EN BANC

[G.R. No. L-20383. May 24, 1967.]

THE PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, petitioner-appellee, vs.
SOCIAL SECURITY COMMISSION, respondent-appellant.
Solicitor General Arturo A. Alafriz, Solicitor Camilo D. Quiason, L. L. Javellana & L. B.
Topacio for respondent-appellant.
Manuel Lim, Manuel Macias, Ricardo T. Bancod and Associates for petitioner-appellee.
SYLLABUS
1. COURT OF FIRST INSTANCE; JURISDICTION TO ISSUE PROHIBITION WITH
PRELIMINARY INJUNCTION AGAINST THE SSC. — A writ of prohibition may be
issued only by a superior court to an inferior court, corporation, board or person, to
prevent the latter from usurping or exercising a jurisdiction or power it does not have
(Moran on Rules of Court, 1963 ed. p. 157). Section 5(a) of Republic Act No. 1161
confers on the Social Security Commission the power to determine and settle claims,
which power partakes of a quasi-judicial function. In the exercise of said power, the
Commission is not inferior to courts of first instance, in much the same way as the
Public Service Commission, as a board performing quasi judicial functions, is not
inferior to said courts. The quasi-judicial nature of the functions of the Social Security
Commission is emphasized by its authority, expressly granted by said Section 5 (a), to
promulgate rules and regulations governing "the filing, determination and settlement
of claims". Hence, the lower court had no jurisdiction to issue the writ of prohibition
therein prayed for by the appellee.
2. SOCIAL SECURITY COMMISSION; WHEN SHALL IT BE SUED IN COURTS OF
FIRST INSTANCE. — The Commission performs administrative, as well as quasi-
judicial functions. Although, it can sue and be sued in courts of first instance, either
as regards its administrative functions, or in the otherwise when the act complained of
forms part of its quasi-judicial functions.
3. ID.; CIRCULAR DOES NOT CONSTITUTE DECISION. — Although Circular No.
34 bears the approval of the Chairman of the Commission, said approval does not
constitute a "decision" thereof, as the term is used in section 5, which regulates the
judicial review of such decision. Indeed, a "decision" connotes the adjudication or
settlement of a controversy, and the same did not exist between the System and the
plaintiff when the Chairman of the Commission affixed his signature to said Circular
No. 34 on or before November 6, 1960.
4. ID.; DUTY OF COMPLAINING ENTITY OF PERSON TO SUBMIT HIS OR HER
OBJECTION TO THE SYSTEM FOR DETERMINATION BEFORE THE SAME IS
SUBMITTED FOR JUDICIAL REVIEW. — It is only fair and just, as well as
administratively expedient, that before judicial review could be sought, appellee's
objection to the aforementioned circular be previously submitted to and to and passed
upon by the Commission, for, pursuant to Section 5(b) the Social Security Act, the
judicial review of "any decision of the Commission shall be permitted only after any
party claiming to be aggrieved thereby has exhausted his remedies before the
Commission".
5. ID.; PROHIBITION, ACTION FOR; REQUISITE. — The general rule applicable to
actions for certiorari and prohibition against tribunal, board or officer is that the
aggrieved party must seek therefrom a reconsideration of the decision complained of
so that the latter will have an opportunity to correct the error or mistake complained
of. No such reconsideration has been asked by plaintiff herein. Hence, it has no cause
of action for prohibition, which does not lie except in the absence of appeal or any
other plain, speedy and adequate remedy in the ordinary course of law.
6. ID.; QUESTION OF COVERAGE; JURISDICTION. — Rep. Act No. 4857, Sec. 2 of
which amended Sec. 5 (c) of Rep. Act No. 1161 provides that "any dispute arising
under this Act with respect to coverage, etc. shall be cognizable by the
Commission . . . " Hence, there can be no question that any dispute with respect to
coverage is cognizable by the Commission.
DECISION
CONCEPCION, C .J p:
Appeal, taken by the Social Security Commission, from a decision of the Court of First
Instance of Manila, the dispositive part of which reads:
"IN VIEW OF THE FOREGOING, judgment is hereby rendered (1) holding that
plaintiff's agents, solicitors or under writers are not employees of plaintiff. The
Philippine American Life Insurance Company and that plaintiff is not their employer
as the plaintiff's said insurance agents, solicitors or underwriters do not fall under the
compulsory coverage of the Social Security System; (2) commanding defendant Social
Security Commission to desist absolutely from taking criminal action against plaintiff's
officers under the provisions of Section 28(e) and (f) of the Social Security Act, and
from requiring plaintiff to remit contributions to the defendant Social Security
Commission or its administrative arm, the Social Security System, to be applied to the
coverage of plaintiff's said agents, solicitors or underwriters under the Social Security
Act, without pronouncement as to costs."
On November 6, 1960, the Social Security System — hereinafter referred to as the
System — issued, with the approval of the Chairman of the Social Security
Commission — hereinafter referred to as the Commission — Circular No. 34 (Exhibit
A), requiring all insurance firms to submit immediately the names of their agents,
solicitors or underwriters, who, pursuant to the Social Security Act 1 — hereinafter
referred to as the Act — are employees of said firms, subject to compulsory coverage of
the System, and to pay the corresponding premiums, based on the actual
commissions received by each agent during each month.
Sometime later, the System, through the manager of its Production Department, sent
to the Philippine American Life Insurance Company — hereinafter referred to as the
plaintiff — the communication Exhibit B, dated February 11, 1961, enclosing
therewith SSS Form R-1-A.1, advising plaintiff that, pursuant to said Circular No. 34,
the insurance agents thereof are considered its employees, subject to compulsory
coverage under said Act, and urging plaintiff to accomplish said SSS Form (for the
purpose of supplying the necessary data concerning said agents, solicitors and
underwriters) and to submit the same, within ten (10) days, to avoid the penalties
provided for by law. This "advice" was reiterated in another letter (Exhibit B-1 of the
same officer, dated March 3, 1961. Plaintiff replied to these letters with a
communication (Exhibit C), dated March 7, 1961, objecting to the aforementioned
compulsory coverage upon the ground that plaintiff's insurance agents, solicitors or
underwriters are not its employees. Still, on May 14, 1961, the System sent to plaintiff
another letter (Exhibit D), with several copies of SSS Form R-1-A.1, with the request
that these forms be accomplished and submitted, as soon as possible, to facilitate
early adjudication of the coverage of its agents under the System.
Instead of complying with this request, on May 30, 1961, plaintiff commenced, in the
Court of First Instance of Manila, the present action, for prohibition with preliminary
injunction against the Commission — to restrain the latter 1) from compelling plaintiff
to remit contributions to the administrative branch of the System, as an incident of
the alleged inclusion of plaintiff's agents, solicitors or underwriters in the compulsory
coverage of the System, and 2) from prosecuting plaintiff and its officers for their
refusal to make the aforementioned contributions — upon the theory that said agents
of the plaintiff are not employees thereof.
After appropriate proceedings, the lower court rendered the aforementioned decision.
Hence, the present appeal to this Court, since questions purely of law are involved
therein, namely: 1) whether or not the trial court had jurisdiction to hear and decide
this case; 2) whether plaintiff has a cause of action against the Commission; and 3)
whether insurance agents of a life insurance company, like plaintiff herein, are its
employees, for purposes of the compulsory coverage under the System.
The System maintains that the first two issues should be resolved in the negative,
upon the ground, inter alia, that decisions of the Commission may not be reviewed by
courts of first instance, not only because the two have the same rank, but, also,
because said decisions are, pursuant to the Act 2 reviewable by the Court of Appeals,
on questions of law and fact, or by the Supreme Court, on questions purely of law;
that plaintiff has no cause of action against the Commission, inasmuch as the former
has not appealed to the latter from the action taken by the System upon the question
of coverage, under the Act; and that plaintiff has not exhausted the administrative
remedies available thereto under the same. 3
Upon the other hand, plaintiff urges an affirmative answer, upon the theory that the
Commission is, at least, a board within the meaning of Rule 67 of the Rules of Court of
1940; 4 that being empowered by law to sue and be sued, the Commission may sue
and be sued in any court of the Philippines; that Section 5 of Republic Act No. 1161 is
inapplicable to the case at bar, because the question of coverage, herein involved, is
not a "claim" within the purview of said section; that the issue whether a given person
is an employee of a particular firm and subject to coverage under the said Act, is not
one that plaintiff is bound to submit to the Commission in the first instance; that
where the employer-employee relationship is contested, the ruling of the Commission
to the effect that such relationship exists presents a legal dispute, which may not be
decided unilaterally by the Commission; that the theory of the Commission to the
effect that is has the same rank as courts of first instance may be true insofar only as
the settlements of "claims," but not as regards the question of compulsory coverage;
that an appeal from the System to the Commission would have been an empty
gesture, for all actions of and proceedings in the System are under the direction and
control of the Commission, and Circular No. 34 (Exhibit A) bears the approval of the
Commission, through its chairman, apart from the fact that the Commission was
poised to take criminal action against the plaintiff and its officers to compel them to
obey the ruling complained of; and that the insistence of the Commission on enforcing
its ruling regarding said coverage amounts to an act performed without or in excess of
jurisdiction or with grave abuse of discretion.
We find that the appeal taken by the Commission is well-founded for the present
action is one for a writ of prohibition, which may be issued only by a superior court to
an inferior court, corporation, board or person, to prevent the latter from usurping or
exercising a jurisdiction or power it does not have (3 Moran on Rules of Court, 1963
ed., p. 157). Section 5 (a) of the Act acknowledges in the Commission the power to
determine and settle claims, which partakes of a quasi-judicial function, in the
exercise of which, the Commission is not inferior to courts of first instance, in much
the same way as the Public Service Commission, as a board performing quasi-judicial
functions, is not inferior to said courts. 5 The quasi-judicial nature of the functions of
the Commission is emphasized by its authority, expressly granted by said Section 5
(a), to promulgate rules and regulations governing "the filing, determination and
settlement of claims." Hence, the lower court had no jurisdiction to issue the writ of
prohibition prayed for.
Besides, the Commission performs administrative, as well as quasi-judicial, functions.
Although it can sue and be sued in courts of first instance, either as regards its
administrative functions, or in the enforcement and protection of its private rights, the
rule is otherwise when the act complained of forms part of its quasi-judicial functions.
For this reason, Section 5 (c) of said Act, explicitly provides, in connection with
"decisions" of the Commission, or the determinations thereof in the exercise of said
functions, that the same "may be reviewed both upon the law and the facts by the
Court of Appeals," or, "if the decision of the Commission involves only questions of
law, . . . by the Supreme Court."
What is more, pursuant to Section 5 (b) of said Act, the judicial review of "any decision
of the Commission . . . shall be permitted only after any party claiming to be aggrieved
thereby has exhausted his remedies before the Commission." In the case at bar,
plaintiff has not exhausted its remedies before the Commission. The Commission has
not even been given a chance to render a decision on the issue raised by plaintiff
herein, because the latter has not appealed to the Commission from the action taken
by the System in insisting upon the enforcement of Circular No. 34 (Exh. A).
It is true that the same bears the approval of the Chairman of the Commission. Even if
this fact were construed as an approval of the Circular by the Commission itself, such
approval would not constitute a "decision" thereof; as the term is used in said section
5, which regulates the judicial review of such decision. Indeed, a "decision" connotes
the adjudication or settlement of a controversy, and the same did not exist between
the System and the plaintiff when the Chairman of the Commission affixed his
signature to said Circular No. 34, on or before November 6, 1960. The issue did not
arise until March 7, 1961, when plaintiff expressed its objection to the circular upon
the ground that the agents, solicitors and underwriters thereof are not its employees.
It is only fair and just, therefore, as well as administratively expedient, that before a
judicial review could be sought, said issue be previously submitted to and passed
upon by the Commission, on appeal from the action taken or contemplated to be taken
by the System, since, prior to such submission to and determination by the
Commission, the same had no occasion to consider the specific reasons adduced by
the plaintiff in support of its objection to said Circular No. 34.
But, even if the approval of the circular by the Chairman of the Commission were
hypothetically regarded as a decision or proof of a decision of the Commission itself,
still section 5 (b) ordains positively that a judicial review of said decision "shall be
permitted only after any party claiming to be aggrieved thereby has exhausted his
remedies before the Commission." In other words, he must first seek therefrom a
reconsideration of the decision complained of. This, by the way, is the general rule
applicable to actions for certiorari and prohibition against a tribunal, board or officer,
who must first be given, through a motion for reconsideration, an opportunity to
correct the error or mistake complained of. No such reconsideration has been asked by
plaintiff herein. Hence, it has no cause of action for prohibition, which does not lie
except in the absence of appeal or any other plain, speedy and adequate remedy in the
ordinary course of law.
It is surged that the Commission had already made clear its intention to prosecute
criminally the plaintiff and its officers. This is not true. The one which no more than
intimated such intention was not the Commission, but the System. Precisely, an
appeal from the latter to the former, which admittedly has control over the System,
would have been a plain, speedy and adequate remedy in the ordinary course of law.
Moreover, it appeared from the acts of the System the danger of prosecution was not
imminent or even proximate. Indeed, the letter Exhibit B, urging plaintiff to " please
accomplish and submit the enclosed SSS Form R-1-A. 1 . . . within ten days . . . to
avoid the penalties provided by law," was written by the "Manager, Production
Department" of the System, which is not in charge of the prosecution of violators of
the Act. Then, again, over two (2) months after plaintiff had objected to the compulsory
coverage of its agents, solicitors and underwriters, or on May 14, 1961, the System
wrote to the plaintiff the letter Exhibit D, enclosing therewith several copies of SSS
Form R-1-A.1, with the entreatment that the same be "please" accomplished and
submitted to "facilitate early adjudication of the compulsory coverage" of its agents
"under the system," and winding up with the "hope" of receiving the "form properly
accomplished as soon as possible." The System thus implied that plaintiff could then
seek an adjudication or decision on said coverage by the Commission. At any rate, had
plaintiff appealed to the Commission, the latter could have restrained the System from
causing the plaintiff and its officers from being prosecuted criminally, during the
pendency of the appeal. In short, once again, the same was a plain, speedy and
adequate remedy in the ordinary course of law.
Inasmuch as the lower court had no jurisdiction to hear and decide this case and, at
any rate, plaintiff has no cause of action against the Commission, it is unnecessary to
pass upon the third issue raised by plaintiff herein. In fact, said issue has become
moot on account of the approval of Republic Act No. 4857, on September 1, 1966,
section 2 of which amended section 5 (a) of Republic Act No. 1161, to read as follows:
"Any dispute arising under this Act with respect to coverage, entitlement to benefits,
collection and settlement of premium contributions and penalties hereon, or any other
matter related thereto, shall be cognizable by the Commission, and any case filed with
the Commission with respect thereto shall be heard by the Commission, or any of its
members, or by hearing officers duly authorized by the Commission, and decided
within twenty days after the submission of the evidence. The filing, determination and
settlement of claims shall be governed by the rules and regulations promulgated by
the Commission." (Emphasis supplied.).
Hence, there can be no question not that any dispute with respect to coverage is
cognizable by the Commission.
Wherefore, the decision appealed from is hereby reversed and another one shall be
entered, dismissing the complaint herein, with costs against plaintiff-appellee the
Philippine American Life Insurance Company. It is so ordered.
Reyes, J.B.L. Dizon, Regala, Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Castro,
JJ., concur.
THIRD DIVISION
[G.R. No. 168859. June 30, 2009.]
UNITED COCONUT PLANTERS BANK, JERONIMO U. KILAYKO, LORENZO V. TAN,
ENRIQUE L. GANA, JAIME W. JACINTO and EMILY R. LAZARO, petitioners, vs. E.
GANZON, INC., respondent.
[G.R. No. 168897. June 30, 2009.]
E. GANZON, INC., petitioner, vs. UNITED COCONUT PLANTERS BANK, JAIME W.
JACINTO and EMILY R. LAZARO, respondents.
DECISION
CHICO-NAZARIO, J p:
These are two consolidated 1 Petitions for Review on Certiorari under Rule 45 of the
1997 Revised Rules of Civil Procedure. cTCaEA
United Coconut Planters Bank (UCPB) is a universal bank duly organized and existing
under Philippine Laws. In G.R. No. 168859, UCPB and its corporate officers, i.e.,
Jeronimo U. Kilayko, Lorenzo V. Tan, Enrique L. Gana, Jaime W. Jacinto and Emily R.
Lazaro (UCPB, et al.) seek the reversal and setting aside of the Decision 2 dated 14
October 2004 and Resolution 3 dated 7 July 2005 of the Court of Appeals in CA-G.R.
SP No. 81385 and the affirmation, instead, of the letter-decision 4 dated 16 September
2003 of the Monetary Board of the Bangko Sentral ng Pilipinas (BSP). The Court of
Appeals, in its assailed Decision, set aside the aforesaid letter-decision of the BSP
Monetary Board and remanded the case to the latter for further proceedings; and in its
questioned Resolution, denied for lack of merit the Motion for Reconsideration of
UCPB, et al., as well as the Partial Motion for Reconsideration of E. Ganzon, Inc. (EGI).
ATaDHC
On the other hand, EGI is a corporation duly organized and existing under Philippine
laws and engaged in real estate construction and development business. In G.R. No.
168897, EGI prays for this Court to review the same Decision dated 14 October 2004
and Resolution dated 7 July 2005 of the Court of Appeals in CA-G.R. SP No. 81385,
and to order the appellate court to (1) act on its findings in the case instead of
remanding the same to the BSP Monetary Board for further proceedings; (2) direct the
BSP Monetary Board to impose the applicable administrative sanctions upon UCPB, et
al.; and (3) to amend its assailed Decision and Resolution by deleting therefrom the
statements requiring the BSP Monetary Board to scrutinize and dig deeper into the
acts of UCPB, et al., and to determine if, indeed, there were irregular and unsound
practices in its business dealings with EGI. CcEHaI
The factual antecedents of these consolidated petitions are as follows:
Beginning 1995 to 1998, EGI availed itself of credit facilities from UCPB to finance its
business expansion. To secure said credit facilities, EGI mortgaged to UCPB its
condominium unit inventories in EGI Rufino Plaza, located at the intersection of
Buendia and Taft Avenues, Manila.
Initially, EGI was able to make periodic amortization payments of its loans to UCPB.
When the negative effects of the Asian economic crisis on the property development
sector finally caught up with the corporation in the middle of 1998, EGI started
defaulting in its payment of amortizations, thus, making all of its obligations due and
demandable. Subsequently, EGI was declared in default by UCPB in its letters dated 2
October 1998 5 and 16 February 1999. 6 Thereafter, UCPB stopped sending EGI
monthly statements of its accounts. HITEaS
In 1999, EGI and UCPB explored the possibility of using the mortgaged condominium
unit inventories of EGI in EGI Rufino Plaza as payment for the loans of EGI to UCPB.
Upon agreeing on the valuation of said mortgaged properties, EGI and UCPB entered
into a Memorandum of Agreement (MOA) 7 on 28 December 1998 in settlement of the
loans of EGI from UCPB. Based on this MOA, the outstanding loan obligations of EGI
with UCPB amounted to P915,838,822.50, inclusive of all interest, charges and fees.
UCPB, through its corporate officers, assured EGI that the said amount already
represented the total loan obligations of EGI to UCPB.
On 18 January 2000, EGI and UCPB executed an Amendment of Agreement 8 to
reflect the true and correct valuation of the properties of EGI listed in the MOA that
would be transferred to UCPB in settlement of the total loan obligations of the former
with the latter. The properties of EGI to be used in paying for its debt with UCPB were
valued at P904,491,052.00. EcHIAC
According to the MOA and its amendments, titles to the properties of EGI shall be
transferred to UCPB by the following modes: (1) foreclosure of mortgage; (2) dacion en
pago; (3) creation of a holding company; and (4) use of other alternatives as may be
deemed appropriate by UCPB.
UCPB proceeded to foreclose some of the properties of EGI listed in the MOA. Per the
Certificate of Sale 9 dated 13 April 2000, the foreclosure proceeds of said properties
amounted only to P723,592,000.00, less than the value of the properties of EGI
stipulated in its amended MOA with UCPB. HSaEAD
UCPB applied the entire foreclosure proceeds of P723,592,000.00 to the principal
amount of the loan obligations of EGI, pursuant to BSP Circular No. 239, 10 which
provided that partial property payments shall first be applied to the principal. After
deducting the said amount from the total loan obligations of EGI, there was still an
unpaid balance of P192,246,822.50.
On 8 May 2001, some of the other properties of EGI at EGI Rufino Plaza, valued at
P166,127,369.50, were transferred by way of dacion en pago to UCPB. However,
during the signing of the transaction papers for the dacion en pago, EGI Senior Vice-
President, Architect Grace S. Layug (Layug), noticed that said papers stated that the
remaining loan balance of EGI in the amount of P192,246,822.50 had increased to
P226,963,905.50. The increase was allegedly due to the addition of the transaction
costs amounting to P34,717,083.00. EGI complained to UCPB about the increase, yet
UCPB did not take any action on the matter. ADETca
This prompted EGI President Engineer Eulalio Ganzon (Ganzon) and Senior Vice-
President Layug to review their files to verify the figures on the loan obligations of EGI
as computed by UCPB. In the process, they discovered the UCPB Internal
Memorandum dated 22 February 2001, 11 signed by UCPB corporate officers. The
said Internal Memorandum presented two columns, one with the heading "ACTUAL"
and the other "DISCLOSED TO EGI". The figures in the two columns were conflicting.
The figures in the "DISCLOSED TO EGI" column computed the unpaid balance of the
loan obligations of EGI to be P226,967,194.80, the amount which UCPB actually made
known to and demanded from EGI. The figures in the "ACTUAL" column calculated the
remaining loan obligations of EGI to be only P146,849,412.58.
Consequently, EGI wrote UCPB a letter dated 21 May 2001, 12 which included, among
other demands, the refund by UCPB to EGI of the over-payment of P83,000,000.00; 13
return to EGI of all the remaining Transfer Certificates of Title (TCTs)/Condominium
Certificates of Title (CCTs) in the possession of UCPB; and cost of damage to EGI for
the delay in the release of its certificates of title. TcaAID
In response, UCPB explained 14 that the "ACTUAL" column in its Internal
Memorandum dated 22 February 2001 contained the same amounts reflected or
recorded in its financial statements, in accordance with the Manual of Accounts for
Banks, Manual of Regulations for Banks 15 and BSP Circular No. 202, 16 Series of
1999. In contrast, the "DISCLOSED TO EGI" column showed the total amount still due
from EGI, including the total principal, interests, transaction and other costs after the
foreclosure, whether reflected in the financial books of UCPB or not. Further, UCPB
maintained that the difference in the figures in the two columns was because BSP
Circular No. 202 and Section X305.4 of the Manual of Regulations for Bank disallowed
banks from accruing in its books interest on loans which had become non-performing.
DACaTI
Despite the explanation of UCPB, EGI insisted that the figures appearing in the
"ACTUAL" column of the former's Internal Memorandum dated 22 February 2001
revealed the true and actual amount of its loan obligations to UCPB, P146,849,412.58.
EGI Senior Vice-President Layug met with UCPB Vice-President, Jaime W. Jacinto
(Jacinto) to discuss the demand of EGI for the return of its overpayment. UCPB Vice-
President Jacinto, however, refused to concede that UCPB had any obligation to make
a refund to EGI and, instead, insisted that EGI Senior Vice-President Layug disclose
who gave her a copy of the UCPB Internal Memorandum dated 22 February 2001.
Based on the possession by EGI of the UCPB Internal Memorandum dated 22
February 2001, UCPB filed a criminal case for theft and/or discovery of secrets
against EGI President Ganzon and Senior Vice-President Layug, but the said case was
dismissed. 17 ESacHC
On 5 November 2002, EGI, also on the basis of the UCPB Internal Memorandum dated
22 February 2001, EGI filed with the BSP an administrative complaint 18 against
UCPB, et al., for violation of Sections 36 19 and 37, 20 Article IV of Republic Act No.
7653, 21 in relation to Section 55.1 (a) 22 of Republic Act No. 8791; 23 and for the
commission of irregularities and conducting business in an unsafe or unsound
manner.
In a letter-decision 24 dated 16 September 2003, the BSP Monetary Board dismissed
the administrative complaint of EGI, holding as follows: aIETCA
Please be informed that the Monetary Board decided to dismiss the complaint based
on the evaluation conducted by the Supervision and Examination Department I and
the Office of the General Counsel and Legal Services to the effect that:
1. UCPB computed interest on the loans based on BSP rules and regulations
which prohibit banks from accruing interest on loans that have become non-
performing (BSP Circular No. 202). This is different from interest which may have run
and accrued based on the promissory notes/loan documents from the date of default
up to settlement date. TAcCDI
2. Fair market value of assets to be foreclosed is different from the bid price
submitted during foreclosure and there is no statutory obligation for the latter to be
equivalent to the former.
3. Regarding the alleged P145,163,000.00 fabricated loan, the documents showed
that there were the EGI Board Resolution to borrow, promissory note signed by Mr.
Eulalio Ganzon, and Loan Agreement stating that the proceeds shall be used to pay
outstanding availments and interest servicing.
4. There is no finding by Supervision and Examination Department I on the
alleged double charging and/or padding of transaction costs. 25
EGI filed a Motion for Reconsideration and a Supplemental Motion for Reconsideration
of the aforequoted letter-decision of the BSP Monetary Board. The BSP Monetary
Board denied both motions in its letter 26 dated 8 December 2003 as there was no
sufficient basis to grant the same. aHIDAE
EGI then filed a Petition for Review under Rule 43 of the 1997 Revised Rules of Civil
Procedure with the Court of Appeals raising the sole issue of "whether the Bangko
Sentral ng Pilipinas erred in dismissing the administrative complaint filed by EGI
against UCPB, et al." The case was docketed as CA-G.R. SP No. 81385.
On 14 October 2004, the Court of Appeals rendered its assailed Decision granting the
Petition for Review of EGI, thus, setting aside the BSP letter-decision dated 16
September 2003 and remanding the case to the BSP Monetary Board for further
proceedings. EaScHT
UCPB, et al., moved for the reconsideration of the 14 October 2004 Decision of the
appellate court, praying for a new judgment dismissing the appeal of EGI for lack of
jurisdiction and/or lack of merit. EGI also filed a Partial Motion for Reconsideration of
the same Court of Appeals Decision, with the prayer that the appellate court, instead
of still remanding the case to the BSP Monetary Board for further proceedings, already
direct the latter to impose the applicable administrative sanctions upon UCPB, et al.
In a Resolution dated 7 July 2005, the Court of Appeals denied for lack of merit both
the Motion for Reconsideration of UCPB, et al. and the Motion for Partial
Reconsideration of EGI. THSaEC
G.R. No. 168859
Aggrieved by the 14 October 2004 Decision and 7 July 2005 Resolution of the Court of
Appeals, UCPB, et al. comes before this Court, via a Petition for Review on Certiorari
under Rule 45 of the 1997 Revised Rules of Civil Procedure, based on the following
assignment of errors:
I. THE HONORABLE COURT OF APPEALS ACTED WITHOUT JURISDICTION AND
GRAVELY ERRED IN HOLDING THAT IT HAS APPELLATE JURISDICTION OVER
DECISIONS OF THE BSP/MONETARY BOARD. caIEAD
II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
THE BANGKO SENTRAL SUMMARILY DISMISSED THE COMPLAINT OF [EGI].
III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DISREGARDING
THE FINDINGS OF FACT OF THE BANGKO SENTRAL AND IN HOLDING THAT [UCPB,
et al.] COMMITTED IRREGULAR AND UNSOUND BANKING PRACTICES IN THE
SUBJECT TRANSACTIONS. 27 aAHTDS
The Petition is docketed as G.R. No. 168859.
UCPB, et al., aver that the Court of Appeals has no appellate jurisdiction over
decisions, orders and/or resolutions of the BSP Monetary Board on administrative
matters. The BSP Monetary Board is not among the quasi-judicial agencies
enumerated under Rule 43 of the 1997 Revised Rules of Civil Procedure, over which
the Court of Appeals has appellate jurisdiction. Further, there is nothing in Republic
Act No. 7653 or in Republic Act No. 8791 which explicitly allows an appeal of the
decisions or orders of the BSP Monetary Board to the Court of Appeals. Resultantly,
the Court of Appeals has no power to review, much less set aside, the findings of fact
of the BSP Monetary Board as contained in its letter-decision dated 16 September
2003.
UCPB, et al. also claim that, contrary to the ruling of the Court of Appeals, the letter-
decision dated 16 September 2003 of the BSP Monetary Board plainly reveals that the
administrative complaint of EGI against UCPB, et al. was not summarily dismissed.
The charges of EGI against UCPB, et al. was resolved only after the BSP Monetary
Board thoroughly reviewed pertinent bank records and studied the arguments raised
by EGI in its complaint and Motion for Partial Reconsideration. In its letter-decision
dated 16 September 2003, the BSP Monetary Board stated in no uncertain terms that
the dismissal of the complaint of EGI was based on the evaluation conducted by its
Supervision and Examination Department I and the Office of the General Counsel and
Legal Services. Also, in its letter dated 8 December 2003, the BSP Monetary Board
denied the Motion for Reconsideration and Supplemental Motion for Reconsideration
of EGI because the latter did not present any new evidence in support of its motions.
Hence, there is no basis for the claim of EGI that the BSP Monetary Board overlooked
and completely ignored its accusations of irregular and unsound banking practice
against UCPB, et al. cDTIAC
Finally, UCPB, et al., maintain that the findings of fact of administrative bodies like
the BSP Monetary Board are accorded great respect, if not finality, especially if
supported by substantial evidence. Such findings are to be respected by the courts,
especially in the absence of grave abuse of discretion or grave errors by the BSP
Monetary Board. No other office, much less an appellate tribunal, can substitute its
own findings of fact over that of the concerned administrative agency in view of the
expertise and specialized knowledge acquired by it on matters falling within its areas
of concern. UCPB, et al. insist that it is the BSP which has the necessary expertise to
draft guidelines for the evaluation of the performance and conduct of banks. Thus, the
Court of Appeals committed grave error in disregarding the findings of fact of the BSP
Monetary Board which justified the latter's dismissal of the administrative complaint
of EGI against UCPB, et al.
The issue of jurisdiction of the Court of Appeals over appeals of decisions, orders
and/or resolutions of the BSP Monetary Board on administrative matters must first be
resolved, before the other issues raised herein by UCPB, et al.
Truly, there is nothing in Republic Act No. 7653 or in Republic Act No. 8791 which
explicitly allows an appeal of the decisions of the BSP Monetary Board to the Court of
Appeals. However, this shall not mean that said decisions are beyond judicial review.
STIcaE
Section 9 (3) of Batas Pambansa Blg. 129, otherwise known as The Judiciary
Reorganization Act of 1980, as amended, reads:
SEC. 9. Jurisdiction. — The Court of Appeals 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, including the Securities and Exchange
Commission, the Social Security Commission, the Employees Compensation
Commission and the Civil Service Commission, except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution, the
Labor Code of the Philippines under Presidential Decree No. 442, as amended, the
provisions of this Act, and of subparagraph (1) of the third paragraph and
subparagraph 4 of the fourth paragraph of Section 17 of the Judiciary Act of 1948.
(Emphasis ours.) aSDHCT
In accordance with the afore-quoted provision, Rule 43 of the 1997 Revised Rules of
Civil Procedure, on Appeals from the Court of Tax Appeals and Quasi-Judicial
Agencies to the Court of Appeals, defines its scope as follows:
SEC. 1. Scope. — This Rule shall apply to appeals from judgments or final orders
of the Court of Tax Appeals and from awards, judgments, final orders or resolutions of
or authorized by any quasi-judicial agency in the exercise of its quasi-judicial
functions. Among these agencies are the Civil Service Commission, Central Board of
Assessment Appeals, Securities and Exchange Commission, Office of the President,
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,
Department of Agrarian Reform under Republic Act No. 6657, Government Service
Insurance System, Employees Compensation Commission, Agricultural Inventions
Board, Insurance Commission, Philippine Atomic Energy Commission, Board of
Investments, Construction Industry Arbitration Commission, and voluntary
arbitrators authorized by law. (Emphasis ours.)
A perusal of Section 9 (3) of Batas Pambansa Blg. 129, as amended, and Section 1,
Rule 43 of the 1997 Revised Rules of Civil Procedure reveals that the BSP Monetary
Board is not included among the quasi-judicial agencies explicitly named therein,
whose final judgments, orders, resolutions or awards are appealable to the Court of
Appeals. Such omission, however, does not necessarily mean that the Court of Appeals
has no appellate jurisdiction over the judgments, orders, resolutions or awards of the
BSP Monetary Board. TcCSIa
It bears stressing that Section 9 (3) of Batas Pambansa Blg. 129, as amended, on the
appellate jurisdiction of the Court of Appeals, generally refers to quasi-judicial
agencies, instrumentalities, boards, or commissions. The use of the word "including"
in the said provision, prior to the naming of several quasi-judicial agencies,
necessarily conveys the very idea of non-exclusivity of the enumeration. The principle
of expressio unius est exclusio alterius does not apply where other circumstances
indicate that the enumeration was not intended to be exclusive, or where the
enumeration is by way of example only. 28
Similarly, Section 1, Rule 43 of the 1997 Revised Rules of Civil Procedure merely
mentions several quasi-judicial agencies without exclusivity in its phraseology. 29 The
enumeration of the agencies therein mentioned is not exclusive. 30 The introductory
phrase "[a]mong these agencies are" preceding the enumeration of specific quasi-
judicial agencies only highlights the fact that the list is not meant to be exclusive or
conclusive. Further, the overture stresses and acknowledges the existence of other
quasi-judicial agencies not included in the enumeration but should be deemed
included. 31
A quasi-judicial agency or body is an organ of government other than a court and
other than a legislature, which affects the rights of private parties through either
adjudication or rule-making. 32 The very definition of an administrative agency
includes its being vested with quasi-judicial powers. The ever increasing variety of
powers and functions given to administrative agencies recognizes the need for the
active intervention of administrative agencies in matters calling for technical
knowledge and speed in countless controversies which cannot possibly be handled by
regular courts. 33 A "quasi-judicial function" is a term which applies to the action,
discretion, etc., of public administrative officers or bodies, who are required to
investigate facts, or ascertain the existence of facts, hold hearings, and draw
conclusions from them, as a basis for their official action and to exercise discretion of
a judicial nature. 34 EacHSA
Undoubtedly, the BSP Monetary Board is a quasi-judicial agency exercising quasi-
judicial powers or functions. As aptly observed by the Court of Appeals, the BSP
Monetary Board is an independent central monetary authority and a body corporate
with fiscal and administrative autonomy, mandated to provide policy directions in the
areas of money, banking and credit. 35 It has power to issue subpoena, to sue for
contempt those refusing to obey the subpoena without justifiable reason, 36 to
administer oaths and compel presentation of books, records and others, needed in its
examination, 37 to impose fines and other sanctions and to issue cease and desist
order. 38 Section 37 of Republic Act No. 7653, 39 in particular, explicitly provides that
the BSP Monetary Board shall exercise its discretion in determining whether
administrative sanctions should be imposed on banks and quasi-banks, which
necessarily implies that the BSP Monetary Board must conduct some form of
investigation or hearing regarding the same.
Having established that the BSP Monetary Board is indeed a quasi-judicial body
exercising quasi-judicial functions; then as such, it is one of those quasi-judicial
agencies, though not specifically mentioned in Section 9 (3) of Batas Pambansa Blg.
129, as amended, and Section 1, Rule 43 of the 1997 Revised Rules of Civil Procedure,
are deemed included therein. Therefore, the Court of Appeals has appellate
jurisdiction over final judgments, orders, resolutions or awards of the BSP Monetary
Board on administrative complaints against banks and quasi-banks, which the former
acquires through the filing by the aggrieved party of a Petition for Review under Rule
43 of the 1997 Revised Rules of Civil Procedure. DIcTEC
As a futile effort of UCPB, et al. to convince this Court that the Court of Appeals has
no appellate jurisdiction over the final judgments, orders, resolutions or awards of the
BSP Monetary Board, it cited Salud v. Central Bank of the Philippines. 40
The invocation of UCPB, et al. of Salud is evidently misplaced.
The present case involves a decision of the BSP Monetary Board as regards an
administrative complaint against a bank and its corporate officers for the alleged
violation of Sections 36 and 37, Article IV of Republic Act No. 7653, in relation to
Section 55.1 (a) of Republic Act No. 8791, and for the commission of irregularity and
unsafe or unsound banking practice. There is nothing in the aforesaid laws which
state that the final judgments, orders, resolutions or awards of the BSP Monetary
Board on administrative complaints against banks or quasi-banks shall be final and
executory and beyond the subject of judicial review. Without being explicitly excepted
or exempted, the final judgments, orders, resolutions or awards of the BSP Monetary
Board are among those appealable to the Court of Appeals by way of Petition for
Review, as provided in Section 9 (3) of Batas Pambansa Blg. 129, as amended, and
Section 1, Rule 43 of the 1997 Revised Rules of Civil Procedure. TCaEAD
Although in Salud, this Court declared that the Intermediate Appellate Court (now
Court of Appeals) has no appellate jurisdiction over resolutions or orders of the
Monetary Board of the Central Bank of the Philippines (CBP, now BSP), because no
law prescribes any mode of appeal therefrom, the factual settings of the said case are
totally different from the one presently before us. Salud involved a resolution issued by
the Monetary Board, pursuant to Section 29 of Republic Act No. 265, otherwise known
as the old Central Bank Act, forbidding banking institutions to do business on
account of a "condition of insolvency" or because "its continuance in business would
involve probable loss to depositors or creditors"; or appointing a receiver to take
charge of the assets and liabilities of the bank; or determining whether the banking
institutions should be rehabilitated or liquidated, and if in the latter case, appointing a
liquidator towards this end. The said Section 29 of the old Central Bank Act was
explicit that the determination by the Monetary Board of whether a banking institution
is insolvent, or should be rehabilitated or liquidated, is final and executory. However,
said determination could be set aside by the trial court if there was convincing proof
that the Monetary Board acted arbitrarily or in bad faith. Under the circumstances
obtaining in Salud, it is apparent that our ruling therein is limited to cases of
insolvency, and not to all cases cognizable by the Monetary Board.
At any rate, under the new law, i.e., Section 30 of Republic Act No. 7653, otherwise
known as The New Central Bank Act, which took effect on 3 July 1993, the order of
the BSP Monetary Board, even regarding the liquidation of a bank, can be questioned
via a Petition for Certiorari before a court when the same was issued in excess of
jurisdiction or with such grave abuse of discretion as to amount to lack or excess of
jurisdiction. The court referred to therein can be construed to mean the Court of
Appeals because it is in the said court where a Petition for Certiorari can be filed
following the hierarchy of courts. HESIcT
Moreover, the appellate jurisdiction of the Court of Appeals over the final judgments,
orders, resolutions or awards of the BSP Monetary Board in administrative cases
involving directors and officers of banks, quasi-banks, and trust entities, is affirmed in
BSP Circular No. 477, Series of 2005. The said BSP Circular expressly provides that
the resolution rendered by the BSP Monetary Board in administrative cases may be
appealed to the Court of Appeals within the period and the manner provided under
Rule 43 of the 1997 Revised Rules of Civil Procedure.
With all the foregoing, it cannot now be questioned that the Court of Appeals has
appellate jurisdiction over the final judgments, orders, resolutions or awards rendered
by the BSP Monetary Board in administrative cases against banks and their directors
and officers, such as UCPB, et al.
The Court then proceeds to resolve the issue of whether the Court of Appeals erred in
holding that the BSP Monetary Board summarily dismissed the administrative
complaint of EGI against UCPB, et al.
After a meticulous scrutiny of the 16 September 2003 letter-decision of the BSP
Monetary Board, this Court rules in the negative and affirms the finding of the Court
of Appeals that the BSP Monetary Board did, indeed, summarily dismiss
administrative complaint of EGI against UCPB, et al., for violation of Sections 36 and
37, Article IV of Republic Act No. 7653, in relation to Section 55.1 (a) of Republic Act
No. 8791, and for the commission of irregularity and unsafe or unsound banking
practice. EaCDAT
Given the gravity and seriousness of the charges of EGI against UCPB, et al., the
sweeping statement of the BSP Monetary Board that it was inclined to dismiss the
complaint of EGI based on the evaluation made by its Supervision and Examination
Department I and Office of the General Counsel and Legal Services, is simply
insufficient and unsatisfactory. Worse, the BSP Monetary Board merely presented the
following conclusions without bothering to explain its bases for the same: (1) UCPB
computed interest on loans based on BSP rules and regulations which prohibit banks
from accruing interest on loans that have become non-performing (BSP Circular No.
202); (2) fair market value of assets to be foreclosed is different from the bid price
submitted during foreclosure and there is no statutory obligation for the latter to be
equivalent to the former; (3) regarding the alleged P145,163,000.00 fabricated loan,
the documents showed that there were the EGI Board resolution to borrow,
promissory note signed by Mr. Eulalio Ganzon, and Loan Agreement stating the
proceeds shall be used to pay outstanding availments and interest servicing; and (4)
there is no finding by Supervision and Examination Department I on the alleged
double charging and/or padding of transaction costs. ECDAcS
Further, in resolving the matter before it, the BSP Monetary Board never considered
the UCPB Internal Memorandum dated 22 February 2001, which was the heart of the
administrative complaint of EGI against UCPB, et al. The BSP Monetary Board did not
even attempt to establish whether it was regular or sound practice for a bank to keep
a record of its borrower's loan obligations with two different sets of figures, one higher
than the other; and to disclose to the borrower only the higher figures. The
explanation of UCPB, et al., adopted by the BSP Monetary Board — that the figures in
the "ACTUAL" column were lower than those in the "DISCLOSED TO EGI" column
because the former was computed in accordance with BSP rules and regulations
prohibiting the accrual of interest on loans that have become non-performing — gives
rise to more questions than answers. Examples of some of these questions would be
whether the loan obligations of EGI have become non-performing; whether the
differences between the figures in the "ACTUAL" and "DISCLOSED TO EGI" columns
indeed corresponded to the interest that should be excluded from the figures in the
first column per BSP rules and regulations; and whether the computations of the
figures in both columns should have been freely disclosed and sufficiently explained to
EGI in the name of transparency. STcEaI
The BSP Monetary Board similarly failed to clarify whether UCPB can foreclose the
mortgaged properties of EGI in amounts that were less than the values of the said
properties as determined and stipulated by EGI and UCPB in their amended MOA. The
Court once more agrees in the ruling of the Court of Appeals that the MOA entered
into by EGI and UCPB serves as a contract between them, and it is the law that
should govern their relationship, which neither of the parties can simply abrogate,
violate, or disregard. Unfortunately, the BSP Monetary Board never even referred to
the MOA executed by the parties in its letter-decision dated 16 September 2003.
Moreover, the BSP Monetary Board found that the P145,163,000.00 loan of EGI from
UCPB was not fabricated based on several documents. However, there is absolute lack
of explanation by the BSP Monetary Board as to why said documents deserved more
weight vis-à-vis evidence of EGI of suspicious circumstances surrounding the said
loan, such as UCPB granting EGI said loan even when the latter was already in default
on its prior loan obligations, and without requiring additional security, detailed
business plan, and financial projections from EGI.
The disregard by BSP Monetary Board of all the foregoing facts and issues in its letter-
decision dated 16 September 2003 leads this Court to declare that it summarily
dismissed the administrative complaint of EGI against UCPB, et al. There can be no
complete resolution of the administrative complaint of EGI without consideration of
these facts and judgment on said issues. DACcIH
Finally, there is no merit in the assertion of UCPB, et al. that the Court of Appeals
erred in disregarding the findings of fact of the BSP Monetary Board in the absence of
grave abuse of discretion or lack of basis for the same.
Although, as a general rule, findings of facts of an administrative agency, which has
acquired expertise in the particular field of its endeavor, are accorded great weight on
appeal, such rule cannot be applied with respect to the assailed findings of the BSP
Monetary Board in this case. Rather, what applies is the recognized exception that if
such findings are not supported by substantial evidence, the Court can make its own
independent evaluation of the facts. 41
The standard of substantial evidence required in administrative proceedings is more
than a mere scintilla. It means such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion. While rules of evidence prevailing in
courts of law and equity shall not be controlling, the obvious purpose being to free
administrative boards from the compulsion of technical rules so that the mere
admission of matter which would be deemed incompetent in judicial proceedings
would not invalidate the administrative order, this assurance of a desirable flexibility
in administrative procedure does not go so far as to justify orders without basis in
evidence having rational probative force. 42 DTEScI
It cannot be convincingly said herein that the factual findings of the BSP Monetary
Board in its letter-decision dated 16 September 2003 was supported by substantial
evidence since (1) most of the findings were not supported by references to specific
evidence; and (2) the findings were made without consideration of the primary
evidence presented by EGI (i.e., the MOA and its amendments and the UCPB Internal
Memorandum dated 22 February 2001).
Even then, the Court of Appeals stopped short of categorically ruling that UCPB, et al.
committed irregularities, or unsound or unsafe banking practice in its transactions
with EGI. What the Court of Appeals positively pronounced was that the BSP
Monetary Board failed to give the necessary consideration to the administrative
complaint of EGI, summarily dismissing the same in its 16 September 2003 letter-
decision. The 14 October 2004 Decision of the Court of Appeals clearly remanded the
case to the BSP for further proceedings since the BSP, with its specialized knowledge
and expertise on banking matters, is more up to task to receive evidence, hold
hearings, and thereafter resolve the issues based on its findings of fact and law.
cSTCDA
G.R. No. 168897
Also unsatisfied with the Decision dated 14 October 2004 and Resolution dated 7 July
2005 of the Court of Appeals, EGI filed with this Court its own Petition for Review on
Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure, raising the
following issues:
I. The Honorable Court of Appeals does have appellate jurisdiction over decisions,
orders, and resolutions of the BSP/Monetary Board.
II. The Honorable Court of Appeals was correct in FINDING that the [BSP]
summarily dismissed the complaint of EGI.
III. Whether or not the Honorable Court of Appeals committed patent, grave, and
reversible error when it remanded the case to the [BSP] for further proceedings instead
of acting upon its findings as narrated in its Decision.
IV. Whether or not the Honorable Court of Appeals committed patent, grave, and
reversible error in not directing the [BSP] to impose the appropriate penalties against
[UCPB, et al.]. 43 ASDTEa
The Petition is docketed as G.R. No. 168897.
Since the first two "issues" have already been addressed by this Court in its previous
discussion herein on G.R. No. 168859, we now proceed to resolve the next two issues
raised by EGI in its Petition in G.R. No. 168897.
EGI avers that the Court of Appeals committed reversible error when it remanded the
case to the BSP for further proceedings instead of directing the BSP to impose the
applicable sanctions on UCPB, et al. EGI reasons that the appellate court, in its
Decision dated 14 October 2004, already found that UCPB had committed several acts
of serious irregularity and conducted business in an unsafe and unsound manner. By
reason thereof, there was no more need for the Court of Appeals to remand this case
to the BSP for a further determination of whether there were irregular and unsound
practices by UCPB, et al. in its dealings with EGI. Should this case be remanded to the
BSP, there would be nothing to prevent the BSP from ruling again that UCPB, et al.,
did not commit any irregularity and unsafe or unsound business practice. To require
that this case be reviewed by the BSP would only lead to multiplicity of suits, promote
unnecessary delay and negate the constitutional rights of all persons to a speedy
disposition of their cases before all judicial, quasi-judicial or administrative bodies.
IDCcEa
The Court reiterates that the Court of Appeals did not yet make conclusive findings in
its Decision dated 14 October 2004, that UCPB, et al., committed irregularities and
unsound or unsafe banking practices in their business dealings with EGI. The
appellate court only adjudged that the BSP Monetary Board summarily dismissed the
administrative complaint of EGI, without fully appreciating the facts and evidence
presented by the latter. Given the seriousness of the charges of EGI against UCPB, et
al., the BSP Monetary Board should have conducted a more intensive inquiry and
rendered a more comprehensive decision.
By remanding the case to the BSP Monetary Board, the Court of Appeals only acted in
accordance with Republic Act No. 7653 and Republic Act No. 8791, which tasked the
BSP, through the Monetary Board, to determine whether a particular act or omission,
which is not otherwise prohibited by any law, rule or regulation affecting banks, quasi-
banks or trust entities, may be deemed as conducting business in an unsafe or
unsound manner. Also, the BSP Monetary Board is the proper body to impose the
necessary administrative sanctions for the erring bank and its directors or officers.
ADaECI
The Court of Appeals did not deem it appropriate, on appeal, to outright reverse the
judgment of the BSP Monetary Board. The Court of Appeals held that the BSP
Monetary Board did not have sufficient basis for dismissing the administrative
complaint of EGI in its 16 September 2003 letter-decision; yet, the appellate court
likewise did not find enough evidence on record to already resolve the administrative
complaint in favor of EGI and against UCPB, et al., precisely the reason why it still
remanded the case to the BSP Monetary Board for further proceedings. The Court of
Appeals never meant to give EGI an assurance of a favorable judgment; it only
ensured that the BSP Monetary Board shall accord all parties concerned to equal
opportunity for presentation and consideration of their allegations, arguments, and
evidence. While the speedy disposition of cases is a constitutionally mandated right,
the paramount duty of the courts, as well as quasi-judicial bodies, is to render justice
by following the basic rules and principles of due process and fair play.
WHEREFORE, premises considered, the Petition for Review on Certiorari of United
Coconut Planters Bank, Jeronimo U. Kilayko, Lorenzo V. Tan, Enrique L. Gana, Jaime
W. Jacinto and Emily R. Lazaro, in G.R. No. 168859; as well as the Petition for Review
on Certiorari of E. Ganzon, Inc. in G.R. No. 168897, are hereby DENIED. The Decision
dated 14 October 2004 and Resolution dated 7 July 2005 of the Court of Appeals in
CA-G.R. SP No. 81385 are hereby AFFIRMED in toto. No costs. HIaTCc
SO ORDERED.
Ynares-Santiago, Velasco, Jr., Nachura and Peralta, JJ., concur.
THIRD DIVISION
[G.R. No. 154243. March 6, 2007.]
DEPUTY DIRECTOR GENERAL ROBERTO LASTIMOSO, ACTING CHIEF PHILIPPINE
NATIONAL POLICE (PNP), DIRECTORATE FOR PERSONNEL AND RECORDS
MANAGEMENT (DPRM), INSPECTOR GENERAL, P/CHIEF SUPT. RAMSEY OCAMPO
and P/SUPT. ELMER REJANO, petitioners, vs. P/SENIOR INSPECTOR JOSE J.
ASAYO, respondent.
DECISION
AUSTRIA-MARTINEZ, J p:
This resolves the Petition for Review on Certiorari assailing the Resolutions dated
March 8, 2002 1 and July 4, 2002, 2 respectively, issued by the Court of Appeals (CA).
The antecedent facts, as gathered from the records, are as follows. cAHITS
Sometime in 1997, a certain Delia Buño (Buño) filed with the Office of the Inspector
General of the PNP an administrative complaint for abuse of authority/harassment
against P/Senior Inspector Jose J. Asayo (respondent). The latter allegedly obstructed
police officers from arresting his brother Lamberto Asayo, one of the suspects in the
shooting of Buño's son.
The complaint was referred to the Inspector General for pre-charge investigation.
When summoned, respondent did not appear but filed a motion to dismiss, arguing
that it was the People's Law Enforcement Board (PLEB) which had jurisdiction over the
case.
On September 23, 1998, the Inspector General submitted a report to the PNP Chief
recommending the commencement of summary dismissal proceedings against
respondent. Upon approval of said recommendation, the administrative complaint was
referred to the PNP Legal Service for summary hearing. At the hearing before the
designated summary hearing officer, respondent was furnished with copies of the pre-
charge investigation report of the Inspector General and the affidavits of Buño and her
witnesses. Thereafter, respondent submitted his counter-affidavit and a rejoinder.
Respondent was asked by the hearing officer if he wanted to cross-examine Buño and
her witnesses but he declined and instead agreed to submit the case for resolution
based on the pleadings.
On December 28, 1998, the hearing officer recommended that respondent be
dismissed from police service for grave misconduct. On January 22, 1999, the PNP
Chief, then Deputy Director General Roberto Lastimoso, rendered a decision
dismissing respondent from police service. Respondent filed a motion for
reconsideration of the PNP Chief's Decision but withdrew the same and instead filed a
petition for certiorari and prohibition, with prayer for the issuance of a temporary
restraining order and writ of preliminary injunction with the Regional Trial Court of
Manila (RTC).
On August 27, 1999, the RTC rendered its Decision, the dispositive portion of which
reads as follows:
WHEREFORE, the subject petition of petitioner Asayo is GRANTED. The assailed
decision of the public respondents dated 22 January 1999 (Exhibit J) is annulled and
set aside for having been rendered with grave abuse of discretion amounting to lack
and or excess of jurisdiction. Consequently, public respondents, their subordinates,
agents, representatives and successors are permanently enjoined from enforcing or
causing the execution in any manner of the aforesaid decision against herein
petitioner Jose J. Asayo.
Pursuant to Section 9 of Rule 65, a certified true copy of this decision should be
served by personal service on the public and private respondents, on the Office of the
Solicitor General and on the counsel for the petitioner. 3
Herein petitioners then appealed the case to the CA. On August 17, 2001, the CA
promulgated its Decision 4 nullifying the RTC Decision and holding that (1) the PNP
Chief had jurisdiction to try the civilian complaint filed against respondent; and, (2)
respondent's failure to exhaust the administrative remedy of filing an appeal with the
National Appellate Board was fatal to his cause. Respondent moved for reconsideration
thereof. AIaDcH
On March 8, 2002, the CA issued the herein assailed Resolution reversing its
Decision. The CA ruled that since the offense charged is punishable by dismissal, then
it was the PLEB which had jurisdiction over the case. The CA further held that the
principle of exhaustion of administrative remedies was not applicable to the case since
the issue involved was purely legal in nature. The RTC Decision was then affirmed.
The CA denied petitioners' motion for reconsideration per its Resolution dated July 4,
2002.
Hence, herein petition to set aside the aforementioned CA Resolutions on the following
grounds:
I
RESPONDENT FAILED TO EXHAUST ALL THE AVAILABLE ADMINISTRATIVE
REMEDIES PRIOR TO THE FILING OF HIS PETITION BEFORE THE COURT A QUO.
II
THE CHIEF OF THE PHILIPPINE NATIONAL POLICE HAS THE AUTHORITY OR
JURISDICTION UNDER REPUBLIC ACT NO. 6975 TO HEAR AND TRY THE CITIZEN'S
COMPLAINT AGAINST RESPONDENT. 5
With regard to the first issue, the respondent rightfully invoked the jurisdiction of the
courts without first going through all the administrative remedies because the
principle of exhaustion of administrative remedies admits of exceptions, such as when
the issue involved is a purely legal question. 6 The only issue presented by respondent
in his petition for certiorari and prohibition before the RTC was whether or not the
PNP Chief had jurisdiction to take cognizance of the complaint filed by a private citizen
against him. Said issue being a purely legal one, the principle of exhaustion of
administrative remedies did not apply to the case.
However, as to the question of whether the PNP Chief had jurisdiction to act on a
private citizen's complaint against respondent, the Court finds merit in petitioners'
position.
The Court has previously ruled on this issue in Quiambao v. Court of Appeals, 7 to
wit:
Republic Act (R.A.) No. 6975 or the Department of the Interior and Local Government
Act of 1990, which took effect on 1 January 1991, . . . delineates the procedural
framework in pursuing administrative complaints against erring members of the police
organization. Section 41 of the law enumerates the authorities to which a complaint
against an erring member of the PNP may be filed, thus;
Section 41. (a) Citizen's Complaints. — Any complaint by an individual person
against any member of the PNP shall be brought before the following:
(1) Chiefs of police, where the offense is punishable by withholding of privileges,
restriction to specified limits, suspension or forfeiture of salary, or any combination
thereof, for a period not exceeding fifteen (15) days;
(2) Mayors of cities or municipalities, where the offense is punishable by
withholding of privileges, restriction to specified limits, suspension or forfeiture of
salary, or any combination thereof, for a period of not less than sixteen (16) days but
not exceeding thirty (30) days;
(3) People's Law Enforcement Board, as created under Section 43 hereof, where the
offense is punishable by withholding of privileges, restriction to specified limits,
suspension or forfeiture of salary, or any combination thereof, for a period exceeding
thirty (30) days; or by dismissal. . . . (Emphasis added) HICSTa
It is readily apparent that a complaint against a PNP member which would warrant
dismissal from service is within the jurisdiction of the PLEB. However, Section 41
should be read in conjunction with Section 42 of the same statute which reads, thus:
Sec. 42. Summary Dismissal Powers of the PNP Chief and Regional Directors. —
The Chief of the PNP and regional directors, after due notice and summary hearings,
may immediately remove or dismiss any respondent PNP member in any of the
following cases:
(a) When the charge is serious and the evidence of guilt is strong;
(b) When the respondent is a recidivist or has been repeatedly charged and there
are reasonable grounds to believe that he is guilty of the charges; and
(c) When the respondent is guilty of conduct unbecoming of a police officer.
(Emphasis ours)
Evidently, the PNP Chief and regional directors are vested with the power to
summarily dismiss erring PNP members if any of the causes for summary dismissal
enumerated in Section 42 is attendant. Thus, the power to dismiss PNP members is
not only the prerogative of PLEB but concurrently exercised by the PNP Chief and
regional directors. This shared power is likewise evident in Section 45.
SEC. 45. Finality of Disciplinary Action. — The disciplinary action imposed upon a
member of the PNP shall be final and executory: Provided, That a disciplinary action
imposed by the regional director or by the PLEB involving demotion or dismissal from
the service may be appealed to the regional appellate board within ten (10) days from
receipt of the copy of the notice of decision: Provided, further, That the disciplinary
action imposed by the Chief of the PNP involving demotion or dismissal may be
appealed to the National Appellate Board within ten (10) days from receipt thereof:
Provided, furthermore, That the regional or National Appellate Board, as the case may
be, shall decide the appeal within sixty (60) days from receipt of the notice of appeal:
Provided, finally, That failure of the regional appellate board to act on the appeal
within said period shall render the decision final and executory without prejudice,
however, to the filing of an appeal by either party with the Secretary. (Emphasis ours)
Once a complaint is filed with any of the disciplining authorities under R.A. No. 6975,
the latter shall acquire exclusive original jurisdiction over the case although other
disciplining authority has concurrent jurisdiction over the case. Paragraph (c) of
Section 41 explicitly declares this point.
(c) Exclusive Jurisdiction — A complaint or a charge filed against a PNP member
shall be heard and decided exclusively by the disciplining authority who has acquired
original jurisdiction over the case and notwithstanding the existence of concurrent
jurisdiction as regards the offense; Provided, That offenses which carry higher
penalties referred to a disciplinary authority shall be referred to the appropriate
authority which has jurisdiction over the offense. (Emphasis ours)
Clearly, the PLEB and the PNP Chief and regional directors have concurrent
jurisdiction over administrative cases filed against members of the PNP which may
warrant dismissal from service.
. . . The Court further declared that R.A. No. 6975 defines the summary dismissal
powers of the PNP Chief and regional directors, among others in cases, "where the
respondent is guilty of conduct unbecoming of a police officer."
Memorandum Circular No. 92-006 prescribes the rules and regulations in the conduct
of summary dismissal proceedings against erring PNP members and defines conduct
unbecoming of a police officer under Section 3(c), Rule II, as follows:
Conduct unbecoming of a police officer refers to any behavior or action of a PNP
member, irrespective of rank, done in his official capacity, which, in dishonoring or
otherwise disgracing himself as a PNP member, seriously compromise his character
and standing as a gentleman in such a manner as to indicate his vitiated or corrupt
state of moral character; it may also refer to acts or behavior of any PNP member in an
unofficial or private capacity which, in dishonoring or disgracing himself personally as
a gentleman, seriously compromises his position as a PNP member and exhibits
himself as morally unworthy to remain as a member of the organization. 8
(Underscoring supplied)
Petitioners maintain that the charge against respondent, which is grave misconduct
for preventing responding policemen from apprehending suspects and threatening one
of the witnesses, constitutes conduct unbecoming a police officer, one of the cases
under Section 42 of R.A. No. 6975, hence, the case falls within the summary dismissal
powers of the PNP Chief. The Court agrees with petitioner on this point.
The allegations in the complaint-affidavit, 9 i.e., that respondent gave refuge to the
suspects in the shooting of complainant's son, and intimidated and harassed
complainant's witness, are "acts or behavior of any PNP member in an unofficial or
private capacity which, in dishonoring or disgracing himself personally as a
gentleman, seriously compromises his position as a PNP member and exhibits himself
as morally unworthy to remain as a member of the organization," which constitute
conduct unbecoming a police officer as defined under Section 3 (c), Rule II, of
Memorandum Circular No. 92-006.
In Zacarias v. National Police Commission, 10 the Court discussed the meaning of
"conduct unbecoming," in this wise:
Webster defines "unbecoming" conduct as "improper" performance. Such term "applies
to a broader range of transgressions of rules not only of social behavior but of ethical
practice or logical procedure or prescribed method." Obviously, the charges of neglect
of duty, inefficiency and incompetence in the performance of official duties fall within
the scope of conduct unbecoming a police officer. Thus, we agree with the Court of
Appeals when it ruled:
Even assuming that the charge against petitioner is not serious within the
contemplation of paragraph (a) of Section 42 above quoted, or that he is not a
recidivist within the context of paragraph (b), he could nonetheless fall within the
ambit of paragraph (c) thereof, in that, because of his laxity and inefficiency in the
performance of his duties, he is guilty of conduct unbecoming of a police officer. 11
Clearly, the charges against respondent in this case are also covered by paragraph (c),
Section 42 of R.A. No. 6975, vesting the PNP Chief with jurisdiction to take cognizance
of the complaint against respondent.
Respondent then insists that petitioners acted with grave abuse of discretion by not
giving him the opportunity to cross-examine the complainant and her witnesses
despite the fact that Memorandum Circular No. 94-0422, providing for rules on how
the summary hearing is to be conducted, grants him such right to cross-examine. This
claim is belied by the testimony of the summary hearing officer, S/Insp. Ermilando O.
Villafuerte, to wit:
Q Now, after submission of these pleadings what are the other steps, if any, that
you have taken, Mr. Witness?
A When he submitted his last pleading — that is the rejoinder, I asked him
[herein respondent] whether he still — he is still submitting any evidence or going to
cross examine the witnesses, but he moved that the case be submitted for resolution
based on the last pleading he submitted, sir. 12
xxx xxx xxx
CROSS-EXAMINATION:
xxx xxx xxx
Q When you apprized (sic) the respondent about his right to cross-examine the
complainant and her witnesses, is that in writing?
A No, sir.
Q As a matter of fact, you did that, if ever you did, without the presence of the
counsel of the respondent. Is it not?
A Yes, sir.
xxx xxx xxx 13 (Emphasis supplied)
The foregoing testimony reveals that respondent was indeed given the opportunity to
cross-examine his accusers but he chose to waive the same. The fact that the hearing
officer merely orally informed respondent that he may cross-examine the complainant
and her witnesses and that respondent was not assisted by counsel when he waived
the right to cross-examine, does not constitute grave abuse of discretion on the part of
the summary hearing officer.
In the first place, Section 4 of Memorandum Circular No. 94-0422 only provides thus:
Being summary in nature, direct examination of witnesses shall be dispensed with
and the sworn statements of witnesses or their affidavits shall take the place of their
oral testimony. Either party shall limit cross-examination to the sworn statements on
hand. Cross-examination must be confined only to material and relevant matters.
Prolonged arguments and other dilatory proceedings shall not be entertained. Insofar
as may be compatible with the ends of justice, cross-examination shall be limited to
not more than fifteen (15) minutes for each witness. AcDaEH
The foregoing rules on summary hearings do not require the summary hearing officer
to even inform a party, either orally or in writing, of such right to cross-examine.
Moreover, as held in Emin v. De Leon, 14 to wit:
. . . in administrative proceedings, technical rules of procedure and evidence are not
strictly applied and administrative due process cannot be fully equated with due
process in its strict judicial sense.
Nothing on record shows he asked for cross-examination as most of the submissions
were written. In our view, petitioner cannot argue that he has been deprived of due
process merely because no cross-examination took place. The rule is well-established
that due process is satisfied when the parties are afforded fair and reasonable
opportunity to explain their side of the controversy or given opportunity to move for
reconsideration of the action or ruling complained of. . . . 15 (Emphasis supplied)
With regard to the right to be assisted by counsel, it has been held in Sebastian v.
Garchitorena 16 that:
While an investigation conducted by an administrative body may at times be akin to a
criminal proceeding, the fact remains that under existing laws, a party in an
administrative inquiry may or may not be assisted by counsel, irrespective of the
nature of the charges and of the respondent's capacity to represent himself, and no
duty rests on such a body to furnish the person being investigated with counsel. It has
been held in the case of Lumiqued v. Exevea that the right to counsel is not imperative
in administrative investigations because such inquiries are conducted merely to
determine whether there are facts that merit disciplinary measures against erring
public officers and employees, with the purpose of maintaining the dignity of
government service. 17 (Emphasis supplied)
Verily, the assistance of counsel was not required for respondent to validly waive his
right to cross-examine the witnesses in the administrative case against him.
In sum, the charges against respondent fall well within the scope of paragraph (c),
Section 42 of R.A. No. 6975, thus, the PNP Chief had jurisdiction to take cognizance of
the complaint against respondent; and the summary hearing officer accorded
respondent due process and never deprived respondent any of his rights.
WHEREFORE, the petition is GRANTED. The Resolutions of the Court of Appeals
dated March 8, 2002 and July 4, 2002, respectively, are SET ASIDE. The Court of
Appeals Decision dated August 17, 2001 is hereby REINSTATED. No costs AaSIET
SO ORDERED.
Ynares-Santiago, Chico-Nazario and Nachura, JJ., concur.
Callejo, Sr., J., is on leave.
SECOND DIVISION
[G.R. No. 146526. May 5, 2006.]
HONGKONG & SHANGHAI BANKING CORPORATION, LTD. and CITIBANK, N.A.,
petitioners, vs. G.G. SPORTSWEAR MANUFACTURING CORPORATION, respondent.
DECISION
CORONA, J p:
The doctrine of exhaustion of administrative remedies is a cornerstone of our judicial
system. The thrust of the rule on exhaustion of administrative remedies is that the
courts must allow the administrative agencies to carry out their functions and
discharge their responsibilities within the specialized areas of their respective
competence. 1
This is a petition for review on certiorari 2 from a decision of the Court of Appeals 3
which reversed a decision of a hearing panel of the Securities and Exchange
Commission (SEC), 4 and the appellate court's resolution denying reconsideration. 5
The undisputed facts of the case follow. HSaIET
On August 29, 1997, respondent G.G. Sportswear (G.G.) filed a petition with the SEC
for a "Declaration of State of Suspension of Payments, for Approval of Proposed
Rehabilitation Plan and for Appointment of Management Committee," docketed as SEC
Case No. 08-97-5752. 6
On September 3, 1997, the SEC hearing panel issued an order directing the
suspension of all actions, claims and proceedings against G.G. pending before any
court, tribunal, office, board, body and/or commission. The SEC hearing panel
likewise enjoined G.G. from disposing of any of its properties in any manner except in
the ordinary course of business and from making any payment outside the legitimate
and ordinary expenses of its business operation during the pendency of the
proceedings. The hearing panel also scheduled a creditors' meeting on October 29,
1997 and directed the publication of a notice to this effect in a newspaper of general
circulation once a week for two (2) consecutive weeks. 7
Three of respondent's creditors, Philippine Commercial and International Bank (PCIB),
Dao Heng Bank and Standard Chartered Bank filed an urgent motion for the
immediate constitution of a management committee. Another creditor, FEB Leasing
and Finance Corporation, on the other hand, filed a motion for exclusion with
manifestation. Despite notice, respondent's representatives failed to appear at the
hearings, as well as at the scheduled creditors' meeting. 8
The hearing panel issued an order dated October 30, 1997 dismissing respondent's
petition and lifting the suspension order. 9
Upon motion, the hearing panel reconsidered its October 30, 1997 order and reset the
creditors' meeting to December 12, 1997. It also extended the suspension order for 30
days. Creditors PCIB, Dao Heng Bank and Standard Chartered Bank questioned the
jurisdiction of the hearing panel to have a creditors meeting sans publication of the
extended order of suspension. Failing to get affirmative relief from the hearing panel,
Dao Heng and Standard Chartered elevated the matter to the SEC en banc by means
of a petition for certiorari with prayer for preliminary injunction. This was docketed as
SEC-AC No. 604. 10
On December 29, 1997, the hearing panel issued another order extending the
suspension to January 31, 1998. 11
During the hearings conducted on February 19, 1998 and April 17, 1998, respondent
presented as its lone witness Mainrado M. Laygo, its external auditor, to substantiate
the feasibility of its rehabilitation plans. Laygo's cross-examination was suspended
due to respondent's failure to attach to its petition and/or to furnish the creditors with
the requisite financial documents and other records. 12 It was then terminated for
lack of material time. 13
On February 26, 1998, the hearing panel extended the suspension order one last time,
to April 30, 1998. 14
During the en banc hearings on SEC-AC No. 604 regarding the injunction aspect of
the petition, it was deduced that respondent was merely suffering from liquidity
problems rather than insolvency. Respondent G.G. was therefore ordered to amend its
petition and limit the issue before the hearing panel to the propriety of the declaration
of suspension of payments. The SEC en banc then enjoined the hearing panel from
proceeding with SEC Case No. 08-97-5752 until after respondent had amended its
petition accordingly. 15
On May 7, 1998, respondent filed its amended petition, which the hearing panel
admitted on November 11, 1998 16 and set for hearing along with several motions
filed by both respondent G.G. and its creditors. CHcETA
On January 25, 1999, Solid Mills, Inc. and Unisol Industries Manufacturing
Corporation informed the hearing panel that respondent attempted to sell 500,000
pieces of garments valued at US $1,500,000 to US Apparel and Collection Pte. Ltd., a
Singaporean company, but was enjoined by the High Court of Singapore upon
application by Dao Heng Bank in Suit No. 82 of 1999. 17 Respondent never informed
the hearing panel of this aborted transaction.
On May 20, 1999, petitioner Hongkong & Shanghai Banking Corporation, Ltd. (HSBC)
manifested that it was exercising its right not to participate in the proceedings in the
amended petition. 18
On July 26, 1999, respondent filed a motion to withdraw its amended petition 19 with
a view to filing another one to include its sister corporation, Magic Apparel
Corporation (MAC), as co-petitioner. This petition was docketed as SEC Case No. 17-
99-6374. 20 PCIB, Dao Heng Bank and Standard Charter Bank opposed the motion
and prayed that the amended petition be dismissed instead. 21
In an order dated August 18, 1999, the SEC hearing panel in SEC Case No. 17-99-
6374 dismissed the joint petition filed by respondent G.G. and its sister company
MAC. 22
On September 9, 1999, respondent filed a manifestation with the hearing panel that
its amended petition be maintained. The hearing panel resolved to maintain the
petition but, considering it on the merits, dismissed it.
On October 13, 1999, respondent filed a "petition for certiorari, prohibition and
mandamus with a prayer for the issuance of a restraining order/injunction" 23 with
the Court of Appeals. DSAICa
On May 31, 2000, the Court of Appeals rendered the assailed decision reversing the
SEC hearing panel and, on December 14, 2000, the assailed resolution denying
reconsideration.
Hence, the instant petition.
Petitioner posits four arguments, namely:
I.
THERE WAS NO VALID GROUND FOR GG SPORTSWEAR TO DISPENSE WITH A
MOTION FOR RECONSIDERATION.
II.
THERE WAS NO VALID GROUND FOR GG SPORTSWEAR TO DISPENSE WITH AN
APPEAL TO THE [SEC] EN BANC.
III.
THE HEARING PANEL OF THE [SEC] DID NOT ACT WITH GRAVE ABUSE OF
DISCRETION IN DISMISSING THE PETITION.
IV.
GG SPORTSWEAR FAILED TO COMPLY WITH THE REQUIREMENTS OF SECTION 5,
RULE 7 OF THE RULES OF COURT. 24
The first three arguments can be compressed into one pivotal issue, namely, whether
or not the Court of Appeals should have dismissed respondent's special civil action for
certiorari for failure to exhaust administrative remedies. HAIDcE
We find for the petitioner.
The remedies available to respondent were stated clearly enough in the 1999 SEC
Rules of Procedure. According to Rule VI, 25 the proper remedy from an adverse
decision of a hearing officer was an appeal which, according to Rule XV, 26 was to be
made to the SEC en banc. Respondent likewise had a remedy under Rule 43 of the
1997 Revised Rules of Civil Procedure. 27
Nowhere in its petition did respondent explain why it did not appeal to the SEC en
banc. It simply attributed the two-year delay of its case to the injunction imposed by
the SEC en banc. Nothing more.
The exceptions to the doctrine of exhaustion of administrative remedies, as
enumerated in Province of Zamboanga del Norte v. Court of Appeals 28 are: (1) when
there is a violation of due process; (2) when the issue involved is purely a legal
question; (3) when the administrative action is patently illegal amounting to lack or
excess of jurisdiction; (4) when there is estoppel on the part of the administrative
agency concerned; (5) when there is irreparable injury; (6) when the respondent is a
department secretary whose acts as an alter ego of the President bears the implied and
assumed approval of the latter; (7) when to require exhaustion of administrative
remedies would be unreasonable; (8) when it would amount to a nullification of a
claim; (9) when the subject matter is a private land in land case proceedings; (10)
when the rule does not provide a plain, speedy and adequate remedy, and (11) when
there are circumstances indicating the urgency of judicial intervention, and
unreasonable delay would greatly prejudice the complainant; (12) where no
administrative review is provided by law; (13) where the rule of qualified political
agency applies and (14) where the issue of non-exhaustion of administrative remedies
has been rendered moot.
From among these exceptions, respondent claims denial of due process by the hearing
panel and grave abuse of discretion on the part of the hearing panel amounting to lack
or excess of jurisdiction. The facts on record, however, do not bear out respondent's
allegations. Respondent did not dispute that the hearing panel extended the
suspension order in its favor three times for a total period of almost eight months.
During this time, the panel provided respondent more than ample opportunity to
present its evidence. Neither did respondent dispute the fact that the cross-
examination of its witness, external auditor Mainrado M. Laygo, was suspended
during the hearing due to its own failure to attach the requisite financial documents
and records to its petition, in violation of the SEC Policy Guidelines. When the cross-
examination was terminated, if anyone was deprived of due process, it was the
creditors who were unable to propound searching questions to respondent's witness.
aETASc
Respondent's claim that it was not given due process is therefore without basis.
Even more baseless is the argument that an appeal to the SEC en banc was useless.
Respondent itself, as a matter of fact, never even raised such a ground in its petition;
it was the Court of Appeals that erroneously drew the conclusion that the SEC en
banc could not supposedly provide respondent with adequate relief. According to the
Court of Appeals, the reasons were based on its understanding of respondent's
"perception." 29 In other words, there was no factual basis for such a conclusion.
In Union Bank v. Court of Appeals, 30 petitioner Union Bank was likewise of the
persuasion that the SEC en banc would be unsympathetic to its pleas. In dismissing
its petition for certiorari, we said:
In this case, petitioner was actually not without remedy to correct what it perceived
and supposed was an erroneous assumption of jurisdiction by the SEC, without
having recourse immediately to the Court of Appeals. Under Section 6(m) of P.D. No.
902-A, it has been expressly provided that "the decision, ruling or order of any such
Commissioner, bodies, boards, committees and/or officer may be appealed to the
Commission sitting en banc within thirty days after receipt by the appellant of notice
of such decision, ruling or order." Such procedure being available, could have been
resorted to by petitioner which, however, it chose to forego. Furthermore, by taking up
the matter with the SEC, it could still have obtained an injunction which it similarly
sought from the appellate court via its petition for certiorari because the said body has
been empowered by Section 6(a) of P.D. No. 902-A "to issue preliminary or permanent
injunctions, whether prohibitory or mandatory, in all cases in which it has
jurisdiction. . ." Finally, petitioner itself hardly concealed the fact that it distrusted
altogether the whole mechanism of appeal to the SEC en banc, which is why it did not
find resort thereto imperative. Thus, it explicitly stated that "it is a given that SEC will
not reverse itself, therefore, any reconsideration or appeal en banc would be a mere
exercise of futility, [particularly] when public respondent Associate Commissioner Fe
Gloria is the acting Chairperson of SEC." What basis does petitioner have in casting
doubt on the integrity and competence of the SEC en banc? This baseless, even
reckless, reasoning hardly deserves an iota of attention. It cannot justify a procedural
short-cut quite contrary to law. If this were so, then the SEC en banc would not have
been empowered at all by the statute to take cognizance of appeals from its
subordinate units. But the lawmakers, having faith in a collegial body such as the
SEC en banc, precisely empowered it to act as such appellate body cannot override the
fact that the law mandates recourse thereto. (emphasis ours) CcHDSA
The fact that the SEC was, at the time respondent filed its special civil action for certiorari,
empowered by PD 902-A 31 to issue writs of injunction refuted respondent's claim that
urgency dictated its decision to take its case straight to the Court of Appeals.
Furthermore, as earlier mentioned, the SEC en banc enjoined the hearing panel from
proceeding with SEC Case No. 08-97-5752, pending amendment by respondent of its petition
so as to limit the issue before the hearing panel to the propriety of the declaration of
suspension of payments. Respondent never complained that the hearing panel ignored that
injunction. This clearly contradicts the Court of Appeals' statement that the hearing panel
"would not respect whatever directive the SEC en banc would issue." 32 It further puts into
sharp relief the simple fact that respondent's suppositions (regarding the futility of an appeal to
the SEC en banc) were nothing but speculation.

