum had been
granted, and that, on May 17, 1962, respondent had issued an order, from which
we quote:
We now have the audit report of the General Auditing Office dated May 4,
1962, covering the operation of the Vigan Electric Light Co., Inc. in Vigan,
Bantay and Cagayan, Ilocos Sur, for the period from January 1 to December
31, 1961. We find from the report that the total invested capital of the
utility as of December 31, 1961, entitled to return amounted to
P118,132.55, and its net operating income for rate purposes of P53,692.34
represents 45.45% of its invested capital; that in order to earn 12% per
annum, the utility should have a computed revenue by rates of
P182,012.78; and that since it realized an actual revenue by rates of
P221,529.17, it had an excess revenue by rates of P39,516.39, which is
17.84% of the actual revenue by rates and 33.45% of the invested capital.
In other words, the present rates of the Vigan Electric Light Co., Inc. may
be reduced by 17.84%, or in round figure, by 18%.
Upon consideration of the foregoing, and finding that the Vigan Electric
Light Co., Inc. is making a net operating profit in excess of the allowable
return of 12% on its invested capital, we believe that it is in the public
interest and in consonance with Section 3 of Republic Act No. 3043 that
reduction of its rates to the extent of its excess revenue be put into effect
immediately.
WHEREFORE, Vigan Electric Light Co., Inc. is hereby ordered to reduce the
present meter rates for its electric service effective upon the billing for the
month of June, 1962, to wit:
METER RATE — 24-HOUR SERVICE
For the first 15 kwh per month at P0.328 per kwh
For the next 35 kwh per month at P0.246 per kwh
For the next 50 kwh per month at P0.205 per kwh
For all over 100 kwh per month at P0.164 per kwh
Minimum Charge: P4.90 per month for connection of 200 was or
less plus P0.01 per watt per month for connection in excess of 200
watts.
TEMPORARY LIGHTING
P0.01 per watt per night.
Minimum Charge: P1.00
Billings to customers shall be made to the nearest multiple of five centavos. The
above rates may be revised, modified or altered at anytime for any just cause
and/or in the public service.
Soon later, or on June 25, 1962, petitioner herein instituted the present action
for certiorari to annul said order of May 17, 1962, upon the ground that, since its
Corporate inception in 1948, petitioner it "never was able to give and never made a
single dividend declaration in favor of its stockholders" because its operation from
1949 to 1961 had resulted in an aggregate loss of P113,351.523; that in the
conference above mentioned petitioner had called the attention of respondent to
the fact that the latter had not furnished the former a "copy of the alleged letter-
petition of Congressman Crisologo and others"; that respondent then expressed the
view that there was no necessity of serving copy of said letter to petitioner, because
respondent was merely holding informal conferences to ascertain whether
petitioner would consent to the reduction of its rates; that petitioner objected to
said reduction without a hearing, alleging that its rates could be reduced only if
proven by evidence validly adduced to be excessive; that petitioner offered to
introduce evidence to show the reasonableness of its aforementioned rates, and
even the fairness of its increase; that petitioner was then assured that it would be
furnished a copy of the aforementioned letter-petition and that a hearing would be
held, if a reduction of its rates could not be agreed upon; that petitioner had not
even been served a copy of the auditor's report upon which the order complained
of is based; that such order had been issued without notice and hearing; and that,
accordingly, petitioner had been denied due process.
In its answer respondent admitted some allegations of the complaint and denied
other allegations thereof, particularly the conclusions drawn by petitioner. Likewise,
respondent alleged that it granted petitioner's motion to quash the
aforementioned subpoena duces tecum because the documents therein referred to
had already been audited and examined by the General Auditing Office, the report
on which was on file with said respondent; that the latter had directed that
petitioner be served a copy of said report; and that, although this has not, as yet,
been actually done, petitioner could have seen and examined said report had it
really wanted to do so. By way of special defenses, respondent, moreover, alleged
that the disputed order had been issued under its delegated legislative authority,
the exercise of which does not require previous notice and hearing; and that
petitioner had not sought a reconsideration of said order, and had, accordingly,
failed to exhaust all administrative remedies.
In support of its first special defense respondent maintains that rate-fixing is a
legislative function; that legislative or rule-making powers may constitutionally be
exercised without previous notice of hearing; and that the decision in Ang Tibay vs.
Court of Industrial Relations (69 Phil., 635) — in which we held that such notice and
hearing are essential to the validity of a decision of the Public Service Commission
— is not in point because, unlike the order complained of — which respondent
claims to be legislative in nature — the Ang Tibay case referred to a proceeding
involving the exercise of judicial functions.
At the outset, it should be noted, however, that, consistently with the principle of
separation of powers, which underlies our constitutional system, legislative powers
may not be delegated except to local governments, and only to matters purely of
local concern (Rubi vs. Provincia Board, 39 Phil., 660; U.S. vs. Heinszen, 206 U.S.
370). However, Congress may delegate to administrative agencies of the
government the power to supply the details in the execution or enforcement of a
policy laid down by a which is complete in itself (Calalang vs. Williams, 70 Phil. 726;
Pangasinan Trans. Co. vs. Public Service Commission, 70 Phil., 221; People vs.
Rosenthal, 68 Phil., 328; People vs. Vera, 65 Phil., 56; Cruz vs. Youngberg, 56 Phil.
234; Alegre vs. Collector of Customs, 53 Phil., 394; U.S. vs. Ang Tang Ho 43 Phil., 1;
Schechter vs. U.S., 295 U.S., 495 Mulford vs. Smith, 307 U.S., 38; Bowles vs.
Willingham, 321 U.S., 503). Such law is not deemed complete unless it lays down a
standard or pattern sufficiently fixed or determinate, or, at least, determinable
without requiring another legislation, to guide the administrative body concerned in
the performance of its duty to implement or enforce said Policy (People vs. Lim Ho,
L-12091, January 28, 1960; Araneta vs. Gatmaitan, L-8895, April 30, 1957; Cervantes
vs. Auditor General, L-4043, May 26, 1952; Philippine Association of Colleges vs.
Secretary of Education, 51 Off. Gaz., 6230; People vs. Arnault, 48 Off. Gaz., 4805;
Antamok Gold Fields vs. Court of Industrial Relations, 68 Phil., 340; U.S. vs. Barrias,
11 Phil., 327; Yakus vs. White, 321 U.S., 414; Ammann vs. Mallonce, 332 U.S., 245;
U.S. vs. Rock Royal Corp. 307 U.S., 533; Mutual Film Corp. vs. Industrial Commission,
276 U.S., 230). Otherwise, there would be no reasonable means to ascertain
whether or not said body has acted within the scope of its authority, and, as a
consequence, the power of legislation would eventually be exercised by a branch of
the Government other than that in which it is lodged by the Constitution, in
violation, not only of the allocation of powers therein made, but, also, of the
principle of separation of powers. Hence, Congress his not delegated, and cannot
delegate legislative powers to the Public Service Commission.
Moreover, although the rule-making power and even the power to fix rates —
when such rules and/or rates are meant to apply to all enterprises of a given
kind throughout the Philippines — may partake of a legislative character, such is not
the nature of the order complained of. Indeed, the same applies exclusively to
petitioner herein. What is more, it is predicated upon the finding of fact — based
upon a report submitted by the General Auditing Office — that petitioner is making
a profit of more than 12% of its invested capital, which is denied by petitioner.
Obviously, the latter is entitled to cross-examine the maker of said report, and to
introduce evidence to disprove the contents thereof and/or explain or complement
the same, as well as to refute the conclusion drawn therefrom by the respondent.
In other words, in making said finding of fact, respondent performed a
function partaking of a quasi-judicial character the valid exercise of which demands
previous notice and hearing.
Indeed, sections 16(c) and 20 (a) of Commonwealth Act No. 146, explicitly require
notice Indeed hearing. The pertinent parts thereof provide:
SEC. 16. The Commission shall have the power, upon proper notice and
hearing in accordance with the rules and provision of this Act, subject to
the limitations and exception mentioned and saving provisions to the
contrary:
xxx xxx xxx
(c) To fix and determine individual or joint rates, tolls charges,
classifications, or schedules thereof, as well as commutation, mileage
kilometrage, and other special rates which shall be imposed, observed, and
followed thereafter by any public service: Provided, That the Commission
may in its discretion approve rates proposed by public services
provisionally and without necessity of any hearing; but it shall call a
hearing thereof within thirty days thereafter, upon publication and
notice to the concerns operating in the territory affected: Provided,
further, That in case the public service equipment of an operator is use
principally or secondarily for the promotion of a private business the net
profits of said private business shall be considered in relation with the
public service of such operator for the purpose of fixing the rates.
SEC. 20. Acts requiring the approval of the Commission. — Subject to
established limitations and exception and saving provisions to the
contrary, it shall be unlawful for any public service or for the owner, lessee
or operator thereof, without the approval and authorization of the
Commission previously had —
(a) To adopt, establish, fix, impose, maintain, collect or carry into effect
any individual or joint rates, commutation mileage or other special rate,
toll, fare, charge, classification or itinerary. The Commission shall approve
only those that are just and reasonable and not any that are unjustly
discriminatory or unduly preferential, only upon reasonable notice to the
public services and other parties concerned, giving them reasonable
opportunity to be heard, ... . (Emphasis supplied.)
Since compliance with law must be presumed, it should be assumed that
petitioner's current rates were fixed by respondent after proper notice and hearing.
Hence, modification of such rates cannot be made, over petitioner's objection,
without such notice and hearing, particularly considering that the factual basis of
the action taken by respondent is assailed by petitioner. The rule applicable is set
forth in the American Jurisprudence the following language:
Whether notice and a hearing in proceedings before a public service
commission are necessary depends chiefly upon statutory or constitutional
provisions applicable to such proceedings, which make notice and hearing,
prerequisite to action by the commission, and upon the nature and object
of such proceedings, that is, whether the proceedings, are, on the one
hand, legislative and rule-making in character, or are, on the other hand,
determinative and judicial or quasi-judicial, affecting the rights an property
of private or specific persons. As a general rule, a public utility must be
afforded some opportunity to be heard as to the propriety and
reasonableness of rates fixed for its services by a public service
commission.(43 Am. Jur. 716; Emphasis supplied.)
Wherefore, we hold that the determination of the issue involved in the order
complained of partakes of the nature of a quasi-judicial function and that having
been issued without previous notice and hearing said order is clearly violative of the
due process clause, and, hence, null and void, so that a motion for reconsideration
thereof is not an absolute prerequisite to the institution of the present action
for certiorari (Ayson vs. Republic. 50 Off. Gaz., 5810). For this reason considering
that said order was being made effective on June 1, 1962, or almost immediately
after its issuance (on May 17, 1962), we find that petitioner was justified in
commencing this proceedings without first filing said motion (Guerrero vs.
Carbonell, L-7180, March 15, 1955).
WHEREFORE, the writ prayed for is granted and the preliminary injunction issued by
this Court hereby made permanent. It is so ordered.
G.R. No. 164026 December 23, 2008
SECURITIES AND EXCHANGE COMMISSION, petitioner,
vs.
GMA NETWORK, INC., respondent.
DECISION
TINGA, J.:
1
Petitioner Securities and Exchange Commission (SEC) assails the Decision dated
February 20, 2004 of the Court of Appeals in CA-G.R. SP No. 68163, which directed
that SEC Memorandum Circular No. 1, Series of 1986 should be the basis for
computing the filing fee relative to GMA Network, Inc.’s (GMA’s) application for the
amendment of its articles of incorporation for purposes of extending its corporate
term.
The undisputed facts as narrated by the appellate court are as follows:
On August 19, 1995, the petitioner, GMA NETWORK, INC., (GMA, for
brevity), a domestic corporation, filed an application for collective approval
of various amendments to its Articles of Incorporation and By-Laws with
the respondent Securities and Exchange Commission, (SEC, for brevity).
The amendments applied for include, among others, the change in the
corporate name of petitioner from "Republic Broadcasting System, Inc." to
"GMA Network, Inc." as well as the extension of the corporate term for
another fifty (50) years from and after June 16, 2000.
Upon such filing, the petitioner had been assessed by the SEC’s Corporate
and Legal Department a separate filing fee for the application for extension
of corporate term equivalent to 1/10 of 1% of its authorized capital stock
plus 20% thereof or an amount of P1,212,200.00.
On September 26, 1995, the petitioner informed the SEC of its intention to
contest the legality and propriety of the said assessment. However, the
petitioner requested the SEC to approve the other amendments being
requested by the petitioner without being deemed to have withdrawn its
application for extension of corporate term.
On October 20, 1995, the petitioner formally protested the assessment
amounting to P1,212,200.00 for its application for extension of corporate
term.
On February 20, 1996, the SEC approved the other amendments to the
petitioner’s Articles of Incorporation, specifically Article 1 thereof referring
to the corporate name of the petitioner as well as Article 2 thereof
referring to the principal purpose for which the petitioner was formed.
On March 19, 1996, the petitioner requested for an official opinion/ruling
from the SEC on the validity and propriety of the assessment for
application for extension of its corporate term.
Consequently, the respondent SEC, through Associate Commissioner Fe
Eloisa C. Gloria, on April 18, 1996, issued its ruling upholding the validity of
the questioned assessment, the dispositive portion of which states:
"In light of the foregoing, we believe that the questioned assessment is in
accordance with law. Accordingly, you are hereby required to comply
with the required filing fee."
An appeal from the aforequoted ruling of the respondent SEC was
subsequently taken by the petitioner on the ground that the assessment of
filing fees for the petitioner’s application for extension of corporate term
equivalent to 1/10 of 1% of the authorized capital stock plus 20% thereof is
not in accordance with law.
On September 26, 2001, following three (3) motions for early resolution
filed by the petitioner, the respondent SEC En Banc issued the assailed
order dismissing the petitioner’s appeal, the dispositive portion of which
provides as follows:
WHEREFORE, for lack of merit, the instant Appeal is hereby dismissed.
SO ORDERED.2
In its petition for review3 with the Court of Appeals, GMA argued that its application
for the extension of its corporate term is akin to an amendment and not to a filing
of new articles of incorporation. It further averred that SEC Memorandum Circular
No. 2, Series of 1994, which the SEC used as basis for assessing P1,212,200.00 as
filing fee for the extension of GMA’s corporate term, is not valid.
The appellate court agreed with the SEC’s submission that an extension of the
corporate term is a grant of a fresh license for a corporation to act as a juridical
being endowed with the powers expressly bestowed by the State. As such, it is not
an ordinary amendment but is analogous to the filing of new articles of
incorporation.
However, the Court of Appeals ruled that Memorandum Circular No. 2, Series of
1994 is legally invalid and ineffective for not having been published in accordance
with law. The challenged memorandum circular, according to the appellate court, is
not merely an internal or interpretative rule, but affects the public in general.
Hence, its publication is required for its effectivity.
The appellate court denied reconsideration in a Resolution 4 dated June 9, 2004.
In its Memorandum5 dated September 6, 2005, the SEC argues that it issued the
questioned memorandum circular in the exercise of its delegated legislative power
to fix fees and charges. The filing fees required by it are allegedly uniformly
imposed on the transacting public and are essential to its supervisory and
regulatory functions. The fees are not a form of penalty or sanction and, therefore,
require no publication.
6
For its part, GMA points out in its Memorandum, dated September 23, 2005, that
SEC Memorandum Circular No. 1, Series of 1986 refers to the filing fees for
amended articles of incorporation where the amendment consists of extending the
term of corporate existence. The questioned circular, on the other hand, refers only
to filing fees for articles of incorporation. Thus, GMA argues that the former
circular, being the one that specifically treats of applications for the extension of
corporate term, should apply to its case.
Assuming that Memorandum Circular No. 2, Series of 1994 is applicable, GMA avers
that the latter did not take effect and cannot be the basis for the imposition of the
fees stated therein for the reasons that it was neither filed with the University of
the Philippines Law Center nor published either in the Official Gazette or in a
newspaper of general circulation as required under existing laws.
It should be mentioned at the outset that the authority of the SEC to collect and
receive fees as authorized by law is not in question.7 Its power to collect fees for
examining and filing articles of incorporation and by-laws and amendments thereto,
certificates of increase or decrease of the capital stock, among others, is
recognized. Likewise established is its power under Sec. 7 of P.D. No. 902-A to
recommend to the President the revision, alteration, amendment or adjustment of
the charges which it is authorized to collect.
The subject of the present inquiry is not the authority of the SEC to collect and
receive fees and charges, but rather the validity of its imposition on the basis of a
memorandum circular which, the Court of Appeals held, is ineffective.
Republic Act No. 3531 (R.A. No. 3531) provides that where the amendment consists
in extending the term of corporate existence, the SEC "shall be entitled to collect
and receive for the filing of the amended articles of incorporation the same fees
collectible under existing law as the filing of articles of incorporation."8 As is clearly
the import of this law, the SEC shall be entitled to collect and receive the same fees
it assesses and collects both for the filing of articles of incorporation and the filing
of an amended articles of incorporation for purposes of extending the term of
corporate existence.
The SEC, effectuating its mandate under the aforequoted law and other pertinent
laws,9 issued SEC Memorandum Circular No. 1, Series of 1986, imposing the filing
fee of 1/10 of 1% of the authorized capital stock but not less than P300.00 nor more
than P100,000.00 for stock corporations, and 1/10 of 1% of the authorized capital
stock but not less than P200.00 nor more than P100,000.00 for stock corporations
without par value, for the filing of amended articles of incorporation where the
amendment consists of extending the term of corporate existence.
Several years after, the SEC issued Memorandum Circular No. 2, Series of 1994,
imposing new fees and charges and deleting the maximum filing fee set forth in SEC
Circular No. 1, Series of 1986, such that the fee for the filing of articles of
incorporation became 1/10 of 1% of the authorized capital stock plus 20% thereof
but not less than P500.00.
A reading of the two circulars readily reveals that they indeed pertain to different
matters, as GMA points out. SEC Memorandum Circular No. 1, Series of 1986 refers
to the filing fee for the amendment of articles of incorporation to extend corporate
life, while Memorandum Circular No. 2, Series of 1994 pertains to the filing fee for
articles of incorporation. Thus, as GMA argues, the former circular, being squarely
applicable and, more importantly, being more favorable to it, should be followed.
What this proposition fails to consider, however, is the clear directive of R.A. No.
3531 to impose the same fees for the filing of articles of incorporation and the filing
of amended articles of incorporation to reflect an extension of corporate term. R.A.
No. 3531 provides an unmistakable standard which should guide the SEC in fixing
and imposing its rates and fees. If such mandate were the only consideration, the
Court would have been inclined to rule that the SEC was correct in imposing the
filing fees as outlined in the questioned memorandum circular, GMA’s argument
notwithstanding.
However, we agree with the Court of Appeals that the questioned memorandum
circular is invalid as it does not appear from the records that it has been published
in the Official Gazette or in a newspaper of general circulation. Executive Order No.
200, which repealed Art. 2 of the Civil Code, provides that "laws shall take effect
after fifteen days following the completion of their publication either in the Official
Gazette or in a newspaper of general circulation in the Philippines, unless it is
otherwise provided."
10
In Tañada v. Tuvera, the Court, expounding on the publication requirement, held:
We hold therefore that all statutes, including those of local application and
private laws, shall be published as a condition for their effectivity, which
shall begin fifteen days after publication unless a different effectivity date
is fixed by the legislature.
Covered by this rule are presidential decrees and executive orders
promulgated by the President in the exercise of legislative powers
whenever the same are validly delegated by the legislature, or, at present,
directly conferred by the Constitution. Administrative rules and regulations
must also be published if their purpose is to enforce or implement existing
law pursuant also to a valid delegation.
the law, but a rule which must be declared ineffective as it was neither published
nor filed with the Office of the National Administrative Register.
A related factor which precludes consideration of the questioned issuance as
interpretative in nature merely is the fact the SEC’s assessment amounting
to P1,212,200.00 is exceedingly unreasonable and amounts to an imposition. A
filing fee, by legal definition, is that charged by a public official to accept a
document for processing. The fee should be just, fair, and proportionate to the
service for which the fee is being collected, in this case, the examination and
verification of the documents submitted by GMA to warrant an extension of its
corporate term.
Rate-fixing is a legislative function which concededly has been delegated to the SEC
by R.A. No. 3531 and other pertinent laws. The due process clause, however,
permits the courts to determine whether the regulation issued by the SEC is
reasonable and within the bounds of its rate-fixing authority and to strike it down
when it arbitrarily infringes on a person’s right to property.

