1.

EN BANC

[G.R. No. L-9657. November 29, 1956.]

LEOPOLDO T. BACANI and MATEO A. MATOTO, Plaintiffs-Appellees, vs. NATIONAL COCONUT

CORPORATION, ET AL., Defendants, NATIONAL COCONUT CORPORATION and BOARD OF
LIQUIDATORS, Defendants-Appellants.

DECISION
198
BAUTISTA ANGELO, J.:

Plaintiffs herein are court stenographers assigned in Branch VI of the Court of First Instance of Manila. During
the pendency of Civil Case No. 2293 of said court, entitled Francisco Sycip vs. National Coconut Corporation,
Assistant Corporate Counsel Federico Alikpala, counsel for Defendant, requested said stenographers for
copies of the transcript of the stenographic notes taken by them during the hearing. Plaintiffs complied with the
request by delivering to Counsel Alikpala the needed transcript containing 714 pages and thereafter submitted
to him their bills for the payment of their fees. The National Coconut Corporation paid the amount of P564 to
Leopoldo T. Bacani and P150 to Mateo A. Matoto for said transcript at the rate of P1 per page.

Upon inspecting the books of this corporation, the Auditor General disallowed the payment of these fees and
sought the recovery of the amounts paid. On January 19, 1953, the Auditor General required the Plaintiffs to
reimburse said amounts on the strength of a circular of the Department of Justice wherein the opinion was
expressed that the National Coconut Corporation, being a government entity, was exempt from the payment of
the fees in question. On February 6, 1954, the Auditor General issued an order directing the Cashier of the
Department of Justice to deduct from the salary of Leopoldo T. Bacani the amount of P25 every payday and
from the salary of Mateo A. Matoto the amount of P10 every payday beginning March 30, 1954. To prevent
deduction of these fees from their salaries and secure a judicial ruling that the National Coconut Corporation is
not a government entity within the purview of section 16, Rule 130 of the Rules of Court, this action was
instituted in the Court of First Instance of Manila.

Defendants set up as a defense that the National Coconut Corporation is a government entity within the
purview of section 2 of the Revised Administrative Code of 1917 and, hence, it is exempt from paying the
stenographers’ fees under Rule 130 of the Rules of Court. After trial, the court found for the Plaintiffs declaring
(1) “that Defendant National Coconut Corporation is not a government entity within the purview of section 16,
Rule 130 of the Rules of Court; chan roblesvirtualawlibrary(2) that the payments already made by said
Defendant to Plaintiffs herein and received by the latter from the former in the total amount of P714, for copies
of the stenographic transcripts in question, are valid, just and legal; chan roblesvirtualawlibraryand (3) that
Plaintiffs are under no obligation whatsoever to make a refund of these payments already received by them.”
This is an appeal from said decision.

Under section 16, Rule 130 of the Rules of Court, the Government of the Philippines is exempt from paying the
legal fees provided for therein, and among these fees are those which stenographers may charge for the
transcript of notes taken by them that may be requested by any interested person (section 8). The fees in
question are for the transcript of notes taken during the hearing of a case in which the National Coconut
Corporation is interested, and the transcript was requested by its assistant corporate counsel for the use of
said corporation.

On the other hand, section 2 of the Revised Administrative Code defines the scope of the term “Government of
the Republic of the Philippines” as follows:

“‘The Government of the Philippine Islands’ is a term which refers to the corporate governmental entity through
which the functions of government are exercised throughout the Philippine Islands, including, save as the
contrary appears from the context, the various arms through which political authority is made effective in said
Islands, whether pertaining to the central Government or to the provincial or municipal branches or other form
of local government.”

The question now to be determined is whether the National Coconut Corporation may be considered as
included in the term “Government of the Republic of the Philippines” for the purposes of the exemption of the
legal fees provided for in Rule 130 of the Rules of Court.
As may be noted, the term “Government of the Republic of the Philippines” refers to a government entity
through which the functions of government are exercised, including the various arms through which political
authority is made effective in the Philippines, whether pertaining to the central government or to the provincial
or municipal branches or other form of local government. This requires a little digression on the nature and
functions of our government as instituted in our Constitution.