Distrust of an administrative agency alone, unsupported by concrete evidence, is not sufficient

reason to dispense with the doctrine of administrative remedies, which serves a very useful
purpose in ensuring the efficient and speedy disposal of cases. Once the courts condone the
circumvention of the mechanisms of administrative appeals on mere suspicion of an agency's
integrity, the doctrine is as good as dead.

WHEREFORE, the instant petition is hereby GRANTED. The decision and resolution of the
Court of Appeals in CA-G.R. SP No. 55270 are hereby REVERSED. The decision of the SEC
hearing panel dismissing SEC Case No. 08-97-5752 is REINSTATED. ITCcAD

SO ORDERED.

Azcuna and Garcia, JJ., concur.

Puno, J., is on leave.

Sandoval-Gutierrez, J., took no part.

THIRD DIVISION
[G.R. No. 160652. February 13, 2006.]
HON. TOMAS N. JOSON III, in his capacity as Governor of the Province of Nueva Ecija,
and The SANGGUNIANG PANLALAWIGAN OF NUEVA ECIJA, petitioners, vs. COURT
OF APPEALS and ELIZABETH R. VARGAS, respondents.
Padilla Jimenez Kintanar & Asuncion Law Offices for petitioners.
Brillantes Navarro, Jumamil Escolin Arcilla Martinez & Vivero Law Offices for private
respondent.
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; WHEN PROPER. —
Under Section 1, Rule 65 of the 1997 Rules of Civil Procedure, the writ of certiorari is
proper when the following requisites are present: 1. It is directed against any tribunal,
board or officer exercising judicial or quasi-judicial functions; 2. Such tribunal, board
or officer has acted without or in excess of its or his jurisdiction, or with grave abuse
of discretion amounting to lack or excess of its or his jurisdiction; and 3. There is no
appeal or any plain, speedy and adequate remedy in the ordinary course of law. The
Court finds no grave abuse of discretion on the part of the appellate court in assuming
jurisdiction over the case. The special civil action of certiorari is proper to correct
errors of jurisdiction including the commission of grave abuse of discretion amounting
to lack or excess of jurisdiction. All the issues submitted for resolution in the Court of
Appeals involve questions of law which are reviewable on certiorari. AICHaS
2. POLITICAL LAW; ADMINISTRATIVE LAW; EXHAUSTION OF ADMINISTRATIVE
REMEDIES; CONCEPT. — Under the doctrine of exhaustion of administrative
remedies, a litigant cannot go to court without first pursuing his administrative
remedies, otherwise his action is premature and his case is not ripe for judicial
determination. A litigant should first exhaust the administrative remedies provided by
law before seeking judicial intervention in order to give the administrative agency an
opportunity to decide correctly the matter and prevent unnecessary and premature
resort to the court.
3. ID.; ID.; ID.; ID.; EXCEPTIONS. — However, the Court recognizes some
exceptions to the rule of exhaustion of administrative remedies. As held in Paat v.
Court of Appeals: . . . However, we are not amiss to reiterate that the principle of
exhaustion of administrative remedies as tested by a battery of cases is not an
ironclad rule. This doctrine is a relative one and its flexibility is called upon by the
peculiarity and uniqueness of the factual and circumstantial settings of a case. Hence,
it is disregarded (1) when there is a violation of due process, (2) when the issue
involved is purely a legal question, (3) when the administrative action is patently illegal
amounting to lack or excess of jurisdiction, (4) when there is estoppel on the part of
the administrative agency concerned, (5) when there is irreparable injury, (6) when the
respondent is a department secretary whose acts as an alter ego of the President bears
the implied and assumed approval of the latter, (7) when to require exhaustion of
administrative remedies would be unreasonable, (8) when it would amount to a
nullification of a claim, (9) when the subject matter is a private land in land case
proceedings, (10) when the rule does not provide a plain, speedy and adequate
remedy, and (11) when there are circumstances indicating the urgency of judicial
intervention. The requirement of prior exhaustion of administrative remedies may
likewise be dispensed with in the following instances: (1) when the claim involved is
small; (2) when strong public interest is involved; and (3) in quo warranto proceedings.
DaTICc
4. ID.; ID.; ID.; ID.; ID.; APPLICATION IN CASE AT BAR. — In this case, Mayor
Vargas filed the petition for certiorari with the Court of Appeals alleging that Secretary
Gaite issued the Resolution dated 8 July 2003 with grave abuse of discretion. Mayor
Vargas raised the following issues: (1) whether it was proper for Secretary Gaite to
have ruled that Mayor Vargas is considered in default pursuant to Article 126, Rule
XIX of the Rules Implementing the Local Government Code of 1991; (2) whether the
civil case filed by Mayor Vargas before the Cabanatuan RTC for annulment of falsified
minutes of session and appropriation ordinance with damages is a prejudicial
question which warrants the suspension of the proceedings in the administrative case;
(3) whether the Sangguniang Panlalawigan has jurisdiction to hear the administrative
case filed against Mayor Vargas, when the relief sought is her removal from office. The
issues raised are questions of law which involve the interpretation and application of
laws. Resolution of such questions constitutes essentially an exercise of judicial power
which is exclusively allocated to the Supreme Court and such courts as the
Legislature may establish. Since the issues involve purely legal questions which the
court may review, exhaustion of administrative remedies may be dispensed with.
5. ID.; ID.; LOCAL GOVERNMENT CODE; PREVENTIVE SUSPENSION; WHEN
MAY BE IMPOSED. — Under Section 63 of the Local Government Code, preventive
suspension may be imposed (a) after the issues are joined; (b) when the evidence of
guilt is strong; and (c) given the gravity of the offense, there is great probability that
the continuance in office of the respondent could influence the witnesses or pose a
threat to the safety and integrity of the records and other evidence. Issues are
considered joined when the complaint has been answered and there are no longer any
substantial preliminary issues that remain to be threshed out. DEcTIS
6. ID.; ID.; ID.; ID.; ID.; NOT PROPER IN CASE AT BAR. — It would thus appear
that the grounds cited by the Sangguniang Panlalawigan for recommending the
preventive suspension of Mayor Vargas were just general statements unsupported by
any evidence. This is contrary to the requisites for a preventive suspension which
require that evidence of guilt must be strong and that given the gravity of the offense,
there is great probability that the continuance in office of the respondent could
influence the witnesses or pose a threat to the safety and integrity of the records and
other evidence. The haste in issuing the resolution recommending the preventive
suspension of Mayor Vargas is unreasonable considering the gravity of the effects of
such suspension. Suspension from office of an elective official would deprive the
electorate of the services of the person they have voted into office. As held in Ganzon v.
Court of Appeals: The plain truth is that this Court has been ill at ease with
suspensions . . . because it is out of the ordinary to have a vacancy in local
government. The sole objective of a suspension, as we have held, is simply "to prevent
the accused from hampering the normal cause (sic) of the investigation with his
influence and authority over possible witnesses" or to keep him off "the records and
other evidence." It is a means, and no more, to assist prosecutors in firming up a case,
if any, against an erring local official. Under the Local Government Code, it cannot
exceed sixty days, which is to say that it need not be exactly sixty days long if a
shorter period is otherwise sufficient, and which is also to say that it ought to be lifted
if prosecutors have achieved their purpose in a shorter span.
7. ID.; ID.; ID.; SANGGUNIANG PANLALAWIGAN; BEREFT OF JURISDICTION
OVER ADMINISTRATIVE CASE WHICH SEEKS REMOVAL FROM OFFICE. — It is,
therefore, apparent that the jurisdiction of the Sangguniang Panlalawigan in the
administrative case is an issue in the certiorari case filed in the Court of Appeals.
Mayor Vargas is questioning the propriety of the proceedings of the Sangguniang
Panlalawigan despite the alleged prejudicial question in the civil case. Likewise, Mayor
Vargas alleges that the Sangguniang Panlalawigan is bereft of jurisdiction over the
administrative case which seeks her removal from office since under Section 60 of the
Local Government Code, only the proper court may order the dismissal from public
office of an elective local official. cSEAHa
DECISION
CARPIO, J p:
The Case
This is a petition for certiorari 1 with a prayer for the issuance of a temporary
restraining order or writ of preliminary injunction. The petition seeks to set aside the
Resolution dated 13 October 2003 of the Court of Appeals in CA-G.R. SP No. 78247
granting the writ of preliminary injunction enjoining and restraining Governor Tomas
N. Joson III ("Governor Joson") and the Sangguniang Panlalawigan of Nueva Ecija
("Sangguniang Panlalawigan") from conducting proceedings in the administrative case
against Mayor Elizabeth R. Vargas and from imposing the order of preventive
suspension. DCATHS
The Facts
On 8 January 2003, eight members of the Sangguniang Bayan of Aliaga, Nueva Ecija
("SB Members"), filed with the Sangguniang Panlalawigan an administrative complaint
against the incumbent Municipal Mayor of Aliaga, Elizabeth R. Vargas ("Mayor
Vargas"), for dishonesty, misconduct in office, and abuse of authority. The SB
Members alleged that Mayor Vargas submitted to the Provincial Budget Officer two
falsified documents, namely, Appropriation Ordinance No. 1, series of 2002
("Appropriation Ordinance No. 1") and Resolution No. 2, series of 2002, approving the
enactment of Appropriation Ordinance No. 1. The administrative case was docketed as
ADM. CASE No. 02-S-2003.
On 13 February 2003, Mayor Vargas filed a complaint for annulment of falsified
minutes of session and appropriation ordinance with damages against the SB
members before the Regional Trial Court of Cabanatuan City ("Cabanatuan RTC"). The
case was docketed as Civil Case No. 4442.
On 18 February 2003, Mayor Vargas filed before the Sangguniang Panlalawigan a
motion to suspend proceedings and/or motion to dismiss due to the pendency of a
prejudicial question in Civil Case No. 4442, specifically questioning the genuineness of
the documents she allegedly falsified. 2 Without resolving the motion, the
Sangguniang Panlalawigan passed Resolution No. 80-S-2003, dated 3 March 2003,
recommending to Governor Joson the preventive suspension of Mayor Vargas for 60
days. 3 On 17 March 2003, the Sangguniang Panlalawigan issued Resolution No. 105-
S-2003, denying Mayor Vargas' motion to suspend proceedings and/or motion to
dismiss. 4
Mayor Vargas appealed to the Office of the President praying for the reversal of
Resolution No. 105-S-2003 of the Sangguniang Panlalawigan. The case was docketed
as O.P. Case No. 03-D-164. EHSIcT
In April 2003, Governor Joson issued an order of preventive suspension against Mayor
Vargas. Mayor Vargas filed before the Office of the President a very urgent petition to
set aside the suspension order.
On 22 April 2003, the Office of the President, through Acting Deputy Executive
Secretary Manuel B. Gaite ("Secretary Gaite"), issued an Order, the dispositive portion
of which reads:
ACCORDINGLY, the instant motion is GRANTED and the undated Preventive
Suspension Order against Mayor Elizabeth R. Vargas of the municipality of Aliaga,
Nueva Ecija is hereby lifted and set aside.
Vice Mayor Victorino E. Reyes who may have assumed the position of Acting Municipal
Mayor of Aliaga, Nueva Ecija, is hereby directed to cease and desist from performing
the duties of and functions of municipal mayor and vacate the same pending final
resolution of Administrative Case No. 02-s-2003. Mayor Vargas may now reassume his
(sic) position as such.
The Department of the Interior and Local Government is hereby directed to implement
this Order immediately.
SO ORDERED. 5
On 25 April 2003, Governor Joson filed with the Office of the President a motion for
reconsideration. On 8 July 2003, the Office of the President issued a Resolution, the
dispositive portion of which reads:
WHEREFORE, the instant motion is hereby GRANTED, and the April 22, 2003 Order
subject thereof is hereby recalled and set aside. Accordingly, the Order of Governor
Tomas N. Joson III placing Mayor Elizabeth R. Vargas under preventive suspension for
a period of sixty (60) days is hereby reinstated. aDcHIC
The Department of Interior and Local Government is directed to implement this
resolution immediately.
SO ORDERED. 6
On 17 July 2003, Mayor Vargas moved for reconsideration of the Resolution dated 8
July 2003. On 18 July 2003, Mayor Vargas filed before the Office of the President an
urgent motion to resolve O.P. Case No. 03-D-164.
On 23 July 2003, Mayor Vargas filed before the Court of Appeals a petition for
"Certiorari, Prohibition and Mandamus, with Urgent Prayer for Preliminary Injunction
or Temporary Restraining Order," docketed as CA-G.R. SP No. 78247.
On 14 August 2003, the Court of Appeals issued a Resolution, the dispositive portion
of which reads:
WHEREFORE, in the interest of justice, to the end that undue prejudice and/or injury
may be avoided to any and all parties affected by these proceedings, as well as not to
render nugatory and ineffectual the resolution of this Court of the issues herein
presented, let a TEMPORARY RESTRAINING ORDER be issued, to be effective upon
service and for a period of SIXTY (60) days, unless sooner lifted. ACCORDINGLY,
respondents Provincial Governor and the SANGGUNIANG PANLALAWIGAN of the
Province of Nueva Ecija are hereby commanded to cease and desist from conducting
proceedings in ADMINISTRATIVE CASE No. 02-S-2003, and from enforcing the
assailed July 8, 2003 Resolution of the Office of the President, through the Executive
Secretary, which directed the reinstatement of the order for petitioner's preventive
suspension. Furthermore, in view of the serious issues involved, let the hearing and
consideration of the propriety of the issuance of a preliminary injunction be scheduled
on September 2, 2003 at 10:30 AM, Paras Hall, Second Floor, Main Building, Court of
Appeals, Ma. Orosa St., Ermita, Manila. HcaATE
In the meantime, without necessarily giving due course to the instant petition for
certiorari, respondents are directed to file a comment, not a motion to dismiss, within
ten (10) days from notice. Petitioner, upon the other hand, has five (5) days from
receipt of respondents' comment, to file her reply.
SO ORDERED. 7
On 13 October 2003, the Court of Appeals resolved to issue a writ of preliminary
injunction to further enjoin and restrain Governor Joson from imposing the order of
preventive suspension and the Sangguniang Panlalawigan from conducting
proceedings in the administrative case against Mayor Vargas.
Hence, this petition.
The Issues
Petitioners contend that:
1. THE COURT OF APPEALS ACTED WITH MANIFEST PARTIALITY,
ARBITRARILY, AND IN GRAVE ABUSE OF DISCRETION IN ISSUING THE
QUESTIONED ORDER BECAUSE —
a. RESPONDENT VARGAS AVAILED OF THE WRONG REMEDY WHEN SHE
FILED CA-G.R. SP NO. 78247;
b. RESPONDENT VARGAS CLEARLY FAILED TO EXHAUST ADMINISTRATIVE
REMEDIES BEFORE SEEKING JUDICIAL RELIEF;
c. THE PREVENTIVE SUSPENSION ORDER WAS LEGALLY AND VALIDLY
ISSUED. CaATDE
2. THE COURT OF APPEALS ACTED ARBITRARILY AND IN GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN DIRECTING
PETITIONERS "TO CEASE AND DESIST FROM CONDUCTING PROCEEDINGS IN
ADMINISTRATIVE CASE NO. 02-S-2003."
3. THE INSTANT CASE PRESENTS A SITUATION WHEREIN A MOTION FOR
RECONSIDERATION MAY BE DISPENSED WITH BEFORE THE INSTANT CERTIORARI
CASE CAN BE FILED. 8
The Ruling of the Court
The petition is without merit.
Petitioners allege that Mayor Vargas should have filed with the Court of Appeals a
petition for review under Rule 43 of the 1997 Rules of Civil Procedure and not a
special civil action for certiorari under Rule 65. Furthermore, Mayor Vargas filed the
action for certiorari even while her motion for reconsideration was still pending
resolution before the Office of the President. According to petitioners, the Court of
Appeals acted with manifest bias and partiality when it issued the writ of preliminary
injunction against petitioners despite the filing of a wrong remedy and the non-
exhaustion of administrative remedies.
Under Section 1, Rule 65 of the 1997 Rules of Civil Procedure, the writ of certiorari is
proper when the following requisites are present:
1. It is directed against any tribunal, board or officer exercising judicial or quasi-
judicial functions;
2. Such tribunal, board or officer has acted without or in excess of its or his
jurisdiction, or with grave abuse of discretion amounting to lack or excess of its or his
jurisdiction; and cCaDSA
3. There is no appeal or any plain, speedy and adequate remedy in the ordinary
course of law.
Mayor Vargas filed with the Court of Appeals a special civil action for certiorari under
Rule 65 alleging grave abuse of discretion on the part of Secretary Gaite. Thus, in a
Resolution dated 14 August 2003, the Court of Appeals stated:
To question the foregoing Resolution of respondent Executive Secretary, petitioner
interposed the instant petition for certiorari under Rule 65 of the 1997 Rules of Civil
Procedure, essentially posing the following issues: (1) was it proper for respondent
Executive Secretary to have ruled that petitioner is considered in default pursuant to
Article 126, Rule XIX of the Rules Implementing the Local Government Code of 1991;
(2) can the civil case filed by petitioner before the Cabanatuan RTC for annulment of
falsified minutes of session and appropriation ordinance with damages be considered
a prejudicial question which warrants the suspension of the proceedings in the
administrative case; (3) has the respondent Sanggunian[g] Panlalawigan jurisdiction to
hear the administrative case filed against herein petitioner, when the relief sought
therein is her removal from office.
At first blush, the assailed resolution having being issued by the Office of the
President, through the Executive Secretary, it would seem that the proper remedy is
an appeal via a petition for review under Rule 43 of the 1997 Rules of Civil Procedure.
A perusal of the instant petition for certiorari would, however, reveal that petitioner is
alleging that the challenged resolution was issued with grave abuse of discretion and
beyond respondents' jurisdiction, hence, the appropriate remedy is certiorari under
Rule 65. Moreover, assuming arguendo that the proper remedy is a petition for review
under Rule 43, the Supreme Court has oftentimes ruled that, in accordance with the
liberal spirit pervading the Rules of Court and in the interest of justice, a petition for
certiorari may be treated as having been filed under Rule 43, in which case this Court
chooses to do so, in view of the gravity and seriousness of the issues involved herein. 9
(Emphasis supplied) cEaTHD
The Court finds no grave abuse of discretion on the part of the appellate court in
assuming jurisdiction over the case. The special civil action of certiorari is proper to
correct errors of jurisdiction including the commission of grave abuse of discretion
amounting to lack or excess of jurisdiction. 10 All the issues submitted for resolution
in the Court of Appeals involve questions of law which are reviewable on certiorari. 11
Exception to the Application of Exhaustion of
Administrative Remedies
Under the doctrine of exhaustion of administrative remedies, a litigant cannot go to
court without first pursuing his administrative remedies, otherwise his action is
premature and his case is not ripe for judicial determination. 12 A litigant should first
exhaust the administrative remedies provided by law before seeking judicial
intervention in order to give the administrative agency an opportunity to decide
correctly the matter and prevent unnecessary and premature resort to the court. 13
However, the Court recognizes some exceptions to the rule of exhaustion of
administrative remedies. As held in Paat v. Court of Appeals: 14
. . . However, we are not amiss to reiterate that the principle of exhaustion of
administrative remedies as tested by a battery of cases is not an ironclad rule. This
doctrine is a relative one and its flexibility is called upon by the peculiarity and
uniqueness of the factual and circumstantial settings of a case. Hence, it is
disregarded (1) when there is a violation of due process, (2) when the issue involved is
purely a legal question, (3) when the administrative action is patently illegal
amounting to lack or excess of jurisdiction, (4) when there is estoppel on the part of
the administrative agency concerned, (5) when there is irreparable injury, (6) when the
respondent is a department secretary whose acts as an alter ego of the President bears
the implied and assumed approval of the latter, (7) when to require exhaustion of
administrative remedies would be unreasonable, (8) when it would amount to a
nullification of a claim, (9) when the subject matter is a private land in land case
proceedings, (10) when the rule does not provide a plain, speedy and adequate
remedy, and (11) when there are circumstances indicating the urgency of judicial
intervention. acCITS
The requirement of prior exhaustion of administrative remedies may likewise be
dispensed with in the following instances: (1) when the claim involved is small; (2)
when strong public interest is involved; and (3) in quo warranto proceedings. 15
In this case, Mayor Vargas filed the petition for certiorari with the Court of Appeals
alleging that Secretary Gaite issued the Resolution dated 8 July 2003 with grave
abuse of discretion. Mayor Vargas raised the following issues: (1) whether it was
proper for Secretary Gaite to have ruled that Mayor Vargas is considered in default
pursuant to Article 126, Rule XIX of the Rules Implementing the Local Government
Code of 1991; (2) whether the civil case filed by Mayor Vargas before the Cabanatuan
RTC for annulment of falsified minutes of session and appropriation ordinance with
damages is a prejudicial question which warrants the suspension of the proceedings
in the administrative case; (3) whether the Sangguniang Panlalawigan has jurisdiction
to hear the administrative case filed against Mayor Vargas, when the relief sought is
her removal from office. 16
The issues raised are questions of law which involve the interpretation and application
of laws. Resolution of such questions constitutes essentially an exercise of judicial
power which is exclusively allocated to the Supreme Court and such courts as the
Legislature may establish. 17 Since the issues involve purely legal questions which the
court may review, exhaustion of administrative remedies may be dispensed with. 18
Propriety of the Preventive Suspension Order
Under Section 63 of the Local Government Code, preventive suspension may be
imposed (a) after the issues are joined; (b) when the evidence of guilt is strong; and (c)
given the gravity of the offense, there is great probability that the continuance in office
of the respondent could influence the witnesses or pose a threat to the safety and
integrity of the records and other evidence. Issues are considered joined when the
complaint has been answered and there are no longer any substantial preliminary
issues that remain to be threshed out. 19
In its Order dated 22 April 2003, the Office of the President stated that the facts of the
case do not warrant a conclusion that issues are deemed joined. Furthermore, the
Office of the President found no basis for the issuance of the preventive suspension.
The Office of the President explained:
In the administrative case, it appears that petitioner did not file, so far, an answer to
the complaint thus the issues could not have been considered joined. What she did
was to file a Motion To Suspend Proceedings And/Or Motion To Dismiss which was
treated by the sanggunian as her answer. However, nothing in the records can be
inferred that the petitioner intended the said motion to be her answer. In fact, when
the motion was denied on March 17, 2003 through SP Resolution No. 105-s-2003, she
immediately appealed the said Resolution to this Office. DAHaTc
In fine, no inference can be had that the motion filed was considered her answer
otherwise, petitioner could have stated so therein.
Finally, even assuming that petitioner's motion was already her answer and therefore,
the issues have been joined, it is observed that the grounds cited by the sanggunian in
recommending the assailed preventive suspension are general statements — mere
verbatim reproduction of the provision of law, unsupported by any factual and
substantial evidence. There is no showing that the evidence of guilt is strong, with
both parties charging each other with falsification of documents. In fact, that is the
subject of Civil Case No. 4442. Moreover, it cannot be said that the continuance in
office of respondent could influence the witnesses or pose a threat to the safety and
integrity of the records and other evidence. The recitals in SP Resolution No. 105 s.
2003 are unconvincing.
ACCORDINGLY, the instant motion is GRANTED and the undated Preventive
Suspension Order against Mayor Elizabeth R. Vargas of the municipality of Aliaga,
Nueva Ecija is hereby lifted and set aside. 20 (Emphasis supplied)
It would thus appear that the grounds cited by the Sangguniang Panlalawigan for
recommending the preventive suspension of Mayor Vargas were just general
statements unsupported by any evidence. This is contrary to the requisites for a
preventive suspension which require that evidence of guilt must be strong and that
given the gravity of the offense, there is great probability that the continuance in office
of the respondent could influence the witnesses or pose a threat to the safety and
integrity of the records and other evidence. The haste in issuing the resolution
recommending the preventive suspension of Mayor Vargas is unreasonable
considering the gravity of the effects of such suspension. Suspension from office of an
elective official would deprive the electorate of the services of the person they have
voted into office. As held in Ganzon v. Court of Appeals: 21
The plain truth is that this Court has been ill at ease with suspensions . . . because it
is out of the ordinary to have a vacancy in local government. The sole objective of a
suspension, as we have held, is simply "to prevent the accused from hampering the
normal cause (sic) of the investigation with his influence and authority over possible
witnesses" or to keep him off "the records and other evidence." It is a means, and no
more, to assist prosecutors in firming up a case, if any, against an erring local official.
Under the Local Government Code, it cannot exceed sixty days, which is to say that it
need not be exactly sixty days long if a shorter period is otherwise sufficient, and
which is also to say that it ought to be lifted if prosecutors have achieved their
purpose in a shorter span. HaIESC
However, upon motion of Governor Joson, the Office of the President reversed its
previous order. Citing the case of Joson v. Torres, 22 the Office of the President held
that Mayor Vargas' failure to file her answer in ADM. CASE No. 02-S-2003 was
deemed a waiver of her right to file answer and present evidence. As a consequence,
the issues were deemed to have been joined.
In the Joson case, this Court found inexcusable the failure of petitioner there to file an
answer despite the grant of three extensions of the period to file an answer. It was only
seven months later and after the lapse of all the extensions of time for filing an answer
that petitioner there filed a motion to dismiss.
In this case, Mayor Vargas moved for a 15-day extension to file an answer. Before the
lapse of the period of extension, Mayor Vargas filed before the Cabanatuan RTC a civil
case for annulment of Appropriation Ordinance No. 1 and the Minutes of the Session
of 7 February 2002 which were the bases of the administrative charge against her.
Four days after the lapse of the period of extension, Mayor Vargas filed a Motion to
Suspend Proceedings and/or Motion to Dismiss due to prejudicial question. Without
resolving Mayor Vargas' motion, the Sangguniang Panlalawigan issued a resolution
recommending the preventive suspension of Mayor Vargas for a period of 60 days.
Unlike the Joson case, there was no unreasonable delay employed by Mayor Vargas in
filing an answer. Instead of an answer, Mayor Vargas filed a Motion to Suspend
Proceedings and/or Motion to Dismiss because of a civil case which she had earlier
filed seeking the annulment of the appropriation ordinance and the minutes of
session. The Joson case is therefore inapplicable to this case.
Validity of appellate court's order for petitioners to cease and desist
from conducting proceedings in Administrative Case No. 02-S-2003
In a Resolution dated 13 October 2003, the Court of Appeals issued a preliminary
injunction to further enjoin petitioners from conducting proceedings in the
administrative case against Mayor Vargas in order to prevent injustice. The Court of
Appeals explained:
In a Resolution dated August 14, 2003, in order not to render nugatory the resolution
of the present petition by this Court, We issued a temporary restraining order
temporarily enjoining the Provincial Governor and the Sangguniang Panlalawigan of
the Province of Nueva Ecija from conducting further proceedings in Administrative
Case No. 02-S-2003, and from enforcing the assailed resolution of the Office of the
President, which directed the reinstatement of the order for petitioner's preventive
suspension. ASDCaI
After taking into account the parties' arguments for and against the issuance of a writ
of preliminary injunction in a hearing conducted on September 2, 2003, as well as
respondents' comment and opposition dated August 25, 2003, and considering that
the present petition is still pending resolution before this Court, We deem it wise to
issue a preliminary injunction to further enjoin and restrain public respondents
Provincial Governor and the Sangguniang Panlalawigan from conducting proceedings
in the administrative case against herein petitioner, particularly in imposing the order
of preventive suspension, so as to prevent any injustice and irreparable injury that
might inure to herein petitioner if it is adjudged by this Court that a reversal of the
assailed resolution is warranted.
WHEREFORE, for the foregoing premises, petitioner's prayer for the issuance of a writ
of preliminary injunction is hereby GRANTED. Petitioner is hereby required to post a
bond in the amount of FIFTY THOUSAND PESOS (P50,000.00) for the issuance of said
writ, as required by Section 4(b), Rule 58 of the 1997 Rules of Civil Procedure.
SO ORDERED. 23
Petitioners allege that the only issue presented in CA-G.R. SP No. 78247 is the validity
of the reinstatement of the preventive suspension order issued against Mayor Vargas
as embodied in the Resolution dated 8 July 2003 of the Office of the President.
According to petitioners, the Court of Appeals therefore acted arbitrarily and in grave
abuse of discretion amounting to lack or excess of jurisdiction in directing the
Sangguniang Panlalawigan to cease and desist from conducting proceedings in
Administrative Case No. 02-S-2003.
Petitioners' contention is without merit. Two of the issues raised by Mayor Vargas in
her petition to the Court of Appeals pertain to the proceedings in Administrative Case
No. 02-S-2003, to wit: (1) whether the civil case filed by Mayor Vargas before the
Cabanatuan RTC for annulment of falsified minutes of session and appropriation
ordinance with damages is a prejudicial question which warrants the suspension of
the proceedings in the administrative case, and (2) whether the Sangguniang
Panlalawigan has jurisdiction to hear the administrative case filed against Mayor
Vargas, when the relief sought is her removal from office. 24
It is, therefore, apparent that the jurisdiction of the Sangguniang Panlalawigan in the
administrative case is an issue in the certiorari case filed in the Court of Appeals.
Mayor Vargas is questioning the propriety of the proceedings of the Sangguniang
Panlalawigan despite the alleged prejudicial question in the civil case. Likewise, Mayor
Vargas alleges that the Sangguniang Panlalawigan is bereft of jurisdiction over the
administrative case which seeks her removal from office since under Section 60 of the
Local Government Code, only the proper court may order the dismissal from public
office of an elective local official. 25
We find no grave abuse of discretion on the part of the Court of Appeals in issuing the
Resolution dated 13 October 2003.
WHEREFORE, we DISMISS the petition for lack of merit, and DENY the prayer for the
issuance of a temporary restraining order or writ of preliminary injunction. DcSEHT
SO ORDERED.
Quisumbing, Carpio-Morales and Tinga, JJ., concur.