Interpretative regulations and those merely internal in nature, that is,
regulating only the personnel of the administrative agency and not the
public, need not be published. Neither is publication required of the so-
called letters of instructions issued by administrative superiors concerning
the rules or guidelines to be followed by their subordinates in the
performance of their duties.11
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-
G.R. SP No. 68163, dated February 20, 2004, and its Resolution, dated June 9, 2004,
are AFFIRMED. No pronouncement as to costs.
SO ORDERED.

The questioned memorandum circular, furthermore, has not been filed with the
Office of the National Administrative Register of the University of the Philippines
Law Center as required in the Administrative Code of 1987.12

In Philsa International Placement and Services Corp. v. Secretary of Labor and

Employment,13 Memorandum Circular No. 2, Series of 1983 of the Philippine
Overseas Employment Administration, which provided for the schedule of
placement and documentation fees for private employment agencies or authority
holders, was struck down as it was not published or filed with the National
Administrative Register.

The questioned memorandum circular, it should be emphasized, cannot be

construed as simply interpretative of R.A. No. 3531. This administrative issuance is
an implementation of the mandate of R.A.

No. 3531 and indubitably regulates and affects the public at large. It cannot,
therefore, be considered a mere internal rule or regulation, nor an interpretation of
G.R. No. 179844 March 23, 2011
EMERSON B. BAGONGAHASA, GIRLIE B. BAGONGAHASA, DEPARTMENT OF
AGRARIAN REFORM - PROVINCIAL AGRARIAN REFORM OFFICER OF LAGUNA, and
REGISTER OF DEEDS OF SINOLOAN, LAGUNA, Petitioners,
vs.
JOHANNA L. ROMUALDEZ, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
SPOUSES CESAR M. CAGUIN and GERTRUDES CAGUIN, SPOUSES TEODORO
MADRIDEJOS and ANICETA IBANEZ MADRIDEJOS, DEPARTMENT OF AGRARIAN
REFORM - PROVINCIAL AGRARIAN REFORM OFFICER OF LAGUNA, and REGISTER
OF DEEDS OF SINOLOAN, LAGUNA, Petitioners,
vs.
DIETMAR L. ROMUALDEZ, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
SOTELA D. ADEA, SPOUSES ESPERANZA and LEONCIO MARIO, SPOUSES DELIA and
DANILO CACHOLA, SPOUSES MA. ALICIA and REYMUNDO CAINTO, EDUARDO B.
DALAY, SPOUSES JOSE LEVITICO and EPIFANIA DALAY, SPOUSES JIFFY and
FAUSTINO DALAY, SPOUSES MA. RUTH and MELCHOR PACURIB, MA. JERIMA B.
DALAY, SPOUSES CLEOFAS and TERESITA VITOR, SPOUSES CELESTINA and
ALEJANDRO COSICO, SPOUSES AUREA and ANTONIO HERNANDEZ, SPOUSES JULIA
and RAFAEL DELA CRUZ, SPOUSES RAQUEL and SEBASTIAN SAN JUAN, SPOUSES
MARGARITA and PABLITO LLANES, SR., FIDEL M. DALAY, SPOUSES JAIME and
MELVITA DALAY, SPOUSES EMILY and FLORENCIO PANGAN, SPOUSES FELIPE and
ROSALIE DALAY, SPOUSES MARCELO and CATALINA B. DALAY, and SPOUSES
RENATO and ELIZABETH DALAY, DEPARTMENT OF AGRARIAN REFORM -
PROVINCIAL AGRARIAN REFORM OFFICER OF LAGUNA, and REGISTER OF DEEDS
OF SINOLOAN, LAGUNA, Petitioners,
vs.
SPOUSES DANIEL and ANA ROMUALDEZ, and JACQUELINE L.
ROMUALDEZ, Respondents.
DECISION
NACHURA, J.:
Before this Court is a Consolidated Petition for Review on Certiorari1 under Rule 45
of the Rules of Civil Procedure, seeking the reversal of the Court of Appeals (CA)
Decision2 dated May 31, 2007 and its Amended Decision (Partial)3 dated September
25, 2007.
The facts, as summarized by the Department of Agrarian Reform Adjudication
Board (DARAB) and as quoted by the CA, are as follows:
It appears that Complainants Johanna L. Romualdez; Dietmar L. Romualdez; Sps.
Daniel and [Ana] Romualdez and Jacquelin[e] C. (sic) Romualdez are absolute and
lawful owners of separate parcels of lands, each parcel with an area of 36,670
square meters, 47,187.50 square meters and 55,453 square meters, respectively, all
situated [in] Sitio Papatahan, Paete, Laguna. Johanna and Dietmar purchased their
properties from Roberto Manalo on January 6, 1994; while Sps. Daniel and [Ana], as
well as Jacqueline bought their landholdings from Leonisa A. Zarraga on August 5,
1998. They allege that the said properties are planted [with] different fruit-bearing
trees. They and their predecessors-in-interest have been paying realty taxes due on
the properties up to the present. However, sometime in 1994 and 1995, the then
Secretary of Agrarian Reform declared the property to be part of the public domain,
awarded the same to the Defendants and forthwith issued Certificates of Land
Ownership Award (CLOAs) to the respective defendants as follows:
CLOA NO. BENEFICIARIES Date of Registration
In Registry of Deeds of Laguna
1. 00155653 Emerson Bagongahasa, April 10, 1995 et al.
2. 00155652 Cesar Caguin, et al. April 10, 1995
3. 00119810 Sotela Adea, et al. June 30, 1994
It was only in 1998 when the complainants learned of the issuance of said CLOAs by
the Register of Deeds of Siniloan, Laguna.
The Complainants pointed out that while the Defendants’ respective CLOAs
describe a property purportedly located in Sitio Lamao, San Antonio, Municipality of
Kalayaan, Province of Laguna, each of the Complainants’ tax declaration describes a
property located [in] Sitio Papatahan, Municipality of Paete, Province of Laguna.
Inspite of the discrepancy in the municipality and sitio of the respective documents,
the lots described in the CLOAs and in the Tax Declarations are almost identical,
except that the property described in Defendants’ title covers a larger area, but the
title and the tax declaration refer to the same lot; that they and their predecessors-
in-interest have been in possession of the properties for more than thirty years;
that the Defendants have never been in possession of the same; that they have not
paid any real estate taxes and have not caused the issuance of a tax declaration (DAR) Secretary committed a mistake in placing the subject properties under the
over the property in their names; that there is no basis for the award of certificates Comprehensive Agrarian Reform Program (CARP). Moreover, the PARAD found that
of land ownership to the Defendants by the Secretary of Agrarian Reform, for the no notice of coverage was sent to respondents and that they were also not paid any
lands have already become private properties by virtue of the open, continuous, just compensation. The dispositive portion of the said decision reads:
exclusive and notorious possession of the property by the Complainants and/or
their predecessors-in-interest which possession was in the concept of an owner. As WHEREFORE, premises considered, judgment is hereby rendered:
absolute and lawful owners thereof, the complainants also maintain that they have
not been notified of any intended coverage thereof by the DAR; that to the best of 1. Ordering the cancellation of Certificate of Land Ownership Award (CLOA)
their knowledge, there is no valuation being conducted by the Land Bank of the NOS. 00155653, 00155652 and 00119810 issued to herein private
Philippines and the DAR involving the property; that there was no compensation respondents; [and]
paid and that the DAR-CENRO Certification shows that the landholdings have 24-
32% slopes and therefore exempt from CARP coverage.
2. Ordering the Register of Deeds of Siniloan, Laguna to cause the
cancellation of the Certificate of Land Ownership Award (CLOA) to herein
The complainants[,] thus, pray for the reconveyance of their respective named defendants.
landholdings; cancellation of the CLOAs and payment of litigation fee.
SO ORDERED.6
On the other hand, the Defendants specifically denied the allegations of the
Plaintiff, maintaining in their Affirmative Defenses that they are farmer
Aggrieved, petitioners appealed to the DARAB.
beneficiaries of the subject properties, covered by Proclamation No. 2280 (sic)
which reclassifies certain portion of the public domain as agricultural land and
In its decision7 dated May 3, 2005, the DARAB held that the complaints filed were
declares the same alienable and disposable for agricultural and resettlement
virtual protests against the CARP coverage, to which it has no jurisdiction. The
purposes of the Kilusang Kabuhayan at Kaunlaran Land Resource Management
DARAB further held that, while it has jurisdiction to cancel the Certificate of Land
Program of the KKK, Ministry of Human Settlements and the area covered is
Ownership Awards (CLOAs), which had been registered with the Register of Deeds
Barangay Papatahan, Paete; that the Plaintiffs’ act of questioning the issuance of
(RD) of Laguna, it cannot pass upon matters exclusively vested in the DAR Secretary.
title is an exercise in futility because Defendants were already in possession of the
Moreover, the DARAB ruled that the assailed CLOAs having been registered in 1994
properties prior to said Proclamation; that upon the issuance of the CLOAs, they
and 1995 became incontestable and indefeasible. Thus:
became the owners of the landholdings and that the complainants’ claim for
damages has no basis.
WHEREFORE, premises considered, the appealed decision is hereby REVERSED
and/or SET ASIDE. A new judgment is hereby entered:
On the part of public Respondent PARO, he invoked the doctrine of regularity in the
performance of their official functions and their adherence in pursuing the
implementation of CARP. He claims that DAR received from the National Livelihood 1. Sustaining the validity of the subject Certificates of Land Ownership
Support Fund (NLSF) portions of the public domain covered by Presidential Award (CLOAs) Nos. 00155653, 00155652 and 00119810 issued to the
Proclamation No. 2282, Series of 1983 and has been mandated to implement the herein Defendants-Appellants: and
agrarian reform laws by distributing alienable and disposable portions of the public
domain, to which the subject lands fall; that actual investigation, proper screening 2. Dismissing the instant complaints for lack of merit.
of applicants-beneficiaries, survey and proper evaluation were conducted,
warranting the generation of the CLOAs and that the registration of the CLOAs with No costs.
the Registry of Deed brought the same under the coverage of the Torrens System of
land registration and have already become indefeasible or uncontestable. 4 SO ORDERED.8

On December 28, 2000, the Provincial Agrarian Reform Adjudicator (PARAD) of Respondents filed a Motion for Reconsideration, which the DARAB, however,
Laguna rendered his decision,5finding that the Department of Agrarian Reform denied for lack of merit.9 Thus, respondents sought recourse from the CA.
On May 31, 2007, the CA, invoking Section 1 (1.6), Rule II of the 2003 DARAB Rules
of Procedure,10 held that the DARAB has the exclusive original jurisdiction to
determine and adjudicate cases involving correction, partition, and cancellation of
Emancipation Patents and CLOAs which are registered with the Land Registration
Authority (LRA), as in this case. The CA ratiocinated that other than the registration
of the assailed CLOAs, the RD already issued Original Certificate of Title No. OCL-474
in favor of respondents. Moreover, the CA relied on the PARAD’s finding that
respondents were deprived of due process when no notice of coverage was ever
furnished and no just compensation was paid to them. The CA disposed of the case
in this wise:
WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision
dated May 3, 2005 and the Resolution dated October 10, 2006 are hereby
REVERSED and SET ASIDE. The Joint Decision of the Provincial Adjudicator dated
December 28, 2000 is hereby REINSTATED with MODIFICATION as follows:
"WHEREFORE, premises considered, judgment is hereby rendered:
1. Ordering the cancellation of the Certificate of Land Ownership Award
(CLOA) NOS. 00155653, 00155652 and 00119810 issued to herein private
respondents [petitioners in the instant case];
hereby GRANTED. The Decision dated May 31, 2007 is hereby PARTIALLY AMENDED
to read as follows:
"WHEREFORE, premises considered, judgment is hereby rendered:
1. Ordering the cancellation of the Certificate of Land Ownership Award
(CLOA) NOS. 00155653, 00155652 and 00119810 issued to herein private
respondents.
2. Ordering the Register of Deeds of Siniloan, Laguna to cause the
cancellation of OCT No. OCL-474 to herein named private respondents.
3. Ordering the Register of Deeds of Siniloan, Laguna to cause the
cancellation of OCT No. OCL-475 and to issue a new one deducting the
area of 47,187.50 square meters claimed by petitioner Dietmar L.
Romualdez.
4. Ordering the Register of Deeds of Siniloan, Laguna to cause the
cancellation of OCT No. OCL-395 and to issue a new one deducting the
area of 55,453.50 square meters claimed by petitioners Spouses Daniel
and Ana Romualdez and Jacqueline L. Romualdez.