To begin with, we state that the term “Government” may be defined as “that institution or aggregate of
institutions by which an independent society makes and carries out those rules of action which are necessary
to enable men to live in a social state, or which are imposed upon the people forming that society by those who
198
possess the power or authority of prescribing them” (U.S. vs. Dorr, 2 Phil., 332). This institution, when referring
to the national government, has reference to what our Constitution has established composed of three great
departments, the legislative, executive, and the judicial, through which the powers and functions of government
are exercised. These functions are twofold: constitute and ministrant. The former are those which constitute
the very bonds of society and are compulsory in nature; the latter are those that are undertaken only by way of
advancing the general interests of society, and are merely optional. President Wilson enumerates the
constituent functions as follows:

“‘(1) The keeping of order and providing for the protection of persons and property from violence and robbery.

‘(2) The fixing of the legal relations between man and wife and between parents and children.

‘(3) The regulation of the holding, transmission, and interchange of property, and the determination of its
liabilities for debt or for crime.

‘(4) The determination of contract rights between individuals.

‘(5) The definition and punishment of crime.

‘(6) The administration of justice in civil cases.

‘(7) The determination of the political duties, privileges, and relations of citizens.

‘(8) Dealings of the state with foreign powers: the preservation of the state from external danger or
encroachment and the advancement of its international interests.’“ (Malcolm, The Government of the Philippine
Islands, p. 19.)

The most important of the ministrant functions are: public works, public education, public charity, health and
safety regulations, and regulations of trade and industry. The principles deter mining whether or not a
government shall exercise certain of these optional functions are: (1) that a government should do for the
public welfare those things which private capital would not naturally undertake and (2) that a government
should do these things which by its very nature it is better equipped to administer for the public welfare than is
any private individual or group of individuals. (Malcolm, The Government of the Philippine Islands, pp. 19-20.)

From the above we may infer that, strictly speaking, there are functions which our government is required to
exercise to promote its objectives as expressed in our Constitution and which are exercised by it as an
attribute of sovereignty, and those which it may exercise to promote merely the welfare, progress and
prosperity of the people. To this latter class belongs the organization of those corporations owned or controlled
by the government to promote certain aspects of the economic life of our people such as the National Coconut
Corporation. These are what we call government-owned or controlled corporations which may take on the form
of a private enterprise or one organized with powers and formal characteristics of a private corporations under
the Corporation Law.

The question that now arises is: Does the fact that these corporation perform certain functions of government
make them a part of the Government of the Philippines?

The answer is simple: they do not acquire that status for the simple reason that they do not come under the
classification of municipal or public corporation. Take for instance the National Coconut Corporation. While it
was organized with the purpose of “adjusting the coconut industry to a position independent of trade
preferences in the United States” and of providing “Facilities for the better curing of copra products and the
proper utilization of coconut by-products”, a function which our government has chosen to exercise to promote
the coconut industry, however, it was given a corporate power separate and distinct from our government, for it
was made subject to the provisions of our Corporation Law in so far as its corporate existence and the powers
that it may exercise are concerned (sections 2 and 4, Commonwealth Act No. 518). It may sue and be sued in
the same manner as any other private corporations, and in this sense it is an entity different from our
government. As this Court has aptly said, “The mere fact that the Government happens to be a majority
stockholder does not make it a public corporation” (National Coal Co. vs. Collector of Internal Revenue, 46
Phil., 586-587). “By becoming a stockholder in the National Coal Company, the Government divested itself of
its sovereign character so far as respects the transactions of the corporation. Unlike the Government, the
corporation may be sued without its consent, and is subject to taxation. Yet the National Coal Company
remains an agency or instrumentality of government.” (Government of the Philippine Islands vs. Springer, 50 198
Phil., 288.)