SECOND DIVISION
[G.R. No. 128305. March 28, 2005.]
FELINO QUIAMBAO, petitioner, vs. THE COURT OF APPEALS, NATIONAL APPELLATE
BOARD, Represented by its CHAIRMAN FEDERICO S. COMANDANTE and MEMBERS,
ATTYS. ROBERTO T. AGAGON and ADELAIDA T. AGUILOS of the NATIONAL POLICE
COMMISSION, RAUL S. IMPERIAL, Police Chief, Philippine National Police and ESPIE
S/L CATOLICO, respondents.
Ricardo Tio Sanico for petitioner.
Public Attorney's Office for respondents.
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; CERTIORARI; GRAVE ABUSE OF
DISCRETION; ELUCIDATED. — Grave abuse of discretion means such capricious and
whimsical exercise of judgment which is equivalent to an excess, or a lack of
jurisdiction, and the abuse of discretion must be so patent and gross as to amount to
an evasion of a 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. In certiorari proceedings under
Rule 65, questions of fact are not generally permitted, the inquiry being limited
essentially to whether or not the respondent tribunal had acted without or in excess of
its jurisdiction or with grave abuse of discretion.
2. ID.; CIVIL PROCEDURE; APPEAL; DISMISSAL; GROUNDS; FAILURE TO
SPECIFICALLY STATE MATERIAL DATES; NOT PRESENT IN CASE AT BAR. — The
failure to specifically state in the petition on material dates such as the date when the
resolution or order denying a motion for reconsideration was received is a ground for
dismissal in accordance with Section 7 of the administrative circular and Rule 43. But
the scenario is not present in the case at bar for the aforecited paragraph 18 of the
petition filed with the appellate court reflected the date when petitioner actually
received the resolution denying his motion for reconsideration, which is 23 September
1996. Procedural rules must be liberally interpreted and applied so as not to frustrate
substantial justice that this Court seeks to achieve.
3. POLITICAL LAW; ADMINISTRATIVE LAW; DEPARTMENT OF THE INTERIOR
AND LOCAL GOVERNMENT ACT OF 1990; AUTHORITIES WITH JURISDICTION OVER
ADMINISTRATIVE CASES FILED AGAINST PHILIPPINE NATIONAL POLICE (PNP)
MEMBERS WHICH MAY WARRANT DISMISSAL FROM SERVICE. — Republic Act
(R.A.) No. 6975 or the Department of the Interior and Local Government Act of 1990,
which took effect on 1 January 1991, defines the structural components, powers and
functions of the PNP as the citizens' guardian of peace and order and enforcer of the
law. The statute likewise delineates the procedural framework in pursuing
administrative complaints against erring members of the police organization. Section
41 of the law enumerates the authorities to which a complaint against an erring
member of the PNP may be filed, thus; . . . (3) People's Law Enforcement Board, as
created under Section 43 hereof, where the offense is punishable by withholding of
privileges, restriction to specified limits, suspension or forfeiture of salary, or any
combination thereof, for a period exceeding thirty (30) days; or by dismissal. . . . It is
readily apparent that a complaint against a PNP member which would warrant
dismissal from service is within the jurisdiction of the PLEB. However, Section 41
should be read in conjunction with Section 42 of the same statute which reads, thus:
Sec. 42. Summary Dismissal Powers of the PNP Chief and Regional Directors. — The
Chief of the PNP and regional directors, after due notice and summary hearings, may
immediately remove or dismiss any respondent PNP member in any of the following
cases: (a) When the charge is serious and the evidence of guilt is strong; (b) When the
respondent is a recidivist or has been repeatedly charged and there are reasonable
grounds to believe that he is guilty of the charges; and (c) When the respondent is
guilty of conduct unbecoming of a police officer. Evidently, the PNP Chief and regional
directors are vested with the power to summarily dismiss erring PNP members if any
of the causes for summary dismissal enumerated in Section 42 is attendant. Thus, the
power to dismiss PNP members is not only the prerogative of PLEB but concurrently
exercised by the PNP Chief and regional directors. This shared power is likewise
evident in Section 45. Once a complaint is filed with any of the disciplining authorities
under R.A. No. 6975, the latter shall acquire exclusive original jurisdiction over the
case although other disciplining authority has concurrent jurisdiction over the case.
Paragraph (c) of Section 41 explicitly declares this point. Clearly, the PLEB and the
PNP Chief and regional directors have concurrent jurisdiction over administrative
cases filed against members of the PNP which may warrant dismissal from service.
4. ID.; ID.; MEMORANDUM CIRCULAR NO. 92-006; CONDUCT UNBECOMING OF
A POLICE OFFICER AND SERIOUS CHARGE AS GROUND FOR SUMMARY
DISMISSAL OF PNP MEMBERS. — Memorandum Circular No. 92-006 prescribes the
rules and regulations in the conduct of summary dismissal proceedings against erring
PNP members and defines conduct unbecoming of a police officer under Section 3 (c),
Rule II, as follows: Conduct unbecoming of a police officer refers to any behavior or
action of a PNP member, irrespective of rank, done in his official capacity, which, in
dishonoring or otherwise disgracing himself as a PNP member, seriously compromise
his character and standing as a gentleman in such a manner as to indicate his vitiated
or corrupt state of moral character; it may also refer to acts or behavior of any PNP
member in an unofficial or private capacity which, in dishonoring or disgracing
himself personally as a gentleman, seriously compromises his position as a PNP
member and exhibits himself as morally unworthy to remain as a member of the
organization. The same Memorandum Circular also defines the phrase "serious
charge" as a ground for summary dismissal of PNP members. This includes charges for
commission of heinous crimes and those committed by organized/syndicated crime
groups wherein PNP members are involved, gunrunning, illegal logging, robbery,
kidnapping for ransom, white slave trade, illegal recruitment, carnapping, smuggling,
piracy, drug trafficking, falsification of land title and other government forms, large
scale swindling, film piracy, counterfeiting, and bank frauds. Clearly, the robbery-
holdup and mauling incident which occurred on 22 December 1990 fall under the
summary dismissal power of PNP Chief and regional directors. HSTaEC
5. REMEDIAL LAW; JURISDICTION; DEFICIENCY THEREOF MAY BE RAISED AT
ANY STAGE OF THE PROCEEDINGS; EXCEPTION; GROUND OF LACHES OR
ESTOPPEL. — Despite the existence of a jurisprudential rule that jurisdictional
question may be raised at any stage of the proceedings, an equitable exceptional rule
has also been laid down by this Court bars a party from raising jurisdictional question
on ground of laches or estoppel. Although the lack of jurisdiction of a court may be
raised at any stage of the action, a party may be estopped from raising such questions
if he has actively taken part in the very proceedings which he questions, belatedly
objecting to the court's jurisdiction in the event that the judgment or order
subsequently rendered is adverse to him.
6. POLITICAL LAW; ADMINISTRATIVE LAW; SUMMARY DISMISSAL
PROCEEDINGS; DUE PROCESS REQUIREMENTS; ELUCIDATED. — Petitioner also
argues that the appellate court erred in affirming the findings of the Acting PNP Chief
and the National Appellate Board (NAB), which was arrived at without hearing and
substantial evidence. We are not persuaded. Summary dismissal proceedings are
governed by specific requirements of notification of the charges together with copies of
affidavits and other attachments supporting the complaints, and the filing of an
answer, together with supporting documents. It is true that consistent with its
summary nature, the duration of the hearing is limited, and the manner of conducting
the hearing is summary, in that sworn statements may take the place of oral
testimonies of witnesses, cross-examination is confined only to material and relevant
matters, and prolonged arguments and dilatory proceedings shall not be entertained.
The instant case filed by Catolico is an administrative case for grave misconduct
against petitioner for the alleged robbery-holdup and mauling incident that took place
on 22 December 1990. In resolving administrative cases, conduct of full-blown trial is
not indispensable to dispense justice to the parties. The requirement of notice and
hearing does not connote full adversarial proceedings. Submission of position papers
may be sufficient for as long as the parties thereto are given the opportunity to be
heard. In administrative proceedings, the essence of due process is simply an
opportunity to be heard, or an opportunity to explain one's side or opportunity to seek
a reconsideration of the action or ruling complained of. This constitutional mandate is
deemed satisfied if a person is granted an opportunity to seek reconsideration of an
action or a ruling. It does not require trial-type proceedings similar to those in the
courts of justice. Where opportunity to be heard either through oral arguments or
through pleadings is accorded, there is no denial of procedural due process.
7. REMEDIAL LAW; APPEAL; FINDINGS OF ADMINISTRATIVE AGENCIES,
RESPECTED. — The recommendation of the Summary Dismissal Hearing Officer
(SDHO) was approved by the Acting PNP Chief whose decision was affirmed by the
NAB. The findings of the NAB was also affirmed by the Court of Appeals. The
unanimity in their conclusions cannot just be disregarded and their factual
determinations are conclusive upon this Court for the records show that petitioner
was afforded reasonable opportunity to defend his side, as he filed position papers to
substantiate his defense and arguments and even filed motions for reconsideration to
set aside adverse decisions rendered against him. This opportunity to defend himself
was more than sufficient to comply with due process requirements in administrative
proceedings. Well-entrenched is the rule that courts will not interfere in matters which
are addressed to the sound discretion of the government agency entrusted with the
regulation of activities coming under the special and technical training and knowledge
of such agency. Administrative agencies are given a wide latitude in the evaluation of
evidence and in the exercise of their adjudicative functions, latitude which includes
the authority to take judicial notice of facts within their special competence. In
administrative proceedings, only substantial evidence or that amount of relevant
evidence that a reasonable mind might accept as adequate to support a conclusion is
required. Thus, findings of fact of quasi-judicial agencies are generally accorded
respect and even finality by the Supreme Court, if supported by substantial evidence,
in recognition of their expertise on the specific matters under their consideration.
Thus, factual determinations made by the SDHO and the NAB as affirmed by the
Court of Appeals are undoubtedly beyond review and conclusive upon this Court, they
being triers of facts. The congruence in their conclusion forecloses any possibility of
reversible error or misappreciation of facts. Such being the case, we cannot but affirm
their common conclusion as petitioner failed to advance substantial and convincing
evidence and arguments that will merit the reversal of prior decisions on the case.
IacHAE
DECISION
TINGA, J p:
This petition assails the Resolution 1 dated 10 January 1997 of the Court of Appeals
which affirmed the Decision 2 dated 25 October 1993 and the Resolution 3 dated 27
December 1993 of National Appellate Board (Board), Third Division, National Police
Commission (NAPOLCOM). The Board's ruling in turn, which likewise affirmed the
Decision 4 dated 31 October 1992 of Acting PNP Chief and Police Deputy Director
General dismissing PO3 Felino Quiambao from the police service. cSIADH
The operative facts of the case follow:
On 22 December 1990, at around 8:00 in the evening, Espie Catolico (Catolico) was
walking along Capulong Street in Tondo, Manila, inquiring as to the whereabouts of
her housemaid Gynalin Garais who left the house the day before. After having asked
her neighbors and bystanders to no avail, an old woman told her that a certain
policeman was looking for her as her housemaid was in his custody. She went to the
area as directed by the old woman but there she was allegedly accosted by petitioner,
PO3 Felino Quiambao, a member of the Philippine National Police (PNP), Western
Police District Command, and five (5) other persons. Quiambao and his companions
forcibly took Catolico's handbag and carried away its contents consisting of precious
assorted merchandise, jewelry and other personal items worth approximately Nine
Thousand Pesos (P9,000.00). Thereafter, petitioner forcibly herded Catolico to his
owner-type jeep and brought her to the dimly lit portion of North Harbor and, while
thereat, he slapped her on the face several times and warned her not to look anymore
for her housemaid. 5
In view of the incident, Catolico filed a sworn statement on 24 June 1991 with the PNP
Inspectorate Division, accusing petitioner and six (6) others, with robbery-holdup and
mauling committed on 22 December 1990. 6 The complaint was corroborated by
Grace Commendador who witnessed the actual incident and confirmed the statement
of Catolico. 7
On 22 August 1991, Catolico filed another administrative complaint with the Office of
the Hearing Officer at NAPOLCOM, Western Police District, Manila, charging petitioner
with grave misconduct for the same incident which occurred on 22 December 1990. 8
An investigation was conducted on this administrative charge by the Office of the
Hearing Officer of NAPOLCOM. On 30 March 1993, the case was forwarded to the City
of Manila's People's Law Enforcement Board (PLEB) for adjudication. 9
The PNP Inspectorate Division likewise conducted an investigation on the charges
filed. On 31 October 1992, the Summary Dismissal Hearing Officer (SDHO)
recommended the dismissal of petitioner. This recommendation was approved by
Acting PNP Chief and Police Deputy Director General, Raul S. Imperial (Acting PNP
Chief). 10
Petitioner appealed the 31 October 1992 resolution to the National Appellate Board
(NAB) of the NAPOLCOM. On 25 October 1993, the Third Division of the NAB,
rendered a decision affirming the dismissal of petitioner from police service. 11 The
motion for reconsideration filed by petitioner was denied in a Resolution dated 27
December 1993. 12 But it was only on 23 September 1996 when petitioner received a
certified xerox copy of the Resolution of the NAB denying his petition for
reconsideration. 13
On 7 October 1996, petitioner filed a petition for review with the Court of Appeals. 14
On 10 January 1997, the appellate court dismissed the petition for review for lack of
merit. caTIDE
The appellate court ruled that the petition did not state all the specific material dates
showing that it was filed within the reglementary period provided by law as it failed to
state the date when petitioner received a copy of the Resolution of NAB dated 27
December 1993, denying his motion for reconsideration of NAB's decision dated 25
October 1993. It found out that NAB's decision dated 25 October 1993 was received by
petitioner on 22 November 1993, and on 2 December 1993, he filed his motion for
reconsideration. The said motion, however, was denied on 27 December 1993, but
according to the appellate court, petitioner did not disclose the date when he received
such denial. The fifteen-day reglementary period for filing a petition for review with the
Court of Appeals started to run from such date. 15
Further, the appellate court ruled that the issue of which administrative disciplinary
authority had jurisdiction over the case was raised by petitioner only for the first time
before it. He did not raise it before the SDHO nor before the NAB. More importantly, it
found that the PNP Inspectorate Division had original, exclusive and summary
jurisdiction over the instant case, and that NAB did not commit any reversible error in
deciding the appealed case without a priori pronouncement as to which among the
disciplinary authorities under Republic Act No. 6975 had jurisdiction over the case. 16
It also added that NAB's not having all the records requested by petitioner after it had
rendered its decision did not necessarily mean that it did not have such documents at
the time it rendered its decision. 17 Petitioner's claim was further belied by the fact
that Catolico was able to obtain certified true copies of the relevant documents which
the PNP Chief transmitted to the NAPOLCOM. ESTaHC
Additionally, the appellate court found that a perusal of the annexes to the comment
of Catolico would readily show that NAB resolved petitioner's case based on
substantial evidence appearing on the record before it. 18 It observed that petitioner's
claim that his case was decided on the basis of an incomplete record was merely an
afterthought. Said defense was not raised by petitioner in his motion for
reconsideration of NAB's decision dated 25 October 1993. 19 Likewise, petitioner was
not denied due process as he was afforded reasonable opportunity to be heard and to
submit his evidence before the SDHO and to appeal to NAB the decision of the Acting
PNP Chief dismissing him from the police service, the Court of Appeals ruled. 20
On 27 January 1997, petitioner filed a Motion for Extension of Time to File Motion for
Reconsideration followed by the filing of his Motion for Reconsideration on 17
February 1997. On the same day, the appellate court issued a Resolution denying
petitioner's motion for extension of time. On 5 March 1997, it issued a resolution
stating that the Motion for Reconsideration was merely "NOTED," the Resolution dated
10 January 1997 being already final. 21 Hence, the instant judicial recourse.
The primordial thrust of the petition seeks the reversal of the decisions and
resolutions of Acting PNP Chief, the NAB and the Court of Appeals, all upholding the
validity of the dismissal of petitioner from police service, and his corresponding
reinstatement in the police service.
Petitioner argues that the appellate court erred and acted without or in excess of
jurisdiction and/or with grave abuse of discretion in holding that the petition is not
meritorious. 22 He specifically assigns the following as errors which need to be
rectified, to wit: (1) that the appellate court ruled that petition did not state the date
when petitioner received a copy of the Resolution of NAB dated 27 December 1993 to
determine if it was filed within the reglementary period; 23 (2) that the appellate court
sustained the findings of the Acting PNP Chief and the NAB without first resolving
and/or giving a reason why it was the Acting PNP Chief and neither the NAPOLCOM
Hearing Officer nor the PLEB that had the power to hear and decide the case; 24 (3)
that the appellate court sustained, through misapprehension of facts and/or contrary
to evidence, the decision of NAB which was not based on the complete records of the
case; 25 (4) that the appellate court ruled that the petition was not meritorious and
sustained the findings of the Acting PNP Chief and the NAB although such findings
were arrived at without a hearing and absent substantial evidence; 26 (5) that the
appellate court's denial of the motion for reconsideration was based on purely
technical considerations; 27 and (6) that the appellate court had been passive to
Catolico's surreptitious introduction into the records of the case evidentiary
documents of which petitioner was not furnished and to the latter's prejudice. 28
The petition is not imbued with merit. DSETac
Readily glaring upon examination of the petition filed by petitioner is its title "Petition
for Review on Certiorari." 29 The title would immediately lead us to conclude that the
petition is primarily anchored on Rule 45 of the 1997 Revised Rules of Civil Procedure.
Under this mode of appeal, only questions of law may be entertained by this Court and
factual issues raised are beyond the ambit of this review. Yet, the issues raised by
petitioner in the petition are fundamentally factual in nature which are inappropriate
for resolution via the mode of review he availed of.
However, a perusal of issues in the petition would indicate that the petition is actually
anchored on Rule 65 as the issues principally sought to assail the resolution rendered
by the appellate court on the ground of grave abuse of discretion amounting to lack or
excess of jurisdiction. 30
Nonetheless, even assuming that the petition was brought under Rule 65, the petition
would still not lie as the implausibility of the grounds on which the petition rests are
convincingly manifest and the grave abuse of discretion amounting to lack or excess of
jurisdiction as the core of this mode of review is strikingly wanting.
Grave abuse of discretion means such capricious and whimsical exercise of judgment
which is equivalent to an excess, or a lack of jurisdiction, and the abuse of discretion
must be so patent and gross as to amount to an evasion of a 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. 31 In certiorari proceedings under Rule 65, questions of fact are not
generally permitted, the inquiry being limited essentially to whether or not the
respondent tribunal had acted without or in excess of its jurisdiction or with grave
abuse of discretion. 32 These grounds under Rule 65 are not attendant in the instant
case. Even if we take this case as so exceptional as to permit a factual review, the
petition at bar fails to persuade us to rule in favor of petitioner. CSTcEI
Petitioner contends that the appellate court acted with grave abuse of discretion
amounting to lack or excess of jurisdiction in holding that the petition was not
meritorious since the petition filed with the appellate court did not state the date when
petitioner received a copy of the Resolution of NAB dated 27 December 1993 to
determine if the petition was indeed filed within the reglementary period. There is
reason basis for such contention.
The petition with the appellate court by petitioner substantially complied with Revised
Administrative Circular No. 1-95. 33 The pertinent portion of the circular reads,
SECTION 6. Contents of the petition. — The petition for review shall (a) state the full
names of the parties to the case, without impleading the court or agencies either as
petitioners or respondents; (b) contain a concise statement of the facts and issues
involved and the grounds relied upon for the review; (c) be accompanied by a clearly
legible duplicate original or a certified true copy of the award, judgment, final order or
resolution appealed from, together with certified true copies of such material portions
of the record as are referred to therein and other supporting papers; and (d) contain a
sworn certification against forum shopping as provided in Revised Circular No. 28-91.
The petition shall state the specific material dates showing that it was filed within the
period fixed herein. 34
The records reveal that the petition filed with the Court of Appeals by petitioner
provides the following,
18. On December 27, 1993, respondent National Appellate Board rendered its
Resolution denying the motion in this manner: DcITaC
WHEREFORE, finding no merit on this instant petition, the same is hereby denied.
A certified xerox copy thereof, duly RECEIVED BY PETITIONER ON SEPTEMBER 23,
1996 is hereto attached as ANNEX "M." 35
A reading of the foregoing allegation, however, disclosed the fact that on 27 December
1993, NAB rendered a resolution denying petitioner's motion for reconsideration.
Although it would seem anomalous as it is unnatural that the purported resolution
was received only by petitioner on 23 September 1996, we are inclined to sustain
petitioner's assertion for the same is supported by the certified xerox copy of the
resolution 36 and the evidence is bereft of any showing that will warrant a contrary
conclusion. Thus, the aforecited allegation substantially complied with the
requirements under Section 6. The appellate court believed that petitioner had already
been served with a copy of the resolution prior to 23 September 1996. 37 Such a
conclusion, however, is bereft of any evidentiary basis and, thus, has no leg to stand
on. It is noteworthy that the date when petitioner received NAB's resolution denying
his motion for reconsideration is material in determining when the fifteen (15)-day
reglementary period for filing a petition for review with the Court of Appeals starts to
run. 38
The failure to specifically state in the petition on material dates such as the date when
the resolution or order denying a motion for reconsideration was received is a ground
for dismissal in accordance with Section 7 of the administrative circular and Rule 43.
39 But the scenario is not present in the case at bar for the aforecited paragraph 18 of
the petition filed with the appellate court reflected the date when petitioner actually
received the resolution denying his motion for reconsideration, which is 23 September
1996. Procedural rules must be liberally interpreted and applied so as not to frustrate
substantial justice that this Court seeks to achieve. CDHacE
Now, on substantial issues rather than on mere technicality. The pivotal questions
posed in this petition are whether the Acting Chief of the PNP had authority to conduct
summary dismissal proceedings over members of the PNP and whether the summary
dismissal of petitioner was sufficiently established by the evidence on record.
Republic Act (R.A.) No. 6975 or the Department of the Interior and Local Government
Act of 1990, which took effect on 1 January 1991, defines the structural components,
powers and functions of the PNP as the citizens' guardian of peace and order and
enforcer of the law. The statute likewise delineates the procedural framework in
pursuing administrative complaints against erring members of the police organization.
Section 41 of the law enumerates the authorities to which a complaint against an
erring member of the PNP may be filed, thus;
Section 41. (a) Citizen's Complaints. — Any complaint by an individual person
against any member of the PNP shall be brought before the following:
(1) Chiefs of police, where the offense is punishable by withholding of privileges,
restriction to specified limits, suspension or forfeiture of salary, or any combination
thereof, for a period not exceeding fifteen (15) days;
(2) Mayors of cities or municipalities, where the offense is punishable by
withholding of privileges, restriction to specified limits, suspension or forfeiture of
salary, or any combination thereof, for a period of not less than sixteen (16) days but
not exceeding thirty (30) days; cDCEIA
(3) People's Law Enforcement Board, as created under Section 43 hereof, where the
offense is punishable by withholding of privileges, restriction to specified limits,
suspension or forfeiture of salary, or any combination thereof, for a period exceeding
thirty (30) days; or by dismissal. . . . (Emphasis added) 40
It is readily apparent that a complaint against a PNP member which would warrant
dismissal from service is within the jurisdiction of the PLEB. However, Section 41
should be read in conjunction with Section 42 of the same statute which reads, thus:
Sec. 42. Summary Dismissal Powers of the PNP Chief and Regional Directors. —
The Chief of the PNP and regional directors, after due notice and summary hearings,
may immediately remove or dismiss any respondent PNP member in any of the
following cases:
(a) When the charge is serious and the evidence of guilt is strong.
(b) When the respondent is a recidivist or has been repeatedly charged and there
are reasonable grounds to believe that he is guilty of the charges; and
(c) When the respondent is guilty of conduct unbecoming of a police officer.
(Emphasis ours)
Evidently, the PNP Chief and regional directors are vested with the power to
summarily dismiss erring PNP members if any of the causes for summary dismissal
enumerated in Section 42 is attendant. Thus, the power to dismiss PNP members is
not only the prerogative of PLEB but concurrently exercised by the PNP Chief and
regional directors. This shared power is likewise evident in Section 45. cCESaH
SEC. 45. Finality of Disciplinary Action. — The disciplinary action imposed upon a
member of the PNP shall be final and executory: Provided, That a disciplinary action
imposed by the regional director or by the PLEB involving demotion or dismissal from
the service may be appealed to the regional appellate board within ten (10) days from
receipt of the copy of the notice of decision: Provided, further, That the disciplinary
action imposed by the Chief of the PNP involving demotion or dismissal may be
appealed to the National Appellate Board within ten (10) days from receipt thereof:
Provided, furthermore, That the regional or National Appellate Board, as the case may
be, shall decide the appeal within sixty (60) days from receipt of the notice of appeal:
Provided, finally, That failure of the regional appellate board to act on the appeal
within said period shall render the decision final and executory without prejudice,
however, to the filing of an appeal by either party with the Secretary. (Emphasis ours)
Once a complaint is filed with any of the disciplining authorities under R.A. No. 6975,
the latter shall acquire exclusive original jurisdiction over the case although other
disciplining authority has concurrent jurisdiction over the case. Paragraph (c) of
Section 41 explicitly declares this point.
(c) Exclusive Jurisdiction — A complaint or a charge filed against a PNP member
shall be heard and decided exclusively by the disciplining authority who has acquired
original jurisdiction over the case and notwithstanding the existence of concurrent
jurisdiction as regards the offense; Provided, That offenses which carry higher
penalties referred to a disciplinary authority shall be referred to the appropriate
authority which has jurisdiction over the offense. (Emphasis ours) ScTCIE
Clearly, the PLEB and the PNP Chief and regional directors have concurrent
jurisdiction over administrative cases filed against members of the PNP which may
warrant dismissal from service.
This Court in Summary Dismissal Board and the Regional Appellate Board, PNP,
Region VI, Iloilo City v. Torcita 41 recognized the authority of both the Summary
Dismissal Board and the Regional Appellate Board of the PNP, Region VI, Iloilo City, to
act on twelve (12) administrative complaints filed against C/Insp. Lazaro Torcita, even
though the controversy occurred in 1994, after the effectivity of R.A. No. 6975. The
Court further declared that R.A. No. 6975 defines the summary dismissal powers of
the PNP Chief and regional directors, among others in cases, "where the respondent is
guilty of conduct unbecoming of a police officer."
Memorandum Circular No. 92-006 prescribes the rules and regulations in the conduct
of summary dismissal proceedings against erring PNP members and defines conduct
unbecoming of a police officer under Section 3(c), Rule II, as follows:
Conduct unbecoming of a police officer refers to any behavior or action of a PNP
member, irrespective of rank, done in his official capacity, which, in dishonoring or
otherwise disgracing himself as a PNP member, seriously compromise his character
and standing as a gentleman in such a manner as to indicate his vitiated or corrupt
state of moral character; it may also refer to acts or behavior of any PNP member in an
unofficial or private capacity which, in dishonoring or disgracing himself personally as
a gentleman, seriously compromises his position as a PNP member and exhibits
himself as morally unworthy to remain as a member of the organization. 42
The same Memorandum Circular also defines the phrase "serious charge" as a ground
for summary dismissal of PNP members. This includes charges for commission of
heinous crimes and those committed by organized/syndicated crime groups wherein
PNP members are involved, gunrunning, illegal logging, robbery, kidnapping for
ransom, white slave trade, illegal recruitment, carnapping, smuggling, piracy, drug
trafficking, falsification of land title and other government forms, large scale swindling,
film piracy, counterfeiting, and bank frauds. Clearly, the robbery-holdup and mauling
incident which occurred on 22 December 1990 fall under the summary dismissal
power of PNP Chief and regional directors. IcHDCS
In the case at bar, the complaint for grave misconduct against petitioner was first filed
by Catolico before the PNP Inspectorate Division on 24 June 1991. However, another
case was filed by Catolico with the Office of the Hearing Officer, NAPOLCOM, WPD, on
22 August 1991. The charges filed with the PNP Inspectorate Division were
investigated, and on 31 October 1992, the SDHO recommended the dismissal of
petitioner which was approved by the Acting PNP Chief. Petitioner appealed the case to
the NAB which affirmed the decision of the Acting PNP Chief. The motion for
reconsideration was also denied. Thus, in accordance with paragraph (c) of Section 41,
the PNP Inspectorate Division had acquired exclusive original jurisdiction over the
complaint of Catolico to the exclusion of other investigating body. It is as if the second
complaint filed by Catolico with the Office of the Hearing Officer, NAPOLCOM, WPD,
had not been filed.
Even assuming ex gratia argumenti that the Acting PNP Chief and the NAB were bereft
of jurisdiction to rule on the complaint filed by Catolico, petitioner, at the earliest
opportunity, neither raised the issue of lack of jurisdiction before the PNP Inspectorate
Division nor with the NAB but only before the appellate court. 43 Despite the existence
of a jurisprudential rule 44 that jurisdictional question may be raised at any stage of
the proceedings, an equitable exceptional rule has also been laid down by this Court
bars a party from raising jurisdictional question on ground of laches or estoppel. 45
Although the lack of jurisdiction of a court may be raised at any stage of the action, a
party may be estopped from raising such questions if he has actively taken part in the
very proceedings which he questions, belatedly objecting to the court's jurisdiction in
the event that the judgment or order subsequently rendered is adverse to him. 46
Petitioner also argues that the appellate court erred in affirming the findings of the
Acting PNP Chief and the NAB, which was arrived at without hearing and substantial
evidence. We are not persuaded. EDISTc
Summary dismissal proceedings are governed by specific requirements of notification
of the charges together with copies of affidavits and other attachments supporting the
complaints, and the filing of an answer, together with supporting documents. It is true
that consistent with its summary nature, the duration of the hearing is limited, and
the manner of conducting the hearing is summary, in that sworn statements may take
the place of oral testimonies of witnesses, cross-examination is confined only to
material and relevant matters, and prolonged arguments and dilatory proceedings
shall not be entertained. 47
Notably, the recommendation of the SDHO was approved by the Acting PNP Chief
whose decision was affirmed by the NAB. The findings of the NAB was also affirmed by
the Court of Appeals. The unanimity in their conclusions cannot just be disregarded
and their factual determinations are conclusive upon this Court for the records show
that petitioner was afforded reasonable opportunity to defend his side, as he filed
position papers to substantiate his defense and arguments and even filed motions for
reconsideration to set aside adverse decisions rendered against him. This opportunity
to defend himself was more than sufficient to comply with due process requirements
in administrative proceedings.
Well-entrenched is the rule that courts will not interfere in matters which are
addressed to the sound discretion of the government agency entrusted with the
regulation of activities coming under the special and technical training and knowledge
of such agency. Administrative agencies are given a wide latitude in the evaluation of
evidence and in the exercise of their adjudicative functions, latitude which includes
the authority to take judicial notice of facts within their special competence. 48
The instant case filed by Catolico is an administrative case for grave misconduct
against petitioner for the alleged robbery-holdup and mauling incident that took place
on 22 December 1990. In resolving administrative cases, conduct of full-blown trial is
not indispensable to dispense justice to the parties. The requirement of notice and
hearing does not connote full adversarial proceedings. 49 Submission of position
papers may be sufficient for as long as the parties thereto are given the opportunity to
be heard. In administrative proceedings, the essence of due process is simply an
opportunity to be heard, or an opportunity to explain one's side or opportunity to seek
a reconsideration of the action or ruling complained of. 50 This constitutional
mandate is deemed satisfied if a person is granted an opportunity to seek
reconsideration of an action or a ruling. 51 It does not require trial-type proceedings
similar to those in the courts of justice. Where opportunity to be heard either through
oral arguments or through pleadings is accorded, there is no denial of procedural due
process. 52
In administrative proceedings, only substantial evidence or that amount of relevant
evidence that a reasonable mind might accept as adequate to support a conclusion is
required. 53 Thus, findings of fact of quasi-judicial agencies are generally accorded
respect and even finality by the Supreme Court, if supported by substantial evidence,
in recognition of their expertise on the specific matters under their consideration. 54
Thus, factual determinations made by the SDHO and the NAB as affirmed by the
Court of Appeals are undoubtedly beyond review and conclusive upon this Court, they
being triers of facts. The congruence in their conclusion forecloses any possibility of
reversible error or misappreciation of facts. Such being the case, we cannot but affirm
their common conclusion as petitioner failed to advance substantial and convincing
evidence and arguments that will merit the reversal of prior decisions on the case.
HTCISE
Finally, petitioner also argues that the appellate court erred in being passive to
Catolico's surreptitious introduction into the records of the case evidentiary
documents of which petitioner was not furnished and to the latter's prejudice. Sad to
say, the matter is a factual one which is outside the ambit of this mode of review.
Besides, this issue was not even raised in the motion for reconsideration filed by
petitioner with the Court of Appeals. 55
WHEREFORE, foregoing premises considered, the Petition is hereby DISMISSED and
the Decision of the Court of Appeals dated 10 January 1997 AFFIRMED. Costs against
petitioner.
SO ORDERED.
Puno, Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ., concur.

EN BANC
[G.R. No. 130866. September 16, 1998.]
ST. MARTIN FUNERAL HOME, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION and BIENVENIDO ARICAYOS, respondents.
Isagani M. Jungco for petitioner.
Sebastinian Office of Legal Aid for private respondent.
SYNOPSIS
This is a case of an illegal dismissal filed by private respondent Bienvenido Aricayos
against St. Martin Funeral Home. The Labor Arbiter ruled in favor of St. Martin
Funeral Home declaring that there was no employer-employee relationship that
existed between the parties, and therefore, his office had no jurisdiction over the case.
On appeal, the National Labor Relations Commission rendered a resolution setting
aside the questioned decision and remanding the case to the labor arbiter for
immediate appropriate proceedings. After the motion for reconsideration of the herein
petitioner was denied, it filed before this Court the instant petition for certiorari.
cdasia
The Court, instead of going to the merits of the case, discussed the mode of judicial
review with respect to decisions of the National Labor Relations Commission pursuant
to the provisions of Presidential Decree No. 442 (Labor Code of the Philippines) and
Batas Pambansa Blg. 129 (The Judiciary Reorganization Act of 1980).
In remanding this case to the Court of Appeals, the Court ruled that while it does not
wish to intrude into the congressional sphere on the matter of the wisdom of a law, it
further observed that there is a growing number of labor cases being elevated to the
court which, not being a trier of facts, has at times been constrained to remand the
case to the NLRC for resolution of unclear or ambiguous factual findings; that the
Court of Appeals is procedurally equipped for that purpose, aside from the increased
number of its component divisions; and that there is undeniably an imperative need
for expeditious action on labor cases as a major aspect of the constitutional protection
to labor.
Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals
from the NLRC to the Supreme Court are interpreted and hereby declared to mean and
refer to petitions for certiorari under Rule 65. Consequently, all such petitions should
henceforth be initially filed in the Court of Appeals in strict observance of the doctrine
on the hierarchy of courts as the appropriate forum for the relief desired. aECTcA
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTION; CERTIORARI; REGLEMENTARY
PERIOD; SIXTY DAYS DESPITE LAPSE OF THE 10-DAY PERIOD FOR FINALITY OF
THE DECISION OF THE NLRC. — . . . the remedy of the aggrieved party is to timely
file a motion for reconsideration as a precondition for any further or subsequent
remedy, and then seasonably avail of the special civil action of certiorari under Rule
65, for which said Rule has now fixed the reglementary period of sixty days from
notice of the decision. Curiously, although the 10-day period for finality of the decision
of the NLRC may already have lapsed as contemplated in Section 223 of the Labor
Code, it has been held that this Court may still take cognizance of the petition for
certiorari on jurisdictional and due process considerations if filed within the
reglementary period under Rule 65.
2. ID.; ID.; ID.; MODE OF JUDICIAL REVIEW OVER DECISIONS OF THE NLRC.
— Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed
appeals from the NLRC to the Supreme Court are interpreted and hereby declared to
mean and refer to petitions for certiorari under Rule 65. Consequently, all such
petitions should henceforth be initially filed in the Court of Appeals in strict
observance of the doctrine on the hierarchy of courts as the appropriate forum for the
relief desired. SAEHaC
DECISION
REGALADO, J p:
The present petition for certiorari stemmed from a complaint for illegal dismissal filed
by herein private respondent before the National Labor Relations Commission (NLRC),
Regional Arbitration Branch No. III, in San Fernando, Pampanga. Private respondent
alleges that he started working as Operations Manager of petitioner St. Martin Funeral
Home on February 6, 1995. However, there was no contract of employment executed
between him and petitioner nor was his name included in the semi-monthly payroll.
On January 22, 1996, he was dismissed from his employment for allegedly
misappropriating P38,000.00 which was intended for payment by petitioner of its
value added tax (VAT) to the Bureau of Internal Revenue (BIR). 1
Petitioner on the other hand claims that private respondent was not its employee but
only the uncle of Amelita Malabed, the owner of petitioner St. Martin's Funeral Home.
Sometime in 1995, private respondent, who was formerly working as an overseas
contract worker, asked for financial assistance from the mother of Amelita. Since then,
as an indication of gratitude, private respondent voluntarily helped the mother of
Amelita in overseeing the business.
In January 1996, the mother of Amelita passed away, so the latter then took over the
management of the business. She then discovered that there were arrears in the
payment of taxes and other government fees, although the records purported to show
that the same were already paid. Amelita then made some changes in the business
operation and private respondent and his wife were no longer allowed to participate in
the management thereof. As a consequence, the latter filed a complaint charging that
petitioner had illegally terminated his employment. 2 Cdpr
Based on the position papers of the parties, the labor arbiter rendered a decision in
favor of petitioner on October 25, 1996 declaring that no employer-employee
relationship existed between the parties and, therefore, his office had no jurisdiction
over the case. 3
Not satisfied with the said decision, private respondent appealed to the NLRC
contending that the labor arbiter erred (1) in not giving credence to the evidence
submitted by him; (2) in holding that he worked as a "volunteer and not as an
employee of St. Martin Funeral Home from February 6, 1995 to January 23, 1996, or
a period of about one year; and (3) in ruling that there was no employer-employee
relationship between him and petitioner. 4
On June 13, 1997, the NLRC rendered a resolution setting aside the questioned
decision and remanding the case to the labor arbiter for immediate appropriate
proceedings. 5 Petitioner then filed a motion for reconsideration which was denied by
the NLRC in its resolution dated August 18, 1997 for lack of merit, 6 hence the
present petition alleging that the NLRC committed grave abuse of discretion. 7
Before proceeding further into the merits of the case at bar, the Court feels that it is
now exigent and opportune to reexamine the functional validity and systemic
practicability of the mode of judicial review it has long adopted and still follows with
respect to decisions of the NLRC. The increasing number of labor disputes that find
their way to this Court and the legislative changes introduced over the years into the
provisions of Presidential Decree (P.D.) No. 442 (The Labor Code of the Philippines and
Batas Pambansa Blg. (B.P. No.) 129 (The Judiciary Reorganization Act of 1980) now
stridently call for and warrant a reassessment of that procedural aspect.
We prefatorily delve into the legal history of the NLRC. It was first established in the
Department of Labor by P.D. No. 21 on October 14, 1972, and its decisions were
expressly declared to be appealable to the Secretary of Labor and, ultimately, to the
President of the Philippines.
On May 1, 1974, P.D. No. 442 enacted the Labor Code of the Philippines, the same to
take effect six months after its promulgation. 8 Created and regulated therein is the
present NLRC which was attached to the Department of Labor and Employment for
program and policy coordination only. 9 Initially, Article 302 (now, Article 223) thereof
also granted an aggrieved party the remedy of appeal from the decision of the NLRC to
the Secretary of Labor, but P.D. No. 1391 subsequently amended said provision and
abolished such appeals. No appellate review has since then been provided for.
Thus, to repeat, under the present state of the law, there is no provision for appeals
from the decision of the NLRC. 10 The present Section 223, as last amended by
Section 12 of R.A. No. 6715, instead merely provides that the Commission shall decide
all cases within twenty days from receipt of the answer of the appellee, and that such
decision shall be final and executory after ten calendar days from receipt thereof by
the parties.
When the issue was raised in an early case on the argument that this Court has no
jurisdiction to review the decisions of the NLRC, and formerly of the Secretary of
Labor, since there is no legal provision for appellate review thereof, the Court
nevertheless rejected that thesis. It held that there is an underlying power of the
courts to scrutinize the acts of such agencies on questions of law and jurisdiction even
though no right of review is given by statute; that the purpose of judicial review is to
keep the administrative agency within its jurisdiction and protect the substantial
rights of the parties; and that it is that part of the checks and balances which restricts
the separation of powers and forestalls arbitrary and unjust adjudications. 11
Pursuant to such ruling, and as sanctioned by subsequent decisions of this Court, the
remedy of the aggrieved party is to timely file a motion for reconsideration as a
precondition for any further or subsequent remedy, 12 and then seasonably avail of
the special civil action of certiorari under Rule 65, 13 for which said Rule has now
fixed the reglementary .period of sixty days from notice of the decision. Curiously,
although the 10-day period for finality of the decision of the NLRC may already have
lapsed as contemplated in Section 223 of the Labor Code, it has been held that this
Court may still take cognizance of the petition for certiorari on jurisdictional and due
process considerations if filed within the reglementary period under Rule 65. 14
Turning now to the matter of judicial review of NLRC decisions, B.P. No. 129 originally
provided as follows:
SEC. 9. Jurisdiction. — The Intermediate Appellate Court shall exercise:
(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas
corpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of
its appellate jurisdiction;
(2) Exclusive original jurisdiction over actions for annulment of judgments of
Regional Trial Courts; and
(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 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. 15
Subsequently, and as it presently reads, this provision was amended by R.A. No. 7902
effective March 18, 1995, to wit:
SEC. 9. Jurisdiction. — The Court of Appeals shall exercise:
(1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas
corpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of
its appellate jurisdiction;
(2) Exclusive original jurisdiction over actions for annulment of judgments of
Regional Trial Courts; and
(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, including the Securities and Exchange
Commission, the Social Security Commission, the Employees Compensation
Commission and the Civil Service Commission, except those falling within the
appellate jurisdiction of the Supreme Court in accordance with the Constitution, the
Labor Code of the Philippines under Presidential Decree No. 442, as amended, the
provisions of this Act, and of subparagraph (1) of the third paragraph and
subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.
The Court of Appeals 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. Trials or hearings in the Court of
Appeals must be continuous and must be completed within, three (3) months, unless
extended by the Chief Justice."
It will readily be observed that, aside from the change in the name of the lower
appellate court, 16 the following amendments of the original provisions of Section 9 of
B.P. No. 129 were effected by R.A. No. 7902, viz.:
1. The last paragraph which excluded its application to the Labor Code of the
Philippines and the Central Board of Assessment Appeals was deleted and replaced by
a new paragraph granting the Court of Appeals limited powers to conduct trials and
hearings in cases within its jurisdiction.
2. The reference to the Labor Code in that last paragraph was transposed to
paragraph (3) of the section, such that the original exclusionary clause therein now
provides "except those falling within the appellate jurisdiction of the Supreme Court in
accordance with the Constitution, the Labor Code of the Philippines under Presidential
Decree No. 442, as amended, the provisions of this Act, and of subparagraph (1) of the
third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the
Judiciary Act of 1948." (Emphasis supplied)
3. Contrarily, however, specifically added to and included among the quasi-
judicial agencies over which the Court of Appeals shall have exclusive appellate
jurisdiction are the Securities and Exchange Commission, the Social Security
Commission, the Employees Compensation Commission and the Civil Service
Commission.
This, then, brings us to a somewhat perplexing impassè, both in point of purpose and
terminology. As earlier explained, our mode of judicial review over decisions of the
NLRC has for some time now been understood to be by a petition for certiorari under
Rule 65 of the Rules of Court. This is, of course, a special original action limited to the
resolution of jurisdictional issues, that is, lack or excess of jurisdiction and, in almost
all cases that have been brought to us, grave abuse of discretion amounting to lack of
jurisdiction.
It will, however, be noted that paragraph (3), Section 9 of B.P. No. 129 now grants
exclusive appellate jurisdiction to the Court of Appeals over all final adjudications of
the Regional Trial Courts and the quasi-judicial agencies generally or specifically
referred to therein except, among others, "those falling within the appellate jurisdiction
of the Supreme Court in accordance with . . . the Labor Code of the Philippines under
Presidential Decree No. 442, as amended, . . ." This would necessarily contradict what
has been ruled and said all along that appeal does not lie from decisions of the NLRC
17 Yet, under such excepting clause literally construed, the appeal from the NLRC
cannot be brought to the Court of Appeals, but to this Court by necessary implication.
The same exceptive clause further confuses the situation by declaring that the Court
of Appeals has no appellate jurisdiction over decisions falling within the appellate
jurisdiction of the Supreme Court in accordance with the Constitution, the provisions
of B. P. No. 129, and those specified cases in Section 17 of the Judiciary Act of 1948.
These cases can, of course, be properly excluded from the exclusive appellate
jurisdiction of the Court of Appeals. However, because of the aforementioned
amendment by transposition, also supposedly excluded are cases falling within the
appellate jurisdiction of the Supreme Court in accordance with the Labor Code. This is
illogical and impracticable, and Congress could not have intended that procedural
gaffe, since there are no cases in the Labor Code the decisions, resolutions, orders or
awards wherein are within the appellate jurisdiction of the Supreme Court or of any
other court for that matter. LibLex
A review of the legislative records on the antecedents of R A. No. 7902 persuades us
that there may have been an oversight in the course of the deliberations on the said
Act or an imprecision in the terminology used therein. In fine, Congress did intend to
provide for judicial review of the adjudications of the NLRC in labor cases by the
Supreme Court, but there was an inaccuracy in the term used for the intended mode
of review. This conclusion which we have reluctantly but prudently arrived at has been
drawn from the considerations extant in the records of Congress, more particularly on
Senate Bill No. 1495 and the Reference Committee Report on S. No. 1495/H. No.
10452. 18
In sponsoring Senate Bill No. 1495, Senator Raul S. Roco delivered his sponsorship
speech 19 from which we reproduce the following excerpts:
The Judiciary Reorganization Act, Mr. President, Batas Pambansa Blg. 129,
reorganized the Court of Appeals and at the same time expanded its jurisdiction and
powers. Among others, its appellate jurisdiction was expanded to cover not only final
judgment of Regional Trial Courts, but also all final judgment(s), decisions,
resolutions, orders or awards of quasi-judicial agencies, instrumentalities, boards and
commissions, except those falling within the appellate jurisdiction of the Supreme
Court in accordance with the Constitution, the provisions of BP Blg. 129 and of
subparagraph 1 of the third paragraph and subparagraph 4 of Section 17 of the
Judiciary Act of 1948.
Mr. President, the purpose of the law is to ease the workload of the Supreme Court by
the transfer of some of its burden of review of factual issues to the Court of Appeals.
However, whatever benefits that can be derived from the expansion of the appellate
jurisdiction of the Court of Appeals was cut short by the last paragraph of Section 9 of
Batas Pambansa Blg. 129 which excludes from its coverage the "decisions and
interlocutory orders issued under the Labor Code of the Philippines and by the Central
Board of Assessment Appeals."
Among the highest number of cases that are brought up to the Supreme Court are
labor cases. Hence, Senate Bill No. 1495 seeks to eliminate the exceptions enumerated
in Section 9 and, additionally, extends the coverage of appellate review of the Court of
Appeals in the decision(s) of the Securities and Exchange Commission, the Social
Security Commission, and the Employees Compensation Commission to reduce the
number of cases elevated to the Supreme Court. (Emphases and corrections ours)
xxx xxx xxx
Senate Bill No. 1495 authored by our distinguished Colleague from Laguna provides
the ideal situation of drastically reducing the workload of the Supreme Court without
depriving the litigants of the privilege of review by an appellate tribunal.
In closing, allow me to quote the observations of former Chief Justice Teehankee in
1986 in the Annual Report of the Supreme Court:
. . . Amendatory legislation is suggested so as to relieve the Supreme Court of the
burden of reviewing these cases which present no important issues involved beyond
the particular fact and the parties involved, so that the Supreme Court may wholly
devote its time to cases of public interest in the discharge of its mandated task as the
guardian of the Constitution and the guarantor of the people's basic rights and
additional task expressly vested on it now "to determine whether or not there has been
a grave abuse of discretion amounting to lack of jurisdiction on the part of any branch
or instrumentality of the Government."
We used to have 500,000 cases pending all over the land, Mr. President. It has been
cut down to 300,000 cases some five years ago. I understand we are now back to
400,000 cases. Unless we distribute the work of the appellate courts, we shall
continue to mount and add to the number of cases pending.
In view of the foregoing, Mr. President, and by virtue of all the reasons we have
submitted, the Committee on Justice and Human Rights requests the support and
collegial approval of our Chamber.
xxx xxx xxx
Surprisingly, however, in a subsequent session, the following Committee Amendment
was introduced by the said sponsor and the following proceedings transpired: 20
Senator Roco. On page 2, line 5, after the line "Supreme Court in accordance with the
Constitution," add the phrase " THE LABOR CODE OF THE PHILIPPINES UNDER P.D.
442, AS AMENDED." So that it becomes clear, Mr. President, that issues arising from
the Labor Code will still be appealable to the Supreme Court.
The President. Is there any objection? (Silence) Hearing none, the amendment is
approved.
Senator Roco. On the same page, we move that lines 25 to 30 be deleted. This was also
discussed with our Colleagues in the House of Representatives and as we understand
it, as approved in the House, this was also deleted, Mr. President.
The President. Is there any objection? (Silence) Hearing none, the amendment is
approved.
Senator Roco. There are no further Committee amendments, Mr. President.
Senator Romulo. Mr. President, I move that we close the period of Committee
amendments.
The President. Is there any objection? (Silence) Hearing none, the amendment is
approved. (Emphasis supplied)
xxx xxx xxx
Thereafter, since there were no individual amendments, Senate Bill No. 1495 was
passed on second reading and being a certified bill, its unanimous approval on third
reading followed. 21 The Conference Committee Report on Senate Bill No. 1495 and
House Bill No. 10452, having theretofore been approved by the House of
Representatives, the same was likewise approved by the Senate on February 20, 1995,
22 inclusive of the dubious formulation on appeals to the Supreme Court earlier
discussed.
The Court is, therefore, of the considered opinion that ever since appeals from the
NLRC to the Supreme Court were eliminated, the legislative intendment was that the
special civil action of certiorari was and still is the proper vehicle for judicial review of
decisions of the NLRC. The use of the word "appeal" in relation thereto and in the
instances we have noted could have been a lapsus plumae because appeals by
certiorari and the original action for certiorari are both modes of judicial review
addressed to the appellate courts. The important distinction between them, however,
and with which the Court is particularly concerned here is that the special civil action
of certiorari is within the concurrent original jurisdiction of this Court and the Court
of Appeals; 23 whereas to indulge in the assumption that appeals by certiorari to the
Supreme Court are allowed would not subserve, but would subvert, the intention of
Congress as expressed in the sponsorship speech on Senate Bill No. 1495.
Incidentally, it was noted by the sponsor therein that some quarters were of the
opinion that recourse from the NLRC to the Court of Appeals as an initial step in the
process of judicial review would be circuitous and would prolong the proceedings. On
the contrary, as he commendably and realistically emphasized, that procedure would
be advantageous to the aggrieved party on this reasoning:
On the other hand, Mr. President, to allow these cases to be appealed to the Court of
Appeals would give litigants the advantage to have all the evidence on record be
reexamined and reweighed after which the findings of facts and conclusions of said
bodies are correspondingly affirmed, modified or reversed.
Under such guarantee, the Supreme Court can then apply strictly the axiom that
factual findings of the Court of Appeals are final and may not be reversed on appeal to
the Supreme Court. A perusal of the records will reveal appeals which are factual in
nature and may, therefore, be dismissed outright by minute resolutions. 24
While we do not wish to intrude into the Congressional sphere on the matter of the
wisdom of a law, on this score we add the further observations that there is a growing
number of labor cases being elevated to this Court which, not being a trier of fact, has
at times been constrained to remand the case to the NLRC for resolution of unclear or
ambiguous factual findings; that the Court of Appeals is procedurally equipped for
that purpose, aside from the increased number of its component divisions; and that
there is undeniably an imperative need for expeditious action on labor cases as a
major aspect of constitutional protection to labor.
Therefore, all references in the amended Section 9 of B.P. No. 129 to supposed appeals
from the NLRC to the Supreme Court are interpreted and hereby declared to mean and
refer to petitions for certiorari under Rule 65. Consequently, all such petitions should
henceforth be initially filed in the Court of Appeals in strict observance of the doctrine
on the hierarchy of courts as the appropriate forum for the relief desired.
Apropos to this directive that resort to the higher courts should be made in
accordance with their hierarchical order, this pronouncement in Santiago vs. Vasquez,
et al. 25 should be taken into account:
One final observation. We discern in the proceedings in this case a propensity on the
part of petitioner, and, for that matter, the same may be said of a number of litigants
who initiate recourses before us, to disregard the hierarchy of courts in our judicial
system by seeking relief directly from this Court despite the fact that the same is
available in the lower courts in the exercise of their original or concurrent jurisdiction,
or is even mandated by law to be sought therein. This practice must be stopped, not
only because of the imposition upon the precious time of this Court but also because
of the inevitable and resultant delay, intended or otherwise, in the adjudication of the
case which often has to be remanded or referred to the lower court as the proper
forum under the rules of procedure, or as better equipped to resolve the issues since
this Court is not a trier of facts. We, therefore, reiterate the judicial policy that this
Court will not entertain direct resort to it unless the redress desired cannot be
obtained in the appropriate courts or where exceptional and compelling circumstances
justify availment of a remedy within and calling for the exercise of our primary
jurisdiction.
WHEREFORE, under the foregoing premises, the instant petition for certiorari is
hereby REMANDED, and all pertinent records thereof ordered to be FORWARDED, to
the Court of Appeals for appropriate action and disposition consistent with the views
and ruling herein set forth, without pronouncement as to costs. cdasia
SO ORDERED.
Narvasa, C .J ., Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza,
Panganiban, Martinez, Quisumbing and Purisima, JJ ., concur.