2. Ordering the Register of Deeds of Siniloan, Laguna to cause the SO ORDERED."

cancellation of OCT No. OCL-474 to herein named private respondents
[petitioners in the instant case].
SO ORDERED.12

SO ORDERED."
Hence, this Petition, assigning the following as errors:

SO ORDERED.11
I.

Both parties filed their respective Motions for Reconsideration. The CA held, to wit:
The Honorable Court of Appeals has no basis in REVERSING the DECISION
of the Department of Agrarian Reform Adjudication Board in upholding the
Finding petitioners’ arguments meritorious, We PARTIALLY AMEND our previous validity of Certificate of Land Ownership Award Nos. 00155653, 00155652
decision in this case by ordering the Register of Deeds of Siniloan, Laguna to cancel and 00119810 issued to herein petitioners; [and]
OCT No. OCL-475 and OCT No. OCL-395 and to issue new certificates of title
deducting the area of 47,187.50 square meters claimed by petitioner Dietmar L.
II.
Romualdez and 55,453.50 square meters claimed by Spouses Daniel and Ana
Romualdez and Jacqueline [L.] Romualdez, respectively.
The Honorable Court of Appeals erred in undermining [the] ISSUE OF
JURISDICTION as this is cognizable by the Regional Director and not by the
WHEREFORE, premises considered, private respondents’ Motion for
PARAD and/or the DARAB.13
Reconsideration is hereby DENIED. Petitioners’ Motion for Partial Reconsideration is
Petitioners Cesar Caguin, Cleofas Vitor, Teresita Vitor, Jose Levitico Dalay, Marcelo
Dalay, Esperanza Mario, Celestina Cosico, Ma. Ruth Pacurib, and Raquel San Juan,
through the Legal Assistance Division of the DAR, claim that findings of fact of the
DARAB should have been respected by the CA; that the CLOAs covering the subject
properties were registered in 1994 and 1995 but respondents only assailed the
validity of the same in 2000; and that the said CLOAs are already incontestable and
indefeasible. Moreover, petitioners highlight the fact that the parties in this case
are not partners to any tenancy venture. Invoking this Court’s ruling in Heirs of
Julian dela Cruz v. Heirs of Alberto Cruz,14 petitioners submit that the DAR Secretary
has jurisdiction in this case, not the DARAB.15
On the other hand, respondents prefatorily manifest that out of the 44 respondents
before the CA, only 9 signed the petition filed before this Court, and that
petitioners’ counsel failed to indicate the full names of petitioners in the petition.
Respondents argue that the errors assigned by petitioners are matters not
pertaining to questions of law but rather to the CA’s factual findings. Respondents
rely on the CA’s findings that their constitutional right to due process was violated
because no notice of coverage was sent to them and that they were deprived of
payment of just compensation. Moreover, respondents claim that they are not
barred by prescription and petitioners cannot raise this issue for the first time on
appeal; that they have been paying the real property taxes and are actually in
possession of the subject properties; and that documents, which petitioners failed
to refute, show that the said properties are private lands owned by respondents
and their predecessors-in-interest. Respondents stress that the action initially filed
before the PARAD was not a protest considered as an Agrarian Law Implementation
(ALI) case, but for quieting and cancellation of title, reconveyance, and damages;
that the 2003 DARAB Rules of Procedure clearly states that the DARAB has
jurisdiction to cancel CLOAs registered with the LRA; and that the assailed CLOAs
were already registered with the RD of Laguna.16
The petition is impressed with merit.
Verily, our ruling in Heirs of Julian dela Cruz v. Heirs of Alberto Cruz 17 is instructive:
The Court agrees with the petitioners’ contention that, under Section 2(f), Rule II of
the DARAB Rules of Procedure, the DARAB has jurisdiction over cases involving the
issuance, correction and cancellation of CLOAs which were registered with the LRA.
However, for the DARAB to have jurisdiction in such cases, they must relate to an
agrarian dispute between landowner and tenants to whom CLOAs have been issued
by the DAR Secretary. The cases involving the issuance, correction and cancellation
of the CLOAs by the DAR in the administrative implementation of agrarian reform
laws, rules and regulations to parties who are not agricultural tenants or lessees are
within the jurisdiction of the DAR and not of the DARAB.18
It is established and uncontroverted that the parties herein do not have any
tenancy relationship. In one case, this Court held that even if the parties therein did
not have tenancy relations, the DARAB still has jurisdiction. However, the said case
must be viewed with particularity because, based on the material allegations of the
complaint therein, the incident involved the implementation of the CARP, as it was
founded on the question of who was the actual tenant and eventual beneficiary of
the subject land. Hence, this Court held therein that jurisdiction should remain with
the DARAB and not with the regular courts.19
However, this case is different. Respondents’ complaint was bereft of any allegation
of tenancy and/or any matter that would place it within the ambit of DARAB’s
jurisdiction.
While it is true that the PARAD and the DARAB lack jurisdiction in this case due to
the absence of any tenancy relations between the parties, lingering essential issues
are yet to be resolved as to the alleged lack of notice of coverage to respondents as
landowners and their deprivation of just compensation. Let it be stressed that while
these issues were discussed by the PARAD in his decision, the latter was precisely
bereft of any jurisdiction to rule particularly in the absence of any notice of
coverage for being an ALI case.20 Let it also be stressed that these issues were not
met head-on by petitioners. At this juncture, the issues should not be left hanging
at the expense and to the prejudice of respondents.
However, this Court refuses to rule on the validity of the CARP coverage of the
subject properties and the issuance of the assailed CLOAs. The doctrine of primary
jurisdiction precludes the courts from resolving a controversy over which
jurisdiction was initially lodged with an administrative body of special
competence.21 The doctrine of primary jurisdiction does not allow a court to
arrogate unto itself authority to resolve a controversy, the jurisdiction over which is
initially lodged with an administrative body of special competence. 22 The Office of
the DAR Secretary is in a better position to resolve the particular issue of non-
issuance of a notice of coverage – an ALI case – being primarily the agency
possessing the necessary expertise on the matter.23 The power to determine such
issue lies with the DAR, not with this Court.
A final note.
It must be borne in mind that this Court is not merely a Court of law but of equity as
well.1avvphil Justice dictates that the DAR Secretary must determine with
deliberate dispatch whether indeed no notice of coverage was furnished to
respondents and payment of just compensation was unduly withheld from them
despite the fact that the assailed CLOAs were already registered, on the premise
that respondents were unaware of the CARP coverage of their properties; hence,
their right to protest the same under the law was defeated. Respondents’ right to
due process must be equally respected. Apropos is our ruling in Heir of Nicolas
Jugalbot v. Court of Appeals:24

[I]t may not be amiss to stress that laws which have for their object the
preservation and maintenance of social justice are not only meant to favor the poor
and underprivileged. They apply with equal force to those who, notwithstanding
their more comfortable position in life, are equally deserving of protection from the
courts. Social justice is not a license to trample on the rights of the rich in the guise
of defending the poor, where no act of injustice or abuse is being committed
against them.

As the court of last resort, our bounden duty to protect the less privileged should
not be carried out to such an extent as to deny justice to landowners whenever
truth and justice happen to be on their side. For in the eyes of the Constitution and
the statutes, EQUAL JUSTICE UNDER THE LAW remains the bedrock principle by
which our Republic abides.

WHEREFORE, the instant petition is GRANTED. The assailed Decision dated May 31,
2007 and Amended Decision (Partial) dated September 25, 2007 of the Court of
Appeals in CA-G.R. SP No. 97768 are hereby REVERSED and SET ASIDE. The case is
DISMISSED for lack of jurisdiction of the Department of Agrarian Reform
Adjudication Board. This decision is without prejudice to the rights of respondents
Johanna L. Romualdez, Dietmar L. Romualdez, Jacqueline L. Romualdez, and
Spouses Daniel and Ana Romualdez to seek recourse from the Office of the
Department of Agrarian Reform Secretary. No costs.

SO ORDERED.
G.R. No. 174674 October 20, 2010
NESTLE PHILIPPINES, INC. and NESTLE WATERS PHILIPPINES, INC. (formerly
HIDDEN SPRINGS & PERRIER, INC.), Petitioners,
vs.
UNIWIDE SALES, INC., UNIWIDE HOLDINGS, INC., NAIC RESOURCES AND
DEVELOPMENT CORPORATION, UNIWIDE SALES REALTY AND RESOURCES CLUB,
INC., FIRST PARAGON CORPORATION, and UNIWIDE SALES WAREHOUSE CLUB,
INC., Respondents.
RESOLUTION
CARPIO, J.:
The Case
1 2
This is a petition for review of the 10 January 2006 Decision and the 13 September
2006 Resolution3 of the Court of Appeals in CA-G.R. SP No. 82184. The 10 January
2006 Decision denied for lack of merit the petition for review filed by petitioners.
The 13 September 2006 Resolution denied petitioners' motion for reconsideration
and referred to the Securities and Exchange Commission petitioners' supplemental
motion for reconsideration.
The Facts
The petitioners in this case are Nestle Philippines, Inc. and Nestle Waters
Philippines, Inc., formerly Hidden Springs & Perrier Inc. The respondents are
Uniwide Sales, Inc., Uniwide Holdings, Inc., Naic Resources and Development
Corporation, Uniwide Sales Realty and Resources Club, Inc., First Paragon
Corporation, and Uniwide Sales Warehouse Club, Inc.
On 25 June 1999, respondents filed in the Securities and Exchange Commission
(SEC) a petition for declaration of suspension of payment, formation and
appointment of rehabilitation receiver, and approval of rehabilitation plan. The
petition was docketed as SEC Case No. 06-99-6340.4 The SEC approved the petition
on 29 June 1999.
On 18 October 1999, the newly appointed Interim Receivership Committee filed a
rehabilitation plan in the SEC. The plan was anchored on return to core business of
retailing; debt reduction via cash settlement and dacion en pago;loan restructuring;
waiver of penalties and charges; freezing of interest payments; and restructuring of
credit of suppliers, contractors, and private lenders.
On 14 February 2000, the Interim Receivership Committee filed in the SEC an
Amended Rehabilitation Plan (ARP). The ARP took into account the planned entry of
Casino Guichard Perrachon, envisioned to infuse ₱3.57 billion in fresh capital. On 11
April 2001, the SEC approved the ARP.
On 11 October 2001, the Interim Receivership Committee filed in the SEC a Second
Amendment to the Rehabilitation Plan (SARP) in view of Casino Guichard
Perrachon's withdrawal. In its Order dated 23 December 2002, the SEC approved
the SARP.
Petitioners, as unsecured creditors of respondents, appealed to the SEC praying
that the 23 December 2002 Order approving the SARP be set aside and a new one
be issued directing the Interim Receivership Committee, in consultation with all the
unsecured creditors, to improve the terms and conditions of the SARP.
The Ruling of the SEC
In its 13 January 2004 Order, the SEC denied petitioners' appeal for lack of merit.
Petitioners then filed in the Court of Appeals a petition for review of the 13 January
2004 Order of the SEC.
The Ruling of the Court of Appeals
In its assailed 10 January 2006 Decision, the Court of Appeals denied for lack of
merit the petition for review filed by petitioners, thus:
In reviewing administrative decisions, the findings of fact made therein must be
respected as long as they are supported by substantial evidence, even if not
overwhelming or preponderant; that it is not for the reviewing court to weigh the
conflicting evidence, determine the credibility of the witnesses, or otherwise
substitute its own judgment for that of the administrative agency on the sufficiency
of the evidence; that the administrative decision in matters within the executive
jurisdiction can only be set aside on proof of grave abuse of discretion, fraud, or
error of law.
WHEREFORE, the petition for review is DENIED for lack of merit.
SO ORDERED.5
Petitioners moved for reconsideration. They also filed a supplemental motion for
reconsideration alleging that they received a letter on 25 January 2006, from the
president of the Uniwide Sales Group of Companies, informing them of the decision
to transfer, by way of full concession, the operation of respondents' supermarkets
to Suy Sing Commercial Corporation starting 1 March 2006.
In its questioned 13 September 2006 Resolution, the Court of Appeals denied for
lack of merit petitioners' motion for reconsideration and referred to the SEC
petitioners' supplemental motion for reconsideration.
Dissatisfied, petitioners filed in this Court on 3 November 2006 the present petition
for review.
The Issue
Before us, petitioners raise the issue of whether the SARP should be revoked and
the rehabilitation proceedings terminated.1avvphi1
The Court's Ruling
The petition lacks merit.
Petitioners contend that the transfer of respondents' supermarket operations to
Suy Sing Commercial Corporation has made the SARP incapable of implementation.
Petitioners point out that since the SARP may no longer be implemented, the
rehabilitation case should be terminated pursuant to Section 4-26, Rule IV of the
SEC Rules of Procedure on Corporate Recovery. Petitioners claim that the terms and
conditions of the SARP are unreasonable, biased in favor of respondents, prejudicial
to the interests of petitioners, and incapable of a determination of feasibility.
Respondents maintain that the SARP is feasible and that the SEC Hearing Panel did
not violate any rule or law in approving it. Respondents stress that the lack of
majority objection to the SARP bolsters the SEC's findings that the SARP is feasible.
Respondents insist that the terms and conditions of the SARP are in accord with the
Constitution and the law.
The Court takes judicial notice of the fact that from the time of the filing in this
Court of the instant petition, supervening events have unfolded substantially
changing the factual backdrop of this rehabilitation case.
As found by the SEC, several factors prevented the realization of the desired goals
of the SARP, to wit: (1) unexpected refusal of some creditors to comply with all the
terms of the SARP; (2) unexpected closure of Uniwide EDSA due to the renovation
of EDSA Central Mall; (3) closure of Uniwide Cabuyao and Uniwide Baclaran; (4) lack
of supplier support for supermarket operations; and (5) increased expenses. 6
On 11 July 2007, the rehabilitation receiver filed in the SEC a Third Amendment to
the Rehabilitation Plan (TARP). But before the SEC could act on the TARP, the
rehabilitation receiver filed on 29 September 2008 a Revised Third Amendment to
the Rehabilitation Plan (revised TARP).
A majority of the secured creditors strongly opposed the revised TARP, which
focused on the immediate settlement of all the obligations accruing to the
unsecured creditors through a dacion of part of respondents' Metro Mall
property.7 Since some creditors claimed that the value of the Metro Mall property
had gone down since 1999, the Hearing Panel issued its 30 July 2009 Order directing
the reappraisal of the Metro Mall property.8
In its 17 September 2009 Order, the Hearing Panel directed respondents to show
cause why the rehabilitation case should not be terminated considering that the
rehabilitation plan had undergone several revisions. The Hearing Panel also directed
the creditors to manifest whether they still wanted the rehabilitation proceedings
to continue.
Respondents moved for reconsideration of the 30 July 2009 and the 17 September
2009 Orders. The Hearing Panel, in its 6 November 2009 Order, denied the motion
for reconsideration for being a prohibited pleading.
Respondents then filed in the SEC a petition for certiorari assailing the 30 July 2009,
the 17 September 2009, and the 6 November 2009 Orders of the Hearing Panel. The
petition was docketed as SEC En Banc Case No. 12-09-183.
Meanwhile, in its 13 January 2010 Resolution, the Hearing Panel disapproved the
revised TARP and terminated the rehabilitation case as a consequence. The
dispositive portion of the Resolution reads:
WHEREFORE, premises considered:
1. Petitioners' Motion to Approve Revised Third Amendment to the Group
Rehabilitation Plan (Revised TARP) is DENIED.
2. The motions to declare petitioners' rehabilitation plan "not feasible" are
GRANTED. Consequently, the instant rehabilitation case is TERMINATED
and the stay order is lifted and dissolved. This case is deemed finally
disposed of pursuant to Section 5.2 of Republic Act No. 8799.9
On 22 January 2010, respondents filed another petition appealing the Hearing
Panel's 13 January 2010 Resolution. The petition was docketed as SEC En Banc Case
No. 01-10-193. In order to preserve the parties' rights during the pendency of the
appeal, the SEC en banc in its Order dated 18 March 2010 directed the parties to
observe the status quo prevailing before the issuance of the 13 January 2010
Resolution of the Hearing Panel.
Meanwhile, on 27 April 2010, the SEC en banc issued an Order directing the
rehabilitation receiver, Atty. Julio C. Elamparo, to submit a comprehensive report
on the progress of the implementation of the SARP.
Finally, in its 30 September 2010 Order, the SEC consolidated SEC En Banc Case No.
01-10-193 with SEC En Banc Case No. 12-09-183, the parties being identical and the
issues in both petitions being in reference to the same rehabilitation case.
Considering the pendency of SEC En Banc Case No. 12-09-183 and SEC En Banc Case
No. 01-10-193, recently filed in the SEC, involving the very same rehabilitation case
subject of this petition, the present petition has been rendered premature.
SEC En Banc Case No. 12-09-183 deals with the Order of the Hearing Panel directing
respondents to show cause why the rehabilitation case should not be terminated
and the creditors to manifest whether they still want the rehabilitation proceedings
to continue. On the other hand, SEC En Banc Case No. 01-10-193 is an appeal of the
Hearing Panel's Resolution disapproving the revised TARP and terminating the
rehabilitation proceedings.
obtained in an administrative proceeding before resort to the court is had even if
the matter may well be within the latter's proper jurisdiction.11
The objective of the doctrine of primary jurisdiction is to guide the court in
determining whether it should refrain from exercising its jurisdiction until after an
administrative agency has determined some question or some aspect of some
question arising in the proceeding before the court.12
It is not for this Court to intrude, at this stage of the rehabilitation proceedings, into
the primary administrative jurisdiction of the SEC on a matter requiring its technical
expertise. Pending a decision of the SEC on SEC En BancCase No. 12-09-183 and
SEC En Banc Case No. 01-10-193, which both seek to resolve the issue of whether
the rehabilitation proceedings in this case should be terminated, we are
constrained to dismiss this petition for prematurity.
WHEREFORE, we DISMISS the instant petition for having been rendered premature
pending a decision of the Securities and Exchange Commission (SEC) in SEC En
Banc Case No. 12-09-183 and SEC En Banc Case No. 01-10-193.
No pronouncement as to costs.
SO ORDERED.