To recapitulate, we may mention that the term “Government of the Republic of the Philippines” used in section
2 of the Revised Administrative Code refers only to that government entity through which the functions of the
government are exercised as an attribute of sovereignty, and in this are included those arms through which
political authority is made effective whether they be provincial, municipal or other form of local government.
These are what we call municipal corporations. They do not include government entities which are given a
corporate personality separate and distinct from the government and which are governed by the Corporation
Law. Their powers, duties and liabilities have to be determined in the light of that law and of their corporate
charters. They do not therefore come within the exemption clause prescribed in section 16, Rule 130 of our
Rules of Court.

“Public corporations are those formed or organized for the government of a portion of the State.” (Section 3,
Republic Act No. 1459, Corporation Law).

“‘The generally accepted definition of a municipal corporation would only include organized cities and towns,
and like organizations, with political and legislative powers for the local, civil government and police regulations
of the inhabitants of the particular district included in the boundaries of the corporation.’ Heller vs. Stremmel,
52 Mo. 309, 312.”

“In its more general sense the phrase ‘municipal corporation’ may include both towns and counties, and other
public corporations created by government for political purposes. In its more common and limited signification,
it embraces only incorporated villages, towns and cities. Dunn vs. Court of County Revenues, 85 Ala. 144, 146,
4 So. 661.” (McQuillin, Municipal Corporations, 2nd ed., Vol. 1, p. 385.)

“We may, therefore, define a municipal corporation in its historical and strict sense to be the incorporation, by
the authority of the government, of the inhabitants of a particular place or district, and authorizing them in their
corporate capacity to exercise subordinate specified powers of legislation and regulation with respect to their
local and internal concerns. This power of local government is the distinctive purpose and the distinguishing
feature of a municipal corporation proper.” (Dillon, Municipal Corporations, 5th ed., Vol. I, p. 59.)

It is true that under section 8, Rule 130, stenographers may only charge as fees P0.30 for each page of
transcript of not less than 200 words before the appeal is taken and P0.15 for each page after the filing of the
appeal, but in this case the National Coconut Corporation has agreed and in fact has paid P1.00 per page for
the services rendered by the Plaintiffs and has not raised any objection to the amount paid until its propriety
was disputed by the Auditor General. The payment of the fees in question became therefore contractual and
as such is valid even if it goes beyond the limit prescribed in section 8, Rule 130 of the Rules of Court.

As regards the question of procedure raised by Appellants, suffice it to say that the same is insubstantial,
considering that this case refers not to a money claim disapproved by the Auditor General but to an action of
prohibition the purpose of which is to restrain the officials concerned from deducting from Plaintiffs’ salaries the
amount paid to them as stenographers’ fees. This case does not come under section 1, Rule 45 of the Rules of
Court relative to appeals from a decision of the Auditor General.

Wherefore, the decision appealed from is affirmed, without pronouncement as to costs.

2. G.R. No. L-11959           October 31, 1959

ARTURO B. PASCUAL, petitioner-appellant,
vs.
HON. PROVINCIAL BOARD OF NUEVA ECIJA, respondent-appellee.

Amado G. Salazar, Felicisimo S. Ocampo, Arturo S. Tomas, Feliciano Bautista and Severo Ongsiapco for appellant.
Mariano D. Capuyoc for appellee.

GUTIERREZ DAVID, J.:

We are asked in this appeal to revoke an order of the Court of First Instance of Nueva Ecija denying appellant's 198
petition for a writ of prohibition with preliminary injunction.