FIRST DIVISION
[G.R. No. 113357. February 1, 1996.]
BENJAMIN PAREDES, LUZ BUENSUCESO, AUGUSTO SEVERINO, RODRIGO
TABANERA, STEPHEN SOLIVEN and ROBERTO SANCHEZ, petitioners, vs. COURT OF
APPEALS, RIZALINO S. NAVARRO, as Secretary of Trade and Industry, and IGNACIO
S. SAPALO, Director of the Bureau of Patents, Trademarks and Technology Transfer,
respondents.
Cipriano Azada for petitioner.
The Solicitor General for respondents.
SYLLABUS
1. POLITICAL LAW; ADMINISTRATIVE LAW; B.P. 325; EXHAUSTION OF
ADMINISTRATIVE REMEDY; IN THE PRESENT CASE, PROHIBITION IS NOT THE
PROPER REMEDY, REASON. — Prohibition is not the proper remedy. The enabling
law itself, which is B.P. Blg. 325, has specifically tasked the Cabinet to review and
approve any proposed revisions of rates of fees and charges. Petitioners should have
availed of this easy and accessible remedy instead of immediately resorting to the
judicial process. Our legislature in delegating to administrative officers the authority
to revise fees and charges expressly required cabinet approval for the proper exercise
of said power. Petitioners should not have wasted the opportunity to utilize this built-
in remedy. The grant (or denial) of a writ of prohibition is ordinarily within the sound
discretion of the court to be exercised with caution and forbearance, according to the
circumstances of the particular case, and only where the right to seek relief is clear.
Prohibition is granted only in cases where no other remedy is available which is
sufficient to afford redress. That the petitioners have another and complete remedy at
law either by appeal or otherwise, is generally a sufficient reason for dismissing the
writ. Hence, in Chua Huat v. CA, we ruled that: Where the enabling statute indicates a
procedure for administrative review, and provides a system of administrative appeal,
or reconsideration, the courts, for reasons of law, comity and convenience will not
entertain a case unless the available administrative remedies have been resorted to
and the appropriate authorities have been given opportunity to act and correct the
errors committed in the administrative forum. SDML
2. ID.; PETITIONERS' CONTENTION THAT THERE WAS NO APPEAL OR OTHER
PLAIN, SPEEDY AND ADEQUATE REMEDY AVAILABLE TO THEM OR THAT THE
CABINET IS NOT AN APPELLATE BODY WITH THE AUTHORITY TO PASS UPON THE
LEGALITY OF THE ACTS OF DEPARTMENT HEADS IS UNAVAILING; REASON. —
Petitioners further contend that there was no appeal or other plain, speedy and
adequate remedy available to them considering the alleged absence of any mechanism
or procedure in the administrative branch of the government to stop public
respondents from enforcing the questioned fee increases. They insist that the Cabinet
is not an appellate body with the authority to pass upon the legality of the acts of
department heads. We do not agree. The provisions of Section 2 of BP 325 cannot be
any clearer. The recommended rates and charges are submitted to the Secretary of the
DTI for his evaluation and approval. The rate increases should be in conformity with
the rules and regulations of the Secretary of Finance and are "subject to the approval
of the Cabinet." Since according to petitioners the rate increases and charges have not
been submitted to the Cabinet for approval, judicial review thereof is certainly
premature.
3. ID.; PUBLIC RESPONDENTS' CLAIM THAT THE REQUIRED CABINET
APPROVAL WAS DEEMED TO HAVE BEEN FULFILLED BY EXECUTIVE ORDER NO.
159 IS INCORRECT BECAUSE E.O. NO. 159 WITH ITS PROSPECTIVE EFFECT HAS
NO APPLICATION IN THE CASE AT BENCH. — However, we reject the claim of public
respondents that the required Cabinet approval was deemed to have been fulfilled with
the issuance of Executive Order (E.O.) No. 159, dated 23 February 1994, the pertinent
portions of which provide . . . Section 1. All departments, bureaus, offices, units, and
agencies, including government-owned or controlled corporations, are hereby directed
to revise their fees and charges to recover at least the full cost of services rendered.
The full cost of services for the year rendered by a government department, bureau,
office, unit, or agency including government-owned or controlled corporation, shall be
equivalent to the appropriation of said department, bureau, office, unit, or agency for
the year under the relevant General Appropriations Act or under the Corporate
Operating Budget submitted by the government-owned or controlled corporation as
approved by the Department of Budget and Management. The revised rates shall,
wherever practicable, be uniform for similar or comparable services and functions and
shall be determined by the respective department heads, governing boards, or
equivalent functionaries; Provided that, this Executive Order shall not apply to fees
charged by departments, bureaus, offices, units, and agencies, including government-
owned or controlled corporations, related to constitutionally mandated free or
subsidized services, such as in education and health, as well as to those exempted by
international agreements, as shall be determined by the President. Section 2. The
heads of departments shall be responsible for the implementation of this Executive
Order by the bureaus, offices, units and agencies, including government-owned or
controlled corporations, within their respective jurisdictions . . . It is private
respondents' thesis that E.O. No. 159 explicitly eliminated the requisite Cabinet
approval. It is a general rule that laws shall have prospective effect. E.O. No. 159 was
promulgated on 23 February 1994 or two years after the subject administrative orders
were issued and, therefore, has no application in the case at bench.
4. ID.; PETITIONERS' SUBMISSION THAT THE QUESTIONED ADMINISTRATIVE
ORDERS ARE NULL AND VOID FOR FAILURE TO COMPLY WITH THE PUBLICATION
REQUIREMENT OF B.P. 325 AND OF THE ADMINISTRATIVE CODE IS LIKEWISE
INCORRECT. — It is petitioners' submission that the questioned administrative orders
are null and void for failure to comply with the publication requirement of B.P. Blg.
325 and of the Administrative Code. We do not agree. B.P. Blg. 325 requires Cabinet
review and approval of the impugned administrative orders before their publication.
However, since the Cabinet has yet to review and approve the proposed revised rates of
fees and charges, there can be no proper publication. The letter sent by the Office of
the National Administrative Register dated 30 September 1993 acknowledging in
general the filing of the administrative orders issued by the BPTTT can hardly stand as
proof of the due publication and filing of the particular administrative orders assailed
in the present case, said letter not having specified what administrative orders were
thus filed.
5. ID.; THE RESPONDENT COURT (COURT OF APPEALS) COULD NOT BE
FAULTED FOR NOT RULING ON THE VALIDITY OF RULE 59 OF ADMINISTRATIVE
ORDER NO. 1 BECAUSE JUDICIAL REVIEW OF THE CHALLENGED
ADMINISTRATIVE ORDERS AT THIS TIME IS YET PREMATURE. — Finally, as to the
third issue, we concur with the findings of the Court of Appeals as follows: At this
point in time, since the challenged administrative orders have not yet been submitted
to the Cabinet for its consideration and approval, this Court finds it untimely to
discuss and resolve the merits of the questions of whether or not the rate increases
and charges are just and reasonable sufficient to cover administrative costs, and/or
that the same are practicable and uniform for similar or comparable services and
functions, and/or that those rates conform with the rules and regulations of the
Ministry of Finance. Certainly, the questions raised in this petition are not yet ripe for
judicial determination, in the light of Matienzo vs. Abellera (162 SCRA 1, 9), that
courts should be reluctant to interfere with administrative action prior to its
completion or finality, the reason being that absence of a final order or decision, the
power of the administrative agency concerned has not been fully exercised and there
can be no irreparable harm. The rule of finality of administrative action for purposes of
judicial review also finds substance in Rochester Telephone Co. vs. U.S. (307 U.S. 125)
and Federal Power Commission vs. Metropolitan Edison Co. (304 U.S. 375). The
principle of exhaustion of administrative remedies which mandates that relief should
first be sought from the highest or most superior administrative agency, the likes of
the Cabinet, may prove that a resort to the courts would be unnecessary (Wee Poco vs.
Posadas, 65 Phil. 648), prevent the courts from being swamped by a resort to them in
the first instance (U.S. vs. Sing Tuck, 194 U.S. 161), strengthened by the rule on
comity and convenience which requires Us to raise our hands until the administrative
process has been finally completed (Matienzo vs. Abellera, supra; Railroad and
Warehouse Commission vs. Duluth, St., R. Co., 273 U.S. 625) and thus it is after
judicial review is no longer premature that the courts may ascertain, in proper cases,
whether the administrative action or findings are not in violation of law, whether they
are free from fraud or imposition and whether they find substantial support from the
evidence.
RESOLUTION
KAPUNAN, J p:
This is an appeal by certiorari under Rule 45 of the Revised Rules of Court from the
Decision dated 27 October 1993 of the Court of Appeals in CA-G.R. SP No. 30388
which dismissed petitioners' Special Civil Action for Prohibition and said court's
Resolution dated 10 January 1994 which denied petitioners' motion for
reconsideration of the said decision. LGM
On 9 November 1992, public respondents promulgated Administrative Order Nos. 1
and 2, Series of 1992, revising the rules of practice before the Bureau of Patents,
Trademarks and Technology Transfer (BPTTT) in patent and trademark cases, to take
effect on 15 March 1993. Among the provisions of said administrative orders are Rule
16 of A.O. No. 1 and Rule 15 of A.O. No. 2, which increased the fees payable to the
BPTTT for registration of patents and trademarks and Rule 59 of A.O. No. 2 which
prohibited the filing of multi-class applications, that is, one application covering
several classes of goods. 1
On 11 March 1993, petitioners, who are registered patent agents, filed with the Court
of Appeals a Petition for Prohibition with prayer for the issuance of a Writ of
Preliminary Injunction to stop public respondents from enforcing the aforementioned
administrative orders 2 and to declare Rule 16 of A.O. No. 1 and Rules 15 and 59 of
A.O. No. 2, series of 1992 of the BPTTT null and void.
On 27 October 1993, the Court of Appeals dismissed the petition for prohibition and
on 10 January 1994, denied the motion for reconsideration filed by petitioners on 18
November 1993. 3
In the present appeal, petitioners assign the following errors:
I
THE RESPONDENT COURT ERRED IN DISMISSING THE PETITION ON THE GROUND
OF NON-EXHAUSTION OF ADMINISTRATIVE REMEDIES.
II
THE RESPONDENT COURT ERRED IN NOT HOLDING THAT THE QUESTIONED
ADMINISTRATIVE ORDERS ARE NULL AND VOID FOR FAILURE TO COMPLY WITH
THE PUBLICATION REQUIREMENTS OF BOTH THE ADMINISTRATIVE CODE AND
B.P. NO. 325.
III
THE RESPONDENT COURT ERRED IN NOT DECLARING NULL AND VOID RULE 59
OF ADMINISTRATIVE ORDER NO. 1 ON THE GROUND THAT THE PUBLIC
RESPONDENTS DO NOT HAVE THE POWER TO AMEND THE TRADEMARK LAW. 4
Petitioners do not dispute that public respondents are expressly authorized to revise
their fees and charges under B.P. Blg. 325, entitled "An Act Authorizing Heads of
Ministries, Offices, Agencies and Commissions of the National Government, including
the Supreme Court and Constitutional Bodies, to Revise the Rates of Fees and
Charges," which took effect on 1 January 1983. 5
Petitioners, however, claim that the aforementioned administrative orders, particularly
Rule 16 of A.O. No. 1 and Rules 15 and 59 of A.O. No. 2, series of 1992, are null and
void for failure of public respondents to comply with the requirements of Cabinet
approval and publication as specifically provided in Sections 2 and 5 of B.P. Blg. 325.
6
We deny the petition.
Prohibition is not the proper remedy. The enabling law itself, which is B.P. Blg. 325,
has specifically tasked the Cabinet to review and approve any proposed revisions of
rates of fees and charges. Petitioners should have availed of this easy and accessible
remedy instead of immediately resorting to the judicial process.
Our legislature in delegating to administrative officers the authority to revise fees and
charges expressly required cabinet approval for the proper exercise of said power.
Petitioners should not have wasted the opportunity to utilize this built-in remedy.
ELC
The grant (or denial) of a writ of prohibition is ordinarily within the sound discretion of
the court to be exercised with caution and forbearance, according to the
circumstances of the particular case, and only where the right to seek relief is clear. 7
Prohibition is granted only in cases where no other remedy is available which is
sufficient to afford redress. That the petitioners have another and complete remedy at
law either by appeal or otherwise, generally a sufficient reason for dismissing the writ.
8
Hence, in Chua Huat v. CA, 9 we ruled that:
Where the enabling statute indicates a procedure for administrative review, and
provides a system of administrative appeal, or reconsideration, the courts, for reasons
of law, comity and convenience, will not entertain a case unless the available
administrative remedies have been resorted to and the appropriate authorities have
been given opportunity to act and correct the errors committed in the administrative
forum.
And in Philnabank Employees v. Estanislao, 10 we declared:
Secondly, although not inflexible, we have repeatedly declined on grounds of
prematurity, as well as in the interest of good order, a hasty recourse to the courts
when administrative avenues are still open.
In the instant case, we concur with the ruling of the Court of Appeals that:
. . . herein petitioners have still another available recourse under the law being relied
upon. Section 2 of B.P. 325 reads in part:
SECTION 2. Determination of Ratio. — . . . . The revision of rates shall be
determined by the respective ministry heads or equivalent functionaries conformably
with the rules and regulations of the Ministry of Finance issued pursuant to Section 4
hereof, upon recommendation of the imposing and collecting authorities concerned,
subject to the approval of the Cabinet. . . . (Emphasis supplied.) RHLY
The above provision envisions a three-step process involving a hierarchy of authority
before the rate increases and charges can be imposed and collected. First, the BPTTT,
which is the imposing and collecting agency, makes a recommendation of the fee
increases and charges. Those recommended rates and charges are submitted to the
Secretary of the DTI for his evaluation and approval. Second, if the Secretary of the
DTI finds that the rate increases and charges conform with the rules and regulations
of the Ministry of Finance, then the same are approved and in turn become the rates
of the department. The determination of the supposed rates and charges does not end
here. As mentioned in Section 2 above; the rates as determined by the department
head are "subject to the approval of the Cabinet."
The phrase "subject to" is one qualification. It means under the control, power or
dominion of or subordinated to, a higher authority (cf. PNB vs. Deputy, G.R. No.
35515-R, December 12, 1970). Meaning, that the proposed rates and charges still
have to obtain the imprimatur of the Cabinet, and prior to which, they have to
undergo Cabinet scrutiny. Thus, there is the contingency that the same may not
obtain the approval of the Cabinet. 11
Petitioners are not unaware of this remedy provided by law. They have, in fact, raised
the lack of Cabinet approval as one of the reasons for seeking the nullification of the
aforementioned administrative orders. 12
Petitioners' claim that public respondents "should have brought the revised schedule
of fees to the Cabinet for the latter's approval" 13 is trivial considering that prior to the
filing of the petition for prohibition, petitioners admittedly requested public
respondents to reconsider or defer implementation of the subject administrative
orders. 14 They were already in the process of availing themselves of the
administrative process when they suddenly abandoned the recourse and went to
court.
Petitioners further contend that there was no appeal or other plain, speedy and
adequate remedy available to them considering the alleged absence of any mechanism
or procedure in the administrative branch of the government to stop public
respondents from enforcing the questioned fee increases. They insist that the Cabinet
is not an appellate body with the authority to pass upon the legality of the acts of
department heads. 15
We do not agree. The provisions of Section 2 of B.P. 325 cannot be any clearer. The
recommended rates and charges are submitted to the Secretary of the DTI for his
evaluation and approval. The rate increases should be in conformity with the rules
and regulations of the Secretary of Finance and are "subject to the approval of the
Cabinet." Since according to petitioners the rate increases and charges have not been
submitted to the Cabinet for approval, judicial review thereof is certainly premature.
The need for Cabinet approval can further be gleaned from Sec. 5 of B.P. Blg. 325,
which provides:
SECTION 5. Publication requirement. — Upon review and approval by the Cabinet of
the adjusted rates of fees or charges, the heads of ministries, offices, agencies or
commissions concerned, including the courts and constitutional bodies, shall each
cause the revised schedule of fees and charges to be published once a week for two
consecutive weeks in two newspapers of general circulation in the Philippines in lieu of
publication in the Official Gazette and the same shall be effective fifteen days after the
last publication. (Emphasis ours.)
However, we reject the claim of public respondents that the required Cabinet approval
was deemed to have been fulfilled with the issuance of Executive Order (E.O.) No. 159,
dated 23 February 1994, the pertinent portions of which provide
xxx xxx xxx
SECTION 1. All departments, bureaus, offices, units, and agencies including
government-owned or controlled corporations, are hereby directed to revise their fees
and charges to recover at least the full cost of services rendered. cda
The full cost of services for the year rendered by a government department, bureau,
office, unit, or agency, including government-owned or controlled corporation, shall be
equivalent to the appropriation of said department, bureau, office, unit, or agency for
the year under the relevant General Appropriations Act or under the Corporate
Operating Budget submitted by the government-owned or controlled corporation as
approved by the Department of Budget and Management.
The revised rates shall, wherever practicable, be uniform for similar or comparable
services and functions and shall be determined by the respective department heads,
governing boards, or equivalent functionaries; Provided that, this Executive Order
shall not apply to fees charged by departments, bureaus, offices, units, and agencies,
including government-owned or controlled corporations, related to constitutionally
mandated free or subsidized services, such as in education and health, as well as to
those exempted by international agreements, as shall be determined by the President.
SECTION 2. The heads of departments shall be responsible for the implementation of
this Executive Order by the bureaus, offices, units, and agencies, including
government-owned or controlled corporations, within their respective jurisdictions.
xxx xxx xxx
It is private respondents' thesis that E.O. No. 159 explicitly eliminated the requisite
Cabinet approval. It is a general rule that laws shall have prospective effect. 16 E.O.
No. 159 was promulgated on 23 February 1994 or two years after the subject
administrative orders were issued and, therefore, has no application in the case at
bench.
Anent the second assigned error, it is petitioners' submission that the questioned
administrative orders are null and void for failure to comply with the publication
requirement of B.P. Blg. 325 and of the Administrative Code. We do not agree.
B.P. Blg. 325 requires Cabinet review and approval of the impugned administrative
orders before their publication. However, since the Cabinet has yet to review and
approve the proposed revised rates of fees and charges, there can be no proper
publication. The letter sent by the Office of the National Administrative Register dated
30 September 1993 acknowledging in general the filing of the administrative orders
issued by the BPTTT can hardly stand as proof of the due publication and filing of the
particular administrative orders assailed in the present case, said letter not having
specified what administrative orders were thus filed.
Finally, as to the third issue, we concur with the findings of the Court of Appeals as
follows:
At this point in time, since the challenged administrative orders have not yet been
submitted to the Cabinet for its consideration and approval, this Court finds it
untimely to discuss and resolve the merits of the questions of whether or not the rate
increases and charges are just and reasonable sufficient to cover administrative costs,
and/or that the same are practicable and uniform for similar or comparable services
and functions, and/or that those rates conform with the rules and regulations of the
Ministry of Finance. Certainly, the questions raised in this petition are not yet ripe for
judicial determination, in the light of Matienzo vs. Abellera, (162 SCRA 1, 9), that
courts should be reluctant to interfere with administrative action prior to its
completion or finality, the reason being that absence of a final order or decision, the
power of the administrative agency concerned has not been fully exercised and there
can be no irreparable harm. The rule of finality of administrative action for purposes of
judicial review also finds substance in Rochester Telephone Co. vs. U.S. (307 U.S. 125)
and Federal Power Commission vs. Metropolitan Edison Co. (304 U.S. 375). The
principle of exhaustion of administrative remedies which mandates that relief should
first be sought from the highest or most superior administrative agency, the likes of
the Cabinet, may prove that a resort to the courts would be unnecessary (Wee Poco vs.
Posadas, 65 Phil. 648), prevent the courts from being swamped by a resort to them in
the first instance (U.S. vs. Sing Tuck, 194 U.S. 161), strengthened by the rule on
comity and convenience which requires Us to raise our hands until the administrative
process has been finally completed (Matienzo vs. Abellera, supra; Railroad and
Warehouse Commission vs. Duluth, St., R. Co., 273 US 625), and thus it is after
judicial review is no longer premature that the courts may ascertain, in proper cases,
whether the administrative action or findings are not in violation of law, whether they
are free from fraud or imposition and whether they find substantial support from the
evidence. 17
WHEREFORE, PREMISES CONSIDERED, the petition is hereby DENIED. LGM
SO ORDERED.
Padilla, Bellosillo, Vitug, and Hermosisima, Jr., JJ., concur.
SECOND DIVISION
[G.R. No. 144681. June 21, 2004.]
PROFESSIONAL REGULATION COMMISSION (PRC), CHAIRMAN HERMOGENES P.
POBRE, ASSOCIATE COMMISSIONER ARMANDO PASCUAL, BOARD OF MEDICINE,
CHAIRMAN RODOLFO P. DE GUZMAN, JOSE S. RAMIREZ, JUANITO B. BILLOTE,
RUBEN R. POLICARPIO, EDGARDO T. FERNANDO and RICARDO D. FULGENCIO II,
petitioners, vs. ARLENE V. DE GUZMAN, VIOLETA V. MENESES, CELERINA S.
NAVARRO, JOSE RAMONCITO P. NAVARRO, ARNEL V. HERRERA and GERALDINE
ELIZABETH M. PAGILAGAN, ELNORA R. RAQUENO, MARISSA A. REGODON, LAURA
M. SANTOS, KARANGALAN D. SERRANO, DANILO A. VILLAVER, MARIA ROSARIO L.
LEONOR, ALICIA S. LIZANO, MARITEL M. ECHIVERRI, BERNADETTE T. MENDOZA,
FERNANDO F. MANDAPAT, ALELI A. GOLLAYAN, ELCIN C. ARRIOLA, HERMINIGILDA
E. CONEJOS, SALLY B. BUNAGAN, ROGELIO B. ANCHETA, OSCAR H. PADUA, JR.,
EVELYN D. GRAJO, EVELYN S. ACOSTA, MARGARITA BELINDA L. VICENCIO,
VALENTINO P. ARBOLEDA, EVELYN O. RAMOS, ACHILLES J. PERALTA, CORAZON
M. CRUZ, LEUVINA P. CHICO, JOSEPH A. JAO, MA. LUISA S. GUTIERREZ, LYDIA C.
CHAN, OPHELIA C. HIDALGO, FERNANDO T. CRUZ, MELVIN M. USITA, RAFAEL I.
TOLENTINO, GRACE E. UY, CHERYL R. TRIGUERO, MICHAEL L. SERRANO,
FEDERICO L. CASTILLO, MELITA J. CAÑEDO, SAMUEL B. BANGOY, BERNARDITA B.
SY, GLORIA T. JULARBAL, FREDERICK D. FRANCISCO, CARLOS M. BERNARDO,
JR., HUBERT S. NAZARENO, CLARISSA B. BACLIG, DAYMINDA G. BONTUYAN,
BERNADETTE H. CABUHAT, NANCY J. CHAVEZ, MARIO D. CUARESMA, ERNESTO L.
CUE, EVELYN C. CUNDANGAN, RHONEIL R. DEVERATURDA, DERILEEN D.
DORADO, SAIBZUR N. EDDING, VIOLETA C. FELIPE, HERMINIO V. FERNANDEZ,
JR., MARIA VICTORIA M. LACSAMANA, NORMA G. LAFAVILLA, RUBY B. LANTIN, MA.
ELOISA Q. MALLARI, CLARISA SJ. NICOLAS, PERCIVAL H. PANGILINAN, ARNULFO
A. SALVADOR, ROBERT B. SANCHEZ, MERLY D. STA. ANA and YOLANDA P. UNICA,
respondents.
The Solicitor General for petitioners.
Ericson O. Ang for respondents.
SYNOPSIS
The respondents are all graduates from the Fatima College of Medicine who
successfully passed the February 1993 Physician Licensure Examination. The Board
of Medicine, however, observed that the grades of the seventy-nine successful
examinees from Fatima College in Biochemistry (Bio-Chem) and Obstetrics and
Gynecology (Ob-Gyne) were unusually and exceptionally high. Accordingly, the Board
issued a resolution withholding the registration as physicians of all the examinees
from the Fatima College. Respondents then filed a special civil action for Mandamus.
After trial, the court a quo allowed the respondents to take their Physician's oath and
to register as duly licensed physicians. The said decision was sustained by the Court
of Appeals. Hence, the petition. cdtai
The petition was granted. The Court ruled that the guidelines provided for in Rep. Act
No. 2382, as amended, which prescribes the requirements for admission to the
practice of medicine, the qualifications of candidates for the board examinations, the
scope and conduct of the examinations, the grounds for denying the issuance of a
physician's license, or revoking a license that has been issued. Verily, to be granted
the privilege to practice medicine, the applicant must show that he possesses all the
qualifications and none of the disqualifications. Furthermore, it must appear that he
has fully complied with all the conditions and requirements imposed by the law and
the licensing authority. Should doubt taint or mar the compliance as being less than
satisfactory, then the privilege will not issue. For said privilege is distinguishable from
a matter of right, which may be demanded if denied. Thus, without a definite showing
that the aforesaid requirements and conditions have been satisfactorily met, the
courts may not grant the writ of mandamus to secure said privilege without thwarting
the legislative will.
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; MANDAMUS; ELUCIDATED. —
Mandamus is a command issuing from a court of competent jurisdiction, in the name
of the state or the sovereign, directed to some inferior court, tribunal, or board, or to
some corporation or person requiring the performance of a particular duty therein
specified, which duty results from the official station of the party to whom the writ is
directed, or from operation of law. Section 3 of Rule 65 of the 1997 Rules of Civil
Procedure outlines two situations when a writ of mandamus may issue, when any
tribunal, corporation, board, officer or person unlawfully (1) neglects the performance
of an act which the law specifically enjoins as a duty resulting from an office, trust, or
station; or (2) excludes another from the use and enjoyment of a right or office to
which the other is entitled.
2. POLITICAL LAW; STATUTORY CONSTRUCTION; INTENT OR MEANING OF THE
STATUTE SHOULD BE ASCERTAINED FROM THE STATUTE TAKEN AS A WHOLE. —
[I]t is a basic rule in statutory construction that each part of a statute should be
construed in connection with every other part to produce a harmonious whole, not
confining construction to only one section. The intent or meaning of the statute should
be ascertained from the statute taken as a whole, not from an isolated part of the
provision. Accordingly, Section 20 of Rep. Act No. 2382, as amended should be read in
conjunction with the other provisions of the Act. Thus, to determine whether the
petitioners had the ministerial obligation to administer the Hippocratic Oath to
respondents and register them as physicians, recourse must be had to the entirety of
the Medical Act of 1959. HEITAD
3. ID.; ADMINISTRATIVE LAW; REPUBLIC ACT NO. 2382 (THE MEDICAL ACT OF
1959); A PERSON WHO ASPIRES TO PRACTICE MEDICINE IN THE PHILIPPINES
MUST HAVE "SATISFACTORILY PASSED" THE LICENSURE EXAMINATIONS;
VIOLATED IN CASE AT BAR. — Section 8 of Rep. Act No. 2382 prescribes, among
others, that a person who aspires to practice medicine in the Philippines, must have
"satisfactorily passed the corresponding Board Examination". Section 22, in turn,
provides that the oath may only be administered "to physicians who qualified in the
examinations". The operative word here is "satisfactorily", defined as "sufficient to
meet a condition or obligation" or "capable of dispelling doubt or ignorance". Gleaned
from Board Resolution No. 26, the licensing authority apparently did not find that the
respondents "satisfactorily passed" the licensure examinations. The Board instead
sought to nullify the examination results obtained by the respondents.
4. REMEDIAL LAW; SPECIAL CIVIL ACTIONS; MANDAMUS; NOT TO ESTABLISH
A RIGHT BUT TO ENFORCE ONE THAT HAS BEEN ESTABLISHED BY LAW. — The
function of mandamus is not to establish a right but to enforce one that has been
established by law. If no legal right has been violated, there can be no application of a
legal remedy, and the writ of mandamus is a legal remedy for a legal right. There must
be a well-defined, clear and certain legal right to the thing demanded. It is long
established rule that a license to practice medicine is a privilege or franchise granted
by the government. aTEHIC
5. POLITICAL LAW; STATE; POLICE POWER; EXERCISE OF THE RIGHT OF
EVERY CITIZEN TO SELECT A PROFESSION CAN BE REGULATED. — It is true that
this Court has upheld the constitutional right of every citizen to select a profession or
course of study subject to a fair, reasonable, and equitable admission and academic
requirements. But like all rights and freedoms guaranteed by the Charter, their
exercise may be so regulated pursuant to the police power of the State to safeguard
health, morals, peace, education, order, safety, and general welfare of the people.
Thus, persons who desire to engage in the learned professions requiring scientific or
technical knowledge may be required to take an examination as a prerequisite to
engaging in their chosen careers. This regulation takes particular pertinence in the
field of medicine, to protect the public from the potentially deadly effects of
incompetence and ignorance among those who would practice medicine. In a previous
case, it may be recalled, this Court has ordered the Board of Medical Examiners to
annul both its resolution and certificate authorizing a Spanish subject, with the
degree of Licentiate in Medicine and Surgery from the University of Barcelona, Spain,
to practice medicine in the Philippines, without first passing the examination required
by the Philippine Medical Act. In another case worth noting, we upheld the power of
the State to upgrade the selection of applicants into medical schools through
admission tests.
6. ID.; ID.; ID.; POWER TO REGULATE THE EXERCISE OF A PROFESSION OR
PURSUIT OF AN OCCUPATION CANNOT BE EXERCISED BY THE STATE OR ITS
AGENTS IN AN ARBITRARY, DESPOTIC OR OPPRESSIVE MANNER. — It must be
stressed, nevertheless, that the power to regulate the exercise of a profession or
pursuit of an occupation cannot be exercised by the State or its agents in an arbitrary,
despotic, or oppressive manner. A political body that regulates the exercise of a
particular privilege has the authority to both forbid and grant such privilege in
accordance with certain conditions. Such conditions may not, however, require giving
up one's constitutional rights as a condition to acquiring the license. Under the view
that the legislature cannot validly bestow an arbitrary power to grant or refuse a
license on a public agency or officer, courts will generally strike down license
legislation that vests in public officials discretion to grant or refuse a license to carry
on some ordinarily lawful business, profession, or activity without prescribing definite
rules and conditions for the guidance of said officials in the exercise of their power.
cCTaSH
7. ID.; ADMINISTRATIVE LAW; REPUBLIC ACT NO. 2382; APPLICANT MUST
SHOW THAT HE POSSESSES ALL THE QUALIFICATIONS AND NONE OF THE
DISQUALIFICATIONS. — [T]he . . . guidelines are provided for in Rep. Act No. 2382, as
amended, which prescribes the requirements for admission to the practice of
medicine, the qualifications of candidates for the board examinations, the scope and
conduct of the examinations, the grounds for denying the issuance of a physician's
license, or revoking a license that has been issued. Verily, to be granted the privilege
to practice medicine, the applicant must show that he possesses all the qualifications
and none of the disqualifications. Furthermore, it must appear that he has fully
complied with all the conditions and requirements imposed by the law and the
licensing authority. Should doubt taint or mar the compliance as being less than
satisfactory, then the privilege will not issue. For said privilege is distinguishable from
a matter of right, which may be demanded if denied. Thus, without a definite showing
that the aforesaid requirements and conditions have been satisfactorily met, the
courts may not grant the writ of mandamus to secure said privilege without thwarting
the legislative will.
8. ID.; ID.; ID.; REMEDIES TO QUESTION THE RESOLUTION OF THE BOARD OF
MEDICINE. — Section 26 of the Medical Act of 1959 provides for the administrative
and judicial remedies that respondents herein can avail to question Resolution No. 26
of the Board of Medicine, namely: (a) appeal the unfavorable judgment to the PRC; (b)
should the PRC ruling still be unfavorable, to elevate the matter on appeal to the Office
of the President; and (c) should they still be unsatisfied, to ask for a review of the case
or to bring the case to court via a special civil action of certiorari.
9. ID.; ID.; DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES; NOT
APPLICABLE WHERE A PURE QUESTION OF LAW IS RAISED. — Thus, as a rule,
mandamus will not lie when administrative remedies are still available. However, the
doctrine of exhaustion of administrative remedies does not apply where, as in this
case, a pure question of law is raised. cEHITA
DECISION
TINGA, J p:
This petition for review under Rule 45 of the 1997 Rules of Civil Procedure seeks to
nullify the Decision, 1 dated May 16, 2000, of the Court of Appeals in CA-G.R. SP No.
37283. The appellate court affirmed the judgment 2 dated December 19, 1994, of the
Regional Trial Court (RTC) of Manila, Branch 52, in Civil Case No. 93-66530. The trial
court allowed the respondents to take their physician's oath and to register as duly
licensed physicians. Equally challenged is the Resolution 3 promulgated on August
25, 2000 of the Court of Appeals, denying petitioners' Motion for Reconsideration.
cASIED
The facts of this case are as follows:
The respondents are all graduates of the Fatima College of Medicine, Valenzuela City,
Metro Manila. They passed the Physician Licensure Examination conducted in
February 1993 by the Board of Medicine (Board). Petitioner Professional Regulation
Commission (PRC) then released their names as successful examinees in the medical
licensure examination.
Shortly thereafter, the Board observed that the grades of the seventy-nine successful
examinees from Fatima College in the two most difficult subjects in the medical
licensure exam, Biochemistry (Bio-Chem) and Obstetrics and Gynecology (OB-Gyne),
were unusually and exceptionally high. Eleven Fatima examinees scored 100% in Bio-
Chem and ten got 100% in OB-Gyne, another eleven got 99% in Bio-Chem, and
twenty-one scored 99% in OB-Gyne. The Board also observed that many of those who
passed from Fatima got marks of 95% or better in both subjects, and no one got a
mark lower than 90%. A comparison of the performances of the candidates from other
schools was made. The Board observed that strangely, the unusually high ratings were
true only for Fatima College examinees. It was a record-breaking phenomenon in the
history of the Physician Licensure Examination.
On June 7, 1993, the Board issued Resolution No. 19, withholding the registration as
physicians of all the examinees from the Fatima College of Medicine. 4 The PRC asked
the National Bureau of Investigation (NBI) to investigate whether any anomaly or
irregularity marred the February 1993 Physician Licensure Examination.
Prior to the NBI investigation, the Board requested Fr. Bienvenido F. Nebres, S.J., an
expert mathematician and authority in statistics, and later president of the Ateneo de
Manila University, to conduct a statistical analysis of the results in Bio-Chem and Ob-
Gyne of the said examination.
On June 10, 1993, Fr. Nebres submitted his report. He reported that a comparison of
the scores in Bio-Chem and Ob-Gyne, of the Fatima College examinees with those of
examinees from De La Salle University and Perpetual Help College of Medicine showed
that the scores of Fatima College examinees were not only incredibly high but
unusually clustered close to each other. He concluded that there must be some
unusual reason creating the clustering of scores in the two subjects. It must be a
cause "strong enough to eliminate the normal variations that one should expect from
the examinees [of Fatima College] in terms of talent, effort, energy, etc." 5
For its part, the NBI found that "the questionable passing rate of Fatima examinees in
the [1993] Physician Examination leads to the conclusion that the Fatima examinees
gained early access to the test questions." 6
On July 5, 1993, respondents Arlene V. De Guzman, Violeta V. Meneses, Celerina S.
Navarro, Jose Ramoncito P. Navarro, Arnel V. Herrera, and Geraldine Elizabeth M.
Pagilagan (Arlene V. De Guzman et al., for brevity) filed a special civil action for
mandamus, with prayer for preliminary mandatory injunction docketed as Civil Case
No. 93-66530 with the Regional Trial Court (RTC) of Manila, Branch 52. Their petition
was adopted by the other respondents as intervenors.
Meanwhile, the Board issued Resolution No. 26, dated July 21, 1993, charging
respondents with "immorality, dishonest conduct, fraud, and deceit" in connection
with the Bio-Chem and Ob-Gyne examinations. It recommended that the test results
of the Fatima examinees be nullified. The case was docketed as Adm. Case No. 1687
by the PRC.
On July 28, 1993, the RTC issued an Order in Civil Case No. 93-66530 granting the
preliminary mandatory injunction sought by the respondents. It ordered the
petitioners to administer the physician's oath to Arlene V. De Guzman et al., and enter
their names in the rolls of the PRC.
The petitioners then filed a special civil action for certiorari with the Court of Appeals
to set aside the mandatory injunctive writ, docketed as CA-G.R. SP No. 31701.
On October 21, 1993, the appellate court decided CA-G.R. SP No. 31701, with the
dispositive portion of the Decision ordaining as follows:
WHEREFORE, this petition is GRANTED. Accordingly, the writ of preliminary
mandatory injunction issued by the lower court against petitioners is hereby nullified
and set aside.
SO ORDERED. 7
Arlene V. de Guzman, et al., then elevated the foregoing Decision to this Court in G.R.
No. 112315. In our Resolution dated May 23, 1994, we denied the petition for failure
to show reversible error on the part of the appellate court. DcCEHI
Meanwhile, on November 22, 1993, during the pendency of the instant petition, the
pre-trial conference in Civil Case No. 93-66530 was held. Then, the parties, agreed to
reduce the testimonies of their respective witnesses to sworn questions-and-answers.
This was without prejudice to cross-examination by the opposing counsel.
On December 13, 1993, petitioners' counsel failed to appear at the trial in the
mistaken belief that the trial was set for December 15. The trial court then ruled that
petitioners waived their right to cross-examine the witnesses.
On January 27, 1994, counsel for petitioners filed a Manifestation and Motion stating
the reasons for her non-appearance and praying that the cross-examination of the
witnesses for the opposing parties be reset. The trial court denied the motion for lack
of notice to adverse counsel. It also denied the Motion for Reconsideration that
followed on the ground that adverse counsel was notified less than three (3) days prior
to the hearing.
Meanwhile, to prevent the PRC and the Board from proceeding with Adm. Case No.
1687, the respondents herein moved for the issuance of a restraining order, which the
lower court granted in its Order dated April 4, 1994.
The petitioners then filed with this Court a petition for certiorari docketed as G.R. No.
115704, to annul the Orders of the trial court dated November 13, 1993, February 28,
1994, and April 4, 1994. We referred the petition to the Court of Appeals where it was
docketed as CA-G.R. SP No. 34506.
On August 31, 1994, the appellate court decided CA-G.R. SP No. 34506 as follows:
WHEREFORE, the present petition for certiorari with prayer for temporary restraining
order/preliminary injunction is GRANTED and the Orders of December 13, 1993,
February 7, 1994, February 28, 1994, and April 4, 1994 of the RTC-Manila, Branch
52, and all further proceedings taken by it in Special Civil Action No. 93-66530 are
hereby DECLARED NULL and VOID. The said RTC-Manila is ordered to allow
petitioners' counsel to cross-examine the respondents' witnesses, to allow petitioners
to present their evidence in due course of trial, and thereafter to decide the case on
the merits on the basis of the evidence of the parties. Costs against respondents.
IT IS SO ORDERED. 8
The trial was then set and notices were sent to the parties.
A day before the first hearing, on September 22, 1994, the petitioners filed an Urgent
Ex-Parte Manifestation and Motion praying for the partial reconsideration of the
appellate court's decision in CA-G.R. SP No. 34506, and for the outright dismissal of
Civil Case No. 93-66530. The petitioners asked for the suspension of the proceedings.
In its Order dated September 23, 1994, the trial court granted the aforesaid motion,
cancelled the scheduled hearing dates, and reset the proceedings to October 21 and
28, 1994.
Meanwhile, on October 25, 1994, the Court of Appeals denied the partial motion for
reconsideration in CA-G.R. SP No. 34506. Thus, petitioners filed with the Supreme
Court a petition for review docketed as G.R. No. 117817, entitled Professional
Regulation Commission, et al. v. Court of Appeals, et al.
On November 11, 1994, counsel for the petitioners failed to appear at the trial of Civil
Case No. 93-66530. Upon motion of the respondents herein, the trial court ruled that
herein petitioners waived their right to cross-examine the herein respondents. Trial
was reset to November 28, 1994.
On November 25, 1994, petitioners' counsel moved for the inhibition of the trial court
judge for alleged partiality. On November 28, 1994, the day the Motion to Inhibit was
to be heard, petitioners failed to appear. Thus, the trial court denied the Motion to
Inhibit and declared Civil Case No. 93-66530 deemed submitted for decision.
On December 19, 1994, the trial court handed down its judgment in Civil Case No. 93-
66530, the fallo of which reads:
WHEREFORE, judgment is rendered ordering the respondents to allow the petitioners
and intervenors (except those with asterisks and footnotes in pages 1 & 2 of this
decision) [sic], 9 to take the physician's oath and to register them as physicians.
CDHaET
It should be made clear that this decision is without prejudice to any administrative
disciplinary action which may be taken against any of the petitioners for such causes
and in the manner provided by law and consistent with the requirements of the
Constitution as any other professionals.
No costs.
SO ORDERED. 10
As a result of these developments, petitioners filed with this Court a petition for review
on certiorari docketed as G.R. No. 118437, entitled Professional Regulation
Commission v. Hon. David G. Nitafan, praying inter alia, that (1) G.R. No. 118437 be
consolidated with G.R. No. 117817; (2) the decision of the Court of Appeals dated
August 31, 1994 in CA-G.R. SP No. 34506 be nullified for its failure to decree the
dismissal of Civil Case No. 93-66530, and in the alternative, to set aside the decision
of the trial court in Civil Case No. 93-66530, order the trial court judge to inhibit
himself, and Civil Case No. 93-66530 be re-raffled to another branch.
On December 26, 1994, the petitioners herein filed their Notice of Appeal 11 in Civil
Case No. 93-66530, thereby elevating the case to the Court of Appeals, where it was
docketed as CA-G.R. SP No. 37283.
In our Resolution of June 7, 1995, G.R. No. 118437 was consolidated with G.R. No.
117817.
On July 9, 1998, we disposed of G.R. Nos. 117817 and 118437 in this wise:
WHEREFORE, the petition in G.R. No. 117817 is DISMISSED for being moot. The
petition in G.R. No. 118437 is likewise DISMISSED on the ground that there is a
pending appeal before the Court of Appeals. Assistant Solicitor General Amparo M.
Cabotaje-Tang is advised to be more circumspect in her dealings with the courts as a
repetition of the same or similar acts will be dealt with accordingly.
SO ORDERED. 12
While CA-G.R. SP No. 37283 was awaiting disposition by the appellate court, Arnel V.
Herrera, one of the original petitioners in Civil Case No. 93-66530, joined by twenty-
seven intervenors, to wit: Fernando F. Mandapat, Ophelia C. Hidalgo, Bernadette T.
Mendoza, Ruby B. Lantin-Tan, Fernando T. Cruz, Marissa A. Regodon, Ma. Eloisa Q.
Mallari-Largoza, Cheryl R. Triguero, Joseph A. Jao, Bernadette H. Cabuhat, Evelyn S.
Acosta-Cabanes, Laura M. Santos, Maritel M. Echiverri, Bernadette C. Escusa,
Carlosito C. Domingo, Alicia S. Lizano, Elnora R. Raqueno-Rabaino, Saibzur N.
Edding, Derileen D. Dorado-Edding, Robert B. Sanchez, Maria Rosario L. Leonor-
Lacandula, Geraldine Elizabeth M. Pagilagan-Palma, Margarita Belinda L. Vicencio-
Gamilla, Herminigilda E. Conejos, Leuvina P. Chico-Paguio, Elcin C. Arriola-Ocampo,
and Jose Ramoncito P. Navarro, manifested that they were no longer interested in
proceeding with the case and moved for its dismissal. A similar manifestation and
motion was later filed by intervenors Mary Jean I. Yeban-Merlan, Michael L. Serrano,
Norma G. Lafavilla, Arnulfo A. Salvador, Belinda C. Rabara, Yolanda P. Unica,
Dayminda G. Bontuyan, Clarissa B. Baclig, Ma. Luisa S. Gutierrez, Rhoneil R.
Deveraturda, Aleli A. Gollayan, Evelyn C. Cundangan, Frederick D. Francisco, Violeta
V. Meneses, Melita J. Cañedo, Clarisa SJ. Nicolas, Federico L. Castillo, Karangalan D.
Serrano, Danilo A. Villaver, Grace E. Uy, Lydia C. Chan, and Melvin M. Usita. The
Court of Appeals ruled that its decision in CA-G.R. SP No. 37283 would not apply to
them.
On May 16, 2000, the Court of Appeals decided CA-G.R. SP No. 37283, with the
following fallo, to wit:
WHEREFORE, finding no reversible error in the decision appealed from, We hereby
AFFIRM the same and DISMISS the instant appeal.
No pronouncement as to costs.
SO ORDERED. 13
In sustaining the trial court's decision, the appellate court ratiocinated that the
respondents complied with all the statutory requirements for admission into the
licensure examination for physicians in February 1993. They all passed the said
examination. Having fulfilled the requirements of Republic Act No. 2382, 14 they
should be allowed to take their oaths as physicians and be registered in the rolls of the
PRC. aSDHCT
Hence, this petition raising the following issues:
I
WHETHER OR NOT RESPONDENTS HAVE A VALID CAUSE OF ACTION FOR
MANDAMUS AGAINST PETITIONERS IN THE LIGHT OF THE RESOLUTION OF THIS
HONORABLE COURT IN G.R. NO. 112315 AFFIRMING THE COURT OF APPEALS'
DECISION DECLARING THAT IF EVER THERE IS SOME DOUBT AS TO THE MORAL
FITNESS OF EXAMINEES, THE ISSUANCE OF LICENSE TO PRACTICE MEDICINE IS
NOT AUTOMATICALLY GRANTED TO THE SUCCESSFUL EXAMINEES.
II
WHETHER OR NOT THE PETITION FOR MANDAMUS COULD PROCEED DESPITE
THE PENDENCY OF ADMINISTRATIVE CASE NO. 1687, WHICH WAS PRECISELY
LODGED TO DETERMINE THE MORAL FITNESS OF RESPONDENTS TO BECOME
DOCTORS. 15
To our mind, the only issue is: Did the Court of Appeals commit a reversible error of
law in sustaining the judgment of the trial court that respondents are entitled to a writ
of mandamus?
The petitioners submit that a writ of mandamus will not lie in this case. They point
out that for a writ of mandamus to issue, the applicant must have a well-defined, clear
and certain legal right to the thing demanded and it is the duty of the respondent to
perform the act required. Thus, mandamus may be availed of only when the duty
sought to be performed is a ministerial and not a discretionary one. The petitioners
argue that the appellate court's decision in CA-G.R. SP No. 37283 upholding the
decision of the trial court in Civil Case No. 93-66530 overlooked its own
pronouncement in CA-G.R. SP No. 31701. The Court of Appeals held in CA-G.R. SP
No. 31701 that the issuance of a license to engage in the practice of medicine becomes
discretionary on the PRC if there exists some doubt that the successful examinee has
not fully met the requirements of the law. The petitioners stress that this Court's
Resolution dated May 24, 1994 in G.R. No. 112315 held that there was no showing
"that the Court of Appeals had committed any reversible error in rendering the
questioned judgment" in CA-G.R. SP No. 31701. The petitioners point out that our
Resolution in G.R. No. 112315 has long become final and executory.
Respondents counter that having passed the 1993 licensure examinations for
physicians, the petitioners have the obligation to administer to them the oath as
physicians and to issue their certificates of registration as physicians pursuant to
Section 20 16 of Rep. Act No. 2382. The Court of Appeals in CA-G.R. SP No. 37283,
found that respondents complied with all the requirements of Rep. Act No. 2382.
Furthermore, respondents were admitted by the Medical Board to the licensure
examinations and had passed the same. Hence, pursuant to Section 20 of Rep. Act No.
2382, the petitioners had the obligation to administer their oaths as physicians and
register them.
Mandamus is a command issuing from a court of competent jurisdiction, in the name
of the state or the sovereign, directed to some inferior court, tribunal, or board, or to
some corporation or person requiring the performance of a particular duty therein
specified, which duty results from the official station of the party to whom the writ is
directed, or from operation of law. 17 Section 3 of Rule 65 18 of the 1997 Rules of Civil
Procedure outlines two situations when a writ of mandamus may issue, when any
tribunal, corporation, board, officer or person unlawfully (1) neglects the performance
of an act which the law specifically enjoins as a duty resulting from an office, trust, or
station; or (2) excludes another from the use and enjoyment of a right or office to
which the other is entitled.
We shall discuss the issues successively.
1. On The Existence of a Duty of the Board of Medicine To Issue Certificates of
Registration as Physicians under Rep. Act No. 2382.
For mandamus to prosper, there must be a showing that the officer, board, or official
concerned, has a clear legal duty, not involving discretion. 19 Moreover, there must be
statutory authority for the performance of the act, 20 and the performance of the duty
has been refused. 21 Thus, it must be pertinently asked now: Did petitioners have the
duty to administer the Hippocratic Oath and register respondents as physicians under
the Medical Act of 1959?
As found by the Court of Appeals, on which we agree on the basis of the records:
cSCADE
It bears emphasizing herein that petitioner-appellees and intervenor-appellees have
fully complied with all the statutory requirements for admission into the licensure
examinations for physicians conducted and administered by the respondent-
appellants on February 12, 14, 20 and 21, 1993. Stress, too, must be made of the fact
that all of them successfully passed the same examinations. 22
The crucial query now is whether the Court of Appeals erred in concluding that
petitioners should allow the respondents to take their oaths as physicians and register
them, steps which would enable respondents to practice the medical profession 23
pursuant to Section 20 of the Medical Act of 1959?
The appellate court relied on a single provision, Section 20 of Rep. Act No. 2382, in
concluding that the petitioners had the ministerial obligation to administer the
Hippocratic Oath to respondents and register them as physicians. But it is a basic rule
in statutory construction that each part of a statute should be construed in
connection with every other part to produce a harmonious whole, not confining
construction to only one section. 24 The intent or meaning of the statute should be
ascertained from the statute taken as a whole, not from an isolated part of the
provision. Accordingly, Section 20, of Rep. Act No. 2382, as amended should be read
in conjunction with the other provisions of the Act. Thus, to determine whether the
petitioners had the ministerial obligation to administer the Hippocratic Oath to
respondents and register them as physicians, recourse must be had to the entirety of
the Medical Act of 1959.
A careful reading of Section 20 of the Medical Act of 1959 discloses that the law uses
the word "shall" with respect to the issuance of certificates of registration. Thus, the
petitioners "shall sign and issue certificates of registration to those who have
satisfactorily complied with the requirements of the Board." In statutory construction
the term "shall" is a word of command. It is given imperative meaning. Thus, when an
examinee satisfies the requirements for the grant of his physician's license, the Board
is obliged to administer to him his oath and register him as a physician, pursuant to
Section 20 and par. (1) of Section 22 25 of the Medical Act of 1959.
However, the surrounding circumstances in this case call for serious inquiry
concerning the satisfactory compliance with the Board requirements by the
respondents. The unusually high scores in the two most difficult subjects was
phenomenal, according to Fr. Nebres, the consultant of PRC on the matter, and raised
grave doubts about the integrity, if not validity, of the tests. These doubts have to be
appropriately resolved.
Under the second paragraph of Section 22, the Board is vested with the power to
conduct administrative investigations and "disapprove applications for examination or
registration," pursuant to the objectives of Rep. Act No. 2382 as outlined in Section 1
26 thereof. In this case, after the investigation, the Board filed before the PRC, Adm.
Case No. 1687 against the respondents to ascertain their moral and mental fitness to
practice medicine, as required by Section 9 27 of Rep. Act No. 2382. In its Decision
dated July 1, 1997, the Board ruled:
WHEREFORE, the BOARD hereby CANCELS the respondents['] examination papers in
the Physician Licensure Examinations given in February 1993 and further DEBARS
them from taking any licensure examination for a period of ONE (1) YEAR from the
date of the promulgation of this DECISION. They may, if they so desire, apply for the
scheduled examinations for physicians after the lapse of the period imposed by the
BOARD.
SO ORDERED. 28
Until the moral and mental fitness of the respondents could be ascertained, according
to petitioners, the Board has discretion to hold in abeyance the administration of the
Hippocratic Oath and the issuance of the certificates to them. The writ of mandamus
does not lie to compel performance of an act which is not duly authorized.
The respondents nevertheless argue that under Section 20, the Board shall not issue a
certificate of registration only in the following instances: (1) to any candidate who has
been convicted by a court of competent jurisdiction of any criminal offense involving
moral turpitude; (2) or has been found guilty of immoral or dishonorable conduct after
the investigation by the Board; or (3) has been declared to be of unsound mind. They
aver that none of these circumstances are present in their case.
Petitioners reject respondents' argument. We are informed that in Board Resolution
No. 26, 29 dated July 21, 1993, the Board resolved to file charges against the
examinees from Fatima College of Medicine for "immorality, dishonesty, fraud, and
deceit in the Obstetrics-Gynecology and Biochemistry examinations." It likewise
sought to cancel the examination results obtained by the examinees from the Fatima
College. cHaADC
Section 8 30 of Rep. Act No. 2382 prescribes, among others, that a person who aspires
to practice medicine in the Philippines, must have "satisfactorily passed the
corresponding Board Examination." Section 22, in turn, provides that the oath may
only be administered "to physicians who qualified in the examinations." The operative
word here is "satisfactorily," defined as "sufficient to meet a condition or obligation" or
"capable of dispelling doubt or ignorance." 31 Gleaned from Board Resolution No. 26,
the licensing authority apparently did not find that the respondents "satisfactorily
passed" the licensure examinations. The Board instead sought to nullify the
examination results obtained by the respondents.
2. On the Right Of The Respondents To Be Registered As Physicians
The function of mandamus is not to establish a right but to enforce one that has been
established by law. If no legal right has been violated, there can be no application of a
legal remedy, and the writ of mandamus is a legal remedy for a legal right. 32 There
must be a well-defined, clear and certain legal right to the thing demanded. 33 It is
long established rule that a license to practice medicine is a privilege or franchise
granted by the government. 34
It is true that this Court has upheld the constitutional right 35 of every citizen to
select a profession or course of study subject to a fair, reasonable, and equitable
admission and academic requirements. 36 But like all rights and freedoms guaranteed
by the Charter, their exercise may be so regulated pursuant to the police power of the
State to safeguard health, morals, peace, education, order, safety, and general welfare
of the people. 37 Thus, persons who desire to engage in the learned professions
requiring scientific or technical knowledge may be required to take an examination as
a prerequisite to engaging in their chosen careers. This regulation takes particular
pertinence in the field of medicine, to protect the public from the potentially deadly
effects of incompetence and ignorance among those who would practice medicine. In a
previous case, it may be recalled, this Court has ordered the Board of Medical
Examiners to annul both its resolution and certificate authorizing a Spanish subject,
with the degree of Licentiate in Medicine and Surgery from the University of Barcelona,
Spain, to practice medicine in the Philippines, without first passing the examination
required by the Philippine Medical Act. 38 In another case worth noting, we upheld the
power of the State to upgrade the selection of applicants into medical schools through
admission tests. 39
It must be stressed, nevertheless, that the power to regulate the exercise of a
profession or pursuit of an occupation cannot be exercised by the State or its agents
in an arbitrary, despotic, or oppressive manner. A political body that regulates the
exercise of a particular privilege has the authority to both forbid and grant such
privilege in accordance with certain conditions. Such conditions may not, however,
require giving up ones constitutional rights as a condition to acquiring the license. 40
Under the view that the legislature cannot validly bestow an arbitrary power to grant
or refuse a license on a public agency or officer, courts will generally strike down
license legislation that vests in public officials discretion to grant or refuse a license to
carry on some ordinarily lawful business, profession, or activity without prescribing
definite rules and conditions for the guidance of said officials in the exercise of their
power. 41
In the present case, the aforementioned guidelines are provided for in Rep. Act No.
2382, as amended, which prescribes the requirements for admission to the practice of
medicine, the qualifications of candidates for the board examinations, the scope and
conduct of the examinations, the grounds for denying the issuance of a physician's
license, or revoking a license that has been issued. Verily, to be granted the privilege
to practice medicine, the applicant must show that he possesses all the qualifications
and none of the disqualifications. Furthermore, it must appear that he has fully
complied with all the conditions and requirements imposed by the law and the
licensing authority. Should doubt taint or mar the compliance as being less than
satisfactory, then the privilege will not issue. For said privilege is distinguishable from
a matter of right, which may be demanded if denied. Thus, without a definite showing
that the aforesaid requirements and conditions have been satisfactorily met, the
courts may not grant the writ of mandamus to secure said privilege without thwarting
the legislative will.
3. On the Ripeness of the Petition for Mandamus
Lastly, the petitioners herein contend that the Court of Appeals should have dismissed
the petition for mandamus below for being premature. They argue that the
administrative remedies had not been exhausted. The records show that this is not the
first time that petitioners have sought the dismissal of Civil Case No. 93-66530. This
issue was raised in G.R. No. 115704, which petition we referred to the Court of
Appeals, where it was docketed as CA-G.R. SP No. 34506. On motion for
reconsideration in CA-G.R. SP No. 34506, the appellate court denied the motion to
dismiss on the ground that the prayers for the nullification of the order of the trial
court and the dismissal of Civil Case No. 93-66530 were inconsistent reliefs. In G.R.
No. 118437, the petitioners sought to nullify the decision of the Court of Appeals in
CA-G.R. SP No. 34506 insofar as it did not order the dismissal of Civil Case No. 93-
66530. In our consolidated decision, dated July 9, 1998, in G.R. Nos. 117817 &
118437, this Court speaking through Justice Bellosillo opined that: AICTcE
Indeed, the issue as to whether the Court of Appeals erred in not ordering the
dismissal of Civil Case No. 93-66530 sought to be resolved in the instant petition has
been rendered meaningless by an event taking place prior to the filing of this petition
and denial thereof should follow as a logical consequence. 42 There is no longer any
justiciable controversy so that any declaration thereon would be of no practical use or
value. 43 It should be recalled that in its decision of 19 December 1994 the trial court
granted the writ of mandamus prayed for by private respondents, which decision was
received by petitioners on 20 December 1994. Three (3) days after, or on 23 December
1994, petitioners filed the instant petition. By then, the remedy available to them was
to appeal the decision to the Court of Appeals, which they in fact did, by filing a notice
of appeal on 26 December 1994. 44
The petitioners have shown no cogent reason for us to reverse the aforecited ruling.
Nor will their reliance upon the doctrine of the exhaustion of administrative remedies
in the instant case advance their cause any.
Section 26 45 of the Medical Act of 1959 provides for the administrative and judicial
remedies that respondents herein can avail to question Resolution No. 26 of the Board
of Medicine, namely: (a) appeal the unfavorable judgment to the PRC; (b) should the
PRC ruling still be unfavorable, to elevate the matter on appeal to the Office of the
President; and (c) should they still be unsatisfied, to ask for a review of the case or to
bring the case to court via a special civil action of certiorari. Thus, as a rule,
mandamus will not lie when administrative remedies are still available. 46 However,
the doctrine of exhaustion of administrative remedies does not apply where, as in this
case, a pure question of law is raised. 47 On this issue, no reversible error may, thus,
be laid at the door of the appellate court in CA-G.R. SP No. 37283, when it refused to
dismiss Civil Case No. 93-66530.
As we earlier pointed out, herein respondents Arnel V. Herrera, Fernando F.
Mandapat, Ophelia C. Hidalgo, Bernadette T. Mendoza, Ruby B. Lantin-Tan, Fernando
T. Cruz, Marissa A. Regodon, Ma. Eloisa Q. Mallari-Largoza, Cheryl R. Triguero,
Joseph A. Jao, Bernadette H. Cabuhat, Evelyn S. Acosta-Cabanes, Laura M. Santos,
Maritel M. Echiverri, Bernadette C. Escusa, Carlosito C. Domingo, Alicia S. Lizano,
Elnora R. Raqueno-Rabaino, Saibzur N. Edding, Derileen D. Dorado-Edding, Robert B.
Sanchez, Maria Rosario Leonor-Lacandula, Geraldine Elizabeth M. Pagilagan-Palma,
Margarita Belinda L. Vicencio-Gamilla, Herminigilda E. Conejos, Leuvina P. Chico-
Paguio, Elcin C. Arriola-Ocampo, and Jose Ramoncito P. Navarro manifested to the
Court of Appeals during the pendency of CA-G.R. SP No. 37283, that they were no
longer interested in proceeding with the case and moved for its dismissal insofar as
they were concerned. A similar manifestation and motion were later filed by
intervenors Mary Jean I. Yeban-Merlan, Michael L. Serrano, Norma G. Lafavilla,
Arnulfo A. Salvador, Belinda C. Rabarra, Yolanda P. Unica, Dayminda G. Bontuyan,
Clarissa B. Baclig, Ma. Luisa S. Gutierrez, Rhoneil R. Deveraturda, Aleli A. Gollayan,
Evelyn C. Cundangan, Frederick D. Francisco, Violeta V. Meneses, Melita J. Cañedo,
Clarisa SJ. Nicolas, Federico L. Castillo, Karangalan D. Serrano, Danilo A. Villaver,
Grace E. Uy, Lydia C. Chan, and Melvin M. Usita. Following these manifestations and
motions, the appellate court in CA-G.R. SP No. 37283 decreed that its ruling would
not apply to them. Thus, inasmuch as the instant case is a petition for review of the
appellate court's ruling in CA-G.R. SP No. 37283, a decision which is inapplicable to
the aforementioned respondents will similarly not apply to them.
As to Achilles J. Peralta, Evelyn O. Ramos, Sally B. Bunagan, Rogelio B. Ancheta,
Oscar H. Padua, Jr., Evelyn D. Grajo, Valentino P. Arboleda, Carlos M. Bernardo, Jr.,
Mario D. Cuaresma, Violeta C. Felipe, Percival H. Pangilinan, Corazon M. Cruz and
Samuel B. Bangoy, herein decision shall not apply pursuant to the Orders of the trial
court in Civil Case No. 93-66530, dropping their names from the suit.
Consequently, this Decision is binding only on the remaining respondents, namely:
Arlene V. de Guzman, Celerina S. Navarro, Rafael I. Tolentino, Bernardita B. Sy, Gloria
T. Jularbal, Hubert S. Nazareno, Nancy J. Chavez, Ernesto L. Cue, Herminio V.
Fernandez, Jr., Maria Victoria M. Lacsamana and Merly D. Sta. Ana, as well as the
petitioners.
WHEREFORE, the instant petition is GRANTED. Accordingly, (1) the assailed decision
dated May 16, 2000, of the Court of Appeals, in CA-G.R. SP No. 37283, which affirmed
the judgment dated December 19, 1994, of the Regional Trial Court of Manila, Branch
52, in Civil Case No. 93-66530, ordering petitioners to administer the physician's oath
to herein respondents as well as the resolution dated August 25, 2000, of the appellate
court, denying the petitioners' motion for reconsideration, are REVERSED and SET
ASIDE; and (2) the writ of mandamus, issued in Civil Case No. 93-66530, and affirmed
by the appellate court in CA-G.R. SP No. 37283 is NULLIFIED AND SET ASIDE.
EcICDT
SO ORDERED.
Puno and Callejo, Sr., JJ ., concur.
Quisumbing, J ., took no part.
Austria-Martinez, J ., took no part — is on leave.
THIRD DIVISION
[G.R. No. 141314. November 15, 2002.]
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY ENERGY REGULATORY
BOARD, petitioner, vs. MANILA ELECTRIC COMPANY, respondent.
[G.R. No. 141369. November 15, 2002.]
LAWYERS AGAINST MONOPOLY AND POVERTY (LAMP) consisting of CEFERINO
PADUA, Chairman, G. FULTON ACOSTA, GALILEO BRION, ANATALIA
BUENAVENTURA, PEDRO CASTILLO, NAPOLEON CORONADO, ROMEO ECHAUZ,
FERNANDO GAITE, ALFREDO DE GUZMAN, ROGELIO KARAGDAG, JR., MA. LUZ
ARZAGA-MENDOZA, ANSBERTO PAREDES, AQUILINO PIMENTEL III, MARIO REYES,
EMMANUEL SANTOS, RUDEGELIO TACORDA, members, and ROLANDO ARZAGA,
Secretary-General, JUSTICE ABRAHAM SARMIENTO, SENATOR AQUILINO
PIMENTEL, JR. and COMMISSIONER BARTOLOME FERNANDEZ, JR., Board of
Consultants, and Lawyer GENARO LUALHATI, petitioners, vs. MANILA ELECTRIC
COMPANY (MERALCO), respondent.
The Solicitor General for petitioner in G.R. No. 141314.
Ceferino Padua Law Office for LAMP.
Quiason Makalintal Barot Torres & Ibarra for MERALCO.
SYNOPSIS
The Court here resolves the following issues: 1. Whether the income tax paid by
Meralco should be treated as part of its operating expenses and thus considered in
determining the amount of increase in the electric rates. 2. Whether it is the net
average investment method of the COA and the ERB, or the average investment
method of the Meralco that should be used. EIASDT
On the first issue, the Court ruled in the negative. Income tax paid by a public utility
is inconsistent with the nature of operating expenses. Operating expenses are those
which are reasonably incurred in connection with business operations to yield revenue
or income. Income tax is imposed on the entity, for the privilege of earning income and
for the benefits received by the taxpayer from the State. On the second issue, the
Court ruled on the propriety of using the net average investment method in the
determination of the rate base. The ERB did not abuse its discretion when it applied
the method as its reasonableness is borne by the records of the case. Meralco had not
adequately shown that the rates prescribed by the ERB are unjust or confiscatory as
to deprive its stockholders a reasonable return on investment.
SYLLABUS
1. POLITICAL LAW; INHERENT POWERS OF THE STATE; POLICE POWER;
REGULATION OF RATES TO BE CHARGED BY PUBLIC UTILITIES FOUNDED
THEREON. — The regulation of rates to be charged by public utilities is founded upon
the police powers of the State and statutes prescribing rules for the control and
regulation of public utilities are a valid exercise thereof. When private property is used
for a public purpose and is affected with public interest, it ceases to be juris privati
only and becomes subject to regulation. The regulation is to promote the common
good. Submission to regulation may be withdrawn by the owner by discontinuing use;
but as long as use of the property is continued, the same is subject to public
regulation. In regulating rates charged by public utilities, the State protects the public
against arbitrary and excessive rates while maintaining the efficiency and quality of
services rendered. However, the power to regulate rates does not give the State the
right to prescribe rates which are so low as to deprive the public utility of a reasonable
return on investment. Thus, the rates prescribed by the State must be one that yields
a fair return on the public utility upon the value of the property performing the service
and one that is reasonable to the public for the services rendered. The fixing of just
and reasonable rates involves a balancing of the investor and the consumer interests.
cdtai
2. REMEDIAL LAW; EVIDENCE; FINDINGS OF THE ENERGY REGULATORY
BOARD ON THE DETERMINATION OF PROPER ENERGY RATES; RESPECTED. —
While the power to fix rates is a legislative function, whether exercised by the
legislature itself or delegated through an administrative agency, a determination of
whether the rates so fixed are reasonable and just is a purely judicial question and is
subject to the review of the courts. Settled jurisprudence holds that factual findings of
administrative bodies on technical matters within their area of expertise should be
accorded not only respect but even finality if they are supported by substantial
evidence even if not overwhelming or preponderant. In one case, we cautioned that
courts should "refrain from substituting their discretion on the weight of the evidence
for the discretion of the Public Service Commission on questions of fact and will only
reverse or modify such orders of the Public Service Commission when it really appears
that the evidence is insufficient to support their conclusions." In the cases at bar,
findings and conclusions of the ERB on the rate that can be charged by MERALCO to
the public should be respected. The function of the court, in exercising its power of
judicial review, is to determine whether under the facts and circumstances, the final
order entered by the administrative agency is unlawful or unreasonable. Thus, to the
extent that the administrative agency has not been arbitrary or capricious in the
exercise of its power, the time-honored principle is that courts should not interfere.
The principle of separation of powers dictates that courts should hesitate to review the
acts of administrative officers except in clear cases of grave abuse of discretion.
DTIaCS
3. POLITICAL LAW; ADMINISTRATIVE LAW; ENERGY REGULATORY BOARD; ON
FIXING RATES TO BE CHARGED IN THE DISTRIBUTION OF ELECTRICITY;
DETERMINES WHAT IS REASONABLE AND JUST. — The ERB was created under
Executive Order No. 172 to regulate, among others, the distribution of energy
resources and to fix rates to be charged by public utilities involved in the distribution
of electricity. In the fixing of rates, the only standard which the legislature is required
to prescribe for the guidance of the administrative authority is that the rate be
reasonable and just. It has been held that even in the absence of an express
requirement as to reasonableness, this standard may be implied. What is a just and
reasonable rate is a question of fact calling for the exercise of discretion, good sense,
and a fair, enlightened and independent judgment. The requirement of reasonableness
comprehends such rates which must not be so low as to be confiscatory, or too high
as to be oppressive: In determining whether a rate is confiscatory, it is essential also to
consider the given situation, requirements and opportunities of the utility. In
determining the just and reasonable rates to; be charged by a public utility, three
major factors are considered by the regulating agency: a) rate of return; b) rate base;
and c) the return itself or the computed revenue to be earned by the public utility
based on the rate of return and rate base. The rate of return is a judgment percentage
which, if multiplied with the rate base, provides a fair return on the public utility for
the use of its property for service to the public: The rate of return of a public utility is
not prescribed by statute but by administrative and judicial pronouncements. This
Court has consistently adopted a 12% rate of return for public utilities. The rate base,
on the other hand, is an evaluation of the property devoted by the utility to the public
service or the value of invested capital or property which the utility is entitled to a
return. CIAHDT
4. ID.; ID.; ID.; ID.; INCOME TAX NOT INCLUDED IN THE COMPUTATION OF
OPERATING EXPENSES OF A PUBLIC UTILITY. — In determining whether or not a
rate yields a fair return to the utility, the operating expenses of the utility must be
considered. The return allowed to a public utility in accordance with the prescribed
rate must be sufficient to provide for the payment of such reasonable operating
expenses incurred by the public utility in the provision of its services to the public.
Thus, the public utility is allowed a return on capital over and above operating
expenses. However, only such expenses and in such amounts as are reasonable for
the efficient operation of the utility should be allowed for determination of the rates to
be charged by a public utility. The ERB correctly ruled that income tax should not be
included in the computation of operating expenses of a public utility. Income tax paid
by a public utility is inconsistent with the nature of operating expenses. In general,
operating expenses are those which are reasonably incurred in connection with
business operations to yield revenue or income. They are items of expenses which
contribute or are attributable to the production of income or revenue. As correctly put
by the ERB, operating expenses "should be a requisite of or necessary in the operation
of a utility, recurring, and that it redounds to the service or benefit of customers."
Income tax, it should be stressed, is imposed on an individual or entity as a form of
excise tax or a tax on the privilege of earning income. In exchange for the protection
extended by the State to the taxpayer, the government collects taxes as a source of
revenue to finance its activities. Clearly, by its nature, income tax payments of a
public utility are not expenses which contribute to or are incurred in connection with
the production of profit of a public utility. Income tax should be borne by the taxpayer
alone as they are payments made in exchange for benefits received by the taxpayer
from the State. No benefit is derived by the customers of a public utility for the taxes
paid by such entity and no direct contribution is made by the payment of income tax
to the operation of a public utility for purposes of generating revenue or profit.
Accordingly, the burden of paying income tax should be Meralco's alone and should
not be shifted to the consumers by including the same in the computation of its
operating expenses. ETDSAc
5. ID.; ID.; ID.; DETERMINATION OF THE RATE BASE ON THE PROPERTY USED
IN THE OPERATION OF THE PUBLIC UTILITY; NET AVERAGE INVESTMENT
METHOD AND AVERAGE INVESTMENT METHOD. — In the determination of the rate
base, property used in the operation of the public utility must be subject to appraisal
and evaluation to determine the fair value thereof entitled to a fair return. With
respect to those properties which have not been used by the public utility for the
entire duration of the test year, i.e., the year subject to audit examination for rate-
making purposes, a valuation method must be adopted to determine the proportionate
value of the property. Under the "net average investment method," properties and
equipment used in the operation of a public utility are entitled to a return only on the
actual number of months they are in service during the period. In contrast, the
"average investment method" computes the proportionate value of the property by
adding the value of the property at the beginning and at the end of the test year with
the resulting sum divided by two.
6. ID.; ID.; ID.; ID.; ID.; PROPRIETY OF THE NET AVERAGE INVESTMENT
METHOD. — The ERB did not abuse its discretion when it applied the net average
investment method. The reasonableness of net average investment method is borne by
the records of the case. In its report, the COA explained that the computation of the
proportionate value of the property and equipment in accordance with the actual
number of months such property or equipment is in service for purposes of
determining the rate base is favored, as against the trending method employed by
MERALCO, "to reflect the real status of the property." By using the net average
investment method, the ERB and the COA considered for determination of the rate
base the value of properties and equipment used by MERALCO in proportion to the
period that the same were actually used during the period in question. This treatment
is consistent with the settled rule in rate regulation that the determination of the rate
base of a public utility entitled to a return must be based on properties and equipment
actually being used or are useful to the operations of the public utility. EcHaAC
DECISION
PUNO, J p:
In third world countries like the Philippines, equal justice will have a synthetic ring
unless the economic rights of the people, especially the poor, are protected with the
same resoluteness as their right to liberty. The cases at bar are of utmost significance
for they concern the right of our people to electricity and to be reasonably charged for
their consumption. In configuring the contours of this economic right to a basic
necessity of life, the Court shall define the limits of the power of respondent
MERALCO, a giant public utility and a monopoly, to charge our people for their
electric consumption. The question is: should public interest prevail over private
profits?
The facts are brief and undisputed. On December 23, 1993, MERALCO filed with the
ERB an application for the revision of its rate schedules. The application reflected an
average increase of 21 centavos per kilowatt hour (kwh) in its distribution charge. The
application also included a prayer for provisional approval of the increase pursuant to
Section 16(c) of the Public Service Act and Section 8 of Executive Order No. 172.
HCTDIS
On January 28, 1994, the ERB issued an Order granting a provisional increase of
P0.184 per kwh, subject to the following condition:
"In the event, however, that the Board finds, after hearing and submission by the
Commission on Audit of an audit report on the books and records of the applicant that
the latter is entitled to a lesser increase in rates, all excess amounts collected from the
applicant's customers as a result of this Order shall either be refunded to them or
correspondingly credited in their favor for application to electric bills covering future
consumptions." 1
In the same Order, the ERB requested the Commission on Audit (COA) to conduct an
"audit and examination of the books and other records of account of the applicant for
such period of time, which in no case shall be less than 12 consecutive months, as it
may deem appropriate" and to submit a copy thereof to the ERB immediately upon
completion. 2
On February 11, 1997, the COA submitted its Audit Report SAO No. 95-07 (the "COA
Report") which contained, among others, the recommendation not to include income
taxes paid by MERALCO as part of its operating expenses for purposes of rate
determination and the use of the net average investment method for the computation
of the proportionate value of the properties used by MERALCO during the test year for
the determination of the rate base. 3
Subsequently, the ERB rendered its decision adopting the above recommendations
and authorized MERALCO to implement a rate adjustment in the average amount of
P0.017 per kwh, effective with respect to MERALCO's billing cycles beginning February
1994. The ERB further ordered that "the provisional relief in the amount of P0.184 per
kilowatt hour granted under the Board's Order dated January 28, 1994 is hereby
superseded and modified and the excess average amount of P0.167 per kilowatt hour
starting with MERALCO's billing cycles beginning February 1994 until its billing cycles
beginning February 1998, be refunded to MERALCO's customers or correspondingly
credited in their favor for future consumption." 4
The ERB held that income tax should not be treated as operating expense as this
should be "borne by the stockholders who are recipients of the income or profits
realized from the operation of their business" hence, should not be passed on to the
consumers. 5 Further, in applying the net average investment method, the ERB
adopted the recommendation of COA that in computing the rate base, only the
proportionate value of the property should be included, determined in accordance with
the number of months the same was actually used in service during the test year. 6
On appeal, the Court of Appeals set aside the ERB decision insofar as it directed the
reduction of the MERALCO rates by an average of P0.167 per kwh and the refund of
such amount to MERALCO's customers beginning February 1994 and until its billing
cycle beginning February 1998. 7 Separate Motions for Reconsideration filed by the
petitioners were denied by the Court of Appeals. 8
Petitioners are now before the Court seeking a reversal of the decision of the Court of
Appeals by arguing primarily that the Court of Appeals erred: a) in ruling that income
tax paid by MERALCO should be treated as part of its operating expenses and thus
considered in determining the amount of increase in rates imposed by MERALCO and
b) in rejecting the net average investment method used by the COA and the ERB and
instead adopted the average investment method used by MERALCO. TSacAE
We grant the petition.
The regulation of rates to be charged by public utilities is founded upon the police
powers of the State and statutes prescribing rules for the control and regulation of
public utilities are a valid exercise thereof. When private property is used for a public
purpose and is affected with public interest, it ceases to be juris privati only and
becomes subject to regulation. The regulation is to promote the common good.
Submission to regulation may be withdrawn by the owner by discontinuing use; but
as long as use of the property is continued, the same is subject to public regulation. 9
In regulating rates charged by public utilities, the State protects the public against
arbitrary and excessive rates while maintaining the efficiency and quality of services
rendered. However, the power to regulate rates does not give the State the right to
prescribe rates which are so low as to deprive the public utility of a reasonable return
on investment. Thus, the rates prescribed by the State must be one that yields a fair
return on the public utility upon the value of the property performing the service and
one that is reasonable to the public for the services rendered. 10 The fixing of just and
reasonable rates involves a balancing of the investor and the consumer interests. 11
In his famous dissenting opinion in the 1923 case of Southwestern Bell Tel. Co. v.
Public Service Commission, 12 Mr. Justice Brandeis wrote:
"The thing devoted by the investor to the public use is not specific property, tangible
and intangible, but capital embarked in an enterprise. Upon the capital so invested,
the Federal Constitution guarantees to the utility the opportunity to earn a fair return.
. . . The Constitution does not guarantee to the utility the opportunity to earn a return
on the value of all items of property used by the utility, or of any of them.
xxx xxx xxx
The investor agrees, by embarking capital in a utility, that its charges to the public
shall be reasonable. His company is the substitute for the State in the performance of
the public service, thus becoming a public servant. The compensation which the
Constitution guarantees an opportunity to earn is the reasonable cost of conducting
the business."
While the power to fix rates is a legislative function, whether exercised by the
legislature itself or delegated through an administrative agency, a determination of
whether the rates so fixed are reasonable and just is a purely judicial question and is
subject to the review of the courts. 13
The ERB was created under Executive Order No. 172 to regulate, among others, the
distribution of energy resources and to fix rates to be charged by public utilities
involved in the distribution of electricity. In the fixing of rates, the only standard which
the legislature is required to prescribe for the guidance of the administrative authority
is that the rate be reasonable and just. It has been held that even in the absence of an
express requirement as to reasonableness, this standard may be implied. 14 What is a
just and reasonable rate is a question of fact calling for the exercise of discretion, good
sense, and a fair, enlightened and independent judgment. The requirement of
reasonableness comprehends such rates which must not be so low as to be
confiscatory, or too high as to be oppressive. In determining whether a rate is
confiscatory, it is essential also to consider the given situation, requirements and
opportunities of the utility. 15
Settled jurisprudence holds that factual findings of administrative bodies on technical
matters within their area of expertise should be accorded not only respect but even
finality if they are supported by substantial evidence even if not overwhelming or
preponderant. 16 In one case, 17 we cautioned that courts should "refrain from
substituting their discretion on the weight of the evidence for the discretion of the
Public Service Commission on questions of fact and will only reverse or modify such
orders of the Public Service Commission when it really appears that the evidence is
insufficient to support their conclusions." 18
In the cases at bar, findings and conclusions of the ERB on the rate that can be
charged by MERALCO to the public should be respected. 19 The function of the court,
in exercising its power of judicial review, is to determine whether under the facts and
circumstances, the final order entered by the administrative agency is unlawful or
unreasonable. 20 Thus, to the extent that the administrative agency has not been
arbitrary or capricious in the exercise of its power, the time-honored principle is that
courts should not interfere. The principle of separation of powers dictates that courts
should hesitate to review the acts of administrative officers except in clear cases of
grave abuse of discretion. 21
In determining the just and reasonable rates to be charged by a public utility, three
major factors are considered by the regulating agency: a) rate of return; b) rate base;
and c) the return itself or the computed revenue to be earned by the public utility
based on the rate of return and rate base. 22 The rate of return is a judgment
percentage which, if multiplied with the rate base, provides a fair return on the public
utility for the use of its property for service to the public. 23 The rate of return of a
public utility is not prescribed by statute but by administrative and judicial
pronouncements. This Court has consistently adopted a 12% rate of return for public
utilities. 24 The rate base, on the other hand, is an evaluation of the property devoted
by the utility to the public service or the value of invested capital or property which
the utility is entitled to a return. 25
In the cases at bar, the resolution of the issues involved hinges on the determination
of the kind and the amount of operating expenses that should be allowed to a public
utility to generate a fair return and the proper valuation of the rate base or the value
of the property entitled to a return.
I
Income Tax as Operating Expense
Cannot be Allowed
For Rate-Determination Purposes
In determining whether or not a rate yields a fair return to the utility, the operating
expenses of the utility must be considered. The return allowed to a public utility in
accordance with the prescribed rate must be sufficient to provide for the payment of
such reasonable operating expenses incurred by the public utility in the provision of
its services to the public. Thus, the public utility is allowed a return on capital over
and above operating expenses. However, only such expenses and in such amounts as
are reasonable for the efficient operation of the utility should be allowed for
determination of the rates to be charged by a public utility. ASHaTc
The ERB correctly ruled that income tax should not be included in the computation of
operating expenses of a public utility. Income tax paid by a public utility is
inconsistent with the nature of operating expenses. In general, operating expenses are
those which are reasonably incurred in connection with business operations to yield
revenue or income. They are items of expenses which contribute or are attributable to
the production of income or revenue. As correctly put by the ERB, operating expenses
"should be a requisite of or necessary in the operation of a utility, recurring, and that
it redounds to the service or benefit of customers." 26
Income tax, it should be stressed, is imposed on an individual or entity as a form of
excise tax or a tax on the privilege of earning income. 27 In exchange for the protection
extended by the State to the taxpayer, the government collects taxes as a source of
revenue to finance its activities. Clearly, by its nature, income tax payments of a
public utility are not expenses which contribute to or are incurred in connection with
the production of profit of a public utility. Income tax should be borne by the taxpayer
alone as they are payments made in exchange for benefits received by the taxpayer
from the State. No benefit is derived by the customers of a public utility for the taxes
paid by such entity and no direct contribution is made by the payment of income tax
to the operation of a public utility for purposes of generating revenue or profit.
Accordingly, the burden of paying income tax should be Meralco's alone and should
not be shifted to the consumers by including the same in the computation of its
operating expenses. CASIEa
The principle behind the inclusion of operating expenses in the determination of a just
and reasonable rate is to allow the public utility to recoup the reasonable amount of
expenses it has incurred in connection with the services it provides. It does not give
the public utility the license to indiscriminately charge any and all types of expenses
incurred without regard to the nature thereof, i.e., whether or not the expense is
attributable to the production of services by the public utility. To charge consumers
for expenses incurred by a public utility which are not related to the service or benefit
derived by the customers from the public utility is unjustified and inequitable.
While the public utility is entitled to a reasonable return on the fair value of the
property being used for the service of the public, no less than the Federal Supreme
Court of the United States emphasized: "[t]he public cannot properly be subjected to
unreasonable rates in order simply that stockholders may earn dividends. . . . If a
corporation cannot maintain such a [facility] and earn dividends for stockholders, it is
a misfortune for it and them which the Constitution does not require to be remedied
by imposing unjust burdens on the public." 28
We are not impressed by the reliance by MERALCO on some American case law
allowing the treatment of income tax paid by a public utility as operating expense for
rate-making purposes. Suffice to state that with regard to rate-determination, the
government is not hidebound to apply any particular method or formula. 29 The
question of what constitutes a reasonable return for the public utility is necessarily
determined and controlled by its peculiar environmental milieu. Aside from the
financial condition of the public utility, there are other critical factors to consider for
purposes of rate regulation. Among others, they are: particular reasons involved for
the request of the rate increase, the quality of services rendered by the public utility,
the existence of competition, the element of risk or hazard involved in the investment,
the capacity of consumers, etc. 30 Rate regulation is the art of reaching a result that is
good for the public utility and is best for the public. IaESCH
For these reasons, the Court cannot give in to the importunings of MERALCO that we
blindly apply the rulings of American courts on the treatment of income tax as
operating expenses in rate regulation cases. An approach allowing the indiscriminate
inclusion of income tax payments as operating expenses may create an undesirable
precedent and serve as a blanket authority for public utilities to charge their income
tax payments to operating expenses and unjustly shift the tax burden to the customer.
To be sure, public utility taxation in the United States is going through the eye of
criticism. Some commentators are of the view that by allowing the public utility to
collect its income tax payment from its customers, a form of "sales tax" is, in effect,
imposed on the public for consumption of public utility services. By charging their
income tax payments to their customers, public utilities virtually become "tax
collectors" rather than taxpayers. 31 In the cases at bar, MERALCO has not justified
why its income tax should be treated as an operating expense to enable it to derive a
fair return for its services.
It is also noteworthy that under American laws, public utilities are taxed differently
from other types of corporations and thus carry a heavier tax burden. Moreover,
different types of taxes, charges, tolls or fees are assessed on a public utility
depending on the state or locality where it operates. At a federal level, public utilities
are subject to corporate income taxes and Social Security taxes — in the same manner
as other business corporations. At the state and local levels, public utilities are subject
to a wide variety of taxes, not all of which are imposed on each state. Thus, it is not
unusual to find different taxes or combinations of taxes applicable to respective utility
industries within a particular state. 32 A significant aspect of state and local taxation
of public utilities in the United States is that they have been singled out for special
taxation, i.e., they are required to pay one or more taxes that are not levied upon other
industries. In contrast, in this jurisdiction, public utilities are subject to the same tax
treatment as any other corporation and local taxes paid by it to various local
government units are substantially the same. The reason for this is that the power to
tax resides in our legislature which may prescribe the limits of both national and local
taxation, unlike in the federal system of the United States where state legislature may
prescribe taxes to be levied in their respective jurisdictions. AcSEHT
MERALCO likewise cites decisions of the ERB 33 allowing the application of a tax
recovery clause for the imposition of an additional charge on consumers for taxes paid
by the public utility. A close look at these decisions will show they are in appropos. In
the said cases, the ERB approved the adoption of a formula which will allow the public
utility to recover from its customers taxes already paid by it. However, in the cases at
bar, the income tax component added to the operating expenses of a public utility is
based on an estimate or approximate figure of income tax to be paid by the public
utility. It is this estimated amount of income tax to be paid by MERALCO which is
included in the amount of operating expenses and used as basis in determining the
reasonable rate to be charged to the customers. Accordingly, the varying factual
circumstances in the said cases prohibit a square application of the rule under the
previous ERB decisions.
II
Use of "Net Average Investment
Method" is Not Unreasonable
In the determination of the rate base, property used in the operation of the public
utility must be subject to appraisal and evaluation to determine the fair value thereof
entitled to a fair return. With respect to those properties which have not been used by
the public utility for the entire duration of the test year, i.e., the year subject to audit
examination for rate-making purposes, a valuation method must be adopted to
determine the proportionate value of the property. Petitioners maintain that the net
average investment method (also known as "actual number of months use method")
recommended by COA and adopted by the ERB should be used, while MERALCO
argues that the average investment method (also known as the "trending method") to
determine the proportionate value of properties should be applied.
Under the "net average investment method," properties and equipment used in the
operation of a public utility are entitled to a return only on the actual number of
months they are in service during the period. 34 In contrast, the "average investment
method" computes the proportionate value of the property by adding the value of the
property at the beginning and at the end of the test year with the resulting sum
divided by two. 35
The ERB did not abuse its discretion when it applied the net average investment
method. The reasonableness of net average investment method is borne by the records
of the case. In its report, the COA explained that the computation of the proportionate
value of the property and equipment in accordance with the actual number of months
such property or equipment is in service for purposes of determining the rate base is
favored, as against the trending method employed by MERALCO, "to reflect the real
status of the property." 36 By using the net average investment method, the ERB and
the COA considered for determination of the rate base the value of properties and
equipment used by MERALCO in proportion to the period that the same were actually
used during the period in question. This treatment is consistent with the settled rule
in rate regulation that the determination of the rate base of a public utility entitled to
a return must be based on properties and equipment actually being used or are useful
to the operations of the public utility. 37
MERALCO does not seriously contest this treatment of actual usage of property but
opposes the method of computation or valuation thereof adopted by the ERB and the
COA on the ground that the net average investment method "assumes an ideal
situation where a utility, like MERALCO, is able to record in its books within any given
month the value of all the properties actually placed in service during that month." 38
MERALCO contends that immediate recordal in its books of the property or equipment
is not possible as MERALCO's franchise covers a wide area and that due to the volume
of properties and equipment put into service and the amount of paper work required
to be accomplished for recording in the books of the company, "it takes three to six
months (often longer) before an asset placed in service is recorded in the books" of
MERALCO. 39 Hence, MERALCO adopted the "average investment method" or the
"trending method" which computes the average value of the property at the beginning
and at the end of the test year to compensate for the irregular recording in its books.
TAacCE
MERALCO'S stance is belied by the COA Report which states that the "verification of
the records, as confirmed by the Management Staff, disclosed that properties are
recorded in the books as these are actually placed in service." 40 Moreover, while the
case was pending trial before the ERB, the ERB conducted an ocular inspection to
examine the assets in service, records and books of accounts of MERALCO to
ascertain the physical existence, ownership, valuation and usefulness of the assets
contained in the COA Report. 41 Thus, MERALCO's contention that the date of
recordal in the books does not reflect the date when the asset is placed in service is
baseless.
Further, computing the proportionate value of assets used in service in accordance
with the actual number of months the same is used during the test year is a more
accurate method of determining the value of the properties of a public utility entitled
to a return. If, as determined by COA, the date of recordal in the books of MERALCO
reflects the actual date the equipment or property is used in service, there is no reason
for the ERB to adopt the trending method applied by MERALCO if a more precise
method is available for determining the proportionate value of the assets placed in
service.
If we were to sustain the application of the "trending method," the public utility may
easily manipulate the valuation of its property entitled to a return (rate base) by
simply including a highly capitalized asset in the computation of the rate base even if
the same was used for a limited period of time during the test year. With the
inexactness of the trending method and the possibility that the valuation of certain
properties may be subject to the control of and abuse by the public utility, the Court
finds no reasonable basis to overturn the recommendation of COA and the decision of
the ERB.
MERALCO further insists that the Court should sustain the "trending method" in view
of previous decisions by the Public Service Commission and of this Court which
"upheld" the use of this method. By refusing to adopt the trending method, MERALCO
argues that the ERB violated the rule on stare decisis.
Again, we are not impressed. It is a settled rule that the goal of rate-making is to arrive
at a just and reasonable rate for both the public utility and the public which avails of
the former's products and services. 42 However, what is a just and reasonable rate
cannot be fixed by any immutable method or formula. Hence, it has been held that no
public utility has a vested right to any particular method of valuation. 43 Accordingly,
with respect to a determination of the proper method to be used in the valuation of
property and equipment used by a public utility for rate-making purposes, the
administrative agency is not bound to apply any one particular formula or method
simply because the same method has been previously used and applied. In fact,
nowhere in the previous decisions cited by MERALCO which applied the trending
method did the Court rule that the same should be the only method to be applied in
all instances. EAcHCI
At any rate, MERALCO has not adequately shown that the rates prescribed by the
ERB are unjust or confiscatory as to deprive its stockholders a reasonable return on
investment. In the early case of Ynchausti S.S. Co. v. Public Utility Commissioner, this
Court held: "there is a legal presumption that the rates fixed by an administrative
agency are reasonable, and it must be conceded that the fixing of rates by the
Government, through its authorized agents, involves the exercise of reasonable
discretion and, unless there is an abuse of that discretion, the courts will not
interfere." 44 Thus, the burden is upon the oppositor, MERALCO, to prove that the
rates fixed by the ERB are unreasonable or otherwise confiscatory as to merit the
reversal of the ERB. In the instant cases, MERALCO was unable to discharge this
burden.
WHEREFORE, in view of the foregoing, the instant petitions are GRANTED and the
decision of the Court of Appeals in C.A. G.R. SP No. 46888 is REVERSED. Respondent
MERALCO is authorized to adopt a rate adjustment in the amount of P0.017 per
kilowatt hour, effective with respect to MERALCO's billing cycles beginning February
1994. Further, in accordance with the decision of the ERB dated February 16, 1998,
the excess average amount of P0.167 per kilowatt hour starting with the applicant's
billing cycles beginning February 1998 is ordered to be refunded to MERALCO's
customers or correspondingly credited in their favor for future consumption.
SO ORDERED.
Panganiban, Sandoval-Gutierrez, Corona and Carpio-Morales, JJ., concur.