In light of supervening events that have emerged from the time the SEC approved
the SARP on 23 December 2002 and from the time the present petition was filed on
3 November 2006, any determination by this Court as to whether the SARP should
be revoked and the rehabilitation proceedings terminated, would be premature.

Undeniably, supervening events have substantially changed the factual backdrop of

this case. The Court thus defers to the competence and expertise of the SEC to
determine whether, given the supervening events in this case, the SARP is no longer
capable of implementation and whether the rehabilitation case should be
terminated as a consequence.

Under the doctrine of primary administrative jurisdiction, courts will not determine
a controversy where the issues for resolution demand the exercise of sound
administrative discretion requiring the special knowledge, experience, and services
of the administrative tribunal to determine technical and intricate matters of fact. 10

In other words, if a case is such that its determination requires the expertise,
specialized training, and knowledge of an administrative body, relief must first be
G.R. No. 138381 April 16, 2002
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,
vs.
COMMISSION ON AUDIT, respondent.
x---------------------------------------------------------x
G.R. No. 141625 April 16, 2002
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner,
vs.
ALFREDO D. PINEDA, DANIEL GO, FELINO BULANDUS, FELICIMO J. FERRARIS, JR.,
BEN HUR PORLUCAS, LUIS HIPONIA, MARIA LUISA A. FERNANDEZ, VICTORINA
JOVEN, CORAZON S. ALIWANAG, SILVER L. MARTINES, SR., RENATO PEREZ, LOLITA
CAYLAN, DOUGLAS VALLEJO and LETICIA ALMAZAN, on their own behalf and on
behalf of all GSIS retirees with all of whom they share a common and general
interest, respondents.
YNARES-SANTIAGO, J.:
At the core of these two consolidated petitions is the determination of whether the
Commission on Audit (COA) properly disallowed on post-audit, certain allowances
and/or fringe benefits granted to employees of the Government Service Insurance
System (GSIS), after the effectivity of Republic Act No. 6758, otherwise known as
the Salary Standardization Law on July 1, 1989.
I. G.R. No. 138381
In this special civil action for certiorari under Rule 65 in relation to Rule 64 of the
1997 Rules of Civil Procedure, petitioner GSIS seeks the annulment of COA Decision
No. 98-337 dated August 25, 1998, which affirmed the Resident Auditor's
disallowance of monetary benefits granted to or paid by GSIS in behalf of its
employees.
After the effectivity of R.A. No. 6758 on July 1, 1989, petitioner GSIS increased the
following benefits of its personnel: a) longevity pay; b) children's allowance; c)
housing allowance for its branch and assistant branch managers; and d) employer's
share in the GSIS Provident Fund from 20% to 45% of basic salary for incumbent
employees as of June 30, 1989.
The GSIS also remitted employer's share to the GSIS Provident Fund for new
employees hired after June 30, 1989, continued the payment of premiums for group
personnel accident insurance and granted loyalty cash award to its employees in
addition to a service cash award.
Upon post-audit and examination, the GSIS Corporate Auditor disallowed the
aforementioned allowances and benefits, citing Section 12 of R.A. No. 6758 in
relation to sub-paragraphs 5.4 and 5.5 of its implementing rules, DBM Corporate
Compensation Circular No. 10 (CCC No. 10). The first paragraph of Section 12, R.A.
No. 6758 reads:
SEC. 12. Consolidation of Allowances and Compensation.- All allowances,
except for representation and transportation allowances; clothing and
laundry allowances; subsistence allowance of marine officers and crew on
board government vessels and hospital personnel; hazard pay; allowances
of foreign service personnel stationed abroad; and such other additional
compensation not otherwise specified herein as may be determined by the
DBM, shall be deemed included in the standardized salary rates herein
prescribed. Such other additional compensation, whether in cash or in kind,
being received by incumbents only as of July 1, 1989, not integrated into
the standardized salary rates shall continue to be authorized. x x x
Sub-paragraphs 5.4 and 5.5 of CCC No. 10,1 meanwhile, supplemented Section 12
above by enumerating the additional compensation authorized to be continued for
incumbent employees as of July 1, 1989.
According to the Corporate Auditor, R.A. No. 6758 authorized the continued grant
of allowances/fringe benefits not integrated into the standardized salary for
incumbents as of June 30, 1989. However, these non-integrated benefits may not
be increased after effectivity of the statute, without prior approval of the DBM or
Office of the President or in the absence of legislative authorization in accordance
with CCC No. 10. Explaining this position, the Corporate Auditor invoked COA
Memorandum No. 90-653 dated June 4, 1990, which states:
x x x While it is true that R.A. 6758 and Corporate Compensation Circular
(CCC) No. 10 are silent with respect to the increase of allowances/fringe
benefits not integrated into the basic salary and allowed to be continued
only for incumbents as of June 30, 1989, it would be inconsistent to allow
further increase in said allowances and fringe benefits after July 1, 1989
since continuance thereof for incumbents is merely being tolerated until
they vacate their present positions for which they have been authorized to
receive allowances/fringe benefits.2
The Corporate Auditor also did not allow in audit the remittance of employer's
share to the GSIS Provident Fund for new-hires because the continuation of said
benefit was only in favor of incumbents, as explicitly stated in the law. The payment
of group insurance premiums covering all employees was likewise disallowed, for
the reason that under sub-paragraph 5.6 of CCC No. 10,3 all fringe benefits granted
on top of basic salary not otherwise enumerated under sub-paragraphs 5.4 and 5.5
thereof were already discontinued effective November 1, 1989. As for the loyalty
cash award and the service cash award, the Corporate Auditor opined that only one
of the two monetary incentives may be availed of by GSIS personnel.
On February 26, 1993, Mr. Julio Navarrete, Vice-President of the GSIS Human
Resources Group, wrote to respondent COA appealing, in behalf of GSIS, the afore-
stated disallowances by the Corporate Auditor. Mr. Navarrete averred that
although it may be conceded that the Salary Standardization Law did not extend the
subject benefits to new-hires after the law's effectivity, the increase thereof should
nonetheless be allowed for incumbents since these benefits have been enjoyed by
said employees even prior to the passage of said law.4
In the case of Philippine Ports Authority v. Commission on Audit,5 which involved a
similar increase, after the enactment of R.A. No. 6758, in the representation and
transportation allowance (RATA) of Philippine Ports Authority (PPA) employees, it
was held that:
x x x the date July 1, 1989 does not serve as a cut-off date with respect to
the amount of RATA. The date July 1, 1989 becomes crucial only to
determine that as of said date, the officer was an incumbent and
was receiving the RATA, for purposes of entitling him to its continued
grant. This given date should not be interpreted as fixing the maximum
amount of RATA to be received by the official.6
It was further alleged that contrary to the Corporate Auditor's contention, the GSIS
Board of Trustees retained its power to fix and determine the compensation
package for GSIS employees despite the passage of the Salary Standardization Law,
pursuant to Section 36 of Presidential Decree No. 1146, as amended by Presidential
Decree No. 1981, to wit:
Sec. 36. x x x
The Board of Trustees has the following powers and functions, among
others:
xxx xxx xxx
(d) Upon the recommendation of the President and General Manager, to
approve the System's organizational and administrative structure and
staffing pattern, and "to establish, fix, review, revise and adjust the
appropriate compensation package for the officers and employees of the
System, with reasonable allowances, incentives, bonuses, privileges and
other benefits as may be necessary or proper for the effective
management, operation and administration of the System." For the
purpose of this and the preceding subsection, the System shall be exempt
from the rules and requirements of the Office of the Budget and
Management and the Office of the Compensation and Position
Classification;
xxx xxx xxx
Pursuant thereto, the GSIS Board of Trustees may validly increase and grant the
subject benefits, even without securing the imprimatur of the DBM, Office of the
President or Congress.
On August 25, 1998, the COA affirmed the disallowances made by the Corporate
Auditor and held that Section 36 of P.D. No. 1146, as amended, was already
repealed by Section 16 of R.A. No. 6758.7 The COA similarly concluded that the GSIS
Board of Trustees may not unilaterally augment or grant benefits to its personnel,
without the necessary authorization required under CCC No. 10.8
GSIS filed a motion for reconsideration of the COA decision, invoking the ruling
in De Jesus, et al. v. COA and Jamoralin.9 Corporate Compensation Circular No. 10
(CCC No. 10) was declared to be of no legal force or effect due to its non-publication
in the Official Gazette or a newspaper of general circulation. In view of this
development, GSIS posited that the questioned disallowances no longer had any leg
to stand on and that COA should consequently lift the disallowances premised on
CCC No. 10.
On March 23, 1999, the COA denied the motion for reconsideration stating:
Although CCC No. 10 has been declared ineffective due to its non-
publication as provided for in Article 2 of the Civil Code of the Philippines,
the disallowances on the increased rates of the allowances/fringe benefits
can still be sustained because as ruled earlier, the power of the governing
boards of corporations to fix compensation and allowances of personnel,
including the authority to increase the rates, pursuant to their specific
charters had already been repealed by Sec. 3 of P.D. 1597 and Section 16
of R.A. 6758. The other reasons or grounds relied upon by the petitioner
upon which the Motion is predicated have already been judiciously passed
 upon by this Commission when it rendered the subject COA Decision No.
98-337.
Accordingly, there being no new, sufficient and material evidence adduced
as would warrant a reversal or modification of the decision herein sought
to be reconsidered, this Commission denies with finality the instant motion
for reconsideration for utter lack of merit.10
Hence, this petition, challenging the above decision and resolution of the COA on
the following grounds:
A.)RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OR EXCESS OF JURISDICTION IN HOLDING THAT THE POWER
SPECIFICALLY GRANTED BY PRESIDENTIAL DECREE NO. 1146, AS AMENDED,
TO THE GSIS BOARD OF TRUSTEES, TO ESTABLISH AND FIX THE
APPROPRIATE COMPENSATION PACKAGE FOR GSIS OFFICERS AND
EMPLOYEES HAS ALREADY BEEN REPEALED BY REPUBLIC ACT NO. 6758.
B.)RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OR EXCESS OF JURISDICTION IN DENYING PETITONER'S MOTION
FOR RECONSIDERATION DESPITE THE DECLARATION BY THIS HONORABLE
COURT IN THE CASE OF RODOLFO S. DE JESUS et al. vs. COMMISSION ON
AUDIT and LEONARDO L. JAMORALIN, THAT CCC NO. 10 - THE MAIN BASIS
OF THE QUESTIONED DISALLOWANCE - IS INVALID AND INEFFECTIVE FOR
LACK OF THE REQUIRED PUBLICATION.11
II. G.R. No. 141625
This petition for review on certiorari under Rule 45 of the Rules of Court was
precipitated by the factual antecedents of G.R. No. 138381. While GSIS was
appealing the disallowances made by the Corporate Auditor above, some of its
employees retired and submitted the requisite papers for the processing of their
retirement benefits. Since the retired employees received allowances and benefits
which had been disallowed by the Corporate Auditor, GSIS required them to
execute deeds of consent that would authorize GSIS to deduct from their
retirement benefits the previously paid allowances, in case these were finally
adjudged to be improper. Some of the retired employees agreed to sign the deed,
while others did not. Nonetheless, GSIS went ahead with the deductions.
On April 16, 1998, a number of these retired GSIS employees12 (hereafter referred
to as "retirees") brought Case No. 001-98 before the GSIS Board of Trustees
(hereafter referred to as "GSIS Board") questioning the legality of the deductions.
They claimed that COA disallowances can not be deducted from retirement
benefits, considering that these were explicitly exempted from such deductions
under the last paragraph of Section 39, Republic Act No. 8291, which states:
SEC. 39. Exemption from Tax, Legal Process and Lien. - x x x
xxx xxx xxx
The funds and/or the properties referred to herein as well as the benefits,
sums or monies corresponding to the benefits under this Act shall be
exempt from attachment, garnishment, execution, levy or other processes
issued by the courts, quasi-judicial agencies or administrative bodies
including Commission on Audit (COA) disallowances and from all financial
obligations of the members, including his pecuniary accountability arising
from or caused or occasioned by his exercise or performance of his official
functions or duties, or incurred relative to or in connection with his
position or work except when his monetary liability, contractual or
otherwise, is in favor of the GSIS.
The GSIS Board subsequently referred the case for hearing to its Corporate
Secretary, Atty. Alicia Albert. Thereafter, the retirees and GSIS, through its Legal
Services Group (LSG), entered into a stipulation of facts and agreed on a focal issue,
namely: whether the COA disallowances may be legally deducted from the
retirement benefits, on the premise that the same are monetary liabilities of the
retirees in favor of GSIS under Section 39 above. GSIS also insisted that since the
deductions were anchored on the disallowances made by the COA, the retirees'
remedy was to ventilate the issue before said Commission and not the GSIS Board.
Meanwhile, the De Jesus case mentioned in G.R. No. 138381 was promulgated,
rendering CCC No. 10 legally ineffective. This prompted the hearing officer to
suggest that the parties enter into an agreement as to what allowances and
benefits are covered by CCC No. 10, so that a partial decision can be rendered
thereon. The retirees thus filed a motion for partial decision, submitting that there
no longer existed any obstacle to the increase in allowances and benefits covered
by CCC No. 10. These allegedly include: a) GSIS management's share in the
Provident Fund; b) initial payment of the productivity bonus; c) acceleration
implementation of the new salary schedule effective August 1, 1995; d) increase in
clothing allowance, rice allowance, meal subsidy, children's allowance and longevity
pay; e) loyalty award; f) 1995 mid-year financial assistance; and g) other allowances
as may be suggested by the Vice-President of the GSIS Human Resources Group.13
On November 25, 1998, GSIS filed an opposition to the retiree's motion for partial
decision,14 asserting that De Jesus had no bearing on the principal issue which, as
agreed upon, was the interpretation of Section 39 of RA No. 8291. GSIS also filed on
even date, a motion to dismiss,15 alleging that the nullity of CCC No. 10 rendered
the petition moot and academic and paved the way for the payment of the
controverted allowances earlier deducted from the retirement benefits.
Replying to the two pleadings filed by GSIS, the retirees countered that a motion to
dismiss was a prohibited pleading under Section 14.13, Rule XIV of the GSIS
Implementing Rules and Regulations.16 Moreover, the retirees maintained that a
motion to dismiss may be filed in proceedings before the GSIS Board only prior to
the filing of an answer which GSIS had already done. Also, the LSG had previously
agreed to a partial decision based on the De Jesus case; it could thus no longer take
a contradictory stand by opposing the retiree's motion for partial decision. 17
On January 14, 1999, the retirees filed a motion for summary judgment 18 claiming
that there were no factual issues involved and that the question raised in the
petition was purely legal in nature. The matter was directly submitted to the GSIS
Board for its consideration and resolution.
On March 3, 1999, the GSIS Board issued Resolution No. 72, 19 dismissing the
petition. A motion for reconsideration filed by the retirees was also denied by the
Board in its Resolution No. 16120 dated May 18, 1999.
The matter was then elevated to the Court of Appeals, which rendered a decision
on September 30, 1999, disposing as follows:
IN THE LIGHT OF ALL THE FOREGOING, the Petition is GRANTED. Resolution
No. 72, Annex "A" of the Petition and Resolution No. 161 Annex "C" of the
Petition are hereby SET ASIDE and NULLIFIED. The Hearing Officer of the
Board of Trustees of the Respondent is directed to proceed, with dispatch,
with the proceedings of Case No. 001-98, as provided for in the Rules and
regulations implementing Republic Act 8291 (IRR).
SO ORDERED.21