Petitioner-appellant Arturo B. Pascual had been elected mayor of San Jose, Nueva Ecija, in November 1951 and
reelected in 1955. In October 6, 1956, the Acting Provincial Governor of that province filed with the Provincial Board
three administrative charges against the said appellant. Charge III was for "Maladministrative, Abuse of Authority,
and Usurpation of Judicial Functions," committed as follows:

Specification I — That on or about the 18th and 20th day of December, 1954, in the municipality of San
Jose, Nueva Ecija, the above-named respondent, being municipal mayor of San Jose, Nueva Ecija, and
while the justice of the peace of the said municipality was present therein, did there and then willfully,
feloniously, criminally, without legal authority, and with grave abuse of authority, assumed and usurped the
judicial powers of the said justice of the peace by accepting the criminal complaint filed in Criminal Case No.
3556, of the said court, conducting the preliminary investigation thereof, fixing the bail bond of P6,000.00,
and issuing the corresponding warrant of arrest; and after the accused in the said criminal case had been
arrested, while the justice of the peace was in his office in San Jose, Nueva Ecija, the herein respondent, in
defiance of the express refusal by the justice of the peace to reduce the bail bond of the accused in Criminal
Case No. 1556, acted on the motion to reduce bail and did reduce the bail bond to P3,000.00.

After the presentation of evidence regarding the first two charges, petitioner-appellant filed with the respondent-
appellee, the Provincial Board, a motion to dismiss the third charge above referred to, on the main ground that the
wrongful acts therein alleged had been committed during his previous term of office and could not constitute a
ground for disciplining him during his second term. Upon opposition filed by a special counsel for the respondent-
appellee, the motion to dismiss was denied by resolution of the Board.

After the denial of the motion for reconsideration of that resolution, the appellant filed with this Court a petition for a
writ of prohibition with preliminary injunction (G. R. No. L-11730), to enjoin the Provincial Board of Nueva Ecija from
taking cognizance of the third charge, but the petition was denied by minute resolution of December 21, 1956
"without prejudice to action, if any, in the Court of First Instance." Accordingly, the petitioner-appellant filed with the
Court of First Instance of Nueva Ecija a petition for prohibition with preliminary injunction seeking to inhibit the said
Provincial Board from proceeding with the hearing of Charge No. III, for lack of jurisdiction.

Instead of filing an answer, the respondent-appellee moved for the dismissal of the case on the ground that it states
no cause of action because the petitioner-appellant had not complied with the cardinal principle of exhaustion of
administrative remedies before he could appeal to the courts, and because the Provincial Board had jurisdiction
over Charge No. III. After responsive pleadings had been filed by both parties, the court below issued an order
dismissing the petition "for being premature," for the reason that the petitioner had not first appealed to the
Executive Secretary. From that order, the case was brought before us on appeal. Upon urgent petition, a writ of
preliminary injunction was issued restraining the respondent-appellee from investigating petitioner-appellant on the
charge above-mentioned.

In his brief, petitioner-appellant claims that the court below erred: (1) in not holding that the alleged usurpation of
judicial functions in December 1954 is not a legal ground for disciplining the appellant during his second term of
office after a reelection, and in not holding that the respondent patently has no authority or jurisdiction to take
cognizance of Charge No. 3; (2) in holding that the petition for prohibition is premature and that the appellant must
first exhaust all administrative remedies available to him under the Revised Administrative Code; and (3) in
dismissing the petition for prohibition.

The first question posed is whether or not it was legally proper for petitioner-appellant to have come to court without
first bringing his case to the Executive Secretary for review. True it is that, in this jurisdiction, the settled rule is that
where the law has delineated the procedure by which administrative appeal or remedy could be effected, the same
should be followed before recourse to judicial action can be initiated (Ang Tuan Kai  vs. Import Control Commission,
91 Phil., 143; Coloso vs. Board, 92 Phil., 938; Miguel vs. Reyes, 93 Phil., 542, and several other cases), but we
believe that this rule is not without exceptions, as in a case like the present, where the only question to be settled in
the prohibition proceedings is a purely legal one — whether or not a municipal mayor may be subjected to an
administrative investigation of a charge based on misconduct allegedly committed by him during his prior term.
 The rule is inapplicable where administrative remedy is provided. Likewise, the rule will be relaxed where
there is grave doubt as to availability of the administrative remedy; where the question in dispute is purely a
legal one, and nothing of an administrative nature is to be or can be done ; where although there are steps to
be taken, they are, under the admitted facts, merely matters of from, and the administrative process, as a
process of judgment, is really over; or where the administrative remedy is not exclusive but merely
cumulative or concurrent to a judicial remedy. A litigant need not proceed with optional administrative
process before seeking juducial relief. (73 C. J. S. p. 354) (Emphasis supplied) .