EN BANC
[G.R. No. L-9185. December 27, 1958.]
BATANGAS TRANSPORTATION COMPANY, ET AL., petitioner, vs. LAGUNA
TRANSPORTATION COMPANY, respondent.
Graciano C. Regala for petitioners.
Evaristo R. Sandoval for respondent.
SYLLABUS
1. APPEAL AND ERROR; FINDING OF FACT OF PUBLIC UTILITY
COMMISSIONER. — "Where after a full hearing the Public Utility Commissioner
makes findings of fact, and there is a material conflict in the evidence, such findings
will not be disturbed where they are reasonably supported by testimony" (Inchausti,
Steamship Co. vs. Public Utility Commissioner, 44, Phil., 363).
2. ID.; PUBLIC UTILITY; ADDITIONAL SERVICES IS A QUESTION OF FACT. —
"Whether public necessity and convenience warrant the putting up of additional
services on the part of the appellee in the case at bar, is a question of fact which
Public Service Commission has found in the affirmative. This finding, being supported
by sufficient evidence, should not be disturbed" (Raymundo Transportation Co., vs.
Cervo, 91 Phil., 313).
3. ID.; ID.; WHEN SUPREME COURT MAY REVERSE ORDERS OF PUBLIC
SERVICE COMMISSION. — The Supreme Court "will refrain from substituting their
discretion on the weight of the evidence for the discretion of the Public Service
Commission on questions of fact and will only reverse or modify such orders of the
Public Service Commission when it really appears that the evidence is insufficient to
support their conclusions" (Manila Yellow Taxicab Co. and Acro Taxicab Co. vs.
Damon, 58 Phil., 75; See also Padua vs. Ocampo, et al. G. R. No. L- 7579, September
17, 1955).
DECISION
BAUTISTA ANGELO, J p:
This is a petition for review of a decision of the Public Service Commission granting to
Laguna Transportation Company three additional round trips from Pagsanjan, Laguna
to Manila and another three additional round trips from Batangas Piers to Manila.
The application for increase was opposed by Laguna-Tayabas Bus Company and
Batangas Transportation Company on the ground that they have already a bus service
from Pagsanjan to Manila with buses starting from Pagsanjan as well as coming from
the municipalities of Paete and Sta. Maria, and vice-versa, which is more than
sufficient to satisfy the needs of the residents of Pagsanjan as well as of intermediate
municipalities; and that the Batangas Transportation Company has likewise a bus
service from Batangas Piers to Manila and vice-versa, which is also sufficient to take
care of the present volume of traffic.
Both parties presented testimonial as well as documentary evidence, and after
considering the same, the Commission granted the increase prayed for in the
application. Hence the present petition for review.
The evidence presented by the applicant, according to the Commission, shows "that
passengers at Pagsanjan have a hard time in getting accommodation at Pagsanjan as
the buses coming from Sta. Maria, Paete or other points farther south, are already
filled up upon reaching Pagsanjan; that the residents of Pagsanjan desire to start at
Pagsanjan very early in the morning so that they can arrive at Manila and transact
their business early, and then return on the same day to Pagsanjan; that the buses of
the applicant are already full of passengers and freight upon starting from Pagsanjan,
so that the passengers are forced to wait for other trips for one hour or more; that the
buses of Lazaro Limjuco only go as far as Sta. Cruz, Laguna, while the other operator
M. Ruiz Highway Transit Inc. has very few trucks left, so much so that it makes very
few trips passing Pagsanjan; that the Biñan Transportation Company has abandoned
its trips on the line Lumbang-Manila, thus lessening the number of trips, passing
Pagsanjan; that there are numerous passengers disembarking at the Batangas Pier
coming from the different boats plying between Mindoro and Batangas who can not be
accommodated by the buses waiting at the Batangas-Pier; that residents of Lobo
(Batangas) in order to go to Manila have to ride on sailboats as far as Batangas Pier,
but upon arriving at the Pier, there are no available trucks so they ride on jitneys or
autocalesas up to the poblacion of Batangas and then transfer to other buses going to
Manila; that residents of Lipa City, Malvar and San Jose (Batangas) have a hard time
riding in buses as those coming from Batangas and other municipalities farther than
Batangas are already full of passengers when passing their respective municipalities;
that on their return trip to Batangas, passengers go to the station of oppositors at
Azcarraga, but can not easily get accommodation as the buses are already full, and if
they are successful in getting a ride, it is only after forcing themselves through and
crowding with other passengers."
"On the other hand, the Commission continued, the oppositors presented its evidence
showing that they are already rendering an adequate service on the lines Pagsanjan-
Manila and Batangas Pier-Manila; that there is not much traffic on said lines to
warrant the increase of trips applied for by applicant as shown by the reports of the
checkers who have been assigned to establish check points along the lines; that
oppositors have suffered losses in the operation of its auto-trucks on the lines
Pagsanjan-Manila, Paete-Manila and Batangas Pier-Manila; and that applicant has not
been making trips from the Batangas Pier but are cutting its trips up to the poblacion
of Batangas only."
After a careful consideration of the evidence submitted by both applicant and
oppositors, the Commission made the following conclusion:
"After a careful consideration of the evidence presented by both parties, we believe that
applicant has presented enough evidence to show the need for the additional trips
applied for by it. The records of the Commission show that in July, 1953, the Biñan
Transportation Company asked for the cancellation of its Lumban-Manila line to
enable said company to utilize the two auto trucks authorized for this line on its
Lemery-Manila line. And Maria Ruiz who was authorized to operate twenty-two (22)
units in different municipalities in that part of Laguna, requested the reduction of her
units to only ten. This, of course, has considerably reduced the number of trips in the
region. The records of this Commission also show that oppositor Batangas
Transportation Company has filed application for certificates of public convenience on
the lines Mataas Na Kahoy-Manila and Lobo-Manila as well as for increase of trips on
its line San Juan de Bolbok- Manila, the greater portion of which lines are concurrent
to the line Batangas Pier-Manila. As to the contention of oppositor Batangas
Transportation Company that the applicant Laguna Transportation Company is
cutting its Manila-Batangas Pier line only up to the Batangas poblacion, the evidence
of record show that the buses of applicant proceed up to the pier. And this is also
admitted by one of oppositor's witnesses.
"It is a matter of record in this Commission that on the line Batangas Pier-Manila,
there are only three operators: the applicant Laguna Transportation Company with
five round trips, the Biñan Transportation Company with four round trips, and the
oppositor Batangas Transportation Company with another four round trips. On this
line, the average interval of trips is fifty (50) minutes, while at Pagsanjan, the interval
of trips is at an average of more than ten (10) minutes. We, therefore, believe that
there is still room for authorizing the additional trips applied for. Besides, the three
additional trips applied for by applicant on the line Pagsanjan- Manila, will in a way
take the place of the trips abandoned by the Biñan Transportation Company and
Maria Ruiz."
Petitioners now contend that the Commission erred, among others, (a) in disregarding
the report of its own agents regarding the volume of traffic that their buses usually
carry which is less than fifty percent of their passenger capacity; (b) in disregarding
the financial loses of petitioners; (c) in disregarding the cut-throat competition existing
on the lines applied from among the different existing operators; and (d) in not giving
credit to the testimony of the agents of the Public Service Commission that respondent
has been cutting most of its trips from Batangas Piers to Manila.
In connection with the first contention, petitioners argue that applicant merely
presented two witnesses in support of its claim that there is need for the three
additional round trips it now seeks from the Commission whose testimony is not
sufficient to warrant the granting of said additional trips. This is contrary to the record
for the same shows that besides witnesses Nicomedes Nicolas and Feliciano Amadin
who testified that they had to wait long in order to be able to ride in the buses
operating between Pagsanjan and Manila, applicant also presented Antonio Liwanag,
its supervising-inspector, who testified that as early as 3:00 o'clock in the morning
passengers already wait at the parking place in order to take the first trip that starts
at 4:00 o'clock a.m. going to Manila but that the buses cannot accommodate all the
passengers, and that the trucks starting from Pagsanjan or from other places when
they pass Pagsanjan are already loaded which makes it impossible for them to
accommodate those that go to the parking place. And this testimonial evidence is
supported by Exhibits E and F, the first being a resolution adopted by the Municipal
Council of Pagsanjan, and the latter a petition of the people of Pagsanjan supporting
the petition for additional trips in the line Pagsanjan-Manila.
It is well-settled that "Where after a full hearing the Public Utility Commissioner
makes finding of fact, and there is a material conflict in the evidence, such findings
will not be disturbed where they are reasonably supported by testimony" (Inchausti
Steamship Co. vs. Public Utility Commissioner, 44 Phil., 363). It was also held that
"Whether public necessity and convenience warrant the putting up of additional
services on the part of the appellee, is a question of fact which the Public Service
Commission has found in the affirmative. This finding, being supported by sufficient
evidence, should not be disturbed" (Raymundo Transportation Co. vs. Cervo, 91 Phil.,
313). This Court even went to the extent of holding that it "will refrain from
substituting their discretion on the weight of the evidence for the discretion of the
Public Service Commission on questions of fact and will only reverse or modify such
orders of the Public Service Commission when it really appears that the evidence is
insufficient to support their conclusions" (Manila Yellow Taxicab Co. and Acro Taxicab
Co. vs. Danon, 58 Phil., 75; See also Padua vs. Ocampo, et al., G. R. No. L-7579,
September 17, 1955).
The claim of petitioners that the reports of the checkers submitted by them were
disregarded by the Commission may be true, but such is partly due to the fact that
the trips authorized to respondent were at 3:00 a.m., 5:47 a.m., and 7:23 a.m.,
whereas the checkers' reports refer to checking made at 8:00 or 8:30 a.m., which
certainly cannot cover the authorized trips (Exhibits 2). Moreover, those reports may
not entirely disprove the fact that there are more passengers than what the buses can
accommodate for they only show that the load of the buses at the starting point was
fifty percent and no one can tell how many more passengers they can pick up on the
way in their trip to Manila.
It is true that there is evidence showing that the present operators of buses on the
lines Pagsanjan-Manila and Sta. Cruz-Manila agreed to cut the rates of P0.01 and
P0.05 per passenger per kilometer to a flat rate of P0.80 per passenger from Sta. Cruz
and P0.85 from Pagsanjan to Manila, but this does not necessarily reflect the
existence of a cut-throat competition among said operators for precisely because of
that reduction a substantial increase in the volume of passengers was registered
induced by such reduction for which reason the additional round trips were found
necessary by respondent.
The claim of petitioners that they are losing in the operation of their Paete-Manila via
Pagsanjan line and Pagsanjan-Manila line is belied by their own witness Hinagpis who
said that the net profit realized by them in their joint operation of their lines for the
year 1954 is over P700,000 and by Exhibit 18 of petitioners covering the period from
January to June 30, 1954 showing that their net profit was P370,080.34. This fact
runs counter to their claim that there is a death of passengers on the lines they
operate and which now serves as basis of their opposition to the petition of
respondent.
Petitioners' contention that the Commission in granting the additional trips from
Batangas Piers to Manila to respondent did not take into account the checkers' reports
Exhibits 11, 12, and 13, is sufficiently answered by respondent's counsel in this wise:
"The reports of the checkers themselves show precisely that from the starting point
where they check at either the poblacion of Batangas or at San Jose, the TPU buses
still carry a load of about 50 percent. This load is already a good load for TPU
operation from starting points, for those buses could still pick passengers on the way
up to Manila, which has a distance of about 100 kilometers from the poblacion of
Batangas to Manila, about 85 kilometers from San Jose where another checking point
was made by the agent, to Manila, and approximately over 70 kilometers from Lipa
City to Manila. This fact, alone, refutes the contention of petitioners, that the checkers'
reports prove the contrary, for even the agents of the Commission who were placed at
the witness stand, Messrs. Atienza and Dantayana, admitted on cross-examination
that the passengers dropped before their check point, as well as the passengers after
the check point, are not reflected in the number of passengers specified in their
checkers' reports. They likewise, admit, further, that the trips made by TPU operators
before the opening of their check point, as well as the trips made after the closing of
the check point, are also not recorded in their checkers' report."
The foregoing makes it unnecessary to discuss the other points raised by petitioners in
their brief.
Wherefore, the decision appealed from is affirmed, with costs against petitioners.
Paras, C.J., Bengzon, Padilla, Labrador, Concepcion, Reyes, J.B.L. and Endencia, JJ.,
concur.