The appellate court held that the motion to dismiss filed by the LSG before the GSIS
Board is a prohibited pleading under applicable GSIS rules. The GSIS also had
jurisdiction over the retirees' petition, as it pertained to the interpretation and
application of Section 39 of R.A. No. 8291, a law exclusively administered by the
GSIS Board. Contrary to the LSG's submissions, the Court of Appeals ruled that there
was no identity in subject matter between the retiree's petition and the appeal
from the auditor's disallowances filed by GSIS with the COA. Thus, the GSIS Board
may take cognizance of the retirees' petition independently from the COA
proceedings.
Hence, this second petition, assigning the following as errors:
I
THE COURT OF APPEALS ERRED IN RULING THAT THE BOARD OF TRUSTEES OF GSIS
HAS JURISDICTION OVER THE CASE.
II
THE COURT OF APPEALS ERRED IN RULING THAT THE CASE PENDING BEFORE THE
SUPREME COURT IS DIFFERENT FROM THE PRESENT CASE.22
On August 20, 2001, the two petitions were consolidated.
During the pendency of these petitions, GSIS Board Resolution No. 79, 23 which
authorized the Provident Fund rate increase for incumbent employees, was
approved retroactively from March 1, 1994 by then President Joseph
Estrada.24 Thus, there no longer appears to be any basis for disallowing the rate
increase in management contribution to the Provident Fund from 20% to 45% of
the basic salary received by petitioner's incumbent employees. The presidential
approval cured the lack of authorization cited by respondent COA for disallowing
this particular increase in benefit.
We now proceed to the resolution of the twin petitions.
Petitioner GSIS insists that the GSIS Board retained its power to increase the subject
benefits under Section 36 of P.D. 1146, as amended (or the Revised GSIS Charter),
despite the passage of R.A. No. 6758, particularly Section 16 thereof. The latter,
which is a general law, can not repeal or take precedence over the former because
the Revised GSIS Charter is a special law that specifically exempts GSIS from Office
of the Compensation and Position Classification coverage.
We need not delve lengthily into this submission as this was earlier laid to rest by
the Court in Philippine International Trading Corporation (PITC) v. COA,25 where we
held that "the repeal by Section 16 of RA 6758 of 'all corporate charters that
exempt agencies from the coverage of the system' was clear and
expressed necessarily to achieve the purposes for which the law was enacted, that
is, the standardization of salaries of all employees in government owned and/or
controlled corporations to achieve 'equal pay for substantially equal work'."26 As
things now stand, GSIS is already exempt from salary standardization by express
provision of R.A. 829127 – a subsequent enactment approved on May 30, 1997
which amended the Revised GSIS Charter. But since GSIS was still governed by the
latter at the time the increase in benefits were disallowed in audit, GSIS was then
yet covered by the Salary Standardization Law, thereby making our ruling in PITC
presently relevant and applicable.
We now come to the legal propriety of the COA disallowances.
For purposes of clarity, a distinction must initially be made between those
allowances which are deemed consolidated into the standardized salary and those
which are not under the terms of R.A. No. 6758. As correctly pointed out by
petitioner GSIS, the housing allowance, longevity pay and children's allowance are
non-integratedbenefits, expressly made so by sub-paragraphs 5.4 and 5.5 of CCC
No. 10 in relation to the last sentence of Section 12 (par. 1), R.A. No. 6758. On the
other hand, the payment of group personnel accident insurance premiums, loyalty
cash award and service cash award are not excluded from the standardized salary
by the same provisions of CCC No. 10 or R.A. No. 6758. These latter allowances are
thus considered integrated into the basic salary and are treated differently under
the same law.
A. NON-INTEGRATED BENEFITS AND ALLOWANCES
a. Longevity Pay and Children's Allowance
As regards the increase in longevity pay and children's allowance, we find applicable
our pronouncement in Philippine Ports Authority (PPA) v. COA.28 This case involved
an adjustment in the representation and transportation allowance (RATA) of
incumbent PPA employees after the effectivity of R.A. No. 6758 on July 1, 1989. The
RATA therein is similar to the longevity pay and children's allowance subject of the
instant petition, in the sense that: a) it is also a non-integrated allowance
authorized to be continued for incumbents under Section 12, R.A. No. 6758; and b)
the rate thereof did not consist of a definite amount but was subject to certain
factors and/or stipulations that were nonetheless fixed before R.A. 6758 took
effect.
In the PPA case, the adjustment was brought about by a corresponding increase in
the employees' basic salary upon which the 40% RATA was based. Respondent
Commission disallowed the payment of RATA differentials arguing, as in this
petition, that the RATA should be fixed at the prevailing rate prior to July 1, 1989,
regardless of the increase in basic salary. It was postulated therein that consistent
with the second sentence of said Section 12 (par. 1), the RATA should no longer be
based on 40% of basic standardized salary but on the highest amount of RATA
received by the incumbent as of July 1, 1989.
We rejected respondent COA's interpretation of Section 12 and held that the date
July 1, 1989 should not be construed as a cut-off date for setting the amount of
allowances authorized to be continued under said provision. The date July 1, 1989 is
important only for determining whether an employee is an incumbent and receiving
the allowance prior to the law's effectivity in order to ascertain if such employee is
qualified to its continued grant. It is not, however, to be interpreted as fixing the
maximum amount of allowance that an incumbent employee is authorized to
receive, but is only a qualifying date imposed by the statute.
Accordingly, the specific amount of longevity pay and children's allowance being
received by an incumbent GSIS employee as of July 1, 1989 is not to be considered
as the highest amount authorized under the law.
It is thus evident that in adjusting the amount of allowances mentioned above,
petitioner GSIS was merely complying with the policy of non-diminution of pay and
benefits enunciated in R.A. No. 6758.29 This policy does not only pertain specifically
to the amount being received by the incumbent as of July 1, 1989, but also to the
terms and conditions attached to these benefits prior to the passage of the statute.
Relative to this, it should be noted that respondent COA did not dispute the fact
that these benefits, including the terms and conditions thereof, are part of a
compensation package granted by the GSIS Board to incumbents even before R.A.
6758 took effect. In turn, this compensation package was incorporated in the 1978
GSIS Revised Compensation System approved by the President, upon
recommendation of the Department of Budget and Management (DBM).
Thus, to peg the amount of these non-integrated allowances at the figure being
received by the incumbent as of July 1, 1989 would vary the terms of the benefits to
which the incumbents are entitled. This could not have been the intendment of the
statute, because such interpretation would effectively impair the incumbents' rights
to these allowances, which have already accrued prior to July 1, 1989. In other
words, before R.A. No. 6758 was enacted, incumbent GSIS employees had a fixed
right to these allowances under the terms and conditions then obtaining. 30They
could not therefore be excluded from its enjoyment under the same terms and
conditions without violating basic precepts of fairness and due process.
b. Housing Allowance
In contrast to the two preceding non-integrated benefits, it appears that the
housing allowance given to petitioner's incumbent branch and assistant branch
managers before the passage of R.A. No. 6758 consisted of a fixed amount of
P500.00 and P300.00 respectively. Said amounts were subsequently increased to
P2,000.00 and P3,000.00 by virtue of GSIS Board Resolution No. 29431 dated July 26,
1991.
As stated earlier, the power of the GSIS Board to "establish, fix, review, revise and
adjust" the allowances, privileges and other benefits of its employees under Section
36 of the Revised GSIS Charter has been repealed by R.A. No. 6758. 32 As a
consequence, the GSIS Board may no longer grant any increase in housing
allowance on its own volition after June 30, 1989.
Further, unlike the two preceding non-integrated benefits, it cannot be said that the
affected branch and assistant branch managers acquired a vested right to any
amount of housing allowance in excess of that granted to them before the passage
of R.A. No. 6758. They could not have been entitled to any amount other than that
which was already determined before the law took effect, because the terms of this
allowance did not admit of any adjustment. Otherwise stated, since the amount of
said housing allowance was fixed, the disallowance by the COA of increases therein
would not result in any diminution of benefits for these incumbent managers.
Neither can the GSIS Board unilaterally grant said increases by board resolution
because it no longer had any power to do so when it issued Resolution No. 294.
It appears that respondent COA did not totally disallow the increase in housing
allowance, but merely approved a lesser amount. Respondent COA allowed a 100%
increase of P1,000.00 and P600.00 respectively, in accordance with the amount
authorized by the DBM.33 In fact, the DBM permitted the increase in express
recognition of the fact that this has been the practice in GSIS before the advent of
R.A. No. 6758. Consequently, it is only to the extent of the approved amount that
the housing allowance should be allowed in audit.
B. INTEGRATED BENEFITS AND ALLOWANCES
a. Group Personnel Accident Insurance Premiums
As stated earlier, the payment of premiums for group personnel accident insurance
in favor of incumbent GSIS employees was not listed as an exception to the
standardized salary under Section 12, R.A. No. 6758 and sub-paragraphs 5.4 and 5.5
of CCC No. 10. As such, it is considered as a fringe benefit granted on top of basic
salary which, according to sub-paragraph 5.6 of CCC No. 10, must be discontinued
as of November 1, 1989.
However, as pointed out by petitioner GSIS, CCC No. 10 was declared to be of no
legal force and effect in De Jesus v. COA.34 It can not thus be utilized as a
justification for depriving incumbent employees of integrated benefits which they
were receiving prior to R.A. No. 6758. As held in De Jesus:
x x x it is decisively clear that DBM CCC No. 10, which completely disallows
payment of allowances and other additional compensation to government
officials and employees, starting November 1, 1989, is not a mere
interpretative and internal regulation. It is something more than that. And
why not, when it tends to deprive government workers of their allowances
and additional compensation sorely needed to keep body and soul
together. At the very least, before said circular under attack may be
permitted to substantially reduce their income, the government officials
and employees concerned should be apprised and alerted by the
publication of subject circular in the Official Gazette or in a newspaper of
general circulation in the Philippines-to the end that they may be given
amplest opportunity to voice out whatever opposition they may have, and
to ventilate their stance on the matter. This approach is more in keeping
with democratic precepts and rudiments of fairness and transparency. 35
Conformably, since the disallowance of the premium payments was founded upon
CCC No. 10, the consequent outcome of the latter's nullification is to remove any
obstacle to the aforesaid benefit.
The subsequent publication of CCC No. 10 in the Official Gazette on March 1,
1999,36 neither cured the defect nor retroact to the time that the aforesaid items
were disallowed in audit. Again, in PITC v. COA,37 we ruled that from the time the
COA disallowed the benefit up to the filing of the instant petition, CCC No. 10
remained in legal limbo due to its lack of publication. And because publication is
a condition precedent to the effectivity of CCC No. 10, it must first be complied with
before affecting individual rights; otherwise, "such omission would offend due
process insofar as it would deny the public, knowledge of the laws that are
supposed to govern it."38
b. Loyalty and Service Cash Award
We have carefully examined the records of the case and find that the disallowance
of the simultaneous grant of these two integrated benefits was not so much
founded on CCC No. 10, but upon a ruling made by the Civil Service Commission
(CSC). Notably, with respect to the loyalty and service cash award, respondent COA
held:
As regards the payment of loyalty cash award under Sec. 7 (e), Rule X, of
the CSC Omnibus rules Implementing Book V of E.O. No. 292 and service
cash award, this Commission holds that only one can be availed of by GSIS
employees in the light of the clear ruling of the Civil Service Commission
embodied in a letter dated May 12, 1993 that since both benefits have the
same rationale, which is to reward long and dedicated service, "availment
of the award can be made only under either system, whichever is more
advantageous to the employees."39
The foregoing conclusion was apparently based on the position taken by Corporate
Auditor Fe R. Munoz, who expounded thereon in a second indorsement40 dated
December 14, 1993 as follows:
Service Cash Award is an incentive granted exclusively to any officer or
employee of the GSIS who has rendered at least fifteen (15) years
continuous and dedicated service to the GSIS. It entitles them to receive
amounts ranging from P500.00 to P15,000.00 according to the number of
years of service, pursuant to the provisions of the Collective Bargaining
Agreement (CBA), which payments are deducted by this Office from
payment of Loyalty (Cash) Award. On the other hand, this should not be
confused with the amount of Loyalty (Cash) Award in graduated amounts
of P1,200.00, P1,300.00, P1,400.00 and P1,500.00 for every year of service
of GSIS executives and employees who have completed at least ten (10)
years of continuous service as authorized under Board Resolution No. 333
dated October 29, 1992 (Annex 7), using as legal basis Section 7 (e), Rule X
of the Omnibus Civil Service Law and Rules, Implementing Book V of
Executive Order No. 292, providing for the cash bonus of not less than One
Hundred Pesos (P100.00) per year of service, chargeable against Agency's
savings. It seems that the foregoing provision allows for a minimum but
not for a maximum amount to be given, thereby giving the agencies
enough flexibility to fix their own maximum amounts depending on the
agency's savings.
It is worthy to note in this connection that when the Civil Service
Commission issued Memorandum Circular No. 42, series 1992, amending
Section 7 (e), Rule X of the Omnibus Civil Service Law and Rules, providing
that the amount of cash bonus to be given should not be more than
P100.00 per year of service, the GSIS returned to the old computation as
authorized under Board Resolutions No. 192 and 187 dated May 16, 1989
and May 29, 1992 respectively (Annexes 8 and 9). Hence, the matter was
referred to the Civil Service Commission for clarification. The Commission
ruled in a letter dated May 12, 1993 (Annex 10) addressed to PGM Cesar N.
Sarino, that the availment of the award can be made only under either
system, whichever is more advantageous to the employees.
thereto. As a result, there has been no real joinder of issues as far as these benefits
are concerned.
Coming now to G.R. No. 141625, the Court of Appeals did not commit any
reversible error when it held that the petition filed before the GSIS Board
questioning the legality of the deductions could proceed independently from the
appeal brought by petitioner GSIS from the COA disallowances. No error could be
attributed to the appellate court's finding that there was no identity of subject
matter or issue between the COA proceedings and the retirees' claim before the
GSIS Board.
However, considering that it has already been resolved in G.R. No. 138381, we no
longer find it necessary to discuss whether GSIS can deduct the COA disallowances
from the respondents/retirees' retirement benefits. Having settled G. R. No.
138381, it is now incumbent upon petitioner GSIS to reimburse the proper amounts
to respondents/retirees. Necessarily, the amount of said refund should be in accord
with our ruling in G.R. No. 138381.
WHEREFORE, in view of the foregoing, G.R. No. 138381 is PARTLY GRANTED. The
disallowance of the adjustment in longevity pay and children's allowance and the
payment of group personnel accident insurance premiums in favor of incumbent
GSIS employees is SET ASIDE. The disallowance of the increase in housing allowance
and the simultaneous grant of loyalty and service cash award are AFFIRMED.
Petitioner GSIS is further ordered to REFUND the amounts deducted from the
retirement benefits in G.R. No. 141625, corresponding to the amount of benefits
allowed in G.R. No. 138381.
SO ORDERED.