On the above authority, we are inclined to agree with the petitioner-appellant that his bringing the case to court is
not a violation of, but merely an exception to, the cardinal rule above referred to.
198

In a case (Mondano vs. Silvosa * 51 Off Gaz., [6], p. 2884), this court granted a writ of prohibition against the
provincial board of Capiz, notwithstanding the fact that the petitioner therein did into appeal to the Executive
Secretary, the only question therein involved being whether or not the charged filed against the municipal mayor of
Calibo, Capiz, constituted any one of the grounds for suspension or removal provided for in sec. 2188 of the
Revised Administrative Code.

We now come to the main issue of the controversy — the legality of disciplining an elective municipal official for a
wrongful act committed by him during his immediately preceding term of office.

In the absence of any precedent in this jurisdiction, we have resorted to American authorities. We found that cases
on the matter are conflicting due in part, probably, to differences in statutes and constitutional provisions, and also,
in part, to a divergence of views with respect to the question of whether the subsequent election or appointment
condones the prior misconduct. The weight of authorities, however, seems to incline to the rule denying the right to
remove one from office because of misconduct during a prior term, to which we fully subscribe.

Offenses committed, or acts done, during previous term are generally held not to furnish cause for removal
and this is especially true where the constitution provides that the penalty in proceedings for removal shall
not extend beyond the removal from office, and disqualification from holding office for the term for which the
officer was elected or appointed. (67 C.J.S. p. 248, citing Rice vs. State, 161 S.W. 2d. 401;
Montgomery vs. Nowell, 40 S.W. 2d. 418; People ex rel. Bagshaw vs. Thompson, 130 P. 2d. 237; Board of
Com'rs of Kingfisher County vs. Shutler, 281 P. 222; State vs. Blake, 280 P. 388; In re Fudula, 147 A. 67;
State vs. Ward, 43 S.W. 2d. 217).

The underlying theory is that each term is separate from other terms, and that the reelection to office operates as a
condonation of the officer's previous misconduct to the extent of cutting off the right to remove him therefor. (43 Am.
Jur. p. 45, citing Atty. Gen. vs. Hasty, 184 Ala. 121, 63 So. 559, 50 L.R.A. (NS) 553. As held in Conant vs. Brogan
(1887) 6 N.Y.S.R. 332, cited in 17 A.I.R. 281, 63 So. 559, 50 LRA (NS) 553 —

The Court should never remove a public officer for acts done prior to his present term of office. To do
otherwise would be to deprive the people of their right to elect their officers. When the people have elected a
man to office, it must be assumed that they did this with knowledge of his life and character, and that they
disregarded or forgave his faults or misconduct, if he had been guilty of any. It is not for the court, by reason
of such faults or misconduct to practically overrule the will of the people.

In view of the foregoing, the order appealed from is hereby revoked; the writ of prohibition prayed for is hereby
granted and the preliminary injunction heretofore issued made permanent. Without special pronouncement as to
costs.

3. EN BANC

G.R. No. L-16537 June 29, 1962

FRANCISCO C. CALO, Petitioner-Appellant, vs. DELFIN C. FUERTES, DIRECTOR OF LANDS and

SECRETARY OF AGRICULTURE AND NATURAL RESOURCES, respondents-appellees.

Calo, Calo and Calo for petitioner-appellant.

Ismael B. Sanchez and Jalandoni and Jamir for respondent-appellee Delfin C. Fuertes.

Office of the Solicitor General for respondent-appellee Director of Lands and Secretary of Agriculture and
Natural Resources.