EN BANC
[G.R. No. 46570. April 21, 1939.]
JOSE D. VILLENA, petitioner, vs. THE SECRETARY OF THE INTERIOR, respondent.
Vicente del Rosario for petitioner.
Solicitor-General Ozaeta for respondent.
SYLLABUS
1. SECRETARY OF THE INTERIOR; EXECUTIVE SUPERVISION OVER THE
ADMINISTRATION OF PROVINCES, MUNICIPALITIES, CHARTERED CITIES AND
OTHER LOCAL POLITICAL SUBDIVISIONS. — Section 79 (C) of the Administrative
Code speaks of direct control, direction, and supervision over bureaus and offices
under the jurisdiction of the Secretary of the Interior, but this section should be
interpreted in relation to section 8G Or the same Code which grants to the
Department of the Interior "executive supervision over the administration of provinces,
municipalities, chartered cities and other local political subdivisions."
2. ID.; ID.; INVESTIGATION OF CHARGES; MEANING OF THE WORD
"SUPERVISION". — In the case of Planas vs. Gil (37 Off. Gaz., 1228) this court
observed that "Supervision is not a meaningless thing. It is an active power. It is
certainly not without limitation, but it at least implies authority to inquire into facts
and conditions in order to render the power real and effective. If supervision is to be
conscientious and rational, and not automatic and brutal, it must be founded upon a
knowledge of actual facts and conditions disclosed after careful study and
investigation." The principle there enunciated is applicable with equal force to the
present case. The Secretary of the Interior is invested with, authority to order the
investigation of the charges against the petitioner and to appoint a special investigator
for that purpose.
3. ID.; ID.; ID.; SUSPENSION BY THE SECRETARY. — As regards the challenged
power of the Secretary of the Interior to decree the suspension of the herein petitioner
pending an administrative investigation or the charges against him, the question, it
may be admitted, is not free from difficulties. There is no clear and express grant of
power to the secretary to suspend a mayor of a municipality who is under
investigation. On the contrary, the power appears lodged in the provincial governor by
section 2188 of the Administrative Code which provides that "The provincial governor
shall receive and investigate complaints made under oath against municipal officers
for neglect of duty, oppression, corruption or other form of maladministration of office,
and conviction by final judgment of any crime involving moral turpitude."
4. ID.; ID.; ID.; ID.; POWERS OF THE PRESIDENT OF THE PHILIPPINES. — The
fact, however, that the power of suspension is expressly granted by section 2188 of the
Administrative Code to the provincial governor does not mean that the grant is
necessary exclusive and precludes the Secretary of the Interior from exercising a
similar power. For instance, counsel for the petitioner admitted in the oral argument
that the President of the Philippines may himself suspend the petitioner from office in
virtue of his greater power of removal (sec. 2191, as amended, Administrative Codes to
be exercised conformably to law.
5. ID.; ID.; ID.; ID. — Indeed, if the President could, in the manner prescribed by
law, remove a municipal official, it would be a legal incongruity if he were to be devoid
of the lesser power of suspension. And the incongruity would be more patent if,
possessed of the power both to suspend and to remove a provincial official (sec. 2078,
Administrative Code), the President were to be without the power to suspend a
municipal official.
6. ID.; ID.; ID.; ID.; ID. — It may be argued with some degree of plausibility that, if
the Secretary of the Interior is, as we have hereinabove concluded, empowered to
investigate the charges against the petitioner and to appoint a special investigator for
that purpose. preventive suspension may be a means by which to carry into effect a
fair and impartial investigation. This is a point, however, which, for the reason
hereinafter indicated the court does not have to decide.
7. ID.; ID.; ID.; ID.; ID. — Withal, at first blush, the argument of ratification may
seem plausible under the circumstances, it should be observed that there are certain
prerogative acts which, by their very nature, cannot be validated by subsequent
approval or ratification by the President. There are certain constitutional powers and
prerogatives of the Chief Executive of the Nation which must be exercised by him in
person and no amount of approval or ratification will validate the exercise of any of
those powers by any other person.
8. ID.; ID.; ID.; ID.; ID. — The heads of the various executive departments are
assistants and agents of the Chief Executive, and, except in cases where the Chief
Executive is required by the Constitution or the law to act in person or the exigencies
of the situation demand that he act personally, the multifarious executive and
administrative functions of the Chief Executive are performed by and through the
executive departments, and the acts of the secretaries of such departments, performed
and promulgated in the regular course of business, are, unless disapproved or
reprobated by the Chief Executive, presumptively the acts of the Chief Executive.
9. ID.; ID.; ID.; ID.; ID.; CONSTITUTION OF THE PHILIPPINES. — With reference
to the Executive Department of the government, there is one purpose which is crystal-
clear and is readily visible without the projection of judicial searchlight, and that is,
the establishment of a single, not plural, Executive. The first section of Article VII of
the Constitution, dealing with the Executive Department, begins with the enunciation
of the principle that "The executive power shall be vested in a President of the
Philippines." This means that the President of the Philippines is the Executive of the
Government of the Philippines, and no other. The heads of the executive departments
occupy political positions and hold office in an advisory capacity, and, in the language
of Thomas Jefferson, "should be of the President's bosom confidence" and, in the
language of Attorney-General Cushing, "are subject to the direction of the President".
10. ID.; ID.; ID.; ID.; ID.; ID.; SECRETARIES OF DEPARTMENT. — Without
minimizing the importance of the heads of the various departments, their personality
is in reality but the projection of that of the President. Stated otherwise, and as
forcibly characterized by Chief Justice Taft of the Supreme Court of the United States,
"each head of a department is, and must be, the President's alter ego in the matters of
that department where the President is required by law to exercise authority" (Myers
vs. United States, 47 Sup. Ct. Rep., 21 at 30; 272 U. S., 52" at 133; 71 Law. ed., 160).
Secretaries of departments, of course, exercise certain powers under the law but the
law cannot impair or in any way affect the constitutional power of control and
direction of the President. As a matter of executive policy, they may be granted
departmental autonomy as to certain matters, but this is by mere concession of the
Executive, in the absence of valid legislation in the particular field.
11. ID.; ID.; ID.; ID.; ID.; ID. — If the President, then, is the authority in the
executive Department, he assumes the corresponding responsibility. The head of a
department is a man of his confidence; he contrast and directs his acts; he appoints
him and can remove him at pleasure; he is the executive, not any of his secretaries.
It .s therefore logical that he, the President, should be answerable for the acts of
administration of the entire Executive Department before his own conscience no less
than before that undefined power of public opinion which, in the language of Daniel
Webster, is the last repository of popular government. These are the necessary
corollaries of the American presidential type of government, and if there is any defect,
it is attributable to the system itself. We cannot modify the system unless we modify
the Constitution, and we cannot modify the Constitution by any subtle process of
judicial interpretation or construction.
DECISION
LAUREL, J p:
This is an original action of prohibition with prayer for preliminary injunction against
the Secretary of the Interior to restrain him and his agents from proceeding with the
investigation of the herein petitioner, Jose D. Villena, mayor of Makati, Rizal, which
was scheduled to take place on March 28, 1939, until this case is finally determined
by this court. The respondent was required to answer, but the petition for preliminary
injunction was denied.
It appears that the Division of Investigation of the Department of Justice, upon the
request of the Secretary of the Interior, conducted an inquiry into the conduct of the
petitioner, as a result of which the latter was found to have committed bribery,
extortion, malicious abuse of authority and unauthorized practice of the law
profession. The respondent, therefore, on February 8, 1939, recommended to the
President of the Philippines the suspension of the petitioner to prevent possible
coercion of witnesses, which recommendation was granted, according to the answer of
the Solicitor-General of March 20, 1939, verbally by the President on the same day.
The Secretary of the Interior suspended the petitioner from office on February 9, 1939,
and then and thereafter wired the Provincial Governor of Rizal with instruction that
the petitioner be advised accordingly. On February 13, 1939, the respondent wrote the
petitioner a letter, specifying the many charges against him and notifying him of the
designation of Emiliano Anonas as special investigator to investigate the charges. The
special investigator forthwith notified the petitioner that the formal investigation would
be commenced on February 17, 1939, at 9 a. m., but due to several incidents and
postponements, the same had to be set definitely for March 28, 1939. Hence, the
petition for preliminary injunction referred to in the beginning of this opinion.
The petitioner contends in his petition:
"(1) That the Secretary of the Interior has no jurisdiction or authority to suspend
and much less to prefer by himself administrative charges against the petitioner and
decide also by himself the merits of the charges as the power to suspend municipal
elective officials and to try and punish them for misconduct in office or dereliction of
duty is lodged in some other agencies of the government;
"(2) That the acts of the respondent in suspending the petitioner from office and in
preferring by himself charges against him and in designating a special investigator to
hear the charges specified in Exhibit A are null and void for the following reasons:
"(a) Because the Secretary of the Interior, by suspending the petitioner, has
exercised control over local governments when that power has been taken away from
the President of the Philippines by the Constitution for the to abrogate and the power
to abrogate means the power to power to control has been interpreted to include the
power usurp and the power to usurp necessarily includes the power to destroy:
"(b) Because even if the respondent Secretary of the Interior has power of
supervision over local governments, that power, according to the constitution, must be
exercised in accordance with the provisions of law and the provisions of law governing
trials of charges against elective municipal officials are those contained in section
2188 of the Administrative Code as amended. In other words, the Secretary of the
Interior must exercise his supervision over local governments, if he has that power
under existing law, in accordance with section 2188 of the Administrative Code, as
amended, as the latter provisions govern the procedure to be followed in suspending
and punishing elective local officials while section 79 (C) of the Administrative Code is
the general law which must yield to the special law;
"(c) Because the respondent Secretary of the Interior is exercising an arbitrary
power by converting himself into a complainant and at the same time judge of the
charges he has preferred against the petitioner;
"(d) Because the action of the respondent Secretary of the Interior is not based on
any sworn statement of any private person or citizen of this government when section
2188 of the Administrative Code requires the complaint against elective municipal
officials to be under oath in order to merit consideration by the authorities."
Petitioner prays this Honorable Court:
"(a) To issue a writ of preliminary injunction against the respondent restraining
him, his agents, attorneys and all persons acting by virtue of his authority from
further proceeding against the petitioner until this case is finally determined by this
court;
"(b) To declare, after the hearing of this petition, that the respondent is without
authority or jurisdiction to suspend the petitioner from the office of mayor of Makati
and to order his immediate reinstatement in office;
"(c) To declare that the respondent has no authority to prefer charges against the
petitioner and to investigate those charges for to grant him that power the respondent
world be acting as prosecutor and judge of the case of his own creation."
Upon the other hand, the Solicitor-General contends in his answer:
"1. That section 79 (C) in relation with section 86 of the Revised Administrative
Code expressly empowers the respondent as Secretary of the Interior to "order the
investigation of any act or conduct of any person in the service of any bureau or office
under his department" and in connection therewith to 'designate an official or person
who shall conduct such investigation'; (Par. 4.)
"2. That although section 2188 of the Revised Administrative Code, invoked by the
petitioner, empowers the provincial governor to 'receive and investigate complaints
made tender oath against municipal officers for neglect of duty, oppression, corruption
or other form of maladministration of office', said section does not preclude the
respondent as Secretary of the Interior from exercising the power vested in him by
section 79 (C) in relation with section 86 of the Revised Administrative Code; and that,
moreover, said section 2188 must be read in relation with section 37 of Act No. 4007,
known as the Reorganization Law of 1932; (Par. 4 [b].)
"3. That at the commencement of the investigation the petitioner did not question
the power or jurisdiction of the Department of the Interior to investigate the
administrative charges against him but merely contended that the filing of said
charges was not in accordance with law for the lesson that they did not bear the oaths
of the complainants; (Par. 5.)
"4. That the authority of a department head to order the investigation of any act or
conduct of any person under his department necessarily carries with it by implication
the authority to take such measures as he may deem necessary to accomplish the
purpose of the investigation, such as by suspending the officer under investigation to
present coercion of witnesses; and that, furthermore, the suspension from office of the
herein petitioner by the respondent was authorized by the Chief Executive, who is
empowered by section 64 (B) of the Administrative Code to remove officials from office;
(Par. 7.)
"5. That the petition does not allege facts and circumstances that would warrant
the granting of the writ of preliminary injunction under section 164 of the Code of Civil
Procedure; (Par. 8.)
"6. That it is a well-settled rule 'that courts of equity have no power to restrain
public officers by injunction from performing any official act which they are by law
required to perform, or acts which are not in excess of the authority and discretion
reposed in them.' (Par. 9.)"
The issues presented in this case may be reduced to an inquiry into the legal authority
of the Secretary of the Interior (a) to order an investigation, by a special investigator
appointed by him, of the charges of corruption and irregularity brought to his
attention against the mayor of the municipality of Makati, Province of Rizal, who is the
petitioner herein, and (b) to decree the suspension of ,he said mayor pending the
investigation of the charges.
Section 79 (C) of the Administrative Code provides as follows:
"The Department Head shall have direct control, direction, and supervision over all
bureaus and offices under his jurisdiction and may, any provision of existing law to
the contrary notwithstanding, repeal or modify the decisions of the chiefs of said
bureaus or offices when advisable in the public interest.
"The Department Head may order the investigation of any act or conduct of any person
in the service of any bureau or office under his department and in connection
therewith may appoint a committee or designate an official or person who shall
conduct such investigations, and such committee, official, or person may summon,
witness by subpoena and subpoena duces tecum, administer cath and take testimony
relevant to the investigation."
The above section speaks, it is true, of direct control, direction, and supervision over
bureaus and offices under the jurisdiction of the Secretary of the Interior, but this
section should be interpreted in relation to section 86 of the same Code which grants
to the Department of the Interior "executive supervision over the administration of
provinces, municipalities, chartered cities and other local political subdivisions." In
the case of Planas vs. Gil (37 Off. Gaz., 1228), we observed that "Supervision is not a
meaningless thing. It is an active power. It is certainly not without limitation, but it at
least implies authority to inquire into facts and conditions in order to render the power
real and effective. If supervision is to be conscientious and rational, and not automatic
and brutal, it must be founded upon a knowledge of actual facts and conditions
disclosed after careful study and investigation." The principle there enunciated is
applicable with equal force to the present case.
We hold, therefore, that the Secretary of the Interior is invested with authority to order
the investigation of the charges against the petitioner and to appoint a special
investigator for that purpose.
As regards the challenged power of the Secretary of the Interior to decree the
suspension of the herein petitioner pending an administrative investigation of the
charges against him, the question, it may be admitted, is not free from difficulties.
There is no clear and express grant of power to the secretary to suspend a mayor of a
municipality who is under investigation. On the contrary, the power appears lodged in
the provincial governor by section 2188 of the Administrative Code which provides
that "The provincial governor shall receive and investigate complaints made under
oath against municipal officers for neglect of duty, oppression, corruption or other
form of maladministration of office, and conviction by final judgment of any crime
involving moral turpitude. For minor delinquency he may reprimand the offender; and
if a more severe punishment seems to be desirable he shall submit written charges
touching the matter to the provincial board, furnishing a copy of such charges to the
accused either personally or by registered mail, and he may in such case suspend the
officer (not being the municipal treasurer) pending action by the board, if in his
opinion the charge be one affecting the official integrity of the officer in question.
Where suspension is thus effected, the written charges against the officer shall be filed
with the board within five days." The fact, however, that the power of suspension is
expressly granted by section 2188 of the Administrative Code to the provincial
governor does not mean that the grant is necessarily exclusive and precludes the
Secretary of the Interior from exercising a similar power. For instance, counsel for the
petitioner admitted in the oral argument that the President of the Philippines may
himself suspend the petitioner from office in virtue of his greater power of removal
(sec. 2191, as amended, Administrative Code) to be exercised conformably to law.
Indeed, if the President could, in the manner prescribed by law, remove a municipal
official, it would be a legal incongruity if he were to be devoid of the lesser power of
suspension. And the incongruity would be more patent if, possessed of the power both
to suspend and to remove a provincial official (sec. 2078, Administrative Code), the
President were to be without the power to suspend a municipal official. Here is,
parenthetically, an instance where, as counsel for petitioner admitted, the power to
suspend a municipal official is not exclusive. Upon the other hand, it may be argued
with some degree of plausibility that, if the Secretary of the Interior is, as we have
hereinabove concluded, empowered to investigate the charges against the petitioner
and to appoint a special investigator for that purpose, preventive suspension may be a
means by which to carry into effect a fair and impartial investigation. This is a point,
however, which, for the reason hereinafter indicated, we do not have to decide.
The Solicitor-General argues that section 37 of Act No. 4007, known as the
Reorganization Law of 1932, by providing, "the provisions of the existing law to the
contrary notwithstanding," that "whenever a specific power, authority, duty, function,
or activity is entrusted to a chief of bureau, office, division or service, the same shall
be understood as also conferred upon the proper Department Head who shall have
authority to act directly in pursuance thereof, or to review, modify or revoke any
decision or action of said chief of bureau, office, division or service", should be
interpreted to concede to the Secretary of the Interior the power to suspend a mayor of
a municipality. The argument is so generally sweeping that, unless distinctions are
made, the effect would be the complete abrogation at will of the powers of provincial
and municipal officials even in corporate affairs of local governments. Under the
theory suggested by the Solicitor-General, the Secretary of the Interior could, as
observed by able counsel for the petitioner, enter into a contract and sign a deed of
conveyance of real property in behalf of a municipality against the opposition of the
mayor thereof who is the local official authorized by law to do so (sec. 2196, Revised
Administrative Code), or in behalf of a province in lieu of the provincial governor
thereof (sec. 2068, Ibid.), and otherwise exercise powers of corporate character
mentioned in sections 2067 and 2175 of the Revised Administrative Code and which
are lodged in the corresponding provincial and municipal officials. And if the power of
suspension of the Secretary of the Interior is to be justified on the plea that the
pretended power is governmental and not corporate, the result would be more
disastrous. Then and thereunder, the Secretary of the Interior, in lieu of the mayor of
the municipality, could directly veto municipal ordinances and resolutions under
section 2229 of the Revised Administrative Code; he could, without any formality,
elbow aside the municipal mayor and himself make appointments to all non-elective
positions in the municipal service, under section 2199 of the Revised Administrative
Code; he could, instead of the provincial governor, fill a temporary vacancy in any
municipal office under subsection (a), section 2188, as amended, of the said Code; he-
could even directly appoint lieutenants of barrios and wrest the authority given by
section 2218 of the Revised Administrative Code to a municipal councilor. Instances
may be multiplied but it is unnecessary to go any further. Prudence, then, dictates
that we should hesitate to accept the suggestion urged upon us by the Solicitor-
General, especially where we find the path indicated by him neither illumined by the
light of our own experience nor cemented by the virtuality of legal principles but is, on
the contrary, dimmed by the recognition however limited in our own Constitution of
the right of local self-government and by the actual operation and enforcement of the
laws governing provinces, chartered cities, municipalities and other political
subdivisions. It is not any question of wisdom of legislation but the existence of any
such destructive authority in the law invoked by the Government that we are called
upon to pass and determine here.
In the deliberation of this case it has also been suggested that, admitting that the
President of the Philippines is invested with the authority to suspend the petitioner,
and it appearing that he had verbally approved or at least acquiesced in the action
taken by the Secretary of the Interior, the suspension of the petitioner should be
sustained on the principle of approval or ratification of the act of the Secretary of the
Interior by the President of the Philippines. There is, to be sure, more weight in this
argument than in the suggested generalization of section 37 of Act No. 4007. Withal,
at first blush, the argument of ratification may seem plausible under the
circumstances, it should be observed that there are certain prerogative acts which, by
their very nature, cannot be validated by subsequent approval or ratification by the
President. There are certain constitutional powers and prerogatives of the Chief
Executive of the Nation which must be exercised by him in person and no amount of
approval or ratification will validate the exercise of any of those powers by any other
person. Such, for instance, is his power to suspend the writ of habeas corpus and
proclaim martial law (par. 3, sec. 11, Art. VII) and the exercise by him of the benign
prerogative of mercy (par. 6, sec. 11, idem). Upon the other hand, doubt is entertained
be some members of the court whether the statement made by the Secretary to the
President in the latter's behalf and by his authority that the President had no
objection to the suspension of the petitioner could be accepted as an affirmative
exercise of the power of suspension in this case, or that the verbal approval by the
President of the suspension alleged in a pleading presented in this case by the
Solicitor-General could be considered as a sufficient ratification in law.
After serious reflection, we have decided to sustain the contention of the government
in this case on the broad proposition, albeit not suggested, that under the presidential
type of government which we have adopted and considering the departmental
organization established and continued in force by paragraph 1, section 12, Article VII,
of our Constitution, all executive and administrative organizations are adjuncts of the
Executive Department, the heads of the various executive departments are assistants
and agents of the Chief Executive, and, except in cases where the Chief Executive is
required by the Constitution or the law to act in person or the exigencies of the
situation demand that he act personally, the multifarious executive and administrative
functions of the Chief Executive are performed by and through the executive
departments, and the acts of the secretaries of such departments, performed and
promulgated in the regular course of business, are, unless disapproved or reprobated
by the Chief Executive, presumptively the acts of the Chief Executive. (Runkle vs.
United States [1887], 122 U. S., 543; 30 Law. ed., 1167; 7 Sup. Ct. Rep., 1141; see
also U. S. vs. Eliason [1839], 16 Pet., 291; 10 Law. ed., 968; Jones vs. U. S. [1890],
137 U. S., 202; 34 Law. ed., 691; 11 Sup. Ct., Rep., 80; Wolsey vs. Chapman [1880],
101 U. S., 755; 25 Law. ed., 915; Wilcox vs. Jackson [1836], 13 Pet., 498; 10 Law. ed.,
264.)
Fear is expressed by more than one member of this court that the acceptance of the
principle of qualified political agency in this and similar cases would result in the
assumption of responsibility by the President of the Philippines for acts of any member
of his cabinet, however illegal, irregular or improper may be these acts. The
implications, it is said, are serious. Fear, however, is no valid argument against the
system once adopted, established and operated. Familiarity with the essential
background of the type of Government established under or Constitution, in the light
of certain well-known principles and practices that go with the system, should offer
the necessary explanation. With reference to the Executive Department of the
government, there is one purpose which is crystal-clear and is readily visible without
the projection of judicial searchlight, and that is, the establishment of a single, not
plural, Executive. The first section of Article VII of the Constitution, dealing with the
Executive Department, begins with the enunciation of the principle that "The executive
power shall be vested in a President of the Philippines." This means that the President
of the Philippines is the Executive of the Government of the Philippines, and no other.
The heads of the executive departments occupy political positions and hold office in an
advisory capacity, and, in the language of Thomas Jefferson, "should be of the
President's bosom confidence" (7 Writings, Ford ed., 498), and, in the language of
Attorney-General Cushing (7 Op., Attorney-General, 453), "are subject to the direction
of the President." Without minimizing the importance of the heads of the various
departments, their personality is in reality but the projection of that of the President.
Stated otherwise, and as forcibly characterized by Chief Justice Taft of the Supreme
Court of the United States, "each head of a department is, and must be, the
President's alter ego in the matters of that department where the President is required
by law to exercise authority" (Myers vs. United States, 47 Sup. Ct. Rep., 21 at 30; 272
U. S., 52 at 133; 71 Law. ed., 160). Secretaries of departments, of course, exercise
certain powers under the law but the law cannot impair or in any way affect the
constitutional power of control and direction of the President. As a matter of executive
policy, they may be granted departmental autonomy as to certain matters but this is
by mere concession of the executive, in the absence of valid legislation in the
particular field. If the President, then, is the authority in the Executive Department, he
assumes the corresponding responsibility. The head of a department is a man of his
confidence; he controls and directs his acts; he appoints him and can remove him at
pleasure; he is the executive, not any of his secretaries. It is therefore logical that he,
the President, should be answerable for the acts of administration of the entire
executive Department before his own conscience no less than before that undefined
power of public opinion which, in the language of Danie, Webster, is the last repository
of popular government. these are the necessary corollaries of the American
presidential type of government, and if there is any defect, it is attributable to the
system itself. We cannot modify the system unless we modify the Constitution, and we
cannot modify the Constitution by any subtle process of judicial interpretation or
construction.
The petition is hereby dismissed, with costs against the petitioner. So ordered.
Avanceña, C.J., Diaz and Concepcion, JJ., concur.
Separate Opinions
VILLA-REAL, J., concurring:
I concur in the result. The Secretary of the Interior is nowhere given the power to
suspend a municipal elective officer pending charges, and in the absence of such
power he may not suspend him. The power to suspend cannot be complied even from
an arbitrary power to remove, except where the power to remove is limited to cause; in
such case, the power to suspend, made use of as a disciplinary power pending
charges, is regarded as included within the power of removal (46 Corpus Juris, sec.
142, page 982). Provincial governors alone are expressly empowered to suspend
municipal officers under certain conditions by section 2188 of the Revised
Administrative Code, and the President of the Philippines by section 2191, as
amended, of the same Code. Though the suspension of the petitioner by the Secretary
of the Interior was unauthorized, the implied approval by the President of the
Philippines validated such suspension.
IMPERIAL, J., concurring and dissenting:
I concur in the result because in my opinion (1) the President of the Philippines, under
sections 64 (b), and 2191 of the Revised Administrative Code, as the latter has been
amended, and section 11 (1), Article VII, of the Constitution, is vested with the power
to expel and suspend municipal officials for grave misconduct, and it appears that the
suspension was ordered by virtue of that authority; and (2) the Secretary of the
Inferior acted within the powers conferred upon him by section 79 (C), in connection
with section 86, of the Revised Administrative Code, as amended, in ordering an
administrative investigation of the charges against the petitioner, in his capacity as
mayor of that municipality of Makati, Province of Rizal.
It is a fact that, as a result of the investigation conducted by the Division of
Investigation of the Department of Justice, the respondent, in turn, ordered the
administrative investigation of the petitioner and recommend his temporary
suspension to the President of the Philippines to preclude him from exerting pressure
upon the witnesses who would testify in the investigation, and that the President of
the Philippines, through Secretary Jorge B. Vargas, stated that he had no objection to
the suspension. The act of the President of the Philippines, in my opinion, was an
exercise of his power to suspend the petitioner and the statement that he had no
objection was, at botton, an order of suspension. The circumstance that in the
communication which the respondent addressed to the petitioner it appeared as
though the suspension had been ordered by him, is immaterial and does not alter the
merits of the case, as the facts disclose that the order of suspension came directly
from the President of the Philippines.
However, I dissent from the conclusion of the majority that, under the existing
presidential system of government and in view of the fact that the department
secretaries are, in the last analysis, agents of the executive, the acts of the said
officials are presumptively deemed the acts of the executive and that, consequently,
the suspension of the petitioner directed by the respondent should be considered,
under the same theory, as the suspension decreed by the President of the Philippines.
I believe that the principle thus enunciated is at once dangerous and without legal
sanction. Under the law each of these officials has his own powers and duties and I
doubt seriously if it has ever been the intention of the legislature to confuse their
duties and prerogatives, for otherwise it would be difficult, if not impossible, to limit
and fix responsibility. The respondent himself could not have so understood the law
when, under the facts, in order to suspend the petitioner he found it necessary to
obtain the express authority of the President of the Philippines.
MORAN, J., concurring and dissenting:
I concur in the result.
The ratio dicidendi of the case is contained in the following paragraph of the majority
decision:
" . . . that under the presidential type of government which we have adopted and
considering the departmental organization established and continued in force by
paragraph 1, section 12, Article VII, of our Constitution, all executive and
administrative organizations are adjuncts of the Executive Department, the heads of
the various executive departments are assistants and agents of the Chief executive,
and, except in cases where the Chief Executive is required by the Constitution or the
law to act in person or the exigencies of the situation demand that he act personally,
the multifarious executive and administrative functions of the Chief Executive are
performed by and through the executive departments, and the acts of the secretaries
of such departments, performed and promulgated in the regular course of business,
are, unless disapproved or reprobated by the Chief Executive, presumptively the acts
of the Chief Executive. . . ."
If by this proposition it is meant that the power of suspension residing in the President
may validly be exercised by the Secretary of the Interior in his own name, and his act,
unless disapproved or reprobated by the President, is presumptively the act of the
President, I disagree. The implications involved in the proposition are serious. Suppose
the Secretary of Justice, pending proceedings against a judge of first instance,
suspends him temporarily, a power vested in the President (section 173, Adm. Code),
is the suspension valid in the silence of the Presidents? Suppose the Secretary of
Public Works and Communications removes the Director of Posts, is the removal the
act of the President if not disapproved by the latter? Suppose the Secretary of the
Interior grants conditional pardon to a prisoner, is the paruon valid unless reprobated
by the President? The answers are self-evident.
It is true that the majority decision makes exception of the powers which the Chief
Executive, by Constitution, by law, or by the exigencies of the situation, should
exercise in person. The distinction, however, thus sought to be established between
the powers which the President should exercise in person and those which he may
exercise thru the Department secretaries, if it exists at all, is extremely shadowy and
in fact can nowhere be found in the Constitution, in the law or practices of
administration. On the contrary, the weight of wisdom and authority is that powers
committed or interested by the Constitution or by law to the President must be
exercised by him positively and in person. The only functions of the President which,
in my opinion, may be performed by the department secretaries are those which are
preliminary or preparatory to the exercise of his powers, such as, investigation,
research and other inquiries which may be necessary for a wise and judicious exercise
of his judgment or discretion. This opinion finds corroboration in section 79-A of the
Administrative Code.
The Proposition contained in the majority decision is even of much wider scope than is
above stated, for it conveys the idea that all the functions of the executive branch of
the government are in the President, with the executive departments as mere adjuncts
to him and the department secretaries his mere assistants or agents with no
authority, function or responsibility of their own, except those emanating from the
President, and that, therefore, as they cannot act but at the will of the President, all
their acts, unless disapproved or reprobated by the President, are presumptively the
acts of the President. This sweeping statement is undoubtedly inspired by section 1,
Article VII, of the Constitution, which provides that "the executive power shall be
vested in a President of the Philippines." It disregards, however, the true meaning of
other provisions of the Constitution, such as paragraph 1 of section 12 of the same
article, which provides that "the executive departments of the present Government of
the Philippine Islands shall continue as now authorized by law until the National
Assembly shall provide otherwise." (Emphasis mine.)
According to section 74 of the Administrative Code " . . . the departments are
established for the proper distribution of the work of the executive, for the
performance of the functions expressly assigned to them by law, and in order that
each branch of the administration may have a chief responsible for its direction and
policy." (Emphasis mine.) To give effect to this provision, each department head is
expressly vested with broad as well as specific powers commensurate with his
responsibility, such as, the power to " . . . promulgate, whenever he may see fit to do
so, all rules, regulations, orders circulars, . . . necessary to regulate the proper
working and harmonious and efficient administration of each and all of the offices and
dependencies of his department, and for the strict enforcement and proper execution
of the laws relative to matters under the jurisdictions of said department" (section 79-
B, Adm. Code); the power of direction and supervision over such bureaus and offices
under his jurisdiction, and to repeal or modify the decisions of the chief of said
bureaus or offices when advisable in the public interest (section 79-C, Adm. Code;
section 37, Act No. 4007); the power to appoint subordinate officers and employees
whose appointment is not expressly vested by law in the President, and to remove and
punish them except as specially provided otherwise in accordance with the Civil
Service Law (section 79-D, Adm. Code), etc. All these powers are continued in force by
the Constitution.
Thus, when in one provision the Constitution vests in the President of the Philippines
the executive power of the government, in another the same Constitution recognizes
the powers of the department secretaries conferred upon them by law. The apparent
conflict between the two provisions is reconciled by the Constitution itself by means of
the power of control vested in the President over the executive departments. That
power of control could not have been intended to wipe out or supersede all the powers
of the department secretaries, for, otherwise, those powers would not have been
continued in force by the Constitution. It would certainly be an absurdity in the
Constitution to recognize and at the same time abrogate those powers. On the
contrary, the creation of the power of control implies the preservation, not the
destruction, of all the powers conferred by law upon the department secretaries. In
fact, the majority admits the existence of those powers, subject, of course, to the
power of control of the President. Now, the power of control may or may not be
exercised. If not exercised, the acts of the department secretaries in pursuance of their
powers would remain in full force and effect, and are their own acts and not the
President's. If exercised, by way of disapproval or reprobation of the acts of the
department secretaries, the acts so reprobated are still their acts and not the
President's.
There is more theory than law in the statement that the personality of the department
secretaries is but the projection of that of the President. There is more truth in the
language used by Chief Justice Talt, as quoted in the majority opinion, to the effect
that 'each head of a department is, and must be, the President's alter ego in the
matters of that department where the President is required by law to exercise
authority' (emphasis mine). For it is only when the President exercises his authority
and powers that the department secretaries act merely as his assistants, agents or
advisers, and, in such cases, their acts are his. But when they act in accordance with
the powers vested in them by law, they act with a personality separate from and no
less distinct than that of the President himself, if the recognition accorded to their
powers by the Constitution is to mean anything at all. And the fact that the
government we have instituted is a presidential one in no wise destroys what the law
has created and the Constitution has recognized. The presidential system of
government could not have been intended to supersede a government of laws for a
government of men.
If, as stated by the majority, all the official acts of the secretaries of the departments
are presumptively the acts of the President, it must follow that the President is
presumptively responsible therefor. That this corollary proposition cannot be
maintained is obvious. At every instance, he would be called upon to accountability for
acts of which he might not have any knowledge at all and for which he could in no
wise be head responsible. In the complicated activities of each department,
multifarious official acts have to be performed from time to time. Very often these acts
are performed in pursuance of powers and duties expressly lodged in them by law;
and, occasionally, upon authority and direction of the President in the latter's exercise
of his power of control. In the performance of such acts, executive and administrative
discretion had to be exercised for which responsibility must accordingly be exclusive
and purely personal. To hold the President presumptively responsible for such acts
would suggest, in effect, the necessity on the part of the President to exercise constant
and unrelaxing vigilance over al. the official acts of the secretaries of the apartments,
under hazard of being involved in endless difficulties. The manifold exigencies of
government render such a suggestion inconceivable.
My view, therefore, is that the department secretaries may act in a purely advisory
capacity or under the direction and authority of the president in the latter's exercise of
his constitutional power of control, and, in such cases, the proposition contained in
the majority decision applies, because, then, the department secretaries act purely for
the Chief Executive. However, they may also act in pursuance of the powers and
duties conferred upon them by law and continued in force by the Constitution, and,
unless the President desires to intervene, in appropriate cases, by interposing his
constitutional power of control, the acts of the department secretaries are exclusively
their own, and they are likewise exclusively responsible therefor. It follows that when
a department secretary acts in his own name and not by order or authority of the
President, he is presumed to be so acting in pursuance of a power conferred upon
him by law, and when the power is not thus conferred, his act is null and void. And if
the power is conferred expressly upon the President, he must exercise its positively
and in person with such assistance, advice and recommendation of the corresponding
department head, as he himself may choose to demand. Accordingly, the bare
statement made by the President of his non-objection to the action taken by the
Secretary of the Interior in the present case is not a sufficient exercise of his power to
suspend, for it may mean neither approval not disapproval. The President probably
believed, and indeed rightly as I shall hereafter show, that the power to suspend the
petitioner also resided in the Secretary of the Interior, and called upon to exercise his
power of supervision, he confined himself to making a mere statement of non-
objection to the latter's exercise of his power. This, in my opinion, is the most rational
explanation of the passive attitude thus observed by the President. I an almost sure
that had he intended to exercise his own power to suspend, he would have done so, as
usually, in a manner that would not admit of any possibility of doubt.
Moreover, besides the written statement of non-objection made by the President, it is
claimed by the Solicitor-General that the President expressly and orally approved the
order of suspension issued by the Secretary of the Interior. Such supposed oral
approval alleged in the respondent's answer is, however, deemed controverted by the
petitioner, according to section 104 of Act No. 190, and, not being supported by proof,
it cannot be considered as a true fact in the disposition of this case.
If I agree with the result, it is not therefore on the broad proposition relied upon by the
majority, but from what is necessarily implied from express provisions of law. Section
37 of Act No. 4007 provides:
"The provisions of the existing law to the contrary notwithstanding, whenever a
specific power, authority, duty, function, or activity is entrusted to a chief of bureau,
office, division or service, the same shall be understood as also conferred upon the
proper Department Head who shall have authority to act directly in pursuance thereof,
or to review, modify or revoke any decision or action of said chief of bureau, office,
division or service."
There can be no question that the word "division" in the above provision has no other
reference than to provinces and municipalities (Chapter 2 and section 86, Adm. Code).
It is then evident that this provision confers upon the Secretary of the Interior the
power residing in the provincial governor (section 2188, Adm. Code) to decree the
suspension of the petitioner pending an administrative investigation of the charges
against him. That this is the true meaning of the law, the majority does not question.
Fear, however, has been expressed in the majority opinion that this view may result in
the complete abrogation of the powers of provincial and municipal officials even in
corporate affairs of local governments. Instances are cited in which the Secretary of
the Interior may exercise for himself the powers vested by law in provincial governors
and municipal mayors as to matters of both governmental and corporate functions of
provinces and municipalities, such as, the power to veto, the power to appoint, and
the power to enter into contracts. Whether or not the Secretary of the Interior can this
exercise the powers vested by law in provincial and municipal executives in the
instances cited, to the complete abrogation of provincial and municipal autonomy, is a
question which I need not discuss now. Other provisions of law and a number of
collateral questions may have to be inquired into if any safe conclusion is to be
formed. But even if, as feared, the law has the effect of nullifying the powers conferred
upon provincial and municipal executives, can there be any doubt that the law can do
so? The same authority that creates those powers may withdraw or qualify them at
will or provide elective measures of supervision over their exercise. The extent or even
the existence of local autonomy is a matter which lies within the exclusive prerogative
of the Legislature to define. If the law is clear, our duty to apply it is just as clear,
irrespective of how destructive it may be of the autonomy of local governments. To
refuse to apply a law, which is otherwise applicable and is valid and constitutional,
simply because it does violence to our theory of government, would, in effect, be
imposing ourselves upon the legislative department of the government and an
intrusion into its own sphere of constitutions, authority.
Moreover, the law is not of such "destructive authority" as the majority has pictured it
to be. The philosophy behind this provision is apparent. It is intended to supply
possible omissions or inactions on the part of the subordinate officers concerned by
reason of the entanglement arising from partisan activities. The power which the law
confers upon the department head is undoubtedly susceptible of abuses. But what
power is not susceptible of abuse? In the enactment of the law, the Legislature
undoubtedly relied much on the sense of patriotism and sound judgment of the
department head. It is perhaps the intention of the law that the department head
should exercise his power in a manner compatible with the autonomy given the local
governments, and that he should act directly only when the exigencies of the situation
require him to act in the interest of the Nation. Thus, the department head is given
ample discretion. The possibility of a mischievous or disastrous abuse of power on his
part is not entirely without any remedy at all. The presidential power of control over
executive departments and the existence of judicial remedies may afford effective
check or redress. In the instant case, there is no showing that the Secretary of the
Interior has abused, or ever intended to abuse, the power of suspension. If a
capricious and whimsical use of such power presents itself to us for determination in
some future time, then and there must we declare where one power begins and the
other ends.
As the law, therefore, is not unconstitutional, we would be ignoring its clear provision
if not applied in this case.
EN BANC
[G.R. No. L-20368. February 28, 1964.]
CRISPIN BONGCAWIL, petitioner, vs. THE PROVINCIAL BOARD OF LANAO DEL
NORTE, ET AL., respondents.
Antonio Barredo and Francisco Ma. Garcia for petitioner.
Solicitor General and Lanao del Norte Provincial Fiscal for respondents.
SYLLABUS
1. ADMINISTRATIVE LAW; APPEALS; EXHAUSTION OF ADMINISTRATIVE
REMEDIES; FAILURE TO APPEAL TO THE PRESIDENT. — A petition for certiorari
cannot be sustained where the petitioner fails to exhaust his administrative remedies
as when he fails to appeal from the decision of the provincial board to the Office of the
President as provided in Section 2190 of the Revised Administrative Code.
2. ID.; ID.; FORMAL RESOLUTION, NOT DRAFTS OF OPINIONS OF MEMBERS, IS
FINAL ACTION OF PROVINCIAL BOARD. — Only the formal resolution of a provincial
board, and not the drafts of the individual opinions of its members, can be considered
as a decision in an administrative case against a municipal mayor.
DECISION
BAUTISTA ANGELO, J p:
This is a petition for certiorari seeking to set aside the resolution approved by
respondents on September 7, 1962 adopting the decision prepared on the same date
by former Vice Governor Valerio V. Rovira by virtue of the authority given him to do so
in a resolution adopted by the Provincial Board of Lanao del Norte which recommends
the dismissal from office of petitioner as Mayor of Maigo, of the same province, as well
as to restrain respondents from carrying out the import of said resolution.
The facts, as alleged in the petition, are: On March 7, 1960, one Victorio Dy filed a
complaint with the Provincial Board of Lanao del Norte charging petitioner with the
commission of certain irregularities in his capacity as Mayor of Maigo of the same
province. Because of the filing of said complaint, petitioner was suspended from office
for 30 days by Governor Mohamad Ali Dimaporo. Meanwhile, the complaint was given
due course and was set for hearing after petitioner had filed his answer. After the case
was submitted for decision, the individual members of the provincial board prepared
their respective opinions, two of which for exoneration while the third for conviction.
Petitioner received copies of these opinions, which became final for lack of appeal on
the part of the complainant. However, on September 7, 1962, after the lapse of almost
two years since the filing of the complaint, the provincial board, acting thru its new
members, in gross violation of law and with grave abuse of discretion, rendered a new
decision on the same complaint which was embodied in a resolution adopted on the
same date wherein it made its own the decision prepared by former Vice Governor
Valerio V. Rovira which recommended petitioner's dismissal. As a result, the
suspension of petitioner was ordered pending the finality of the decision. And
considering that the decision rendered by the new provincial board, although headed
by the same governor, is null and void for having been rendered in violation of law and
with grave abuse of discretion, petitioner has interposed the present petition for
certiorari.
On the other hand, the version given by respondents is as follows: When Victorio Dy
filed his complaint against petitioner on March 7, 1960 with the Provincial Board of
Lanao del Norte, copy thereof was served on petitioner who was given 48 hours from
receipt within which to file his answer. After petitioner had filed his answer, the
complaint was set for hearing, at which complainant and petitioner submitted
evidence both oral and documentary. Thereafter, the case was submitted to the
provincial board for decision. Then the provincial board passed a resolution
designating Vice Governor Valerio V. Rovira to draft the decision in the case having in
view the evidence submitted and, accordingly, Rovira submitted said draft sometime in
August, 1961 for deliberation and study by the provincial board. But before a final
decision could be adopted even if the provincial board had begun its study and
deliberation on the matter, Vice Governor Rovira and Board Member Bienvenido L.
Padilla both launched their candidacies for the office of congressman of the province
in the elections held in 1961 thereby vacating their positions in the board in
accordance with the Revised Election Code, and to fill their vacancies, Arsenio A.
Quibranza and Sheik Cosain Ali Usman were appointed by the President as Vice
Governor and board member, respectively. On September 7, 1962, the provincial
board as newly constituted was convened at a special meeting to deliberate on the
decision of the case of petitioner as prepared by former Vice Governor Rovira,
including the opinion submitted by Member Felixberto Avellanosa, and after a study
made on the case, together with the evidence extant on the record, the board
unanimously resolved to adopt the decision prepared by former Vice Governor Rovira
wherein the latter found petitioner guilty of the charges preferred against him and
recommended his dismissal from office.
It further appears that notwithstanding the fact that petitioner received copy of the
decision of September 7, 1962, he failed to take any step to appeal to the Office of the
President as provided in Section 2190 of the Revised Administrative Code, but instead
filed the present petition for certiorari.
There are several reasons why the present petition cannot be sustained one of them
being petitioner's failure to appeal from the decision of the Provincial Board of Lanao
Del Norte to the Office of the President as provided in Section 2190 of the Revised
Administrative Code which shows that he failed to exhaust his administrative
remedies as required by law before he may be given the right to interpose the present
special civil action.
Another reason is the fact that, as the facts clearly show, the case of petitioner has not
been actually acted upon by the provincial board that had actually conducted the
examination and received the evidence even if the individual written opinions of its
members had been actually prepared and submitted for the reason that by virtue of a
resolution unanimously approved by said board action on the case was suspended
because two of its members launched their candidacies for the office of congressman
of the province in the elections held in 1961 thereby vacating their respective
positions, and that only after they were duly substituted when the newly constituted
provincial board formally and finally acted upon the case and rendered its decision on
September 7, 1962. The contention of petitioner that after the case was submitted for
decision to the former provincial board its members had written their individual
decisions two of which were for exoneration and the third for conviction and that of
said individual decisions he was duly informed and, as a consequence, said decision
should be given binding force and effect, cannot be entertained, for the most that can
be said is that said decisions were merely drafts prepared by the individual members
of the board but that the same had not yet been finally acted upon by the board itself.
At least, petitioner has not been able to show any resolution of the former provincial
board adopting any of said decisions as its own as is the usual procedure on matters
that are acted upon by a deliberative body like the Provincial Board of Lanao del Norte.
The truth is that the only formal resolution adopted by the said board on the case of
petitioner is that dated September 7, 1962 which, as already stated, reiterates the
decision prepared by former Vice Governor Rovira recommending the dismissal of
petitioner from his office as Mayor of Maigo, Lanao del Norte. In the circumstances, we
have no other alternative than to hold that respondents acted in the proper exercise of
their functions as Members of the Provincial Board of Lanao del Norte, and that if
petitioner was not satisfied with such decision, his remedy was to appeal to the Office
of the President as provided for by law. This he failed to do.
WHEREFORE, petition is denied. No costs.
Bengzon, C.J., Padilla, Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon,
Regala and Makalintal, JJ., concur.
SECOND DIVISION
[G.R. No. L-25373. July 1, 1976.]
IRENEO ROQUE, petitioner-appellant, vs. THE HONORABLE, THE DIRECTOR OF
LANDS; THE HONORABLE, THE ASSISTANT EXECUTIVE SECRETARY TO THE
PRESIDENT and JOSE FACUN, respondents-appellees.
Antonio M. Orara for petitioner-appellant.
Solicitor General Antonio P. Barredo and Solicitor Dominador L. Quiroz for
respondents-appellees The Director of Lands, et al., etc.
Cipriano A. Tan for respondent-appellee Jose Facun.
SYNOPSIS
In a special civil action for certiorari filed in the court a quo, petitioner assailed the
decision of the Assistant Executive Secretary sustaining the homestead award made
by the Director of Lands in favor of private respondent, on the ground that the said
Executive Secretary exceeded his jurisdiction and committed grave abuse of discretion,
arbitrarily disregarding the sales award of the subject land made by the Secretary of
Agriculture and Natural Resources in his (petitioner's) favor. The Court honored the
homestead application of private respondent giving conclusiveness to the finding of the
Director of Lands which was approved by the Office of the President, through his
Assistant Executive Secretary.
On appeal, the Supreme Court saw no justification for a reversal holding that the
paramount public purpose of the law in awarding homestead applications should not
be nullified by the courts and that the President, under his constitutional power of
control over executive departments, bureaus and offices, can disapprove or reprobate
an act of a department head.
Decision affirmed.
SYLLABUS
1. CONSTITUTIONAL LAW; CHIEF EXECUTIVE; FUNCTIONS OF THE PRESIDENT
PERFORMED THROUGH THE DIFFERENT EXECUTIVE DEPARTMENTS ARE
PRESUMPTIVELY HIS ACTS; CASE OF VILLENA VS. SECRETARY OF THE INTERIOR.
— In the case of Villena vs. Secretary of the Interior, 67 Phil. 451 (1939) it was
announced that "under the presidential type of government and considering the
departmental organization established and continued in force by paragraph 1, section
12, Article VII of the Constitution, all executive and administrative organizations are
adjuncts of the Executive Department, the heads of the various executive departments
are assistants and agents of the Chief Executive, and, except in cases where the Chief
Executive is required by the Constitution or the law to act in person or the exigencies
of the situation demand that he act personally, the multifarious executive and
administrative functions of the Chief Executive are performed by and through the
executive departments, and the acts of the secretaries of such departments, performed
and promulgated in the regular course of business, are, unless disapproved or
reprobated by the Chief Executive, presumptively the acts of the Chief Executive."
2. ID.; ID.; ID.; PRESIDENT CAN REVIEW A DECISION OF A DEPARTMENT
HEAD. — What the command of Article VII, Section 10, par. 1 of the 1935
Constitution that the President shall have control of all executive departments,
bureaus, or offices, and shall exercise general supervision over all local governments
as may be provided by law signifies was enunciated in categorical language in Pelaez
vs. Auditor General, L-23825, December 24, 1965 Thus: "The power of control under
this provision implies the right of the President to interfere in the exercise of such
discretion as may be vested by law in the officers of the executive departments,
bureaus, or offices of the national government, as well as to act lieu of such officers."
3. PUBLIC LANDS; HOMESTEADS; PURPOSE OF THE HOMESTEAD LAW. — In
Aquino v. Director of Lands, 39 Phil. 850 it was stressed that homestead applicants,
"poor men with a legitimate ambition to acquire homes are [not to be] discouraged." If
it were otherwise, the result would be "agrarian troubles and internal strife" because of
the natural discontent of the masses. "The object and purpose of the homestead law,"
according to him, "is to encourage residence upon and the cultivation and
improvement of the public domain." That "paramount public purpose" should not be
nullified by the courts. "A perfect homestead, under the law, is property in the highest
sense, which may be sold and conveyed and will pass by descent. It has the effect of a
grant of the right to present and exclusive possession of said land. A valid and
subsisting perfected homestead, made and kept up in accordance with the provisions
of the statute, had the effect of a grant of the present and exclusive possession of the
land. Even without a patent, a perfected homestead is a property right in the fullest
sense, unaffected by the fact that the paramount title to the land is in the
Government. Such land may be conveyed or inherited."
4. ID.; ID.; CHARACTERISTICS. — A perfected homestead, under the law, is
property in the highest sense, which may be sold and conveyed and will pass by
descent. It has the effect of a grant of the right to present and exclusive possession of
said land. A valid and subsisting perfected homestead, made and kept up in
accordance with the provisions of the statute, has the effect of a grant of the present
and exclusive possession of the land. Even without a patent, a perfected homestead is
a property right in the fullest sense unaffected by the fact that the paramount title to
the land is in the Government. Such land may be conveyed or inherited.
5. ID.; ID.; AWARD OF APPLICATION; FINALITY OF ORDER MUST BE RAISED IN
COURT PROCEEDINGS. — The lower court cannot be held in error in not according
finality to the decision of the Secretary of Agriculture and Natural Resources reversing
the award made in respondent's favor by the Director of Lands where such question
was never an issue before it.
DECISION
FERNANDO, J p:
The appealed decision of the lower court, 1 dismissing a certiorari petition against the
Assistant Executive Secretary of the President for sustaining the award by the Director
of Lands of a homestead application and thus overruling the Secretary of Agriculture
and Natural Resources, has in its favor conformity with the policy of the law as
reiterated in a host of cases. Petitioner, himself a previous beneficiary of the statute,
would seek to add to his holding by a sales application. The prevailing party, private
respondent Jose Facun, on the other hand, had applied for the disputed lot as a
homesteader as far back as 1935, and had submitted his final proof in 1948. To put
the matter thus is to indicate the fate in store for this appeal. There would be no
justification both in law and in conscience for a reversal. To contend that the Office of
the President, through respondent Assistant Executive Secretary, lacks the power to
overrule the Department of Agriculture and Natural Resources is to betray lack of
awareness of the implications of what Justice Laurel referred to in Villena v. Secretary
of the Interior 2 as "the establishment [in the Philippines] of a single, not plural,
Executive." 3 As was further stressed by him "Without minimizing the importance of
the heads of the various departments, their personality is in reality but the projection
of that of the President." 4 What was asserted then by petitioner, now appellant, is, to
put it at its mildest, highly unorthodox. We affirm.
The nature of the case was set forth in the decision thus: "This is a special civil action
for certiorari filed by Ireneo Roque, as petitioner, v. the Honorable Director of Lands,
the Honorable Assistant Executive Secretary to the President and Jose Facun, as
respondents, praying that, after due hearing, the order of the respondent Honorable
Director of Lands . . . and the decision of the respondent Honorable Assistant
Executive Secretary, . . . be set aside on the alleged ground that the said order of the
Director of Lands was issued with grave abuse of discretion, consisting of unqualified
reliance and the biased report and recommendation of the Assistant Public Land
Inspector Andres V. Arias, . . . and on the factual allegation that the said decision of
the Honorable Executive Secretary exceeded his jurisdiction and committed a grave
abuse of discretion, arbitrarily disregarding the sales award of the land in question in
favor of the herein petitioner having already paid in full the price of the same, . . . and
praying further that the decision of the Honorable Secretary of Agriculture and Natural
Resources be sustained. . . . Respondent Jose Facun, through Atty. Cipriano A. Tan,
filed an answer to the petition denying specifically the allegation of paragraph 6 of the
petition, and specifically denying petitioner's aforequoted allegations Re: abuse of
discretion, arbitrariness and excess of jurisdiction. The Honorable Director of Lands,
through his counsel Atty. Ernesto B. Llaguno, submitted an answer specifically
denying paragraphs 3 and 12 of the petition and its averments concerning abuse of
discretion, arbitrariness, and excess of jurisdiction. The Honorable Assistant Executive
Secretary to the President, through Assistant Solicitor General Pacifico P. de Castro,
and then Solicitor Isidro C. Borromeo, recently promoted as Assistant Solicitor
General, filed an answer denying specifically the alleged paragraphs 3, 10, 12 and 13
of the petition, and likewise denying emphatically and specifically petitioner's
assertion of abuse of discretion, arbitrariness and lack of jurisdiction. They alleged the
following affirmative defenses: (1) Petition states no cause of action; and (2) Assuming
arguendo that it states a cause of action, the decision of the Assistant Executive
Secretary is perfectly valid." 5 The contention of petitioner was then set forth:
"Petitioner's counsel maintains that the order of the District Land Officer had already
become final and executory, hence, the order of the Director of Lands reversing the
order of the District Land Officer is in violation of Lands Administrative Order No. 6." 6
The appealed decision, after taking note of the conclusion arrived at by respondent
Director of Lands, quoted from the order of respondent Assistant Executive Secretary.
This is the relevant portion: "It is noteworthy that Lands Inspector Cruz who
investigated the case in 1948 was the same investigator, who inspected appellant's
entire homestead a year earlier and recommended the issuance of a patent herefor. If
it is true that the appellee [Petitioner Roque] had been in occupation of the disputed
portion since 1937, then the investigator would not have recommended the issuance
of a patent to the appellant for the whole of Lot No. 4507. Likewise, it is significant to
note that the appellant [Respondent Facun] filed his homestead application in 1935
and submitted the final proof therefore in 1939. On the other hand, the appellee
[Roque] submitted his sales application for the disputed portion in 1948, only during
the course of the investigation of his protest. If it were true that he had occupied the
disputed portion since 1937, he could have filed his application earlier, it appearing
that he is also the applicant of another lot adjoining Lot No. 4507. Moreover, it was
verified during the reinvestigation of this case that the appellee [Roque] entered upon
the disputed portion in 1951 only." 7 There should then be conclusiveness of such
finding, according to the appealed decision, "when approved by the Office of the
President, through his Executive Secretary, or Assistant Executive Secretary,
[representing] the Highest Magistracy of the Land, and the personification of the
sovereignty of the Republic of the Philippines." 8
As set forth at the outset, there is no justification for a reversal. The facts argue
against it and the law, in accordance with the mandate of the Constitution no less, is
on the side of private respondent Facun.
1. It would be a plain defiance of the settled policy of the law if the homestead
application of private respondent Facun would not be honored and the sales
application of petitioner Roque sustained. Justice Malcolm, as ponente, in Aquino v.
Director of Lands, 9 decided in 1919, stressed that homestead applicants, "poor men
with a legitimate ambition to acquire homes are [not to be] discouraged." 10 If it were
otherwise, the result would be "agrarian troubles and internal strife" 11 because of the
natural discontent of the masses. "The object and purpose of the homestead law,"
according to him, "is to encourage residence upon and the cultivation and
improvement of the public domain." 12 That "paramount public purpose" 13 should
not be nullified by the courts. That approach has commended itself to this Tribunal in
all subsequent cases. 14 This Court has even gone so far as to rule in Government of
the Philippine Islands v. Franco, 15 speaking through Justice Street: "There is indeed
some authority for this point of view, but the better doctrine, revealing the drift of the
later cases, is to the contrary; and it is now held, by the better considered decisions,
that a person who takes possession of land in the erroneous belief that it is public
land, with the intention of holding and claiming it under the homestead law, may
acquire title thereto by adverse possession as against the true owner." 16 Earlier, in
Balboa v. Farrales, 17 it was held: "A perfected valid appropriation of public lands
operates as a withdrawal of the tract from the body of the public domain and, so long
as such appropriation remains valid and subsisting, the land covered thereby is
deemed private property. A perfected homestead, under the law, is property in the
highest sense, which may be sold and conveyed and will pass by descent. It has the
effect of a grant of the right to present and exclusive possession of said land. A valid
and subsisting perfected homestead, made and kept up in accordance with the
provisions of the statute, has the effect of a grant of the present and exclusive
possession of the land. Even without a patent, a perfected homestead is a property
right in the fullest sense, unaffected by the fact that the paramount title to the land is
in the Government. Such land may be conveyed or inherited." 18 The strength of the
claim of private respondent Facun is thus quite obvious if deference be paid to
previous authoritative pronouncements of this Court. That was all that the lower court
did.
2. With such formidable, not to say insurmountable, obstacle confronting
petitioner Roque, it is understandable why he would seize on what could be a legal
loophole, however tenuous, as an avenue of escape. Unfortunately for him, he came
out with the theory that can only be characterized as a constitutional heresy. It is his
contention that respondent Assistant Executive Secretary, acting for the President,
could not reverse a decision of the Secretary of Agriculture and Natural Resources.
The doctrine so clearly and emphatically announced by Justice Laurel in the
aforecited Villena decision 19 is precisely the opposite. Thus: "After serious reflection,
we have decided to sustain the contention of the government in this case on the broad
proposition, albeit not suggested, that under the presidential type of government
which we have adopted and considering the departmental organization established
and continued in force by paragraph 1, section 12, Article VII, of our Constitution, all
executive and administrative organizations are adjuncts of the Executive Department,
the heads of the various executive departments are assistants and agents of the Chief
Executive, and, except in cases where the Chief Executive is required by the
Constitution or the law to act in person or the exigencies of the situation demand that
he act personally, the multifarious executive and administrative functions of the Chief
Executive are performed by and through the executive departments, and the acts of
the secretaries of such departments, performed and promulgated in the regular course
of business, are, unless disapproved or reprobated by the Chief Executive,
presumptively the acts of the Chief Executive." 20 Clearly then, there is nothing to
prevent the President to disapprove or reprobate the act of a department head. That
was what happened in this case. What was said in a 1970 decision, Tecson v. Salas,
21 concerning the broad executive authority is still good law; "the Villena ruling
applies with undiminished force." 22 It cannot be otherwise, considering the plain and
explicit command of the 1935 Constitution that the President has "control of all the
executive departments, bureaus or offices, . . ." 23 What is signifies was enunciated in
categorical language by former Chief Justice Concepcion in Pelaez v. Auditor General:
24 "The power of control under this provision implies the right of the President to
interfere in the exercise of such discretion as may be vested by law in the officers of
the executive departments, bureaus, or offices of the national government, as well as
to act in lieu of such officers." 25 This is not to dabble in generalities. Neither is it to
rely merely on logical inferences to a constitutional concept of major dimension. There
is quite a number of cases where precisely from a decision of the Secretary of
Agriculture and Natural Resources, an appeal was taken to the Office of the President.
26 To argue as petitioner Roque did then is to indulge in a futile endeavor.
3. That is all there is then to his case, if it may be called that. There is, in
addition, one other error assigned. It can also be disposed of quite easily. He would
impress finality on the decision of the Secretary of Agriculture and Natural Resources
reversing the award made in respondent Facun's favor by the Director of Lands. No
such error could possibly be imputed to the lower court as no such question was
therein raised. As noted in the opening paragraph of the appealed decision herein
cited, petitioner Roque objected to the order of the Director of Lands, asserting that it
was issued with grave abuse of discretion, characterizing it as the result of an
"unqualified reliance [on the] report and recommendation" of a certain public lands
inspector. 27 Apparently, during the trial, he raised as one of the legal questions the
finality of the order of a district land officer, which was reversed by the Director of
Lands, who made the award in favor of respondent Facun: "Petitioner's counsel
maintains that the order of the District Land Officer had already become final and
executory, hence, the order of the Director of Lands reversing the order of the District
Land Officer is in violation of Lands Administrative Order No. 6" 28 The lower court,
after considering the matter, found against him: "All the exhibits of the petitioner do
not show when Jose Facun and Ines Yarcia received copies of the said order. Hence,
they do not show that the said order has become final." 29 How then could it be
plausibly contended that the lower court was in error in not according finality to the
decision of the Secretary of Agriculture and Natural Resources when that was never an
issue before it? There can be no relevance therefore to that portion of petitioner's brief
making reference to the dates as to when such decision was allegedly received by
respondent Facun. Even if such were not the case, however, what he cited was Section
14 of Lands Administrative Order No. 6, which would allow the Secretary of
Agriculture and Natural Resources to relieve the party or his legal representative from
a decision, order, or other proceeding if there be a mistake, inadvertence, surprise,
default, or executive neglect, with the proviso that the application for that purpose
should be made within a reasonable time, but in no case exceeding one year. From his
own computation, only two months elapsed from the date the appeal was taken to the
Office of the President. He still had then a period of ten months within which to seek a
reconsideration of the decision of the Secretary of Agriculture and Natural Resources.
Thus, when matters are seen in their true light, it becomes apparent why, as was
made clear at the start, a reversal of the appealed decision cannot in law or in
conscience be justified.
WHEREFORE, the appealed decision is affirmed. This decision is immediately
executory. Costs against petitioner Ireneo Roque.
Antonio, Muñoz Palma, Aquino and Martin, JJ., concur.
Barredo, J., did not take part.
Concepcion, Jr., J., is on leave.