Petitioner GSIS did not squarely address the above finding of respondent COA or
the Corporate Auditor. Instead, it based its arguments on the general assumption
that all the benefits and allowances subject of this petition were disallowed on the
basis of Section 12, R.A. No. 6758 and its implementing rules. This is beside the
point, however, as it can readily be seen that respondent COA's ruling on the loyalty
and service cash award is actually based on a purported CSC declaration relative
 [G.R. No. 141625. November 10, 2004]
GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner, vs. ALFREDO D. PINEDA,
DANIEL GO, FELINO BULANDUS, FELICIMO J. FERRARIS, JR., BEN HUR
PORLUCAS, LUIS HIPONIA, MARIA LUISA A. FERNANDEZ, VICTORINA
JOVEN, CORAZON S. ALIWANAG, SILVER L. MARTINES, SR., RENATO
PEREZ, LOLITA CAYLAN, DOUGLAS VALLEJO and LETICIA ALMAZAN, on
their own behalf and on behalf of all GSIS retirees with all of whom they
share a common and general interest, respondents.
RESOLUTION
YNARES-SANTIAGO, J.:
On April 16, 2002, the Court promulgated a decision on these two
consolidated cases partially granting the petition in G.R. No. 138381 (first petition)
thereby reversing the Commission on Audits (COA) disallowance of certain fringe
benefits granted to GSIS employees. As a result, the Court ordered the refund of
amounts representing fringe benefits corresponding to those allowed in the first
petition in favor of the respondents in G.R. No. 141625 (second petition).
The benefits which the Court ordered to be refunded included increases in
longevity pay, childrens allowance and management contribution to the Provident
Fund as well as premiums for group personal accident insurance. On the other
hand, the Court affirmed the COA disallowance of loyalty and service cash award as
well as housing allowance in excess of that approved by the COA. Amounts
corresponding to these benefits were previously deducted by GSIS from
respondents retirement benefits in view of the COA disallowance in the first
petition. COA did not seek reconsideration of the judgment ordering said refund,
which thus became final and executory.
On August 7, 2002, the respondents in the second petition, all GSIS retirees,
filed a motion for amendatory and clarificatory judgment (amendatory
motion).[1] They averred that we did not categorically resolve the issue raised in the
second petition, namely: whether or not the GSIS may lawfully deduct any amount
from their retirement benefits in light of Section 39 of Republic Act No. 8291.
According to respondents, said provision of law clearly states that no amount
whatsoever could be legally deducted from retirement benefits, even those
amounts representing COA disallowances. They posit that we should have ordered
refund not only of benefits allowed in the first petition, but all amounts claimed,
regardless of whether or not these were allowed by the COA. These include items
which were correctly disallowed by the COA in the first petition, as well as
disallowed benefits under the second petition. The latter consists of initial payment
of productivity bonus, accelerated implementation of the new salary schedule
effective August 1, 1995, 1995 mid-year financial assistance and increase in
clothing, rice and meal allowances. Respondents further insist that we should have
awarded damages in their favor, citing the GSIS alleged bad faith in making the
deductions.
GSIS filed a comment[2] to respondents amendatory motion, as directed by the
Court in a resolution dated September 3, 2002. GSIS posited that the other benefits
not passed upon in the main judgment should be understood by respondents as
having been impliedly denied by this Court. It also sought clarification of our
decision insofar as it declared that there was no identity of subject matter between
the COA proceedings, from which the first petition stemmed, and respondents
claim under the second petition, which emanated from an order of the GSIS Board
of Trustees (Board). As for the damages claimed by respondents, GSIS insists that it
made the deductions in good faith for these were done in accordance with COA
directives.
Respondents filed a reply[3] to the comment of GSIS on September 9, 2002.
Meanwhile, respondents filed a second motion, this time for leave to file a
motion for discretionary and partial execution [4] (motion for execution). They
prayed that GSIS be ordered to effect the refund, as finally adjudged in our decision,
pending resolution of their amendatory motion as to the other deducted amounts.
We granted the motion for execution on September 3, 2002.
Subsequently, on December 26, 2002, counsel for respondents, Atty. Agustin
Sundiam, filed a motion for entry and enforcement of attorneys lien [5] (motion for
charging lien) and a supplement[6] to this motion on January 10, 2003. He sought
entry of a charging lien in the records of this case pursuant to Section 37 of Rule
138. He prayed for an order directing the GSIS to deduct, as his professional fees,
15% from respondents refund vouchers since the GSIS was already in the process of
releasing his clients checks in compliance with our judgment in the first
petition. The payment scheme was allegedly authorized by the Board of Directors of
his clients, the GSIS Retirees Association, Inc. (GRIA), through a board
resolution[7] that he has attached to the motion.
Atty. Sundiams motion for charging lien was opposed by petitioner GSIS on the
ground that it was through its efforts, and not Atty. Sundiams, that the retirees
were able to obtain a refund.[8] Meanwhile, the GRIA confirmed the payment
scheme it adopted with Atty. Sundiam and prayed for its approval. [9]
Thereafter, on January 10, 2003, respondents filed another manifestation and
motion as well as supplement thereto, claiming that GSIS was deducting new and
unspecified sums from the amount it was refunding to respondents. These new
deductions purportedly pertain to another set of COA disallowances. [10]
On January 21, 2003, respondents again filed a motion[11] praying for the
inclusion in the refundable amount of dividends on the management contribution
to the Provident Fund (motion for payment of dividends). Respondents claimed that
the contribution, which amounted to Fifty Million Pesos (P50M), was retained by
GSIS for more than five years and thus earned a considerable sum of income while
under its control. GSIS declared and paid dividends on said contribution to
incumbent officials and employees, but refused to extend the same benefits to
respondents/retirees.
On March 6, 2003, GSIS filed a joint comment[12] to respondents two foregoing
motions contending that the new deductions are legitimate. The deductions pertain
to car loan arrearages, disallowed employees compensation claims and the like. As
for the dividends on the Provident Fund contributions, respondents are not entitled
to the same because while the first petition was pending, the contributions were
not actually remitted to the fund but were withheld by COA pursuant to its earlier
disallowance.
On October 2, 2003, respondents filed another motion [13] for an order to
compel the GSIS to pay dividends on the Provident Fund contributions pending
resolution of their other motions. They also sought refund of Permanent Partial
Disability (PPD) benefits that GSIS supposedly paid to some of the respondents, but
once again arbitrarily deducted from the amount which the Court ordered to be
refunded.
In a minute resolution[14] dated November 11, 2003, we denied the last motion
for lack of merit. We likewise denied with finality respondents motion for
reconsideration from the denial of said motion.[15]
We now resolve the matters raised by the parties.
On the amendatory motion, it must be clarified that the question raised
before this Court in the second petition was the issue of the Boards jurisdiction to
resolve respondents claim for refund of amounts representing deductions from
their retirement benefits. What was assailed in the second petition was the
appellate courts ruling that the Board had jurisdiction over respondents claim since
there was no identity of subject matter between the proceedings then pending
before the COA and the petition brought by respondents before the Board. The
Court of Appeals did not rule on the main controversy of whether COA
disallowances could be deducted from retirement benefits because the Board
ordered the dismissal of respondents claim for alleged lack of jurisdiction, before it
could even decide on the principal issue.
Consequently, the only matter that was properly elevated to this Court was
the issue of whether or not the Board had jurisdiction over respondents
demands. We did not resolve the issue of whether or not the deductions were valid
under Section 39 of RA 8291, for the simple reason that the Board, as well as the
appellate court, did not tackle the issue. The doctrine of primary
jurisdiction[16] would ordinarily preclude us from resolving the matter, which calls
for a ruling to be first made by the Board. It is the latter that is vested by law with
exclusive and original jurisdiction to settle any dispute arising under RA 8291, as
well as other matters related thereto.[17]
However, both the GSIS and respondents have extensively discussed the
merits of the case in their respective pleadings and did not confine their arguments
to the issue of jurisdiction.Respondents, in fact, submit that we should resolve the
main issue on the ground that it is a purely legal question. Respondents further
state that a remand of the case to the Board would merely result in unnecessary
delay and needless expense for the parties. They thus urge the Court to decide the
main question in order to finally put an end to the controversy.
Indeed, the principal issue pending before the Board does not involve any
factual question, as it concerns only the correct application of the last paragraph of
Section 39, RA 8291. The parties agreed that the lone issue is whether COA
disallowances could be legally deducted from retirement benefits on the ground
that these were respondents monetary liabilities to the GSIS under the said
provision. There is no dispute that the amounts deducted by GSIS represented COA
disallowances. Thus, the only question left for the Board to decide is whether the
deductions are allowed under RA 8291.
Under certain exceptional circumstances, we have taken cognizance of
questions of law even in the absence of an initial determination by a lower court or
administrative body. In China Banking Corporation v. Court of Appeals,[18] the Court
held:
At the outset, the Courts attention is drawn to the fact that since the filing of this
suit before the trial court, none of the substantial issues have been resolved. To
avoid and gloss over the issues raised by the parties, as what the trial court and
respondent Court of Appeals did, would unduly prolong this litigation involving a
rather simple case of foreclosure of mortgage. Undoubtedly, this will run counter to
the avowed purpose of the rules, i.e., to assist the parties in obtaining just, speedy
and inexpensive determination of every action or proceeding. The Court, therefore,
feels that the central issues of the case, albeit unresolved by the courts below,
should now be settled specially as they involved pure questions of
law. Furthermore, the pleadings of the respective parties on file have amply
ventilated their various positions and arguments on the matter necessitating
prompt adjudication.
In Roman Catholic Archbishop of Manila v. Court of Appeals,[19] the Court
likewise held that the remand of a case is not necessary where the court is in a
position to resolve the dispute based on the records before it. The Court will decide
actions on the merits in order to expedite the settlement of a controversy and if the
ends of justice would not be subserved by a remand of the case.
 Here, the primary issue calls for an application of a specific provision of RA
8291 as well as relevant jurisprudence on the matter. No useful purpose will indeed
be served if we remand the matter to the Board, only for its decision to be elevated
again to the Court of Appeals and subsequently to this Court. Hence, we deem it
sound to rule on the merits of the controversy rather than to remand the case for
further proceedings.
The last paragraph of Section 39, RA 8291 specifically provides:
SEC. 39. Exemption from Tax, Legal Process and Lien.-
xxxxxxxxx
The funds and/or the properties referred to herein as well as the benefits, sums or
monies corresponding to the benefits under this Act shall be exempt from
attachment, garnishment, execution, levy or other processes issued by the courts,
quasi-judicial agencies or administrative bodies including Commission on Audit
(COA) disallowances and from all financial obligations of the members, including his
pecuniary accountability arising from or caused or occasioned by his exercise or
performance of his official functions or duties, or incurred relative to or in
connection with his position or work except when his monetary liability,
contractual or otherwise, is in favor of the GSIS.
It is clear from the above provision that COA disallowances cannot be
deducted from benefits under RA 8291, as the same are explicitly made exempt by
law from such deductions. Retirement benefits cannot be diminished by COA
disallowances in view of the clear mandate of the foregoing provision. It is a basic
rule in statutory construction that if a statute is clear, plain and free from
ambiguity, it must be given its literal meaning and applied without
interpretation. This is what is known as plain-meaning rule or verba legis.[20]
Accordingly, the GSIS interpretation of Section 39 that COA disallowances have
become monetary liabilities of respondents to the GSIS and therefore fall under the
exception stated in the law is wrong. No interpretation of the said provision is
necessary given the clear language of the statute. A meaning that does not appear
nor is intended or reflected in the very language of the statute cannot be placed
therein by construction.[21]
Moreover, if we are to accept the GSIS interpretation, then it would be
unnecessary to single out COA disallowances as among those from which benefits
under RA 8291 are exempt. In such a case, the inclusion of COA disallowances in the
enumeration of exemptions would be a mere surplusage since the GSIS could
simply consider COA disallowances as monetary liabilities in its favor. Such a
construction would empower the GSIS to withdraw, at its option, an exemption
expressly granted by law. This could not have been the intention of the statute.
That retirement pay accruing to a public officer may not be withheld and
applied to his indebtedness to the government has been settled in several
cases. In Cruz v. Tantuico, Jr.,[22] the Court, citing Hunt v. Hernandez,[23] explained
the reason for such policy thus:
x x x we are of the opinion that the exemption should be liberally construed in favor
of the pensioner. Pension in this case is a bounty flowing from the graciousness of
the Government intended to reward past services and, at the same time, to provide
the pensioner with the means with which to support himself and his family. Unless
otherwise clearly provided, the pension should inure wholly to the benefit of the
pensioner. It is true that the withholding and application of the amount involved
was had under section 624 of the Administrative Code and not by any judicial
process, but if the gratuity could not be attached or levied upon execution in view
of the prohibition of section 3 of Act No. 4051, the appropriation thereof by
administrative action, if allowed, would lead to the same prohibited result and
enable the respondents to do indirectly what they can not do directly under section
3 of Act No. 4051. Act No. 4051 is a later statute having been approved on February
21, 1933, whereas the Administrative Code of 1917 which embodies section 624
relied upon by the respondents was approved on March 10 of that year.
Considering section 3 of Act No. 4051 as an exception to the general authority
granted in section 624 of the Administrative Code, antagonism between the two
provisions is avoided. (Underscoring supplied)
The above ruling was reiterated in Tantuico, Jr. v. Domingo,[24] where the
Court similarly declared that benefits under retirement laws cannot be withheld
regardless of the petitioners monetary liability to the government.
The policy of exempting retirement benefits from attachment, levy and
execution, as well as unwarranted deductions, has been embodied in a long line of
retirement statutes. Act No. 4051,[25] which provides for the payment of gratuity to
officers and employees of the Insular Government upon retirement due to
reorganization, expressly provides in its Section 3 that (t)he gratuity provided for in
this Act shall not be attached or levied upon execution.
The law which established the GSIS, Commonwealth Act No. 186 (CA No.
186),[26] went further by providing as follows:
SEC. 23. Exemptions from legal process and liens. No policy of life insurance issued
under this Act, or the proceeds thereof, except those corresponding to the annual
premium thereon in excess of five hundred pesos per annum, when paid to any
member thereunder, shall be liable to attachment, garnishment, or other process,
or to be seized, taken, appropriated, or applied by any legal or equitable process or
operation of law to pay any debt or liability of such member, or his beneficiary, or
any other person who may have a right thereunder, either before or after payment;
nor shall the proceeds thereof, when not made payable to a named beneficiary,
constitute a part of the estate of the member for payment of his debt.
Presidential Decree No. 1146,[27] which amended CA No. 186, likewise
contained a provision exempting benefits from attachment, garnishment, levy or
other processes. However, the exemption was expressly made inapplicable to
obligations of the member to the System, or to the employer, or when the benefits
granted are assigned by the member with the authority of the System. [28]
The latest GSIS enactment, RA 8291,[29] provides for a more detailed and wider
range of exemptions under Section 39. Aside from exempting benefits from judicial
processes, it likewise unconditionally exempts benefits from quasi-judicial and
administrative processes, including COA disallowances, as well as all financial
obligations of the member. The latter includes any pecuniary accountability of the
member which arose out of the exercise or performance of his official functions or
duties or incurred relative to his position or work. The only exception to such
pecuniary accountability is when the same is in favor of the GSIS.
Thus, monetary liability in favor of GSIS refers to indebtedness of the member
to the System other than those which fall under the categories of pecuniary
accountabilities exempted under the law. Such liability may include unpaid social
insurance premiums and balances on loans obtained by the retiree from the
System, which do not arise in the performance of his duties and are not incurred
relative to his work. The general policy, as reflected in our retirement laws and
jurisprudence, is to exempt benefits from all legal processes or liens, but not from
outstanding obligations of the member to the System. This is to ensure
maintenance of the GSIS fund reserves in order to guarantee fulfillment of all its
obligations under RA 8291.
Notwithstanding the foregoing, however, we find it necessary to nonetheless
differentiate between those benefits which were properly disallowed by the COA
and those which were not.
Anent the benefits which were improperly disallowed, the same rightfully
belong to respondents without qualification. As for benefits which were justifiably
disallowed by the COA, the same were erroneously granted to and received by
respondents who now have the obligation to return the same to the System.
It cannot be denied that respondents were recipients of benefits that were
properly disallowed by the COA. These COA disallowances would otherwise have
been deducted from their salaries, were it not for the fact that respondents retired
before such deductions could be effected. The GSIS can no longer recover these
amounts by any administrative means due to the specific exemption of retirement
benefits from COA disallowances. Respondents resultantly retained benefits to
which they were not legally entitled which, in turn, gave rise to an obligation on
their part to return the amounts under the principle of solutio indebiti.
Under Article 2154 of the Civil Code,[30] if something is received and unduly
delivered through mistake when there is no right to demand it, the obligation to
return the thing arises.Payment by reason of mistake in the construction or
application of a doubtful or difficult question of law also comes within the scope
of solutio indebiti.[31]
In the instant case, the confusion about the increase and payment of benefits
to GSIS employees and executives, as well as its subsequent disallowance by the
COA, arose on account of the application of RA 6758 or the Salary Standardization
Law and its implementing rules, CCC No. 10. The complexity in the application of
these laws is manifested by the several cases that have reached the Court since its
passage in 1989.[32] The application of RA 6758 was made even more difficult when
its implementing rules were nullified for non-publication.[33]Consequently, the
delivery of benefits to respondents under an erroneous interpretation of RA 6758
gave rise to an actionable obligation for them to return the same.
While the GSIS cannot directly proceed against respondents retirement
benefits, it can nonetheless seek restoration of the amounts by means of a proper
court action for its recovery.Respondents themselves submit that this should be the
case,[34] although any judgment rendered therein cannot be enforced against
retirement benefits due to the exemption provided in Section 39 of RA
8291. However, there is no prohibition against enforcing a final monetary judgment
against respondents other assets and properties. This is only fair and consistent
with basic principles of due process.
As such, a proper accounting of the amounts due and refundable is in order. In
rendering such accounting, the parties must observe the following guidelines:
(1) All deductions from respondents retirement benefits should be
refunded except those amounts which may properly be defined as
monetary liability to the GSIS;
(2) Any other amount to be deducted from retirement benefits must be
agreed upon by and between the parties; and
(3) Refusal on the part of respondents to return disallowed benefits shall
give rise to a right of action in favor of GSIS before the courts of
law.
Conformably, any fees due to Atty. Sundiam for his professional services may
be charged against respondents retirement benefits. The arrangement, however,
must be covered by a proper agreement between him and his clients under (2)
above.
 As to whether respondents are entitled to dividends on the provident fund
contributions, the same is not within the issues raised before the Court. The second
petition refers only to the legality of the deductions made by GSIS from
respondents retirement benefits. There are factual matters that need to be
threshed out in determining respondents right to the payment of dividends, in view
of the GSIS assertion that the management contributions were not actually
remitted to the fund. Thus, the payment of dividends should be the subject of a
separate claim where the parties can present evidence to prove their respective
assertions. The Court is in no position to resolve the matter since the material facts
that would prove or disprove the claim are not on record.
In the interest of clarity, we reiterate herein our ruling that there is no identity
of subject matter between the COA proceedings, from which the first petition
stemmed, and respondents claim of refund before the Board. While the first
petition referred to the propriety of the COA disallowances per se, respondents
claim before the Board pertained to the legality of deducting the COA disallowances
from retirement benefits under Section 39 of RA 8291.
Finally, on respondents claim that the GSIS acted in bad faith when it deducted
the COA disallowances from their retirement benefits, except for bare allegations,
there is no proof or evidence of the alleged bad faith and partiality of the
GSIS. Moreover, the latter cannot be faulted for taking measures to ensure recovery
of the COA disallowances since respondents have already retired and would be
beyond its administrative reach. The GSIS merely acted upon its best judgment and
chose to err in the side of prudence rather than suffer the consequence of not
being able to account for the COA disallowances. It concededly erred in taking this
recourse but it can hardly be accused of malice or bad faith in doing so.
WHEREFORE, in view of the foregoing, the April 16, 2002 Decision in G.R. Nos.
138381 and 141625 is AMENDED. In addition to the refund of amounts
corresponding to benefits allowed in G.R. No. 138381, the GSIS is ordered to
REFUND all deductions from retirement benefits EXCEPT amounts representing
monetary liability of the respondents to the GSIS as well as all other amounts
mutually agreed upon by the parties.
SO ORDERED.
G.R. No. 180388 January 18, 2011
GREGORIO R. VIGILAR, SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND
HIGHWAYS (DPWH), DPWH UNDERSECRETARIES TEODORO E. ENCARNACION AND
EDMUNDO E. ENCARNACION AND EDMUNDO V. MIR, DPWH ASSISTANT
SECRETARY JOEL L. ALTEA, DPWH REGIONAL DIRECTOR VICENTE B. LOPEZ, DPWH
DISTRICT ENGINEER ANGELITO M. TWAÑO, FELIX A. DESIERTO OF THE TECHNICAL
WORKING GROUP VALIDATION AND AUDITING TEAM, AND LEONARDO ALVARO,
ROMEO N. SUPAN, VICTORINO C. SANTOS OF THE DPWH PAMPANGA 2ND
ENGINEERING DISTRICT, Petitioners,
vs.
ARNULFO D. AQUINO, Respondent.
DECISION
SERENO, J.:
Before the Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of
Court, assailing the Decision2of the Court of Appeals in C.A.-G.R. CV No. 82268,
dated 25 September 2006.
The antecedent facts are as follows:
On 19 June 1992, petitioner Angelito M. Twaño, then Officer-in-Charge (OIC)-
District Engineer of the Department of Public Works and Highways (DPWH) 2nd
Engineering District of Pampanga sent an Invitation to Bid to respondent Arnulfo D.
Aquino, the owner of A.D. Aquino Construction and Supplies. The bidding was for
the construction of a dike by bulldozing a part of the Porac River at Barangay
Ascomo-Pulungmasle, Guagua, Pampanga.
Subsequently, on 7 July 1992, the project was awarded to respondent, and a
"Contract of Agreement" was thereafter executed between him and concerned
petitioners for the amount of PhP1,873,790.69, to cover the project cost.
By 9 July 1992, the project was duly completed by respondent, who was then issued
a Certificate of Project Completion dated 16 July 1992. The certificate was signed by
Romeo M. Yumul, the Project Engineer; as well as petitioner Romeo N. Supan, Chief
of the Construction Section, and by petitioner Twaño.
Respondent Aquino, however, claimed that PhP1,262,696.20 was still due him, but
petitioners refused to pay the amount. He thus filed a Complaint 3 for the collection
of sum of money with damages before the Regional Trial Court of Guagua,
Pampanga. The complaint was docketed as Civil Case No. 3137.
Petitioners, for their part, set up the defense 4 that the Complaint was a suit against
the state; that respondent failed to exhaust administrative remedies; and that the
"Contract of Agreement" covering the project was void for violating Presidential
Decree No. 1445, absent the proper appropriation and the Certificate of Availability
of Funds.5
On 28 November 2003, the lower court ruled in favor of respondent, to wit:
WHEREFORE, premises considered, defendant Department of Public Works and
Highways is hereby ordered to pay the plaintiff Arnulfo D. Aquino the following:
1. PhP1,873,790.69, Philippine Currency, representing actual amount for
the completion of the project done by the plaintiff;
2. PhP50,000.00 as attorney’s fee and
3. Cost of this suit.
SO ORDERED. 6
It is to be noted that respondent was only asking for PhP1,262,696.20; the award in
paragraph 1 above, however, conforms to the entire contract amount.
On appeal, the Court of Appeals reversed and set aside the Decision of the lower
court and disposed as follows:
WHEREFORE, premises considered, the appeal is GRANTED. The "CONTRACT
AGREEMENT" entered into between the plaintiff-appellee’s construction company,
which he represented, and the government, through the Department of Public
Works and Highway (DPWH) – Pampanga 2nd Engineering District, is declared null
and void ab initio.
The assailed decision of the court a quo is hereby REVERSED AND SET ASIDE.
In line with the pronouncement in Department of Health vs. C.V. Canchela &
Associates, Architects,7 the Commission on Audit (COA) is hereby ordered to
determine and ascertain with dispatch, on a quantum meruit basis, the total
obligation due to the plaintiff-appellee for his undertaking in implementing the
subject contract of public works, and to allow payment thereof, subject to COA
Rules and Regulations, upon the completion of the said determination.
No pronouncement as to costs.
SO ORDERED.8
Dissatisfied with the Decision of the Court of Appeals, petitioners are now before
this Court, seeking a reversal of the appellate court’s Decision and a dismissal of the
Complaint in Civil Case No. G-3137. The Petition raises the following issues:
1. WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT THE
DOCTRINE OF NON-SUABILITY OF THE STATE HAS NO APPLICATION IN THIS CASE.
2. WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT DISMISSING THE
COMPLAINT FOR FAILURE OF RESPONDENT TO EXHAUST ALL ADMINISTRATIVE
REMEDIES.
3. WHETHER OR NOT THE COURT OF APPEALS ERRED IN ORDERING THE COA TO
ALLOW PAYMENT TO RESPONDENT ON A QUANTUM MERUIT BASIS DESPITE THE
LATTER’S FAILURE TO COMPLY WITH THE REQUIREMENTS OF PRESIDENTIAL DECREE
NO. 1445.
After a judicious review of the case, the Court finds the Petition to be without
merit.
Firstly, petitioners claim that the Complaint filed by respondent before the Regional
Trial Court was done without exhausting administrative remedies. Petitioners aver
that respondent should have first filed a claim before the Commission on Audit
(COA) before going to the courts. However, it has been established that the
doctrine of exhaustion of administrative remedies and the doctrine of primary
jurisdiction are not ironclad rules. In Republic of the Philippines v. Lacap, 9 this Court
enumerated the numerous exceptions to these rules, namely: (a) where there is
estoppel on the part of the party invoking the doctrine; (b) where the challenged
administrative act is patently illegal, amounting to lack of jurisdiction; (c) where
there is unreasonable delay or official inaction that will irretrievably prejudice the
complainant; (d) where the amount involved is relatively so small as to make the
rule impractical and oppressive; (e) where the question involved is purely legal and
will ultimately have to be decided by the courts of justice; (f) where judicial
intervention is urgent; (g) where the application of the doctrine may cause great
and irreparable damage; (h) where the controverted acts violate due process; (i)
where the issue of non-exhaustion of administrative remedies has been rendered
moot; (j) where there is no other plain, speedy and adequate remedy; (k) where
strong public interest is involved; and (l) in quo warranto proceedings. In the
present case, conditions (c) and (e) are present.
The government project contracted out to respondent was completed almost two
decades ago. To delay the proceedings by remanding the case to the relevant
government office or agency will definitely prejudice respondent. More
importantly, the issues in the present case involve the validity and the
enforceability of the "Contract of Agreement" entered into by the parties. These are
questions purely of law and clearly beyond the expertise of the Commission on
Audit or the DPWH. In Lacap, this Court said:
... It does not involve an examination of the probative value of the evidence
presented by the parties. There is a question of law when the doubt or difference
arises as to what the law is on a certain state of facts, and not as to the truth or the
falsehood of alleged facts. Said question at best could be resolved
only tentatively by the administrative authorities. The final decision on the matter
rests not with them but with the courts of justice. Exhaustion of administrative
remedies does not apply, because nothing of an administrative nature is to be or
can be done. The issue does not require technical knowledge and experience but
one that would involve the interpretation and application of law. (Emphasis
supplied.)
Secondly, in ordering the payment of the obligation due respondent on a quantum
meruit basis, the Court of Appeals correctly relied on Royal Trust Corporation v.
COA,10 Eslao v. COA,11 Melchor v. COA,12 EPG Construction Company v. Vigilar,13 and
Department of Health v. C.V. Canchela & Associates, Architects.14 All these cases
involved government projects undertaken in violation of the relevant laws, rules
and regulations covering public bidding, budget appropriations, and release of
funds for the projects. Consistently in these cases, this Court has held that the
contracts were void for failing to meet the requirements mandated by law; public
interest and equity, however, dictate that the contractor should be compensated
for services rendered and work done.
Specifically, C.V. Canchela & Associates is similar to the case at bar, in that the
contracts involved in both cases failed to comply with the relevant provisions of
Presidential Decree No. 1445 and the Revised Administrative Code of 1987.
Nevertheless, "(t)he illegality of the subject Agreements proceeds, it bears
emphasis, from an express declaration or prohibition by law, not from any intrinsic
illegality. As such, the Agreements are not illegal per se, and the party claiming
thereunder may recover what had been paid or delivered." 15
The government project involved in this case, the construction of a dike, was
completed way back on 9 July 1992. For almost two decades, the public and the
government benefitted from the work done by respondent. Thus, the Court of instrument in the perpetration thereof. Justice and equity sternly demand that
Appeals was correct in applying Eslao to the present case. In Eslao, this Court the State's cloak of invincibility against suit be shred in this particular instance,
stated: and that petitioners-contractors be duly compensated — on the basis of quantum
meruit — for construction done on the public works housing project. (Emphasis
...the Court finds that the contractor should be duly compensated for services supplied.)
rendered, which were for the benefit of the general public. To deny the payment to
the contractor of the two buildings which are almost fully completed and presently WHEREFORE, in view of the foregoing, the Petition is DENIED for lack of merit. The
occupied by the university would be to allow the government to unjustly enrich assailed Decision of the Court of Appeals in CA-G.R. No. 82268 dated 25 September
itself at the expense of another. Justice and equity demand compensation on the 2006 is AFFIRMED.
basis of quantum meruit. (Emphasis supplied.)
SO ORDERED.
Neither can petitioners escape the obligation to compensate respondent for
services rendered and work done by invoking the state’s immunity from suit. This
Court has long established in Ministerio v. CFI of Cebu,16 and recently reiterated in
Heirs of Pidacan v. ATO,17 that the doctrine of governmental immunity from suit
cannot serve as an instrument for perpetrating an injustice to a citizen. As this
Court enunciated in EPG Construction:181avvphi1