PADILLA, J
In Bureau of Lands Claim No. 224 (N), Lot No. 143-A, Cadastral Case No. 84, Butuan City entitled Francis C.
Calo, claimant-contestant, vs. H.A. No. 86871 (E-40476) Delfin C. Fuertes, applicant-respondent, the Director
of Lands rendered on 12 April 1956 an opinion denying a dismissing former's claim and contest against the
Homestead Application No. 86871 (E-40476) of Delfin C. Fuertes, was ordering him to vacate the premises
within sixty days from receipt of a copy of the opinion, and stating that upon finality thereof homestead patent
would be issued to Delfin C. Fuertes. His request for reconsideration having been denied by the Director of
Lands on 25 January 1957, Francisco C. Calo brought to the Secretary of Agriculture and Natural Resources
198
the case, docketed as DANR case No. 1549. On 28 February 1958 the Secretary of Agriculture and Natural
Resources modified the opinion of the Director of Lands -

. . . in the sense that Delfin C. Fuertes should reimburse Francisco C. Calo of the difference between the value
of the improvements the latter introduced on the land in controversy and the value of the consequential
benefits derived by him therefrom within thirty (30) days from advice by the Director of Lands who is hereby
directed to determine the aforementioned difference within sixty (60) days from receipt of a copy of this
decision.

Still dissatisfied with the above opinion, Francisco C. Calo asked the Secretary of Agriculture and Natural
Resources to reconsider it but the latter denied a reconsideration thereof. Hence, on 1 August 1958 Francisco
C. Calo appealed to the President of the Philippines (Annex A Answer, p. 54, rec. of case No. 55), but on 8
August 1958 he withdrew it before the President of the Philippines could act thereon (Annex A to memorandum
of the petitioner, p. 64, rec. of case No. 55).

On 22 August 1958 Francisco C. Calo filed in the Court of First Instance of Agusan a petition for writs of
certiorari and prohibition with preliminary injunction praying that the enforcement of the opinions of the Director
of Lands and the Secretary of Agriculture and Natural Resources be enjoined; that if a bond be needed for the
purpose he was willing to file it; that after hearing the injunction be made final and permanent; that the
respondent Delfin C. Fuertes pay him P18,000 as damages and attorney's fees and costs of the suit; that he
be declared the owner entitled to possess the parcel of land subject of the litigation; and for any other just and
equitable relief (special civil case No. 55).

On 24 December 1958 the respondent Delfin C. Fuertes filed an answer and, on 27 December 1958, an
amended answer to the petition; on 29 December 1958 and 3 January 1959 the respondent Secretary of
Agriculture and Natural Resources and the Director of Lands, respectively, filed their answers. After a
preliminary hearing as provided for in section 5, Rule 8, of the Rules of Court, on 31 July 1959 the court
rendered judgment, the dispositive part of which is -

WHEREFORE, for failure to state a cause of action, for lack of jurisdiction and for not exhausting all the
administrative remedies available to the petitioner in the ordinary course of law, the Court resolves to dismiss
as it hereby dismisses the herein petition with costs against petitioner.

The petitioner appealed, but as only a question of law is raised, the Court of Appeals certified the appeal to this
Court.

This appeal has not been perfected within the reglementary period, as provided for in section 17, Rule 41, for
although the notice of appeal was filed on 31 August 1959 (p. 77, record of case No. 55) or on the 13th day
from the receipt of case No. 55) the appeal bond was filed on 18 September 1959 (p. 78, record of case No.
55) or on the 31st day after notice of judgment. This is enough to dispose of the
case.chanroblesvirtualawlibrarychanrobles virtual law library

At any rate, the appellant's contention that, as the Secretary of Agriculture and Natural Resources is the alter
ego of the President and his acts or decisions are also those of the latter, he need not appeal from the decision
or opinion of the former to the latter, and that, such being the case, after he had appealed to the Secretary of
Agriculture and Natural Resources from the decision or opinion of the Director of Lands he had exhausted all
the administrative remedies, is untenable.

The withdrawal of the appeal taken to the President of the Philippines is tantamount to not appealing at all
thereto. Such withdrawal is fatal, because the appeal to the President is the last step he should take in an
administrative case.
Furthermore, a special civil action for certiorari and prohibition under Rule 67 of the Rules of Court lies only
when "there is no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law." In the
case at bar, appeal from an opinion or order by the Secretary of Agriculture and Natural Resources to the
President of the Philippines is the plain, speedy and adequate remedy available to the petitioner.