SECOND DIVISION
[G.R. No. L-29534. February 28, 1977.]
BENGUET EXPLORATION, INC., petitioner, vs. DEPARTMENT OF AGRICULTURE AND
NATURAL RESOURCES and SOFIA V. REYES, respondents.
William H. Quasha & Associates for petitioner.
Office of the Solicitor General, for respondent DANR.
S. Fangonil & Associates for private respondent.
DECISION
FERNANDO, J p:
A more extensive appraisal of the controlling doctrines on the status of a department
head as an alter ego of the President, with particular reference to the broad
competence enjoyed by the Secretary of Agriculture and Natural Resources in the
disposition of the public lands and the wealth it contains, and a more careful reading
of the specific provisions of the Mining Act, 1 not to mention the explicit recital in the
order challenged that the purpose thereof is to accord a party the "formal hearing"
thereby complying with the procedural due process requisite, ought to have cautioned
against the filing of this certiorari petition against the Department of Agriculture and
Natural Resources. Petitioner is a domestic mining corporation engaged in the
exploration and development of certain lode mineral claims. The records show that
private respondent Sofia V. Reyes filed with the Bureau of Mines an adverse claim
against petitioner's Lode Lease Application covering three mining claims in Benguet,
Mountain Province. 2 That was countered by a motion to dismiss, alleging as one of
three legal objections the failure of such adverse claim to comply with the mandatory
requirements of Section 73 of the Mining Act. 3 The private respondent then
submitted an opposition with the Bureau of Mines thereafter dismissing the adverse
claim. 4 The matter was taken up on appeal to the Department of Agriculture and
Natural Resources, private respondent maintaining the sufficiency of its adverse claim
under the law, a point disputed by petitioner, as could have been expected. 5 At first,
the action taken by respondent Department was the dismissal of such appeal, but on
a second motion for reconsideration, an order was issued with its dispositive portion
reading thus: "Order of the Director of Mines dated September 15, 1966, and the
Decision and Order of this Office dated July 21, 1967 and December 11, 1967,
respectively, should be, as hereby they are, set aside; and to abbreviate proceedings,
Atty. [Romulo A. Redula] of this Office is hereby directed to conduct a formal hearing
of this case." 6 Hence this certiorari petition.
As intimated at the outset, this petition lacks merit. It must be dismissed. cdrep
1. Petitioner lost sight of the fundamental doctrine set forth in Villena v. Secretary
of Interior, 7 decided in 1939, where Justice Laurel categorically declared that acts of
a department head, and the challenged order in this case came from the then Acting
Secretary of Agriculture and Natural Resources, Isosceles Pascual, "performed and
promulgated in the regular course of business, are, unless disapproved or reprobated
by the Chief Executive, presumably the acts of the Chief Executive." 8 Not so long ago,
in Tecson v. Salas, 9 it was affirmed that as far as the power of control over all
executive departments, bureaus and offices are concerned, "the Villena doctrine
applies with undiminished force." 10 Since then, two other decisions did reiterate such
a principle. 11 Moreover, petitioner likewise did not take into account the doctrine
announced by the leading case of Ortua v. Singson Encarnacion. 12 As stated by
Justice Malcolm: "Accordingly, to paraphrase the authorities and decisions coming
principally from the United States Supreme Court, we deduce the rule on the subject
to be, that a decision rendered by the Director of Lands and approved by the Secretary
of Agriculture and Commerce, upon a question of fact is conclusive and not subject to
be reviewed by the courts, in the absence of a showing that such decision was
rendered in consequence of fraud, imposition, or mistake, other than error of
judgment in estimating the value or effect of evidence, regardless of whether or not it
is consistent with the preponderance of the evidence, so long as there is some evidence
upon which the finding in question could be made." 13 Here such a stage has not
been reached. Precisely, the assailed order spoke of no "hearing on the merits,
[therefore] it is but right and proper in the interest of justice that a formal hearing on
the merits be conducted." 14 There is, therefore, an element of prematurity. That alone
would have sufficed for the dismissal of this petition.
2. What appears to be the motivation behind this move of petitioner is to preclude
the Secretary of Agriculture and Natural Resources from conducting his own inquiry.
He would thus be denied the power accorded a bureau director. In Pinero, Jr. v.
Director of Lands 15 this Court, in an opinion by Justice Barredo, expressly referring
to the Regalian doctrine, pointed out that even a Torrens title is not a bar to the power
of the Director of Lands to investigate an allegation of fraud that could have led to the
issuance of a free patent. As stated by him: "It is to the public interest that one who
succeeds in fraudulently acquiring a title to a public land should not be allowed to
benefit therefrom, and the State should, therefore, have an ever-existing authority,
thru its duly authorized officers, to inquire into the circumstances surrounding the
issuance of any such title, to the end that the Republic, thru the Solicitor General or
any other officer who may be authorized by law, may file the corresponding action for
the reversion of the land involved to the public domain, subject thereafter to disposal
to other qualified persons in accordance with law. In other words, the indefeasibility of
a title over land previously public is not a bar to an investigation by the Director of
Lands as to how such title has been acquired, if the purpose of such investigation is to
determine whether or not fraud had been committed in securing such title in order
that the appropriate action for reversion may be filed by the Government." 16 If
petitioner would prevail, such power of inquiry vested in a subordinate would be
denied a department head. That is to disregard a well-settled concept in public law.
What is more, that is to be insensible to another facet the jura regalia concept by
virtue of which the Republic of the Philippines possessed of the attributes of imperium
and dominium, acting through the Secretary of Agriculture and Natural Resources, is
given the utmost latitude in ascertaining which party shall enjoy the privilege of
exploiting the wealth that is found in its natural resources. 17 If petitioner were to
prevail, there would be an undue diminution of the broad competence conferred on
the Secretary of Agriculture and Natural Resources, as recognized in a host of cases
notable for their number and unanimity. 18
3. Petitioner would seek to weaken the force of the above authoritative doctrines
as applied to it by the allegation that there is a failure to abide by the statutory
requirements in the Mining Act, as amended by Republic Act No. 4388. Reference is
made to Sections 61 and 73 as amended by Republic Act No. 4388. 19 The proviso in
the former section which is relevant to the present controversy reads thus: "Provided,
That the decision or order of the Director of Mines may be appealed to the Secretary of
Agriculture and Natural Resources within thirty days from receipt of such decision or
order. In case any one of the parties should disagree from the decision or order of the
Secretary of Agriculture and Natural Resources, the matter may be taken to the Court
of Appeals or the Supreme Court, as the case may be, within thirty days from the
receipt of such decision or order, otherwise the said decision or order shall be final
and binding upon the parties concerned. Findings of facts in the decision or order of
the Director of Mines when affirmed by the Secretary of Agriculture and Natural
Resources shall be final and conclusive, and the aggrieved party or parties desiring to
appeal from such decision or order shall file in the Supreme Court a petition for review
wherein only questions of law may be raised." What cannot be sufficiently stressed is
that only upon the affirmance of the Secretary of Agriculture and Natural Resources
does the findings of fact become conclusive, leaving only questions of law for this
Court to decide. In the order complained of, the Acting Secretary of Agriculture and
Natural Resources commendably sought to have a rational basis for the acceptance or
rejection of the conclusion reached by the Director of Mines. What was objected to was
that it could no longer be done as the matter had reached the stage of finality, such
order coming only after a second motion for reconsideration. Petitioner would thus
ignore the basic principle that unless the administrative procedure followed conforms
with the requirement of procedural due process the actuation could be stigmatized as
void, a hearing being deemed of the essence of such proceeding. As a matter of fact, its
absence would result in the loss of jurisdiction. As was stated by Chief Justice
Concepcion in Vda. de Cuaycong v. Vda. de Sengbenco, 20 acts whether of Congress
or of the Executive, "can deny due process only under pain of nullity, . . ." 21 As a
matter of law, to accept petitioner's claim that in thus issuing such an order the
Acting Secretary of Agriculture and Natural Resources failed to abide by the
requirements of the law would be precisely to cast doubt on the validity of such
sections of the Mining Act when all that was required by him was compliance with the
requisite of a formal hearing. That would be to incur the vice of the construction given
such sections being repugnant to the due process clause. Certainly, between two lines
of interpretation, one of which would give it life and the other which would be fatal to
its validity, the former should prevail. Thus petitioner's first two errors assigned,
which could be summed up in the proposition that Secretary Pascual should not have
passed upon the second motion for reconsideration are clearly without merit.
4. It is thus apparent that the third error assigned to the effect that the
Department of Agriculture and Natural Resources acted in excess of its jurisdiction
when it arrogated the function of hearing the adverse claims is even more bereft of
support in law. The very provision of the Mining Act upon, as previously set forth,
speaks of the findings of facts of the Director of Mines "when affirmed by the Secretary
of Agriculture and Natural Resources being final and conclusive," in which case the
aggrieved party may file a petition for review with this Court where only questions of
law may be raised. 22 To sustain the contention of petitioner would be to run counter
to what was held in the leading case of Ang Tibay v. Court of Industrial Relations. 23
Justice Laurel specifically spoke of "cardinal primary rights" embraced in "the
fundamental and essential requirements of due process in trials and investigations of
an administrative character." 24 Here precisely, vital and essential facts remained at
issue. It was the considered judgment of the Acting Secretary of Agriculture and
Natural Resources that a hearing should he held to ascertain the truth of the matter.
As set forth in the challenged order: "It is but right and proper in the interest of justice
that a formal hearing on the merits of this case be conducted." 25 In a subsequent
paragraph, such point of view was reiterated: "The reason for this ruling is that the
proceedings before this Office is administrative in character, and, therefore, the parties
to the case must be given all the opportunity to be heard." 26 Hence, the dispositive
portion directing a certain Romulo A. Redula, presumably of the staff of the
Department of Agriculture and Natural Resources, "to conduct a formal hearing of this
case and to submit his report relative thereto within thirty (30) days from the
termination thereof." 27
Clearly, to repeat, the allegation in the last assignment of error that there was an
arrogation of the power on the part of respondent department is devoid of any legal
justification. Moreover had petitioner taken into consideration the aforesaid landmark
opinion of Justice Laurel in Ang Tibay v. Court of Industrial Relations on the
indispensability of complying with the due process requirement in an administrative
proceeding, it would have noted that one of the doctrines relied upon by this Court in
that case is an opinion of Chief Justice Hughes in Morgan v. United States. 28 It ought
to be affirmed that in the two subsequent Morgan cases, the stress became even more
emphatic on the indispensability of complying with the due process mandate,
characterized as "the rudimentary requirements of fair play." 29 The relevance of the
Morgan decisions should be evident, dealing as they do with the exercise of powers
granted the Secretary of Agriculture of the United States. prLL
WHEREFORE, the petition is dismissed for lack of merit.
Barredo, Antonio, Aquino and Concepcion, Jr., JJ., concur.
FIRST DIVISION
[G.R. No. 166197. February 27, 2007.]
METROPOLITAN BANK & TRUST COMPANY, petitioner, vs. ASB HOLDINGS, INC.,
ASB REALTY CORPORATION, ASB DEVELOPMENT CORPORATION, ASB LAND, INC.,
ASB FINANCE, INC., MAKATI HOPE CHRISTIAN SCHOOL, INC., BEL-AIR HOLDINGS
CORPORATION, WINCHESTER TRADING, INC., VYL DEVELOPMENT CORPORATION,
GERICK HOLDINGS CORPORATION, NEIGHBORHOOD HOLDINGS, INC., and
ROSARIO S. BERNALDO, respondents.
CAMERON GRANVILLE 3 ASSET MANAGEMENT, INC., intervenor.
DECISION
SANDOVAL-GUTIERREZ, J p:
For our resolution is the instant Petition for Review on Certiorari 1 assailing the
Decision dated August 16, 2004 2 of the Court of Appeals in CA-G.R. SP No. 77260
and its Resolution dated December 1, 2004.
The facts borne by the records are:
The Metropolitan Bank and Trust Company, petitioner, is a creditor bank of
respondent corporations, collectively known as the ASB Group of Companies, owner
and developer of condominium and real estate projects. Specifically, the loans
extended by petitioner bank to respondents ASB Realty Corporation and ASB
Development Corporation amounted to P523.5 million and P1.073 billion, respectively.
These loans were secured by real estate mortgages.
On May 2, 2000, the ASB Group of Companies filed with the Securities and Exchange
Commission (SEC) a Petition For Rehabilitation With Prayer For Suspension Of
Actions And Proceedings Against Petitioners, 3 pursuant to Presidential Decree (P.D.)
No. 902-A, as amended, docketed as SEC Case No. 05-00-6609. The pertinent
portions of the petition allege:
6. The total assets of petitioner ASB Group of Companies, together with petitioner
ASB Allied Companies, amount to Nineteen Billion Four Hundred Ten Million Pesos
(P19,410,000,000.00).
7. The Projects were financed with loans or borrowings from bank and individual
creditors which resulted in petitioner Group of Companies having a total liability in
the amount of Twelve Billion Seven Hundred Million Pesos (P12,700,000,000.00).
8. On account of the sudden non-renewal and/or the massive withdrawal by
creditors of their loans to petitioner ASB Holdings, Inc., coupled with the recent
developments in the country, like, among others, (i) the glut in the real estate market;
(ii) the severe drop in the sale of real properties; (iii) the depreciation of the peso vis-a-
vis the dollar; and (iv) the decreased investor confidence in the economy, petitioner
Group of Companies was unable to complete and sell some of its projects on schedule
and, hence, was unable to service its obligations as they fell due.
9. Petitioner Group of Companies possesses sufficient property to cover its
obligations. However, petitioner Group of Companies foresees its inability to pay its
obligations within a period of one (1) year.
10. Because of the inability of the Group of Companies to pay its obligations as they
respectively fall due, its secured and non-secured creditors pressed for payments of
due and maturing obligations and threatened to initiate separate actions against it,
which will adversely affect its operations and shatter its hope in rehabilitating itself for
the benefit of its investors and creditors and the general public.
11. There is a clear, present and imminent danger that the creditors of petitioner
Group of Companies will institute extrajudicial and judicial foreclosure proceedings
and file court actions unless restrained by this Honorable Commission.
12. The institution of extrajudicial and judicial foreclosure proceedings and the
filing of court actions against petitioner Group of Companies will necessarily result in
the paralization of its business operation and its assets being lost, dissipated or
wasted.
13. There is, therefore, a need for the suspension of payment of all claims against
petitioner Group of Companies, in the separate and combined capacities of its member
companies, while it is working for its rehabilitation.
14. Petitioner Group of Companies has at least seven hundred twelve (712)
creditors, three hundred seventeen (317) contractors/suppliers and four hundred
ninety-two (492) condominium unit buyers, who will certainly be prejudiced by the
disruption of the operations of petitioner ASB Group of Companies which seeks to
protect the interest of the parties from any precipitate action of any person who may
only have his individual interest in mind.
15. The business of petitioner ASB Group of Companies is feasible and profitable.
Petitioner Group of Companies will eventually be able to pay all its obligations given
some changes in its management, organization, policies, strategies, operations, or
finances.
16. With the support of this Honorable Commission, petitioner Group of Companies
is confident that it will be able to embark on a sound and viable rehabilitation plan,
with a built-in debt repayment schedule through the optimal use of their present
facilities, assets and resources. Although a proposed rehabilitation plan is attached to
this petition, a detailed and comprehensive rehabilitation proposal will be presented
for the approval of this Honorable Commission, with the foregoing salient features:
a. Servicing and eventual full repayment of all debts and liabilities, focusing on
debt restructure and possible liquidation through dacion en pago, transfer and
assignment, or outright sale of assets, in order to lighten the debt burden of petitioner
Group of Companies;
b. Forming of strategic alliances with third party investors, including joint
ventures and similar arrangements;
c. Contributing specified properties from petitioner ASB Allied Companies;
d. Streamlining the operations of petitioner ASB Group of Companies, and the
effective management of its revenues and funds towards the strengthening of its
financial and business positions; and
e. Stabilizing the operations of petitioner Group of Companies, and preparing it to
take advantage of future opportunities for growth and development.
On May 4, 2000, the Hearing Panel of the SEC Securities Investigation and Clearing
Department, finding the petition for rehabilitation sufficient in form and substance,
issued a sixty-day Suspension Order (a) suspending all actions for claims against the
ASB Group of Companies pending or still to be filed with any court, office, board,
body, or tribunal; (b) enjoining the ASB Group of Companies from disposing of their
properties in any manner, except in the ordinary course of business, and from paying
their liabilities outstanding as of the date of the filing of the petition; and (c)
appointing Atty. Monico V. Jacob as interim receiver of the ASB Group of Companies.
On May 22, 2000, the SEC Hearing Panel issued an Order appointing Mr. Fortunato
Cruz as interim receiver of the ASB Group of Companies, replacing Atty. Monico
Jacob.
On August 18, 2000, the ASB Group of Companies submitted to the SEC for its
approval a Rehabilitation Plan, 4 thus:
Metropolitan Bank and Trust Co.
Principal Amount — Principal (amount) plus any interest due
and unpaid as of April 30, 2000, less
any prepaid interest, without any
penalties and charges.
Form of Agreement — Dacion en Pago Agreement
Purpose — To retire existing loans.
Tenor — Immediate Dacion en Pago of related
properties, subject to the approval of
the Securities and Exchange
Commission (SEC).
Effective Date — September 1, 2000, subject to the
approval of the SEC.
Dacion En Pago
Arrangement — ASB will dacion the bank's equity in
St. Francis Square and apply the excess
dacion value on its BSA Twin Tower
loan. Further, Makati Hope, Buendia
cor. Malugay, 21 Annapolis (which is
expected to be released by PNB) and #
28 & 23 Eisenhower St., will be
dacioned to Metrobank, the excess of
which will also be applied to
Metrobank's exposure on BSA Twin
Towers. In return, State Condominium
will be freed up and placed in the ASB
creditors' asset pool. Further,
Metrobank shall also undertake the
completion of BSA Twin Towers.
Outstanding Loan Balance
After Dacion En Pago — None 5
Petitioner bank, in its Comment/Opposition to the Rehabilitation Plan, 6 objected to
the above Plan, specifically the arrangement concerning the mode of payment by
respondents ASB Realty Corporation and ASB Development Corporation of their loan
obligations.
Petitioner bank claimed that the above arrangement "is not acceptable" because: (1) it
does not agree with the valuation of the properties offered for dacion; (2) the waiver of
interests, penalties and charges after April 30, 2000 is not feasible considering that
the bank continues to incur costs on the funds owed by ASB Realty Corporation and
ASB Development Corporation; and (3) since the proposed dacion is not acceptable to
the bank, there is no basis to release the properties which serve as collateral for the
loans. Petitioner thus prayed that the Rehabilitation Plan be disapproved.
On April 26, 2001, the SEC Hearing Panel, finding petitioner bank's objections
unreasonable, issued an Order 7 approving the Rehabilitation Plan and appointing Mr.
Fortunato Cruz as rehabilitation receiver, thus:
PREMISES CONSIDERED, the objections to the rehabilitation plan raised by the
creditors are hereby considered unreasonable.
Accordingly, the Rehabilitation Plan submitted by petitioners is hereby APPROVED,
except those pertaining to Mr. Roxas' advances, and the ASB-Malayan Towers. Finally,
Interim Receiver Mr. Fortunato Cruz is appointed as Rehabilitation Receiver.
SO ORDERED.
On July 10, 2001, petitioner bank filed with the SEC En Banc a Petition for Certiorari,
8 docketed as EB-725, alleging that the SEC Hearing Panel, in approving the
Rehabilitation Plan, committed grave abuse of discretion amounting to lack or excess
of jurisdiction; and praying for the issuance of a temporary restraining order and/or a
writ of preliminary injunction to enjoin its implementation. Subsequently, the ASB
Group of Companies filed their Opposition 9 to the petition, to which petitioner bank
filed its Reply. 10
In a Resolution 11 dated April 15, 2003, the SEC En Banc denied petitioner bank's
Petition for Certiorari and affirmed the SEC Hearing Panel's Order of April 26, 2001.
Petitioner bank then filed with the Court of Appeals a Petition for Review. 12 On
August 16, 2004, the appellate court rendered its Decision 13 denying due course to
the petition, thus:
WHEREFORE, finding the instant petition not impressed with merit, the same is
DENIED DUE COURSE. No pronouncement as to costs.
SO ORDERED.
Petitioner bank's Motion for Reconsideration was likewise denied in a Resolution dated
December 1, 2004. 14
Hence, this petition for review on certiorari.
In the meantime, or on June 1, 2006, Cameron Granville 3 Asset Management, Inc.
(Cameron Granville) filed a Motion For Intervention 15 alleging that in September of
2003, petitioner bank assigned the loans and mortgages of ASB Realty Corporation
and ASB Development Corporation to Asset Recovery Corporation (ARC). However,
pursuant to its Service Agreement with ARC, petitioner continued to pursue its action
before the Court of Appeals in CA-G.R. SP No. 77260 and before this Court in the
instant case. On March 31, 2006, ARC in turn assigned the loans and mortgages of
the said two respondent corporations to herein intervenor, Cameron Granville.
In a Resolution dated June 5, 2006, 16 the Court granted the motion for intervention.
Accordingly, on August 28, 2006, the intervenor filed its Petition For Intervention 17
and manifested therein that it adopts as its own petitioner bank's petition and all its
other pleadings. Thereafter, respondent ASB Group of Companies filed their Comment.
18
Now to the resolution of the instant petition.
Petitioner bank contends that the Court of Appeals erred:
1. In not nullifying the SEC Resolution dated April 15, 2003 approving the
Rehabilitation Plan. Such approval illegally compels petitioner bank to accept, through
a dacion en pago arrangement, the mortgaged properties based on ASB Group of
Companies' transfer values and to release part of the collateral. This forced transfer of
properties and diminution of the bank's right to enforce its lien on the mortgaged
properties violate its constitutional right against impairment of contracts and right to
due process.
2. In not finding that the Rehabilitation Plan compels petitioner bank to waive the
interests, penalties and other charges that accrued after the SEC issued its Stay
Order. Again, this is in violation of the constitutional mandate on non-impairment of
contracts and due process.
3. In not finding that only respondent ASB Holdings, Inc. suffered financial
distress as stated in the Rehabilitation Plan and, as such, the coercive reach of the
SEC's Stay Order under P.D. 902-A can extend only to the enforcement of claims
against this distressed corporation. It cannot suspend the claims and actions against
its affiliate corporations.
In their Comment, respondent corporations comprising the ASB Group of Companies
prayed for the dismissal of the instant petition for being unmeritorious.
The first two (2) assigned errors lack merit. We shall discuss them jointly as they are
closely interrelated.
We are not convinced that the approval of the Rehabilitation Plan impairs petitioner
bank's lien over the mortgaged properties. Section 6 [c] of P.D. No. 902-A provides that
"upon appointment of a management committee, rehabilitation receiver, board or
body, pursuant to this Decree, all actions for claims against corporations,
partnerships or associations under management or receivership pending before any
court, tribunal, board or body shall be suspended."
By that statutory provision, it is clear that the approval of the Rehabilitation Plan and
the appointment of a rehabilitation receiver merely suspend the actions for claims
against respondent corporations. Petitioner bank's preferred status over the
unsecured creditors relative to the mortgage liens is retained, but the enforcement of
such preference is suspended. The loan agreements between the parties have not been
set aside and petitioner bank may still enforce its preference when the assets of ASB
Group of Companies will be liquidated. Considering that the provisions of the loan
agreements are merely suspended, there is no impairment of contracts, specifically its
lien in the mortgaged properties.
As we stressed in Rizal Commercial Banking Corporation v. Intermediate Appellate
Court, 19 such suspension "shall not prejudice or render ineffective the status of a
secured creditor as compared to a totally unsecured creditor," for what P.D. No. 902-A
merely provides is that all actions for claims against the distressed corporation,
partnership or association shall be suspended. This arrangement provided by law is
intended to give the receiver a chance to rehabilitate the corporation if there should
still be a possibility for doing so, without being unnecessarily disturbed by the
creditors' actions against the distressed corporation. However, in the event that
rehabilitation is no longer feasible and the claims against the distressed corporation
would eventually have to be settled, the secured creditors, like petitioner bank, shall
enjoy preference over the unsecured creditors.
Likewise, there is no compulsion on the part of petitioner bank to accept a dacion en
pago arrangement of the mortgaged properties based on ASB Group of Companies'
transfer values and to condone interests and penalties. The Rehabilitation Plan itself,
under item IV-A, explains the dacion en pago proposal, thus:
IV. THE REVISED REHABILITATION PLAN
A. The Total Approach
It is apparent that ASB's corporate indebtedness needs to be reduced as quickly as
possible in order to prevent rapid deterioration in equity. . . . . In order to reduce debt
quickly, we must do the following:
1. Complete or sell on-going projects;
2. Invite secured creditors to complete dacion en pago transactions, waiving all
penalties; and
3. Invite unsecured creditors to purchase real estate parcels and other assets and
set-off the amount of their outstanding claim against the purchase price.
The assets included in the above program include all real estate assets.
In order to determine the feasibility of the above, representatives of our financial
advisors met with or had discussions with most of the secured creditors. Preliminary
discussions indicate support from the secured creditors towards the concepts of the
program associated with them. The majority of these secured creditors appear to want
to complete dacion en pago transactions based on MUTUALLY AGREED UPON TERMS
. . . . . We continue to pursue discussions with secured creditors. Based on the
program, secured creditors' claims amounting to PhP5.192 billion will be paid in full
including interest up to April 30, 2000. Secured creditors have been asked to waive all
penalties and other charges. This dacion en pago program is essential to eventually
pay all creditors and rehabilitate the ASB Group of Companies. If the dacion en pago
herein contemplated does not materialize for failure of the secured creditors to agree
thereto, this rehabilitation plan contemplates to settle the obligations (without
interest, penalties, and other related charges accruing after the date of the initial
suspension order) to secured creditors with mortgaged properties at ASB selling prices
for the general interest on the employees, creditors, unit buyers, government, general
public and the economy.
xxx xxx xxx 20 (Underscoring supplied)
Indeed, based on the above explanation in the Rehabilitation Plan, the dacion en pago
program and the intent of respondent ASB Group of Companies to ask creditors to
waive the interests, penalties and related charges are not compulsory in nature. They
are merely proposals for the creditors to accept. In fact, as explained, there was
already an initial discussion on these proposals and the majority of the secured
creditors showed their desire to complete dacion en pago transactions, but they must
be "based on MUTUALLY AGREED UPON TERMS." The SEC En Banc in its Resolution
dated April 15, 2003, affirming the SEC Hearing Panel's Order of April 26, 2001
approving the Rehabilitation Plan, aptly declared:
. . . , petitioner asserts that the Rehabilitation Plan is not legally feasible because
respondents cannot dictate the terms of dacion.
We do not agree. A cursory reading of the Rehabilitation Plan debunks this assertion.
The Plan provides that dacion en pago transaction will be effected only if the secured
creditors, like petitioner, agree thereto and under terms and conditions mutually
agreeable to private respondents and the secured creditor concerned. The dacion en
pago program is essential to eventually pay all creditors and rehabilitate private
respondents. If the dacion en pago does not materialize in case secured creditors
refuse to agree thereto, the Rehabilitation Plan contemplates to settle the obligations
to secured creditors with mortgaged properties at selling prices. This is for the general
interest of the employees, creditors, unit buyers, government, general public, and the
economy. 21 (Underscoring supplied)
With respect to the third assigned error, we note that the same was not raised by
petitioner bank in its Comment/Opposition to the Rehabilitation Plan filed with the
SEC Hearing Panel. Such belated issue cannot be considered, especially because it
involves a question of fact, the resolution of which is normally beyond the authority of
this Court as it is not a trier of facts. 22
At any rate, the SEC En Banc found that the SEC Hearing Panel "acted within its legal
authority in resolving this case. Neither it overstepped its lawful authority nor acted
whimsically in approving the Rehabilitation Plan. Hence, it cannot be faulted of grave
abuse of discretion." 23 We find no reason to disturb such finding, it being a
fundamental rule that factual findings of quasi-judicial agencies, like the SEC, which
have acquired expertise as their jurisdiction is confined to special matters such as the
subject of this case, are generally accorded great respect and even finality, absent any
showing that they arbitrarily disregarded evidence or misapprehended evidence to
such an extent as to compel a contrary conclusion if such evidence had been properly
appreciated. 24
Petitioner bank also argues that "ASB Group of Companies" is merely a generic name
used to describe collectively various companies and as such, it is not a legal entity
with juridical personality and cannot be a party to a suit. True, "ASB Group of
Companies" is merely used in this case as a generic name, for brevity, to collectively
describe the various companies/corporations that filed a Petition For Rehabilitation
with the SEC. However, in their petition, all the respondent corporations are
individually named as petitioners, not "ASB Group of Companies."
One last word. The purpose of rehabilitation proceedings is to enable the company to
gain new lease on life and thereby allows creditors to be paid their claims from its
earnings. 25 Rehabilitation contemplates a continuance of corporate life and activities
in an effort to restore and reinstate the financially distressed corporation to its former
position of successful operation and solvency. 26 This is in consonance with the
State's objective to promote a wider and more meaningful equitable distribution of
wealth to protect investments and the public. 27 The approval of the Rehabilitation
Plan by the SEC Hearing Panel, affirmed by both the SEC En Banc and the Court of
Appeals, is precisely in furtherance of the rationale behind P.D. No. 902-A, as
amended, which is "to effect a feasible and viable rehabilitation" 28 of ailing
corporations which affect the public welfare.
WHEREFORE, we DENY the instant petition for review on certiorari. The assailed
Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 77260 are
AFFIRMED.
Costs against intervenor Cameron Granville.
SO ORDERED.
Puno, C.J., Corona and Garcia, JJ., concur.
Azcuna, J., is on official leave.
SECOND DIVISION
[G.R. No. 166116. March 31, 2006.]
OFFICE OF THE OMBUDSMAN, petitioner, vs. FLORENTINA SANTOS, respondent.
R.R. Mendez & Associates Law Offices for respondent.
SYLLABUS
1. POLITICAL LAW; ADMINISTRATIVE LAW; ADMINISTRATIVE PROCEEDINGS
ARE GOVERNED BY THE "SUBSTANTIAL EVIDENCE RULE"; DECISION OF THE
OFFICE OF OMBUDSMAN AND THOROUGH EXAMINATION OF THE RECORDS OF
THE CASE SHOW SUFFICIENT EVIDENCE TO PROVE RESPONDENT'S
ADMINISTRATIVE LIABILITY. — Administrative proceedings are governed by the
"substantial evidence rule." A finding of guilt in an administrative case would have to
be sustained for as long as it is supported by substantial evidence that the respondent
has committed acts stated in the complaint or formal charge. As defined, substantial
evidence is such relevant evidence as a reasonable mind may accept as adequate to
support a conclusion. A reading of the decision of the Office of the Ombudsman and a
thorough examination of the records of this case show sufficient evidence to prove
respondent's administrative liability. In its decision, the Office of the Ombudsman,
through Graft Investigation Officer Joselito P. Fangon, cites the pieces of evidence that
support its ruling. CSDTac
2. ID.; ID.; ID.; RESPONDENT, AS A PUBLIC OFFICER, TRANSGRESSED THE
PROVISIONS OF SECTION 7 (b) (2) OF R.A. 6713 BY ACTIVELY PARTICIPATING IN
THE MANAGEMENT OF A PRIVATE SCHOOL WHILE SERVING AS PRINCIPAL OF
LAGRO ELEMENTARY SCHOOL, A GOVERNMENT SCHOOL. — As a general rule,
factual findings of administrative bodies are accorded great respect by this Court. We
do not see any reason to depart from this policy, except as regards respondent's
liability for holding the position of President/Chairman of the Board of Golden Child
Montessori and managing the affairs of said school. Contrary to the Ombudsman's
ruling that such act does not violate any provision of law, Section 7 (b) (2) of R.A. 6713
prohibits all public officials and employees from engaging in the private practice of
their profession. . . . The rule is that all public officers and employees are prohibited
from engaging in the private practice of their profession. The exception is when such
private practice is authorized by the Constitution or law. However, even if it is allowed
by law or the Constitution, private practice of profession is still proscribed when such
practice will conflict or tends to conflict with the official functions of the employee
concerned. Indeed, public servants are expected to devote their undivided attention to
their public duties, to give the taxpayers the competent and excellent service that they
deserve. In fact, Section 4 of the Code of Conduct and Ethical Standards for Public
Officials and Employees enjoins said officials and employees to always uphold public
interest over and above personal interest. By actively participating in the management
of Golden Child Montessori, a private school, while serving as Principal of Lagro
Elementary School, a government school, respondent has transgressed the provisions
of Section 7 (b) (2) of R.A. 6713. We affirm all the other findings of the Office of the
Ombudsman. The testimonial and documentary evidence contained in the records
constitutes substantial evidence to prove the administrative liability of respondent, as
discussed by the Ombudsman.
3. ID.; ID.; ID.; ADDITIONAL PENALTY OF FINE OF FIVE THOUSAND PESOS
(P5,000.00) IMPOSED ON RESPONDENT FOR VIOLATION OF SECTION 7 OF R.A. NO.
6713. — Section 11 of R.A. 6713 provides that violations of Section 7 of said law shall
be punishable with imprisonment not exceeding five (5) years, or a fine not exceeding
five thousand pesos (P5,000), or both, and, in the discretion of the court,
disqualification to hold public office. Hence, we deem it appropriate to impose a fine of
five thousand pesos (P5,000) upon respondent in addition to the penalty imposed
upon her by the Office of the Ombudsman. cHCSDa
DECISION
PUNO, J p:
This is a petition for review of the decision dated June 22, 2004 and resolution dated
November 23, 2004 of the Court of Appeals, which reversed the decision of the
Ombudsman finding respondent guilty of dishonesty, violation of Sec. 4 (c) of Republic
Act No. (R.A.) 6713 1 and grave misconduct, and penalizing her with dismissal from
the service with forfeiture of benefits equivalent to twelve (12) months salary and
temporary disqualification for re-employment in the government service for one (1)
year. cCTaSH
This case arose from a complaint filed by Estrelita L. Gumabon, Teacher III, Lagro
Elementary School, against the school Principal, respondent Florentina A. Santos,
before the Office of the Ombudsman on September 29, 1997. The complaint alleged
that respondent falsified her daily time record as her entries therein did not match the
entries of the school's security guard in their logbook. In particular, on August 20,
1997, respondent indicated in her daily time record that she reported for work at
Lagro Elementary School the whole day, but she actually went to Golden Child
Montessori Dela Costa III Annex at 9:00 a.m., and later at 11:30 a.m. to its Carissa II
Annex. She left the premises of said school around one in the afternoon. The
complaint also pointed out that respondent was one of the owners/incorporators of
Golden Child Montessori and held the position of President/Chairman of the Board. It
was further alleged that respondent exhibited rude and oppressive behavior not only
to the teachers and personnel of Lagro Elementary School, but also to the parents of
their pupils. 2 In a supplemental complaint dated April 1, 1998, Gumabon also
charged respondent with taking several pieces of galvanized iron sheets used in the
construction and repair of some rooms and toilets at Lagro Elementary School.
Respondent allegedly ordered one Jose Sabalilag to take the galvanized iron sheets
and deliver them to her house, and even asked school janitress Pia Amparo to
accompany Sabalilag to show him the direction to respondent's house. 3
Answering the charges, respondent explained that it was her daily routine upon arrival
at the school to inspect its outer premises before entering the school grounds, to see if
the school fence is clean and garbage-free. The security guard only logs in the time of
respondent's entry into the school grounds as her arrival time. As regards the incident
on August 20, 1997, respondent stated that she sought permission from Mrs. Paz T.
Quejada, District Supervisor, School District X, to attend an activity at Golden Child
Montessori. She said that Mrs. Quejada did not object to her request. Respondent also
admitted being an owner/incorporator of Golden Child Montessori, but argued that it
did not violate any existing law. She denied all the other allegations in the complaint.
With respect to the taking of the galvanized iron sheets, respondent explained that
they were excess materials from the construction projects in the school and they were
sold to her by the project contractor at cost. 4
Hearings were conducted before Graft Investigation Officer Joselito P. Fangon at the
Administrative Adjudication Bureau, Office of the Ombudsman. TADIHE
Gumabon appeared to identify her affidavit, as well as the affidavits of her witnesses,
and the documentary evidence consisting of the photocopy of respondent's daily time
record for the months of February, March and August 1997, 5 copy of the logbook of
security guard Willy Casauay, 6 copy of the memo issued by respondent to the
Principals of the various annexes of Golden Child Montessori, 7 the letters of several
parents of Lagro Elementary School pupils complaining about the attitude of
respondent towards them, and the copy of the police receipt showing that the police
recovered several galvanized iron sheets from Jose Sabalilag.
Hermelina de Vera, former Principal of Golden Child Montessori Dela Costa III Annex,
testified that respondent attended the Linggo ng Wika celebration at their campus in
San Jose Del Monte, Bulacan on August 20, 1997. Respondent arrived at said campus
around nine in the morning. 8
Zaida Zayde, Corporate Secretary and Principal of Golden Child Montessori Dela Costa
II Annex, testified that respondent is also one of the incorporators of said school, and
that respondent handles its finances, signs checks, keeps bank accounts, and issues
and signs memoranda for and in behalf of the school. She also stated that she and
respondent visited the Dela Costa III Annex of Golden Child Montessori during the
Linggo ng Wika celebration. 9
Juan S. Gambol, Police Inspector, Lagro Police Station, stated that on February 13,
1998, Gumabon reported the alleged missing pieces of galvanized iron at Lagro
Elementary School. They recovered around 40 pieces of galvanized iron sheets from
Jose Sabalilag on February 23, 1998 and issued a receipt therefor. 10
Jeorgia Loperez, one of the incorporators of Golden Child Montessori, testified that
respondent is the President and Chairman of the Golden Child Montessori, and that
she handles the finances, keeps the bank account, signs checks and issues
memoranda for and in behalf of the school. 11
Fructuosa C. Gavilan, Grade School Teacher, Lagro Elementary School, testified that
respondent has the habit of scolding her even in front of other people. She also
testified to an incident where she was marked absent despite being present, albeit late
on the particular date. 12
Sophia Amparo, Janitress at Lagro Elementary School, testified that on February 10,
1998, she was instructed by respondent to bring to the latter's house several pieces of
galvanized iron sheets. 13
Didith Sacueza testified that she used to sell food to the teachers at the Lagro
Elementary School. She said that she had an agreement with respondent that she
would be allowed to sell food in the school but she was required to give a certain
amount to the school. Then, one day, without any notice, Sacueza was refused entry
into the school. The guard informed her that it was the Principal's order. She wrote
respondent asking why she was no longer allowed to sell food in the school, but she
did not get any response. 14
Vicente Cue, Security Guard at Lagro Elementary School, testified that on September
5, 1999, his wife made an emergency call at the school but respondent refused to give
the call to him. 15
Willy Casauay, also a Security Guard at Lagro Elementary School, testified that a
certain Jose Sabalilag went to the Lagro Elementary School and, upon instruction of
respondent, took several pieces of galvanized iron sheets. Accompanied by Pia
Amparo, Sabalilag brought the same to respondent's residence. The incident was
noted in his logbook. 16
Jose Sabalilag, Benedict Guantero and Erlinda Dela Rosa, on the other hand, testified
for respondent. SCADIT
Jose Sabalilag stated that sometime in February 1998, he was tasked to renovate a
comfort room at Lagro Elementary School. He used about forty (40) pieces of
galvanized iron sheets for the construction. There was an excess of about eight (8)
pieces of galvanized iron sheets which respondent ordered to be taken to her house.
He also said that he removed around forty-one (41) pieces of used galvanized iron
sheets which he took to their storage (bodega), but which he also returned to the
school the next day upon instruction of a Commission on Audit (COA) personnel.
While they were unloading the returned materials, Gumabon arrived, took some
pictures, and reported the incident to the police. Gumabon also made him sign an
affidavit stating that respondent was the one who ordered the taking of the galvanized
iron sheets. 17
Benedict Guantero, an employee of the COA, testified that respondent sought his
advice concerning the salvageable materials taken from two (2) school toilets which
underwent renovation. 18
Erlinda Dela Rosa, former Officer-in-Charge of Golden Child Montessori, testified that
Golden Child Montessori and its branches were being managed by their respective
Principals. She also testified that the payment of rentals for the school, the payment of
salaries of teachers and financial management of the school were undertaken by the
respective administrators. 19
On July 23, 2001, the Office of the Ombudsman rendered a decision finding
respondent guilty of dishonesty, violation of Sec. 4 (c) of R.A. 6713 and grave
misconduct. It imposed upon respondent the penalty of dismissal from service with
forfeiture of benefits equivalent to twelve (12) months salary and temporary
disqualification for re-employment in the government for one (1) year from the finality
of said decision. 20
The Court of Appeals, however, reversed and set aside the decision of the Ombudsman
and ordered the dismissal of the complaint. It held that the findings of the Office of the
Ombudsman were not supported by substantial evidence. 21
Hence, this petition. Petitioner raised the following arguments:
1. Contrary to the appellate court a quo's [sic] ruling, the extant evidence on
record constitutes more than substantial evidence to establish the administrative guilt
of respondent. Cdpr
2. Findings of fact of an administrative agency are generally accorded not only
respect but at times finality. 22
The petition is impressed with merit.
Administrative proceedings are governed by the "substantial evidence rule." A finding
of guilt in an administrative case would have to be sustained for as long as it is
supported by substantial evidence that the respondent has committed acts stated in
the complaint or formal charge. As defined, substantial evidence is such relevant
evidence as a reasonable mind may accept as adequate to support a conclusion. 23
A reading of the decision of the Office of the Ombudsman and a thorough examination
of the records of this case show sufficient evidence to prove respondent's
administrative liability. In its decision, the Office of the Ombudsman, through Graft
Investigation Officer Joselito P. Fangon, cites the pieces of evidence that support its
ruling. It discussed its findings thus:
Respondent FLORENTINA A. SANTOS stands administratively charged with, among
others, the falsification of her Form 48; of being one of the Owners/Incorporators of a
private school; of having oppressed and harassed school teachers and employees; and
of theft of school property.
With respect to the first charge, the complainant adduced as evidence the Daily Time
Record (Civil Service Form No. 48) of respondent SANTOS for the month of August
1997 (Exhibit B, p. 0191, Records). Marked as Exhibit "B-1" (supra.) is the entry for
August 20, 1997 showing that respondent SANTOS reported for work at Lagro
Elementary School, Quezon City, at 6:45 in the morning and departed at 7:15 in the
evening. Likewise adduced as evidence is the testimony of Hermelina de Vera . . . .
ECcTaH
On the basis of the foregoing, it has been substantially established that respondent
SANTOS actually reported for work at the Lagro Elementary School in Quezon City.
However, evidence shows that said respondent, instead of rendering the required
number of hours of work, went to a private school (to attend a school function) in San
Jose Del Monte, Bulacan. It is therefore clear that the respondent deliberately made it
appear that she reported for work on 20 August 1997, when in truth, she attended a
private function and was physically absent from school. The respondent's act of
punching her Daily Time Record constitutes Dishonesty for making it appear that she
was present for work when in fact she was absent therefrom.
As against these, the respondent failed to present any evidence to counter the same,
and as such, her guilt has been adequately shown.
As to the charge against respondent of being an Owner/Incorporator of the Golden
Child Montessori School, we find the evidence to be inadequate to establish any
administrative liability.
Although the evidence tend to prove that the respondent is an Owner/Incorporator of
the said school, still, the complainant failed to show any conflict of interest on the part
of the respondent. Moreover, no evidence was presented to show that being an
Owner/Incorporator of a private school amounts to a violation of any law. Verily, the
charge against respondent on this score should be dismissed.
On the charge of Oppression/Harassment, witness VICENTE CUE testified that on 8
September 1997, his wife made an emergency call at Lagro Elementary School where
he works as a Security Guard. However, despite his presence thereat, respondent
SANTOS refused to give the call to him. On cross-examination, the testimony of
witness CUE was not rebutted by any evidence. ScaAET
Hence, it has been fairly established that the respondent committed an oppressive act
against Vicente Cue. Her actuations definitely runs [sic] counter to the established
norms of conduct and ethical standards for public officials who, "must act with justice
and shall not discriminate against anyone". Moreover, her action violates the standard
of personal conduct, which mandates all civil servants to "respect the rights of others,
and to refrain from doing acts contrary to good morals and customs". Accordingly,
respondent SANTOS appears to be liable for violation of Republic Act No. 6713.
The respondent was also accused of having misappropriated government property. On
this point, Sophia Amparo, janitress, Lagro Elementary School, testified . . . .
It is clear from the foregoing that at the instance of the respondent, several galvanized
iron sheets which appear to be the property of the government were taken out of Lagro
Elementary School and delivered to the residence of the respondent.
The respondent then presented her witnesses, namely: JOSE SABALILAG and
BENEDICT GUANTERO, to rebut the allegation of theft, however, the same proved
insufficient to counter the evidence against her.
xxx xxx xxx
It is therefore clear from the testimony of JOSE SABALILAG that at least eight (8)
galvanized iron sheets (which were purportedly new) were taken by the respondent
and which remain unaccounted for. This bolsters the finding that the respondent was
responsible for having taken several galvanized iron sheets which were government
property.
With respect to BENEDICT GUANTERO, a witness for the respondent, the basis for his
testimony, which is a purported Affidavit was not formally offered as evidence in the
present case. Hence, the allegations therein can not be possibly considered in the
resolution of the instant case. ICTacD
All told, it has been substantially established that the respondent took government
property for her own personal benefit which constitutes Grave Misconduct, and for
which the respondent may be held liable. (citations omitted) 24
As a general rule, factual findings of administrative bodies are accorded great respect
by this Court. We do not see any reason to depart from this policy, except as regards
respondent's liability for holding the position of President/Chairman of the Board of
Golden Child Montessori and managing the affairs of said school. Contrary to the
Ombudsman's ruling that such act does not violate any provision of law, Section 7 (b)
(2) of R.A. 6713 prohibits all public officials and employees from engaging in the
private practice of their profession, thus:
SECTION 7. Prohibited Acts and Transactions. — In addition to acts and omissions of
public officials and employees now prescribed in the Constitution and existing laws,
the following shall constitute prohibited acts and transactions of any public official
and employee and are hereby declared to be unlawful:
xxx xxx xxx
(b) Outside employment and other activities related thereto. — Public officials and
employees during their incumbency shall not:
(1) Own, control, manage or accept employment as officer, employee, consultant,
counsel, broker, agent, trustee or nominee in any private enterprise regulated,
supervised or licensed by their office unless expressly allowed by law;
(2) Engage in the private practice of their profession unless authorized by the
Constitution or law, provided, that such practice will not conflict or tend to conflict
with their official functions; or
(3) Recommend any person to any position in a private enterprise which has a
regular or pending official transaction with their office. ISaTCD
These prohibitions shall continue to apply for a period of one (1) year after resignation,
retirement, or separation from public office, except in the case of subparagraph (b) (2)
above, but the professional concerned cannot practice his profession in connection
with any matter before the office he used to be with, in which case the one-year
prohibition shall likewise apply.
The rule is that all public officers and employees are prohibited from engaging in the
private practice of their profession. The exception is when such private practice is
authorized by the Constitution or law. However, even if it is allowed by law or the
Constitution, private practice of profession is still proscribed when such practice will
conflict or tends to conflict with the official functions of the employee concerned.
Indeed, public servants are expected to devote their undivided attention to their public
duties, to give the tax payers the competent and excellent service that they deserve. In
fact, Section 4 of the Code of Conduct and Ethical Standards for Public Officials and
Employees enjoins said officials and employees to always uphold public interest over
and above personal interest. By actively participating in the management of Golden
Child Montessori, a private school, while serving as Principal of Lagro Elementary
School, a government school, respondent has transgressed the provisions of Section 7
(b) (2) of R.A. 6713.
We affirm all the other findings of the Office of the Ombudsman. The testimonial and
documentary evidence contained in the records constitutes substantial evidence to
prove the administrative liability of respondent, as discussed by the Ombudsman.
We now go to the penalty. Section 11 of R.A. 6713 provides that violations of Section 7
of said law shall be punishable with imprisonment not exceeding five (5) years, or a
fine not exceeding five thousand pesos (P5,000), or both, and, in the discretion of the
court, disqualification to hold public office. Hence, we deem it appropriate to impose a
fine of five thousand pesos (P5,000) upon respondent in addition to the penalty
imposed upon her by the Office of the Ombudsman. cHCIDE
IN VIEW WHEREOF, the petition is GRANTED. The assailed decision and resolution of