To our mind, it would be the apex of injustice and highly inequitable to defeat
respondent’s right to be duly compensated for actual work performed and
services rendered, where both the government and the public have for years
received and accepted benefits from the project and reaped the fruits of
respondent’s honest toil and labor.

xxx xxx xxx

Under these circumstances, respondent may not validly invoke the Royal
Prerogative of Dishonesty and conveniently hide under the State's cloak of
invincibility against suit, considering that this principle yields to certain settled
exceptions. True enough, the rule, in any case, is not absolute for it does not say
that the state may not be sued under any circumstance.

xxx xxx xxx

Although the Amigable and Ministerio cases generously tackled the issue of the
State's immunity from suit vis a vis the payment of just compensation for
expropriated property, this Court nonetheless finds the doctrine enunciated in the
aforementioned cases applicable to the instant controversy, considering that the
ends of justice would be subverted if we were to uphold, in this particular
instance, the State's immunity from suit.

To be sure, this Court — as the staunch guardian of the citizens' rights and welfare
— cannot sanction an injustice so patent on its face, and allow itself to be an
G.R. No. 167824 July 2, 2010 relative to their current immigration status, to which the petitioners objected by
filing with the Special Task Force of the BI Commissioner a Comment/Opposition
GERALDINE GAW GUY and GRACE GUY CHEU, Petitioners, with Motion Ad Cautelam to Quash Re: Subpoena11 dated 30 April 2004 (Duces
vs. Tecum/Ad Testificandum), which was eventually denied by respondent Salcedo in
ALVIN AGUSTIN T. IGNACIO, Respondent. an Order12 dated May 14, 2004.

x - - - - - - - - - - - - - - - - - - - - - - -x Respondent Board of Commissioners (BOC) filed a Charge Sheet13 dated June 1,

2004 for Violation of Sections 37 (a) 7, 45 (e) and 45-A of the Philippine Immigration
G.R. No. 168622 Act of 1940, as amended, which reads as follows:

GERALDINE GAW GUY and GRACE GUY CHEU, Petitioners, The undersigned Special Prosecutor charges GRACE GUY CHEU and GERALDINE
vs. GAW GUY, both Canadian citizens, for working without permit, for fraudulently
THE BOARD OF COMMISSIONERS OF THE BUREAU OF IMMIGRATION, HON. representing themselves as Philippine citizens in order to evade immigration laws
MARICEL U. SALCEDO, MAYNARDO MARINAS, RICARDO CABOCHAN and ELISEO and for failure to comply with the subpoena duces tecum/ad testificandum, in
EXCONDE, Respondents. violation of the Philippine Immigration Act of 1940, as amended, committed as
follows:
DECISION
That respondents GRACE GUY CHEU and GERALDINE GAW GUY, knowingly, willfully
and unlawfully engage in gainful activities in the Philippines without appropriate
PERALTA, J.:
permit by working as the Vice-President for Finance & Treasurer and General
Manager, respectively, of Northern Islands Company, Inc., with office address at No.
This is a petition for review on certiorari1 under Rule 45 of the 1997 Rules of Civil
3 Mercury Avenue, Libis, Quezon City;
Procedure seeking, among others, to annul and set aside the Decisions dated
January 6, 20052 and April 20, 20053 and Resolutions dated March 10, 20054 and
That both respondents, knowingly, willfully and fraudulently misrepresent
June 29, 20055 rendered by the Court of Appeals (CA), reversing and setting aside
themselves as Philippine citizens as reflected in the general Information Sheet of
the Writ of Preliminary Injunction issued by the Regional Trial Court6 (RTC), Branch
Northern Islands Company, Inc., for 2004, in order to evade any requirement of the
37, Manila.
Philippine Immigration Laws;
The antecedent facts follow.
That both respondents, duly served with subpoenas duces tecum/ad testificandum,
dated April 20, 2004, knowingly, willfully and unlawfully failed to comply with
The father of petitioners Geraldine Gaw Guy and Grace Guy Cheu became a requirements thereof.1avvphi1
naturalized7 Filipino citizen sometime in 1959. The said petitioners, being minors at
that time, were also recognized8 as Filipino citizens.
CONTRARY TO LAW.
Respondent Atty. Alvin Agustin T. Ignacio, filed a Complaint9 dated March 5, 2004
As a remedy, petitioners filed a Petition for Certiorari with Damages and a Prayer
for blacklisting and deportation against petitioners Geraldine and Grace before the
for Issuance of a Temporary Restraining Order and Preliminary Injunction14 dated
Bureau of Immigration (BI) on the basis that the latter two are Canadian citizens
May 31, 2004 before the RTC of Manila, Branch 37.15
who are illegally working in the Philippines, petitioners having been issued Canadian
passports.
The trial court, after hearing petitioner's application for issuance of a temporary
restraining order (TRO) and writ of preliminary injunction, issued an Order 16 dated
Acting upon the Complaint, respondent Maricel U. Salcedo, Special Prosecutor,
June 28, 2004, the dispositive portion of which reads:
Special Task Force of the BI Commissioner, directed the petitioners, through the
issuance of a subpoenae,10 to appear before her and to bring pertinent documents
WHEREFORE, premises considered, the application for temporary restraining order
is hereby GRANTED. The respondents and all persons acting in their behalf and
those under their instructions are directed to cease and desist from continuing with
the deportation proceedings involving the petitioners. In the meantime set the case
for hearing on preliminary injunction on July 5 and 6, 2004, both at 2:00 o'clock in
the afternoon and the respondents are directed to show cause why writ of
preliminary injunction should not issue.
prayed for the nullification of the Orders dated June 28, 2004 and July 19, 2004
issued by the RTC in Civil Case No. 04-110179 and for the dismissal of the petition
therein. Later on, petitioner Geraldine filed a Motion to Consolidate both petitions.
On January 6, 2005, the Ninth Division of the CA granted the petition filed by
respondent Atty. Ignacio and annulled the writ of preliminary injunction issued by
the trial court, the dispositive portion of the Decision 27 reads:

SO ORDERED. WHEREFORE, the instant petition is GRANTED and the Order of the Regional Trial
Court, Branch 37, Manila, dated July 19, 2004, is hereby ANNULLED and SET ASIDE.
On July 5, 2004, public respondents filed their Answer 17 and on July 13, 2004, filed a
Supplement (To the Special and Affirmative Defenses/Opposition to the Issuance of SO ORDERED.
a Writ of Preliminary Injunction).18 The parties were then directed to file their
respective memoranda as to the application for issuance of a writ of preliminary On January 21, 2005, petitioners filed a Motion for Reconsideration. 28
injunction and public respondents' special and affirmative defenses. On July 16,
2004, public respondents as well as the petitioners,19 filed their respective
On March 1, 2005, petitioners reiterated29 their prayer for the consolidation of the
Memoranda.20 On the same day, respondent Atty. Ignacio filed his Answer 21 to the
petitions in the Eighth and Ninth Divisions. In its Resolution 30 dated March 10, 2005,
petition.
the CA Ninth Division denied petitioners' Motion for Reconsideration.

In an Order22 dated July 19, 2004, the trial court granted the application for
Hence, petitioners filed before this Court a Petition for Review on Certiorari31 dated
preliminary injunction enjoining public respondents from further continuing with
March 31, 2005 praying for the reversal of the Decision rendered by the CA's Ninth
the deportation proceedings. The Order reads, in part:
Division, which is now docketed as G.R. No. 167824.

In view of the foregoing, the Court finds that, indeed, there exists a pressing reason
Thereafter, the CA's Eighth Division rendered its own Decision32 dated April 29,
to issue a writ of preliminary injunction to protect the rights of the petitioners
2005 granting the petition therein and nullifying the Orders dated June 28 and July
pending hearing of the main case on the merits and unless this Court issues a writ,
19, 2004 in Civil Case No. 04-110179, the dispositive portion of which reads as
grave irreparable injury would be caused against the petitioners.
follows:

WHEREFORE, premises considered, the application for the Writ of Preliminary

WHEREFORE, finding the instant petition impressed with merit and in accordance
Injunction is hereby GRANTED. The respondents and all persons acting on their
with our decision in CA-G.R. SP No. 86432, the same is GIVEN DUE COURSE and is
behalf and those under their instructions are directed to cease and desist from
GRANTED. The assailed Orders of the respondent court dated 28 June and 19 July
continuing with the deportation proceedings involving the petitioners during the
2004 are hereby NULLIFIED and SET ASIDE.
pendency of the instant case. The petitioners are directed to post a bond in the
amount of ₱50,000.00 to answer for whatever damages that may be sustained by
SO ORDERED.
the respondent should the court finally resolve that the petitioners are not entitled
thereto.
Petitioners filed their Motion for Reconsideration33 from the said Decision, which
SO ORDERED. the CA denied in its Resolution34dated June 21, 2005.

Thus, petitioners filed before this Court a Petition for Review on Certiorari35 dated
As a consequence, public respondents, on September 10, 2004, filed a Petition for
July 12, 2005 seeking to reverse and set aside the said Decision and Resolution
Certiorari with Prayer for Issuance of Temporary Restraining Order and Writ of
rendered by the Eighth Division of the CA and is now docketed as G.R. No. 168622.
Preliminary Injunction23 before the CA24 and, on September 17, 2004, respondent
In its Resolution36 dated August 10, 2005, the Court dismissed the said petition and
Atty. Ignacio filed a Petition for Certiorari,25 also with the CA.26 Both petitions
said dismissal, despite petitioners' motion for reconsideration,37 was affirmed in a
Resolution38 dated October 17, 2005. This Court, however, upon another motion for
reconsideration39 filed by the petitioners, reinstated the petition and ordered its
consolidation with G.R. No. 167824.40
On September 7, 2007, a Manifestation41 was filed informing this Court that
petitioner Grace Guy Cheu died intestate on August 12, 2007 in the United States of
America.
Petitioners raised the following grounds in their Consolidated
Memorandum42 dated March 27, 2007:
I.
THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AND ERRED IN HOLDING
THAT THE LOWER COURT HAS NO JURISDICTION OVER CIVIL CASE NO. 04-110179
AND ISSUE A WRIT OF PRELIMINARY INJUNCTION THEREIN CONSIDERING THAT THE
INSTANT CASE IS AN EXCEPTION TO THE RULE ON PRIMARY JURISDICTION
DOCTRINE AND WARRANTS PETITIONERS' IMMEDIATE RESORT TO JUDICIAL
INTERVENTION.
A.
CONSIDERING THAT PROOF OF PETITIONERS' PHILIPPINE CITIZENSHIP IS
SUBSTANTIAL, PETITIONERS ARE ALLOWED UNDER THIS HONORABLE
COURT'S RULING IN BID V. DELA ROSA, SUPRA, TO SEEK INJUNCTIVE RELIEF
FROM THE REGIONAL TRIAL COURT TO ENJOIN THE DEPORTATION
PROCEEDINGS CONDUCTED AGAINST THEM.
B.
LIKEWISE, CONSIDERING THAT PETITIONERS STAND TO SUFFER GRAVE
AND IRREPARABLE INJURIES SHOULD THE DEPORTATION PROCEEDINGS
AGAINST THEM BE ALLOWED TO CONTINUE, PETITIONERS ARE ALLOWED
UNDER TE LAW TO IMMEDIATELY SEEK JUDICIAL RELIEF DESPITE THE
PENDENCY OF THE ADMINISTRATIVE PROCEEDINGS.
II.
FURTHER, IT IS RESPECTFULLY SUBMITTED THAT THE RULING OF THIS HONORABLE
COURT IN DWIKARNA V. DOMINGO, 433 SCRA 748 (2004) DID NOT STRIP THE
LOWER COURT OF ITS AUTHORITY TO ENTERTAIN THE PETITION IN CIVIL CASE NO.
04-110179 AND TO ISSUE A WRIT OF PRELIMINARY INJUNCTION IN THE AFORESAID
CASE.
III.
EVEN IF THE RULING OF THIS HONORABLE COURT IN DWIKARNA V. DOMINGO,
SUPRA, DID STRIP THE LOWER COURT OF ITS JURISDICTION IN BID V. DELA ROSA,
SUPRA, TO ENJOIN DEPORTATION PROCEEDINGS, THE RULING CAN ONLY HAVE
PROSPECTIVE EFFECT.
Basically, petitioners argue that the doctrine of primary jurisdiction, relied upon by
the CA in its decision, does not apply in the present case because it falls under an
exception. Citing Board of Commissioners (CID) v. Dela Rosa,43petitioners assert that
immediate judicial intervention in deportation proceedings is allowed where the
claim of citizenship is so substantial that there are reasonable grounds to believe
that the claim is correct. In connection therewith, petitioners assail the applicability
of Dwikarna v. Domingo in the present case, which the CA relied upon in ruling
against the same petitioners.
After a careful study of the arguments presented by the parties, this Court finds the
petition meritorious.
Petitioners rely on Board of Commissioners (CID) v. Dela Rosa,44 wherein this Court
ruled that when the claim of citizenship is so substantial as to reasonably believe it
to be true, a respondent in a deportation proceeding can seek judicial relief to
enjoin respondent BOC from proceeding with the deportation case. In particular,
petitioners cited the following portions in this Court's decision:
True, it is beyond cavil that the Bureau of Immigration has the exclusive authority
and jurisdiction to try and hear cases against an alleged alien, and in the process,
determine also their citizenship (Lao vs. Court of Appeals, 180 SCRA 756 [1089]. And
a mere claim of citizenship cannot operate to divest the Board of Commissioners of
its jurisdiction in deportation proceedings (Miranda vs. Deportation Board, 94 Phil.
531 [1951]).
However, the rule enunciated in the above-cases admits of an exception, at least
insofar as deportation proceedings are concerned. Thus, what if the claim to
citizenship of the alleged deportee is satisfactory? Should the deportation
proceedings be allowed to continue or should the question of citizenship be
ventilated in a judicial proceeding? In Chua Hiong vs. Deportation Board (96 Phil.
665 [1955]), this Court answered the question in the affirmative, and We quote:
When the evidence submitted by a respondent is conclusive of his citizenship, the
right to immediate review should also be recognized and the courts should
promptly enjoin the deportation proceedings. A citizen is entitled to live in peace,
without molestation from any official or authority, and if he is disturbed by a
deportation proceeding, he has the unquestionable right to resort to the courts
for his protection, either by a writ of habeas corpus or of prohibition, on the legal
ground that the Board lacks jurisdiction. If he is a citizen and evidence thereof is
satisfactory, there is no sense nor justice in allowing the deportation proceedings to
continue, granting him the remedy only after the Board has finished its
investigation of his undesirability.
x x x And if the right (to peace) is precious and valuable at all, it must also be
protected on time, to prevent undue harassment at the hands of ill-meaning or
misinformed administrative officials. Of what use is this much boasted right to
peace and liberty if it can be availed of only after the Deportation Board has
unjustly trampled upon it, besmirching the citizen's name before the bar of public
opinion?
The doctrine of primary jurisdiction of petitioners Board of Commissioners over
deportation proceedings is, therefore, not without exception (Calayday vs. Vivo,
33 SCRA 413 [1970]; Vivo vs. Montesa, 24 SCRA 155 [1967]). Judicial intervention,
however, should be granted in cases where the claim of citizenship is so substantial
that there are reasonable grounds to believe that the claim is correct. In other
words, the remedy should be allowed only on sound discretion of a competent
court in a proper proceeding (Chua Hiong v. Deportation Board, supra; Co vs.
Deportation Board, 78 SCRA 107 [1977]). It appearing from the records that
respondent's claim of citizenship is substantial, as We shall show later, judicial
intervention should be allowed.45
The present case, as correctly pointed out by petitioners and wrongfully found by
the CA, falls within the above-cited exception considering that proof of their
Philippine citizenship had been adduced, such as, the identification
numbers46 issued by the Bureau of Immigration confirming their Philippine
citizenship, they have duly exercised and enjoyed all the rights and privileges
exclusively accorded to Filipino citizens, i.e., their Philippine passports47 issued by
the Department of Foreign Affairs.
In BOC v. Dela Rosa, it is required that before judicial intervention is sought, the
claim of citizenship of a respondent in a deportation proceeding must be so
substantial that there are reasonable grounds to believe that such claim is correct.
In the said case, the proof adduced by the respondent therein was so substantial
and conclusive as to his citizenship that it warranted a judicial intervention. In the
present case, there is a substantial or conclusive evidence that petitioners are
Filipino citizens. Without necessarily judging the case on its merits, as to whether
petitioners had lost their Filipino citizenship by having a Canadian passport, the fact
still remains, through the evidence adduced and undisputed by the respondents,
that they are naturalized Filipinos, unless proven otherwise.
However, this Court cannot pass upon the issue of petitioners' citizenship as this
was not raised as an issue. The issue in this petition is on the matter of jurisdiction,
and as discussed above, the trial court has jurisdiction to pass upon the issue
whether petitioners have abandoned their Filipino citizenship or have acquired dual
citizenship within the confines of the law.
In this regard, it must be remembered though that this Court's ruling in Dwikarna v.
Domingo did not abandon the doctrine laid down in BOC v. Dela Rosa. The
exception remains. Dwikarna merely reiterated the doctrine of primary jurisdiction
when this Court ruled that if the petitioner is dissatisfied with the decision of the
Board of Commissioners of the Bureau of Immigration, he can move for its
reconsideration and if his motion is denied, then he can elevate his case by way of
a petition for review before the Court of Appeals, pursuant to Section 1, Rule 43
of the Rules of Civil Procedure. However, utmost caution must be exercised in
availing of the exception laid down in BOC v. Dela Rosa in order to avoid trampling
on the time-honored doctrine of primary jurisdiction. The court cannot or will not
determine a controversy involving a question which is within the jurisdiction of the
administrative tribunal prior to resolving the same, where the question demands
the exercise of sound administrative discretion requiring special knowledge,
experience and services in determining technical and intricate matters of fact. 48 In
cases where the doctrine of primary jurisdiction is clearly applicable, the court
cannot arrogate unto itself the authority to resolve a controversy, the jurisdiction
over which is initially lodged with an administrative body of special competence. 49
Above all else, this Court still upholds the doctrine of primary jurisdiction. As
enunciated in Republic v. Lacap:50
The general rule is that before a party may seek the intervention of the court, he
should first avail of all the means afforded him by administrative processes. 51 The
issues which administrative agencies are authorized to decide should not be
summarily taken from them and submitted to a court without first giving such
administrative agency the opportunity to dispose of the same after due
deliberation.52
Corollary to the doctrine of exhaustion of administrative remedies is the doctrine of
primary jurisdiction; that is, courts cannot or will not determine a controversy
involving a question which is within the jurisdiction of the administrative tribunal
prior to the resolution of that question by the administrative tribunal, where the
question demands the exercise of sound administrative discretion requiring the
special knowledge, experience and services of the administrative tribunal to
determine technical and intricate matters of fact. 53

Nonetheless, the doctrine of exhaustion of administrative remedies and the

corollary doctrine of primary jurisdiction, which are based on sound public policy
and practical considerations, are not inflexible rules. There are many accepted
exceptions, such as: (a) where there is estoppel on the part of the party invoking
the doctrine; (b) where the challenged administrative act is patently illegal,
amounting to lack of jurisdiction; (c) where there is unreasonable delay or official
inaction that will irretrievably prejudice the complainant; (d) where the amount
involved is relatively small so as to make the rule impractical and oppressive; (e)
where the question involved is purely legal and will ultimately have to be decided
by the courts of justice;54 (f) where judicial intervention is urgent; (g) when its
application may cause great and irreparable damage; (h) where the controverted
acts violate due process; (i) when the issue of non-exhaustion of administrative
remedies has been rendered moot;55 (j) when there is no other plain, speedy and
adequate remedy; (k) when strong public interest is involved; and, (l) in quo
warranto proceedings. x x x56

WHEREFORE, the petition is GRANTED. Consequently, the Decisions dated January

6, 2005 and April 20, 2005, and the Resolutions dated March 10, 2005 and June 29,
2005 of the Court of Appeals, nullifying and setting aside the Writ of Preliminary
Injunction issued by the Regional Trial Court (RTC), Branch 37, Manila, are
hereby NULLIFIED and SET ASIDE. The case is hereby remanded to the trial court for
further proceedings, with dispatch.

SO ORDERED.