The judgment appealed from already had become final and cannot be reviewed. The appeal is dismissed, with
costs against the petitioner-appellant.

198

4. G.R. No. L-33022 April 22, 1975

CENTRAL BANK OF THE PHILIPPINES, petitioner,

vs.
COURT OF APPEALS and ABLAZA CONSTRUCTION & FINANCE CORPORATION, respondents.

F.E. Evangelista for petitioner.

Cruz, Villarin & Laureta for private respondent.

BARREDO, J.: ñé+.£ªwph!1

Petition of the Central Bank of the Philippines for review of the decision of the Court of Appeals in CA-G.R. No.
43638-R affirming the judgment of the Court of First Instance of Rizal in Civil Case No. Q-10919 sentenced
petitioner to pay respondent Ablaza Construction and Finance Corporation damages for breach contract in that after
having formally and officially awarded, pursuant to the results of the usual bidding to Ablaza in December 1965 the
"contract" for the construction of its San Fernando, La Union branch building and allowed said contractor to
commence the work up to about May, 1966, albeit without any written formal contract having been executed, the
Bank failed and refused to proceed with the project, unless the plans were revised and a lower price were agreed to
by Ablaza, the Bank claiming that its action was pursuant to the policy of fiscal restraint announced by the then new
President of the Philippines on December 30, 1965 and the Memorandum Circular No. 1 dated December 31, 1965
of the same President.

The factual background of this case is related in the following portions of the decision of the trial court, which the
Court of Appeals affirmed without modification:  têñ.£îhqwâ£

Sometime in 1965, defendant Central Bank of the Philippines issued Invitations to Bid and
Instructions to Bidders for the purpose of receiving sealed proposals for the general construction of
its various proposed regional offices, including the Central Bank regional office building in San
Fernando, La Union.

In response to the aforesaid Invitations to Bid, the plaintiff Ablaza Construction and Finance
Corporation, which was one of the qualified bidders, submitted a bid proposal for the general
construction of defendant's proposed regional office building in San Fernando, La Union at the public
bidding held on November 3, 1965. The said proposal was, as required by the defendant
accompanied by a cash bidder's bond in the sum of P275,000.00.

On December 7, 1965, the Monetary Board of the defendant Central Bank of the Philippines, after
evaluating all the bid proposals submitted during the above-mentioned bidding, unanimously voted
and approved the award to the plaintiff of the contract for the general construction of defendant's
proposed regional office building in San Fernando, La Union, for the sum of P3,749,000.00 under
plaintiff's Proposal Item No. 2.

Pursuant thereto, on December 10, 1965, Mr. Rizalino L. Mendoza, Assistant to the Governor and
concurrently the Chairman of the Management Building Committee of the defendant Central Bank of
the Philippines, set a telegram to the plaintiff, informing the latter that the contract for the general
construction of defendant's proposed regional office building in San Fernando, La Union, had been
awarded to the plaintiff. The said telegram was followed by a formal letter, also dated December 10,
1965, duly signed by said Mr. Rizalino L. Mendoza, confirming the approval of the award of the
above-stated contract under plaintiff's Proposal Item No. 2 in the amount of P3,749,000.00.

Upon receipt of the aforementioned letter, plaintiff immediately accepted the said award by means of
a letter dated December 15, 1965, whereby plaintiff also requested permission for its workmen to
enter the site of the project, build a temporary shelter and enclosure, and do some clearing job
thereat. Accordingly, said permission was granted by the defendant as embodied in its letter dated
January 4, 1966, addressed to the plaintiff..