the Court of Appeals are SET ASIDE. The decision of the Office of the Ombudsman in
OMB-ADM-0-98-0307 dated July 23, 2001 is REINSTATED with MODIFICATION that
an additional FINE of FIVE THOUSAND PESOS (P5,000.00) is imposed upon
respondent.
SO ORDERED.
Sandoval-Gutierrez, Corona, Azcuna and Garcia, JJ., concur.
THIRD DIVISION
[G.R. No. 154377. December 8, 2003.]
LAND CAR, INC., petitioner, vs. BACHELOR EXPRESS, INC. AND VALLACAR
TRANSIT, INC., respondents.
Omar M. Mayo for petitioner.
Pastor C. Bacani for respondents.
SYNOPSIS
Petitioner herein filed with the Regional Office of the Land Transportation Franchising
and Regulatory Board (LTFRB) a verified application to operate a public utility bus
service, to which the respondents opposed. The LTFRB granted the petitioner's
application. However, the Secretary of the Department of Transportation and
Communication (DOTC) reversed the decision upon respondent's motion for
reconsideration. The petitioner filed a letter appeal to the Office of the President, then,
later filed a petition for certiorari before the Court of Appeals. (CA). Upon advice of the
new counsel, petitioner filed a notice of withdrawal of the petition for certiorari with
the appellate court. The appellate court, instead of acting on the notice of withdrawal
of the petition, dismissed the petition for failure of compliance with the rules on non-
forum shopping. Meanwhile, the Office of the President directed a stay in the
execution of the DOTC Secretary. The respondent appealed the said order before the
Court of Appeals stating lack of jurisdiction on the part of the Office of the President.
The Court of Appeals granted the respondent's petition basically on the ground that
the petitioner was guilty of forum shopping. Hence, this appeal. aIcETS
The Supreme Court held that the Office of the President validly acquired jurisdiction
over the case upon the filing therewith of the appeal by herein petitioner, and said
jurisdiction was not lost by the subsequent recourse by petitioner of the certiorari
proceedings before the Court of Appeals. Jurisdiction which has attached in the first
instance continues until final resolution of the case. The decision of the appellate
court ordering the dismissal of the appeal taken to the Office of the President was
clearly flawed and could well constitute an undue intrusion into a valid exercise of
jurisdiction over acts of subordinates within that office.
SYLLABUS
1. REMEDIAL LAW; ACTIONS; FORUM SHOPPING; DEFINED AND CONSTRUED.
— Forum shopping refers to the act of availing oneself of several judicial remedies in
different courts, either simultaneously or successively, substantially founded on the
same transaction and identical material facts and circumstances, raising basically like
issues either pending in, or already resolved by, some other court. The principle
applies not only with respect to suits filed before courts but also in connection with a
litigation commenced in court while an administrative proceeding is pending in order
to defeat administrative processes in anticipation of an unfavorable administrative
ruling and possibly a favorable court ruling. Forum shopping is said to exist where the
elements of litis pendentia are present or where a final judgment in one case would
amount to res judicata in the other; or where, in the two or more cases pending, there
is identity of (a) parties, (b) rights or causes of action, and (c) reliefs sought.
2. ID.; ID.; REQUIREMENT FOR CERTIFICATION OF NON-FORUM SHOPPING;
JUSTIFIED. — In order to deter the evils of forum shopping, Circular 28-91, dated 08
February 1994, issued by the Supreme Court requires that every petition filed with the
Supreme Court or the Court of Appeals must be accompanied by a certification of non-
forum shopping. Administrative Circular 04-94, made effective on 01 April 1994,
expands the certification requirement to include cases filed in court and quasi-judicial
agencies below the Supreme Court and the Court of Appeals. Ultimately, the Court
adopted paragraphs (1) and (2) of Administrative Circular No. 04-94 to become Section
5, Rule 7, of the 1997 Rules of Civil Procedure. Significantly, to curb the malpractice
of forum shopping, the rule ordains that a violation thereof would constitute contempt
of court and be a cause for the summary dismissal of both petitions without prejudice
to the taking of appropriate action against the counsel of the party concerned.
CHEIcS
3. POLITICAL LAW; ADMINISTRATIVE LAW; DOCTRINE OF EXHAUSTION OF
ADMINISTRATIVE REMEDIES; PURPOSE THEREOF. — The doctrine of exhaustion of
administrative remedies empowers the Office of the President to review any
determination or disposition of a department head. The doctrine allows, indeed
requires, an administrative decision to first be appealed to the administrative
superiors up to the highest level before it may be elevated to a court of justice for
review. Thus, if a remedy within the administrative machinery can still be had by
giving the administrative officer concerned every opportunity to decide on the matter
that comes within his jurisdiction, then such remedy should be priorly exhausted
before the court's judicial power is invoked.
DECISION
VITUG, J p:
On 21 May 1999, petitioner filed with the Regional Office of the Land Transportation
Franchising and Regulatory Board (LTFRB), Region XII, a verified application to
operate a public utility bus service from Davao City to Cagayan de Oro City via Butuan
City. aDATHC
Respondents, themselves grantees of certificates of public convenience, opposed
petitioner's application alleging that the route applied for was sufficiently being served
by them, and that "cutthroat competition" would only result if petitioner's application
were to be favorably acted upon.
On 29 October 1999, the LTFRB rendered its decision granting petitioner's application
and directing the issuance of the corresponding Certificate of Public Convenience.
Respondents' motion for reconsideration was denied in the board's resolution of 27
January 2000. Respondents then appealed to the Office of the Secretary of the
Department of Transportation and Communication (DOTC). On 05 June 2000, the
DOTC Secretary reversed the decision of the LTFRB. This time, it was petitioner's turn
to move for reconsideration of the DOTC Secretary's resolution. The motion, however,
was denied by the DOTC Secretary in his order of 30 August 2000. Respondents
thereupon moved for the immediate implementation by the LTFRB of the decision of
the DOTC Secretary. On 03 October 2000, the LTFRB granted respondents' motion
and directed petitioner to cease and desist from operating its buses along the
contested route.
On 07 October 2000, petitioner filed a letter-appeal to the Office of the President
seeking to set aside the resolution and order, dated 05 June 2000 and 30 August
2000, respectively, of the DOTC Secretary. Petitioner then likewise filed before the
Court of Appeals a petition for certiorari, docketed C.A.-G.R. SP No. 61159,
questioning the same resolution and order of the DOTC Secretary subject of the letter-
appeal addressed to the Office of the President. Upon advice of its new counsel,
however, petitioner filed a notice of withdrawal of its petition for certiorari (C.A.-G.R.
SP No. 61159) pending with the appellate court. The appellate court did not act upon
the notice of withdrawal of the petition (C.A. G.R. SP No. 61159) but, instead,
dismissed, in its resolution of 09 November 2000, the petition for failure of compliance
with Section 1, Rule 42, of the 1997 Rules of Civil Procedure on non-forum shopping.
On 20 October 2000, the Office of the President issued a memorandum directing that
the execution of the resolution and order of the DOTC Secretary, dated 05 June 2000
and 30 August 2000, respectively, be meanwhile stayed.
On 15 January 2001, respondents filed with the Court of Appeals a petition for
certiorari under Rule 65 of the 1997 Rules of Civil Procedure, docketed C.A.-G.R. SP
No. 62619, assailing the Memorandum Order of the Office of the President.
Respondents argued that the Office of the President had no jurisdiction to issue the
assailed order in the absence of any law providing for an appeal from the DOTC to the
Office of the President, adding that petitioner was guilty of forum shopping in
addressing a letter-appeal to the Office of the President.
On 18 June 2001, the Court of Appeals granted respondents' petition for certiorari
basically on the ground that petitioner was guilty of forum shopping. It ordered the
dismissal of the appeal filed by petitioner before the Office of the President and
reinstated the resolution and order of the DOTC Secretary enjoining petitioner from
operating its buses along the contested route. HEITAD
In the instant appeal, petitioner contends that the appellate court has decided a
question in a way not in accord with applicable jurisprudence. There is merit in the
petition.
Forum shopping refers to the act of availing oneself of several judicial remedies in
different courts, either simultaneously or successively, substantially founded on the
same transaction and identical material facts and circumstances, raising basically like
issues either pending in, or already resolved by, some other court. 1 The principle
applies not only with respect to suits filed before courts but also in connection with a
litigation commenced in court while an administrative proceeding is pending in order
to defeat administrative processes in anticipation of an unfavorable administrative
ruling and possibly a favorable court ruling. 2 Forum shopping is said to exist where
the elements of litis pendentia are present or where a final judgment in one case would
amount to res judicata in the other; 3 or where, in the two or more cases pending,
there is identity of (a) parties, (b) rights or causes of action, and (c) reliefs sought. 4
In order to deter the evils of forum shopping, Circular 28-91, dated 08 February 1994,
issued by the Supreme Court requires that every petition filed with the Supreme Court
or the Court of Appeals must be accompanied by a certification of non-forum
shopping. Administrative Circular 04-94, made effective on 01 April 1994, expands the
certification requirement to include cases filed in court and quasi-judicial agencies
below the Supreme Court and the Court of Appeals. Ultimately, the Court adopted
paragraphs (1) and (2) of Administrative Circular No. 04-94 to become Section 5, Rule
7, of the 1997 Rules of Civil Procedure. Significantly, to curb the malpractice of forum
shopping, the rule ordains that a violation thereof would constitute contempt of court
and be a cause for the summary dismissal of both petitions without prejudice to the
taking of appropriate action against the counsel of the party concerned. 5
Undeniably, there is identity of cause of action and reliefs sought between the
petitioner's letter-appeal filed with the Office of the President and the petition for
certiorari filed with the Court of Appeals (C.A. G.R. SP No. 61159). The DOTC
resolution and order, dated 05 June 2000 and 30 August 2000, respectively, were
sought to be set aside in both appeals filed by petitioner.
The doctrine of exhaustion of administrative remedies empowers the Office of the
President to review any determination or disposition of a department head. The
doctrine allows, indeed requires, an administrative decision to first be appealed to the
administrative superiors up to the highest level before it may be elevated to a court of
justice for review. Thus, if a remedy within the administrative machinery can still be
had by giving the administrative officer concerned every opportunity to decide on the
matter that comes within his jurisdiction, then such remedy should be priorly
exhausted before the court's judicial power is invoked. 6
The appellate court correctly ruled that the action of a department head bears only the
implied approval of the President, and the latter is not precluded from exercising the
power to review the decision of the former pursuant to the President's power of control
over all executive departments, bureaus and offices. 7 The Office of the President
validly acquired jurisdiction over the case upon the filing therewith of the appeal by
herein petitioner, and said jurisdiction is not lost by the subsequent recourse by the
petitioner of the certiorari proceedings before the Court of Appeals. Jurisdiction which
has attached in the first instance continues until the final resolution of the case.
Incongruently, the appellate court, while recognizing to be valid the exercise of
jurisdiction by the Office of the President, ordered the dismissal of the appeal pending
with the said office based on forum shopping.
The decision of the appellate court ordering the dismissal of the appeal taken to the
Office of the President is clearly flawed. It is the latter, not the appellate court, which
could dismiss the case pending before that office. It also behooves courts of justice, if
only for reasons of comity and convenience, to shy away from a dispute until the
system of administrative redress is completed so as to give the administrative office
every opportunity to correct its error and to properly dispose of the case. In fact, the
appellate court's order to dismiss the appeal pending with the Office of the President
could well constitute an undue intrusion into a valid exercise of jurisdiction by the
President over acts of subordinates within that office.
WHEREFORE, the petition is GRANTED, and the assailed decision is SET ASIDE. No
costs. DCTHaS
SO ORDERED.
Sandoval-Gutierrez, Corona and Carpio-Morales, JJ ., concur.
THIRD DIVISION
[G.R. No. 169277. February 9, 2007.]
DEPARTMENT OF AGRARIAN REFORM, 1 represented by OIC-Secretary Nasser C.
Pangandaman, petitioner, vs. VICENTE K. UY, respondent.
DECISION
CALLEJO, SR., J p:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised
Rules of Court of the Amended Decision 2 of the Court of Appeals (CA) in CA-G.R. SP
No. 70541 and the Resolution 3 of the appellate court denying the motion for
reconsideration thereof. The CA reversed and set aside the Decision 4 of the Office of
the President which had affirmed the Order 5 of the Department of Agrarian Reform
(DAR) exempting only a portion (219.50 hectares) of respondent Vicente K. Uy's
349.9996-ha landholding from the coverage of the Comprehensive Agrarian Reform
Program (CARP). DECSIT
On December 4, 1990, this Court promulgated its decision in Luz Farms v. Secretary
of the Department of Agrarian Reform 6 where it declared unconstitutional Sections 3
(b), 11, 13 and 32 of Republic Act (R.A.) No. 6657. 7 The nullified provisions pertain to
the inclusion of land used in raising livestock, poultry, and swine in the coverage of
the law. The Court likewise nullified the Implementing Rules and Guidelines
promulgated in accordance therewith. 8
On December 27, 1993, the DAR issued Administrative Order (A.O.) No. 9, Series of
1993 9 primarily to curb the pernicious practice of landowners who convert their
lands from agricultural to livestock and poultry in order to circumvent the law. The
prefatory statement reads:
. . . , the Supreme Court held that lands devoted to the raising of livestock, poultry
and swine are excluded from the coverage of R.A. No. 6657. Following the said
decision, numerous reports have been received that some landowners had taken steps
to convert their agricultural lands to livestock, poultry and swine raising. CSAaDE
In order to prevent circumvention of the Comprehensive Agrarian Reform Program and
to protect the rights of the [a]grarian reform beneficiaries, specifically against their
possible unlawful ejectment due to the unauthorized change or conversion or
fraudulent declaration of areas actually, directly, and exclusively used for livestock,
poultry and swine raising purposes, the following rules and regulations are hereby
prescribed for the guidance of all concerned. 10
The DAR also declared that as of June 15, 1988, the date R.A. No. 6657 took effect,
the following rules shall apply in determining the "areas qualified for exclusion":
A. Private Agricultural lands or portions thereof exclusively, directly and actually
used for livestock, poultry and swine raising as of 15 June 1998 shall be excluded
from the coverage of CARP. cSEaDA
B. In determining the areas qualified for exclusion under this Administrative
Order, the following ratios of land, livestock, poultry and swine raising shall be
adopted:
1.0 Grazing
1.1 Cattle, Carabao 11 and Horse Raising
— cattle, carabao and horse (regardless of age) — the maximum ratio is one (1)
head to one (1) hectare
xxx xxx xxx
2.0 Infrastructure
2.1 Cattle, Horses and Carabao Raising — a ratio of 21 heads for every 1.7815
hectares of infrastructure . . . . 12
Dr. Vicente K. Uy, Wellington K. Ong, Jaime Chua, and Daniel Sy, among others, are
owners of a 349.9996-ha parcel of land located in Barangay Camaflora, Barrio of San
Andres, Municipality of San Narciso, Province of Quezon. The property is covered by
Transfer Certificate of Title (TCT) No. 160988. cIaCTS
Sometime in 1993, some 44 farmers who occupied portions of the property filed
petitions in the DAR, seeking to be declared as owners-beneficiaries. On December 20,
1994, the DAR issued a Notice of Coverage under the CARP over the property. For his
part, respondent, in behalf of the co-owners, filed an Application for Exclusion 13 in
the form of a letter dated May 10, 1995, through Provincial Agrarian Reform Officer
(PARO) Durante L. Ubeda. To substantiate his request to exclude their landholding
from CARP coverage under the Luz Farms ruling, respondent declared that their
property had been exclusively used for livestock-raising for several years prior to June
15, 1988. According to the applicants, they had 400 heads of cattle, 5 horses, and 25
carabaos in the landholding and —
Our private landholding has been devoted and actually used for cattle and/or livestock
raising, together with raising of carabaos, and horses continuously from the time it
was owned by our predecessors-in-interest, Emiterio Florido, and even when we
acquired title over the property in 1979, we continually devoted and actually used the
said landholding for cattle raising from 1979 up to the present. 14
On May 10, 1995, the Provincial Task Force on Exclusion led by Municipal Agrarian
Reform Officer (MARO) Belen T. Babalcon conducted an ocular inspection of the
property and an actual "headcount" was conducted. The following were present to
witness the inspection: the Mayor of San Andres, the Barangay Agrarian Reform
Committee Chairman, Legal Officer III James Carigo, and representatives of the
applicants, farmers-beneficiaries, the Provincial Agrarian Reform Office, and the
Philippine National Police. The findings of the Task Force are contained in the
Investigation Report:
Registered Owner/s: (If deceased, indicate name of heirs)
OWNER
1. Dr. Vicente K. Uy
2. Wellington K. Ong, mrd. to So Ngo Grace Ong
3. Jaime Chua, mrd. to Letty Ong Chua
4. Daniel Sy, mrd. to Carolyn T. Ngo
5. Nancy Ong Uy
6. Emily Ong Uy
7. Lucy Ong
8. Wilson Ong
9. John Ong Uy
E. Actual Land Use No. of Actual Area Approximate Topo-
Animal (has.) used Area used graphy
heads/ for grazing for infra-
birds structure
1. Livestock
1.1 cattle 401 ) 346.00 3.00 more Flat to
1.2 horse 20 ) hectares or less undulating
 1.3 carabao 8 ) more or less
2. Goat allegedly owned by FBs
Sheep and overseer
3. Swine none
4. Poultry
4.1 layers none
4.2 broilers
F. Other Land Uses
Agriculture
Crops Planted No. of Has. No. of Tenants No. of FWs &
employees
1. Coconut and 346.00 more more than 29
auxiliary or less and 44
crops presently
utilized for
pasture and
grazing of
livestock.
Others (specify)
20 hectares more or less are sporadically planted to coconut with "aroma shrubs" also
utilized for pasture at sitio Ipil. cDTHIE
G. Improvements and Infrastructures. Describe the kind of improvements and
infrastructures whether constructed with strong or light materials and indicate the
date constructed.
2 corral made of coco lumber. The old one have constructed in 1980 and the other one
constructed sometime on February 1995. Barb wire and fences on the perimeter of the
area, wooden primary and secondary gate, feed storage, embankments. Cayab and
potot creek are utilized for drinking purposes of the livestock.
H. Finishing.
The landholding are entirely planted to bearing coconut trees "tenanted by more or
less 44 FBs with sharing arrangement of 60:40 in favor of the landowner. The
tenanted coconut land are presently used as pasture and grazing of the livestock."
Landowner alleged that they are engaged in livestock raising prior to June 15, 1988.
FBs are now petitioning for the acquisition and distribution of their occupied area
under CARP coverage. 15
The Task Force made the following declaration:
I. Comments/Remarks/Recommendations:
The density required on commercial farming as far as the number of livestock is
concerned have been met; however, the necessary infrastructure and facilities like
paddocks, dike, water trough and others were not present much more per information
revealed by farmers in the area majority of the cattles were only brought in the early
part of this year. Therefore, it is recommended that the areas actually cultivated and
occupied by the tenants be covered by CARP and only areas not affected be excluded
from CARP coverage. 16
Thus, on the basis of the aforesaid findings, MARO Belen Babalcon made a Final
Report, declaring that 346.000 ha, more or less, is devoted to coconut and livestock
farming; the registered owner is Dr. Vicente K. Uy; 346 ha is used for grazing and 3 ha
for infrastructure. She declared that while a total of 429 livestock heads (401 cows, 20
horses, 8 carabaos) are being raised in the property, "the total area for exclusion is
undetermined because there are portions occupied by tenants which should not be
excluded from CARP coverage." 17
Meanwhile, PARO Durante L. Ubeda submitted a separate Report 18 dated July 4,
1995 where he declared:
1) THAT the total number of Certificate[s] of Ownership is 434 which is more than
the actual headcount of 401;
2) THAT the number of cattle 7 years old and above totaled 134 heads with 13
males and 121 females as of date of certification;
3) THAT 300 cattles were of ages 6 years old and below with 76 males and 234
females, [also as of the date of certification.] 19
Ubeda's basis for exclusion is the Certificate of Ownership of Large Cattle issued by
the Municipal Treasurer of San Andres on May 12-29, 1995, submitted by the
landowner, which, according to Ubeda is "more conclusive" (although issued fairly
recently). He recommended the exclusion from CARP coverage a total of 219.50 has:
134 has. for cattle-grazing, 28 has. for horse and carabao grazing, 12.5 has. for
infrastructure and 45 has. for retention of nine landowners. IDTHcA
The applicants, through Uy, wrote a letter 20 to DAR Region IV Director Percival C.
Dalugdug dated July 18, 1995, requesting for a reinvestigation of the Report of PARO
Ubeda. This request was reiterated in an August 11, 1995 letter 21 where the
applicants requested, for the first time, the exclusion of another parcel of land —
22.2639 ha and covered by TCT No. T-11948 — which is contiguous to the 349.9996-
ha lot covered by their earlier application.
On August 14, 1995, the Regional Director issued an Order affirming the findings and
recommendation of PARO Ubeda. Respondent and his co-owners appealed the order to
the DAR Secretary on August 28, 1995. They argued that the properties have been
devoted to livestock-raising even prior to 1977. Thus, the landholdings should be
excluded from CARP coverage. 22 They further argued that for purposes of
determining the area for exclusion under A.O. No. 9, the entire number of livestock
should be credited in applying the ratio of one head to one hectare. Considering that
the landholdings totaled only 370 ha and there are 429 heads of livestock, they have
more than complied with A.O. No. 9, Series of 1993. 23
On March 15, 1996, the DAR issued an Order suspending the processing and
issuance of Certificates of Land Ownership Awards to the farmers-beneficiaries of the
landholding covered by TCT No. 160988 pending the resolution of the appeal. 24
On October 7, 1996, the DAR issued an Order 25 partially granting the application for
exclusion. It held that, in accordance with the Luz Farms ruling and A.O. No. 9,
private agricultural lands are considered excluded from the CARP if already devoted to
livestock, poultry, and swine-raising as of June 15, 1988. According to the DAR, this
means that the livestock must have been in the area at the time the law took effect.
Since the Certificates of Ownership of Large Cattle were issued only on May 12 to 29,
1995, only those livestock which are seven years of age or more can be presumed to be
within the area as of June 15, 1988. Consequently, following the animal to land ratio
provided in A.O. No. 9 for 134 cattle and 28 horses and carabaos, only 162 ha should
be exempted from CARP coverage. DASEac
The DAR also ruled that additional exemptions include 12.50 ha for infrastructure
(following the ratio 21 heads for every 1.7815 ha) and 45 ha for retention of nine
landowners, for a total of 219.50 ha. The dispositive portion of the Order reads:
WHEREFORE, premises considered, Order is hereby issued:
1. GRANTING the instant application for exclusion/exemption from CARP
coverage pursuant to Administrative Order No. 09 Series [o]f 1993 but only with
respect to a total of TWO HUNDRED NINETEEN POINT FIFTY (219.50) hectares. The
remainder of ONE HUNDRED THIRTY POINT FOUR NINE NINE SIX (130.4996)
hectares are hereby placed under CARP coverage;
2. Directing the MARO/PARO concerned to cause the survey of the entire area for
purposes of segregating the areas which are covered from those which are excluded.
STcHDC
SO ORDERED. 26
On October 15, 1996, the applicants appealed the order to the OP via an Appeal with
Prayer for Status Quo/Stay of Execution. The case was docketed as OP Case No. 98-
D-8316.
On April 13, 1998, the President, through then Deputy Executive Secretary Renato C.
Corona (now a member of the Court), rendered a decision dismissing the appeal for
lack of merit, as follows:
The language of DAR Administrative Order No. 09 appears to be quite explicit: "Private
agricultural lands or portions thereof exclusively, directly and actually used for
livestock, poultry and swine raising as of 15 June 1988 shall be excluded from the
coverage of CARP." By simple reading, it is obvious that the livestock, poultry and
swine, in order to be included in the computation of the area to be exempted from
CARP coverage, should have been existing in the area sought to be exempted at the
time of the effectivity of RA 6657, which is June 15, 1988. Thus, in ascertaining the
animal/land ratio, the age of the cattle should be reckoned with. From the certification
of the Municipal Treasurer of San Andres, Quezon, it appears that only 134 of the 434
cattles are found to be at least seven years of age. Accordingly, only 162 hectares (134
for the cattle and 28 for the horses and carabaos) are exempted from CARP coverage
following the one hectare per one head of cattle ratio provided under the same
administrative order. This, of course, does not include the retention area of the
appellants-landowners and the area reserved for the infrastructures. 27
Respondent and his co-owners filed a Motion for Reconsideration dated May 21, 1998
of the decision. In an Order dated September 15, 1998 signed by the then Executive
Secretary Ronaldo Zamora, by authority of the President, the appeal was denied for
being devoid of substantial merit. 28
However, on October 5, 1998, then Chief Presidential Legal Adviser Harriet Demetriou
submitted the following Memorandum to the President:
1. For total exemption:
Administrative Order No. 9 provides that the maximum ratio in determining areas to
be exempted is one head to one hectare "regardless of age."
Hence, if Administrative Order No. 9 does not distinguish, neither should we. AaCTcI
The use of age as a reference when not so required is arbitrary and very dangerous
because it would then variably depend on the arbitrary decision of the DAR on when
to conduct an inspection, and this is no fault of the landowner. Thus, the more recent
the inspection is made, the higher the age requirement will be just to reckon the
animals' existence from 15 June 1988. The ultimate result is that an owner will never
be able to augment his herd, or replace lost or deceased livestock, after 1988, which is
absurd and an undue limitation of property rights.
The arbitrary use of age to determine the number of head of livestock as of 15 June
1988 is based on an unwieldy theory that the business of raising livestock involves a
fixed number of head of livestock. At any rate, Mr. Uy's land admittedly has always
been devoted to livestock. Therefore, there should be no apprehension that the land
was merely converted to circumvent the application of the CARL. Hence, in the
absence of collusion or intent to circumvent the law, the number of heads of livestock
should be counted as of the date of inspection. aCHDST
Finally, we would like to inform the following that the dispute is pending resolution
before the Office of the President to which the case was elevated. Hence, the case also
merits the opinion of Hon. Secretary Ronaldo B. Zamora as the final reviewing
authority. 29
On October 19, 1998, the respondent and his co-owners filed a Second Motion for
Reconsideration of the decision of the OP. On April 16, 2002, the President, through
Deputy Executive Secretary Arthur P. Autea, issued an Order denying the October 19,
1998 second motion for reconsideration for being a prohibited pleading and for lack of
merit. 30 Citing Ortigas and Company Limited Partnership v. Velasco, 31 the OP also
declared that the Second Motion for Reconsideration was a prohibited pleading.
Furthermore, Section 7 of A.O. No. 18 dated February 12, 1987 allows only one
motion for reconsideration save for exceptionally meritorious cases.
On December 22, 2002, the OP, through Executive Secretary Ronaldo B. Zamora,
issued a Memorandum 32 for DAR Secretary Horacio Morales referring the case for the
Secretary's final disposition, on the matter of exemption from CARP coverage the
subject landholding, as indicated in the aforesaid Memorandum of the Chief
Presidential Legal Adviser to the President. 33
Respondent for himself and in behalf of other owners then filed a "Petition for Review
with Application/Prayer for Status Quo and/or Stay of Execution" 34 before the CA,
docketed as CA-G.R. SP. No. 70541. They alleged that the OP committed the following
errors:
I
IT UNILATERALLY RE-ASSUMED JURISDICTION OVER THE CASE AND ISSUED THE
ORDER OF APRIL 16, 2002, DENYING THE SECOND MOTION FOR
RECONSIDERATION AND FOR RULING THAT IT WAS NOT "EXCEPTIONALLY
MERITORIOUS ENOUGH," EITHER OF WHICH CONSTITUTES GRAVE ABUSE OF
DISCRETION AND/OR EXCESS OF JURISDICTION, AND THEREFORE, REVERSIBLE.
35
II
IT DECLINED TO PASS UPON A JURISDICTIONAL ISSUE RAISED; THAT IS THE
ASSUMPTION OF JURISDICTION BY DAR OVER SUBJECT LANDHOLDING/S,
POPULARLY KNOWN AND ACCEPTED AS DEVOTED TO LIVESTOCK RAISING
DESPITE JURISPRUDENCE EXPLICITLY DECLARING IT, TOGETHER WITH POULTRY
AND SWINE RAISING, AS NOT COVERED BY THE AGRARIAN REFORM PROGRAM
OF THE GOVERNMENT, THEREFORE, BEYOND THE OFFICIAL COMPETENCE OF
DAR. 36
III
IT UPHELD DAR ADMINISTRATIVE ORDER NO. 9, SERIES OF 1993, BUT, IN
EFFECT, ONLY AS TO THE GENERAL RULE PRESCRIBED, FOR IT DISREGARDED
THE CONDITIONS AND/OR QUALIFICATIONS ATTACHED THERETO [AND] THEREBY
CONSTITU[TING] AN ARBITRARY AND DISCRIMINATORY APPLICATION OF THE
RULE, A GRAVE ABUSE OF DISCRETION. 37
The appellate court rendered judgment affirming the decision of the OP and,
consequently, the October 7, 1996 DAR Order. According to the appellate court —
The DAR has the power to establish and promulgate operational policies, rules and
regulations and priorities for agrarian reform implementation (Executive Order 129-A,
Section 5(c), July 26, 1987). The Comprehensive Agrarian Reform Law (R.A. 6657)
itself mandates that:
"SECTION 49. Rules and Regulations. — The PARC and the DAR shall have the
power to issue rules and regulations, whether substantive or procedural, to carry out
the objects and purposes of this Act. Said rules shall take effect ten (10) days after
publication in two (2) national newspapers of general circulation."
Thus, applying DAR Administrative Order No. 9, Series of 1993, and based on the
ocular inspection and Certificate of Ownership of Large Cattle issued by the Municipal
Treasurer, the DAR exempted 219.50 hectares of the subject landholding from CARP
coverage. It was found that of the 434 heads of cattle, only 134 were over seven years
of age. Added to this number of cattle were the 28 heads of horses and carabaos,
totaling 162 heads. Accordingly, pursuant to the one hectare per one head ratio, 162
hectares were exempted. The retention areas of the landowners amounting to 45
hectares and the 12.50 hectares allotted for infrastructure was also exempted.
DaCEIc
Such application by the DAR is in accordance with the spirit of the law and its aim of
preventing unlawful conversion of agricultural lands to escape coverage under the
CARP.
It is well-settled that factual findings of administrative agencies, which have acquired
expertise in their field, are generally binding and conclusive upon the Court. (Cagayan
Robina Sugar Milling Co. v. Court of Appeals, 342 SCRA 663) 38
Respondent and his co-owners filed a motion for reconsideration of the decision,
praying that the entire 349.9996 ha be exempted from CARP coverage.
On May 24, 2004, the CA rendered an Amended Decision 39 reversing and setting
aside its previous decision. The fallo reads:
WHEREFORE, based on the foregoing premises, the instant motion for reconsideration
is hereby GRANTED. The Decision of this Court promulgated on February 18, 2003 is
accordingly RECONSIDERED and SET ASIDE. Consequently, the April 13, 1998
Decision of the Office of the President is REVERSED and the areas under TCT No. T-
160988 and T-111948 are declared EXEMPTED from CARP coverage. ETCcSa
SO ORDERED. 40
This time the CA declared that A.O. No. 9, Series of 1993, requires that the
landholding be devoted to cattle-raising when R.A. No. 6657 took effect. It also pointed
out that Section III-B of the A.O. provides that in determining the areas qualified for
exclusion, the ratio shall be one head of livestock to one hectare of land, regardless of
age. Neither the law nor the A.O. requires that the livestock during inspection should
be those that already existed on the landholding on or before June 15, 1988.
Consequently, the appellate court declared that in order to determine the area for
exclusion, the counting of livestock should be, as stated in the administrative order,
"regardless of age" during actual inspection. The appellate court concluded that all
434 heads of cattle present in the subject property should have been considered in
determining the exempt area used for livestock raising. AEHCDa
On June 21, 2004, the DAR, represented by the Secretary of Agrarian Reform, filed a
motion for reconsideration 41 of the appellate court's amended decision. It reiterated
that the pronouncement by this Court that "the law only requires that for exemption of
CARP to apply, the subject landholding should be devoted to cattle-raising as of June
15, 1988" is not entirely correct, for the law requires that it be exclusively, directly and
actually used for livestock as of June 15, 1988. Under A.O. No. 9, Series of 1993, two
conditions must be established:
1) It must be shown that the subject landholding was EXCLUSIVELY, DIRECTLY
AND ACTUALLY used for livestock, poultry or swine on or before June 15, 1988; and
2) The farm must satisfy the ratios of land to livestock. 42
It must be shown that the entire landholding, and not just portions of it, should be
devoted to livestock raising. The words "regardless of age" in the order should be
interpreted to mean only those heads of cattle existing as of June 15, 1988.
Accordingly, the ratio of land to livestock should be based on those livestock found
existing in the landholding at the time R.A. No. 6657 took effect on June 15, 1988.
This is consistent with the intent of the law to prevent fraudulent declaration of areas
actually, directly and exclusively used for livestock as well as to protect the rights of
agrarian beneficiaries therein. ECaTAI
It was not proven that the entire landholding was exclusively used for livestock as of
June 15, 1988. In fact, the ocular inspection of the property conducted by the
Provincial Task Force on Exclusion reported that about 20 ha were planted with
coconuts. It also revealed that the topography is flat and undulated, and that 44
farmers-beneficiaries occupied portions of the said landholding. On these bases alone,
it is hard to imagine how the said landholding could have been "exclusively, directly
and actually used for livestock as of June 15, 1988."
Moreover, out of the 434 heads of cattle found in the subject landholding as of May
1995, only 134 heads of cattle and 28 horses and carabaos could have been present in
the subject landholding. This is based on the finding that only 134 heads of cattle
were 7 years and older, and, consequently, were the only ones that could have existed
as of June 15, 1988. Hence, they could not be made as basis for the computation of
the areas qualified for exclusion, for to do so would clearly violate the first condition
that the heads of cattle must be in existence as of June 15, 1988. 43
The appellate court was not persuaded and resolved to deny, for lack of merit, the
motion for the reconsideration of its amended decision. 44
The DAR, now the petitioner, filed the instant petition for review, alleging that the
appellate court erred as follows:
I
IT GAVE DUE COURSE AND GRANTED RESPONDENT'S [DR. UY] PETITION DESPITE
BEING FILED OUT OF TIME. 45
II
IT DECLARED THE ENTIRE 349.9996 HECTARE-PROPERTY OF RESPONDENT AS
EXEMPT FROM COVERAGE OF THE COMPREHENSIVE AGRARIAN REFORM
PROGRAM. 46
Thus, the pivotal issues to be resolved here are (1) whether or not the second motion
for reconsideration filed by respondent tolled the reglementary period to appeal; and
(2) whether or not the phrase "regardless of age" in Section III-B of DAR A.O. No. 9,
Series of 1993 should be reckoned from June 15, 1988, or from the date of inspection.
acTDCI
On the first issue, petitioner claims that, under the OP Rules of Procedure, specifically
the second paragraph of Section 7, A.O. No. 18, Series of 1987, only one motion for
reconsideration is allowed except in meritorious cases. Hence, the period to file the
petition for review had already expired 15 days after the denial of the first motion for
reconsideration. Petitioner insists that the filing of the second motion for
reconsideration is of no consequence since the OP had already concluded that the
case was "not exceptionally meritorious to justify additional motions for
reconsiderations."
On the second issue, petitioner contends that in the Luz Farms case, the entire
property therein was devoted to livestock and poultry prior to June 15, 1988; in the
present case, only a minimal portion of the property involved is so devoted. It further
insists that the report of the Task Force on Exclusion revealed that 20 ha are planted
with coconut trees while undetermined portions are occupied by 44 farmers-
beneficiaries. Thus, the 20 ha planted with coconuts were not intended for cattle
grazing, neither do they serve the purpose of shade and fodder for the bovines. The
presence of farmers-beneficiaries who tend to the trees indicates that respondent is
also engaged in the coconut industry, belying the fact that the entire 349.9996 ha is
exclusively devoted to livestock-raising. Petitioner further claims that Luz Farms was a
corporation engaged in the livestock and poultry business even before 1988. On the
other hand, respondent did not present any business permit or articles of
incorporation to prove that the entire 349.9996 ha is devoted to the livestock
business. HADTEC
Petitioner further avers that it had received reports that A.O. No. 9 was issued to
prescribe the rules for exclusion of the land used for livestock production. Petitioner
posits that the order is curative in nature and retroactive in application; and the
phrase "regardless of age" refers to heads of cattle in the year 1988 and not during
actual inspection. Petitioner argues that if the phrase were to be given any other
meaning, landowners could easily fill their land with livestock and apply for
exemption, defeating the purpose of agrarian reform. Thus, during actual inspection,
the headcount should be based on the existence of the animals in 1988 through
available records; if there be none, then the tallying must be done according to the age
of the animals alive at that time.
By way of Comment, 47 respondent maintains that Section 7 of A.O. No. 18, Series of
1987 does not totally rule out a second motion for reconsideration; the governing
principle in the resolution of the case is its merits. Citing a plethora of cases, he avers
that substantial justice should overrule rules of procedure. Respondent further points
out that even his predecessor-in-interest was engaged in the business of livestock
raising on the landholding. This livestock business was evident during the ocular
inspection of the Task Force on Exclusion. Contrary to petitioner's claim, he does have
a business permit, and the absence of the articles of incorporation is irrelevant
because no corporate personality is involved here. HTCESI
Respondent further asserts that the 20 ha planted with coconut trees is a minimal
part of the 349.9996 ha. The diminutive size of the area is in keeping with the purpose
of providing shade to the animals and the young leaves used as fodder when grasses
are scarce during dry weather. Respondent also asserts that the DAR interpretation of
the phrase "regardless of age" referring to the year 1988 is an "amendment under the
guise of interpretation." He emphasized that since the law does not distinguish,
petitioner should not distinguish. He argues that the DAR interpretation falls short of
acceptability even on practical considerations, because in the business of raising
livestock, the inventory is never fixed at any given time especially for long periods, i.e.,
seven years. It constantly changes either due to natural causes prevalent in the
business or the interplay of market forces or the peace and order condition within the
area.
The petition is partially granted. cITaCS
In Land Car, Inc. v. Bachelor Express Inc. and Vallacar Transit, Inc., 48 the Court
ruled that the doctrine of exhaustion of administrative remedies empowers the OP to
review any determination or disposition of a department head. In fact, the doctrine
requires an administrative decision to first be appealed to the administrative superiors
up to the highest level before it may be elevated to a court of justice for review. Thus, if
a remedy within the administrative machinery can still be had by giving the
administrative officer concerned every opportunity to decide on the matter that comes
within his jurisdiction, then such remedy should be priorly exhausted before the
court's judicial power is invoked. 49
Appeals to the OP are governed by A.O. No. 18, Series of 1987. Section 7 thereof,
provides the rule on filing a motion for reconsideration:
Sec. 7. Decisions/resolutions/orders of the Office of the President shall, except
as otherwise provided for by special laws, become final after the lapse of fifteen (15)
days from receipt of a copy thereof by the parties, unless a motion for reconsideration
thereof is filed within such period.
Only one motion for reconsideration by any one party shall be allowed and
entertained, save in exceptionally meritorious cases. cESDCa
It is clear then that only one motion for reconsideration is allowed to be filed from a
decision, resolution or order of the OP. However, the filing of a second motion for
reconsideration is not absolutely prohibited. A second motion for reconsideration is
allowed in exceptionally meritorious cases. 50
Furthermore, the explanation of the OP that the second motion for reconsideration
deserves scant merit because the "grounds therein are not substantially different from
the same ones discussed in the first motion for reconsideration" is untenable.
A rehash of arguments may not necessarily be pro forma per se. In Security Bank and
Trust Company, Inc. v. Cuenca, 51 the Court declared that a motion for
reconsideration is not pro forma just because it reiterated the arguments earlier
passed upon and rejected by the appellate court; a movant may raise the same
arguments precisely to convince the court that its ruling was erroneous. 52 The Court
also held that the pro forma rule will not be applicable if the arguments were not
sufficiently passed upon and answered in the decision sought to be reconsidered, and
elucidated the raison d'etre of the pro forma principle as follows:
. . . a pro forma motion had no other purpose than to gain time and to delay or impede
the proceedings. Hence, "where the circumstances of a case do not show an intent on
the part of the movant merely to delay the proceedings, our Court has refused to
characterize the motion as simply pro forma." . . .
We note finally that because the doctrine relating to pro forma motions for
reconsideration impacts upon the reality and substance of the statutory right of
appeal, that doctrine should be applied reasonably, rather than literally. The right to
appeal, where it exists, is an important and valuable right. Public policy would be
better served by according the appellate court an effective opportunity to review the
decision of the trial court on the merits, rather than by aborting the right to appeal by
a literal application of the procedural rules relating to pro forma motions for
reconsideration. aSCDcH
Respondent certainly did not intend to delay the proceedings here; in fact, it would
adversely affect his cause if he were to delay his appeal to the regular courts because
he would certainly lose vast tracts of land which are integral elements of his trade. In
this case, not only was a second motion for reconsideration allowed by the OP rules,
more importantly, the OP decision and the order denying the first motion for
reconsideration failed to provide its basis in law. The ends of justice would have been
served if the OP decision did more than copy the DAR order and turned toward the
important issues presented before it.
In any event, even if we considered the second motion for reconsideration as pro forma
or not "exceptionally meritorious," the argument of petitioner would still be untenable.
It is settled that rules of procedure are, as a matter of course, construed liberally in
proceedings before administrative bodies. Thus, technical rules of procedure imposed
in judicial proceedings are unavailing in cases before administrative bodies.
Administrative bodies are not bound by the technical niceties of law and procedure
and the rules obtaining in the courts of law. Rules of procedure are not to be applied
in a very rigid and technical manner, as they are used only to help secure and not to
override substantial justice. 53
It bears stressing that the threshold substantive issue is the validity and
implementation of DAR Administrative Order No. 9, Series of 1993 on the respondent's
landholding of more or less 472 ha in light of the ruling of this Court in Department of
Agrarian Reform v. Sutton, 54 where DAR Administrative Order No. 9, Series of 1993
was declared unconstitutional. cHATSI
The fundamental rule in administrative law is that, to be valid, administrative rules
and regulations must be issued by authority of law and must not contravene the
provisions of the Constitution. The rule-making power of an administrative agency
may not be used to abridge the authority given to it by Congress or by the
Constitution. Nor can it be used to enlarge the power of the administrative agency
beyond the scope intended. Constitutional and statutory provisions control with
respect to what rules and regulations may be promulgated by administrative agencies
and the scope of their regulations.
In the case at bar, we find that the impugned A.O. is invalid as it contravenes the
Constitution. The A.O. sought to regulate livestock farms by including them in the
coverage of agrarian reform and prescribing a maximum retention limit for their
ownership. However, the deliberations of the 1987 Constitutional Commission show a
clear intent to exclude, inter alia, all lands exclusively devoted to livestock, swine and
poultry-raising. The Court clarified in the Luz Farms case that livestock, swine and
poultry-raising are industrial activities and do not fall within the definition of
"agriculture" or "agricultural activity." The raising of livestock, swine and poultry is
different from crop or tree farming. It is an industrial, not an agricultural, activity. A
great portion of the investment in this enterprise is in the form of industrial fixed
assets, such as: animal housing structures and facilities, drainage, waterers and
blowers, feedmill with grinders, mixers, conveyors, exhausts and generators, extensive
warehousing facilities for feeds and other supplies, anti-pollution equipment like bio-
gas and digester plants augmented by lagoons and concrete ponds, deepwells, elevated
water tanks, pumphouses, sprayers, and other technological appurtenances. HIaTCc
Clearly, petitioner DAR has no power to regulate livestock farms which have been
exempted by the Constitution from the coverage of agrarian reform. It has exceeded its
power in issuing the assailed A.O.
The subsequent case of Natalia Realty, Inc. v. DAR reiterated our ruling in the Luz
Farms case. In Natalia Realty, the Court held that industrial, commercial and
residential lands are not covered by the CARL. We stressed anew that while Section 4
of R.A. No. 6657 provides that the CARL shall cover all public and private agricultural
lands, the term "agricultural land" does not include lands classified as mineral, forest,
residential, commercial or industrial. Thus, in Natalia Realty, even portions of the
Antipolo Hills Subdivision, which are arable yet still undeveloped, could not be
considered as agricultural lands subject to agrarian reform as these lots were already
classified as residential lands. aCIHAD
A similar logical deduction should be followed in the case at bar. Lands devoted to
raising of livestock, poultry and swine have been classified as industrial, not
agricultural, lands and thus exempt from agrarian reform. Petitioner DAR argues that,
in issuing the impugned A.O. it was seeking to address the reports it has received that
some unscrupulous landowners have been converting their agricultural lands to
livestock farms to avoid their coverage by the agrarian reform. Again, we find neither
merit nor logic in this contention. The undesirable scenario which petitioner seeks to
prevent with the issuance of the A.O. clearly does not apply in this case. Respondents'
family acquired their landholdings as early as 1948. They have long been in the
business of breeding cattle in Masbate which is popularly known as the cattle-
breeding capital of the Philippines. Petitioner DAR does not dispute this fact. Indeed,
there is no evidence on record that respondents have just recently engaged in or
converted to the business of breeding cattle after the enactment of the CARL that may
lead one to suspect that respondents intended to evade its coverage. It must be
stressed that what the CARL prohibits is the conversion of agricultural lands for non-
agricultural purposes after the effectivity of the CARL. There has been no change of
business interest in the case of respondents. ECDHIc
Moreover, it is a fundamental rule of statutory construction that the reenactment of a
statute by Congress without substantial change is an implied legislative approval and
adoption of the previous law. On the other hand, by making a new law, Congress
seeks to supersede an earlier one. In the case at bar, after the passage of the 1988
CARL, Congress enacted R.A. No. 7881 which amended certain provisions of the
CARL. Specifically, the new law changed the definition of the terms "agricultural
activity" and "commercial farming" by dropping from its coverage lands that are
devoted to commercial livestock, poultry and swine-raising. With this significant
modification, Congress clearly sought to align the provisions of our agrarian laws with
the intent of the 1987 Constitutional Commission to exclude livestock farms from the
coverage of agrarian reform.
In sum, it is doctrinal that rules of administrative bodies must be in harmony with the
provisions of the Constitution. They cannot amend or extend the Constitution. To be
valid, they must conform to and be consistent with the Constitution. In case of conflict
between an administrative order and the provisions of the Constitution, the latter
prevails. The assailed A.O. of petitioner DAR was properly stricken down as
unconstitutional as it enlarges the coverage of agrarian reform beyond the scope
intended by the 1987 Constitution. 55
The Report 56 of MARO Babalcon clearly declared that 346 ha are used for grazing of
the 429 heads of livestock; and indicated that the density required on commercial
farming as far as the number of livestock is concerned was satisfied. This was
confirmed in the DAR Order stating that the land has been devoted to livestock-raising
since its acquisition in 1979, and that the 20 ha planted with coconut trees are
simultaneously used as pasture land. These facts are borne by the records and
undisputed by the parties. The courts generally accord great respect, if not finality, to
factual findings of administrative agencies because of their special knowledge and
expertise over matters falling under their jurisdiction. 57
It is not uncommon for an enormous landholding to be intermittently planted with
trees, and this would not necessarily detract it from the purpose of livestock farming
and be immediately considered as an agricultural land. It would be surprising if there
were no trees on the land. Also, petitioner did not adduce any proof to show that the
coconut trees were planted by respondent and used for agricultural business or were
already existing when the land was purchased in 1979. In the present case, the area
planted with coconut trees bears an insignificant value to the area used for the cattle
and other livestock-raising, including the infrastructure needed for the business.
There can be no presumption, other than that the "coconut area" is indeed used for
shade and to augment the supply of fodder during the warm months; any other use
would be only be incidental to livestock farming. The substantial quantity of livestock
heads could only mean that respondent is engaged in farming for this purpose. The
single conclusion gathered here is that the land is entirely devoted to livestock farming
and exempted from the CARP. AaHTIE
This Court's ruling in the Luz Farms case and Natalia Realty, Inc. v. DAR 58 was
emphatic on the exemption from CARP of land devoted to residential, commercial and
industrial purposes without any other qualifications. Moreover, after the passage of
the 1988 CARL, Congress enacted R.A. No. 7881, amending certain provisions of the
CARL. Specifically, the new law changed the definition of the terms "agricultural
activity" and "commercial farming" by dropping from its coverage lands that are
devoted to commercial livestock, poultry and swine-raising. With this significant
modification, Congress clearly sought to align the provisions of our agrarian laws with
the intent of the 1987 Constitutional Commission to exclude livestock farms from the
coverage of agrarian reform. 59
Notably, however, a careful review of the records of the case reveal that the Notice of
Coverage, the Investigation Report by MARO Babalcon and Report of PARO Ubeda, the
DAR Order, and the OP Decision referred only to the 349.9996-ha landholding covered
by TCT No. 160988. There is no showing in the records that the landholding covered
by TCT No. 11948 had been included for CARP coverage; or that any investigation had
been conducted by the MARO or PARO on whether such landholding is exempt from
CARP coverage. The Court notes that respondent sought exemption of their property
covered by TCT No. 11948 only in their letter dated August 11, 1995 when they
appealed from the Report of the PARO. Absent any evidence showing that this land
was investigated by the DAR, there can be no basis as to whether the said landholding
is exempt from CARP coverage or not. TEAaDC
IN LIGHT OF THE FOREGOING, the instant petition is PARTIALLY GRANTED. The
Amended Decision of the Court of Appeals in CA-G.R. SP No. 70541 exempting the
parcel of land under TCT No. T-160988 with an area of 349.9996 hectares from
coverage of the Comprehensive Agrarian Reform Law is AFFIRMED. However, the
Amended Decision exempting the 22.2639-hectare landholding covered by TCT No.
11948 from the coverage of the CARP is REVERSED and SET ASIDE.
No pronouncement as to costs.
SO ORDERED.
Ynares-Santiago, Austria-Martinez and Chico-Nazario, JJ., concur.