Within five (5) days from receipt by the plaintiff of the said notice of award, and several times
thereafter Mr. Nicomedes C. Ablaza, an officer of the plaintiff corporation, went personally to see Mr.
Rizalino L. Mendoza at the latter's Central Bank office to follow up the signing of the corresponding
contract. A performance bond in the total amount of P962,250.00 (P275,000.00 of which was in cash
and P687,250.00 in the form of a surety bond) was subsequently posted by the plaintiff in
compliance with the above-stated Instructions to Bidders, which bond was duly accepted by the
defendant.
198

Pursuant to the permission granted by the defendant, as aforesaid, plaintiff commenced actual
construction work on the project about the middle of January, 1966. On February 8, 1966, by means
of a formal letter, defendant requested the plaintiff to submit a schedule of deliveries of materials
which, according to plaintiff's accepted proposal, shall be furnished by the defendant. In compliance
therewith, on February 16, 1966, plaintiff submitted to the defendant the schedule of deliveries
requested for.

During the period when the actual construction work on the project was in progress, Mr. Nicomedes
G. Ablaza had several meetings with Mr. Rizalino L. Mendoza at the latter's office in the Central
Bank. During those meetings, they discussed the progress of the construction work being then
undertaken by the plaintiff of the projects of the defendant in San Fernando, La Union, including the
progress of the excavation work.

Sometime during the early part of March, 1966, Mr. Rizalino L. Mendoza was at the construction site
of the said project. While he was there, he admitted having seen pile of soil in the premises. At that
time, the excavation work being undertaken by the plaintiff was about 20% complete. On March 22,
1966, defendant again wrote the plaintiff, requesting the latter to submit the name of its
representative authorized to sign the building contract with the defendant. In compliance with the
said request, plaintiff submitted to the defendant the name of its duly authorized representative by
means of a letter dated March 24, 1966.

A meeting called by the defendant was held at the conference room of the Central Bank on May 20,
1966. At the said meeting, the defendant, thru Finance Secretary Eduardo Romualdez, announced,
among other things, the reduction of the appropriations for the construction of the defendant's
various proposed regional offices, including that of the proposed San Fernando, La Union regional
office building, the construction of which had already been started by the plaintiff. He also stated that
the Central Bank Associated Architects would be asked to prepare new plans and designs based on
such reduced appropriations. The defendant, during that same meeting, also advised the plaintiff,
thru Messrs. Nicomedes G. Ablaza and Alfredo G. Ablaza (who represented the plaintiff corporation
at the said meeting), to stop its construction work on the Central Bank Regional office building in San
Fernando, La Union. This was immediately complied with by the plaintiff, although its various
construction equipment remained in the jobsite. The defendant likewise presented certain offer and
proposals to the plaintiff, among which were: (a) the immediate return of plaintiff's cash bidder's
bond of P275,000.00; (b) the payment of interest on said bidder's bond at 12% per annum; (c) the
reimbursement to the plaintiff of the value of all the work accomplished at the site; (d) the entering
into a negotiated contract with the plaintiff on the basis of the reduced appropriation for the project in
question; and (e) the reimbursement of the premium on plaintiff's performance bond. Not one of
these offers and proposals of the defendant, however, was accepted by the plaintiff during that
meeting of May 20, 1966.

On June 3, 1966, plaintiff, thru counsel, wrote the defendant, demanding for the formal execution of
the corresponding contract, without prejudice to its claim for damages. The defendant, thru its
Deputy Governor, Mr. Amado R. Brinas, on June 15, 1966, replied to the said letter of the plaintiff,
whereby the defendant claimed that an agreement was reached between the plaintiff and the
defendant during the meeting held on May 20, 1966. On the following day, however, in its letter
dated June 16, 1966, the plaintiff, thru counsel, vehemently denied that said parties concluded any
agreement during the meeting in question.

On July 5, 1966, defendant again offered to return plaintiff's cash bidder's bond in the amount of
P275,000.00. The plaintiff, thru counsel, on July 6, 1966, agreed to accept the return of the said
cash bond, without prejudice, however, to its claims as contained in its letters to the defendant dated
June 3, June 10, and June 16, 1966, and with further reservation regarding payment of the
corresponding interest thereon. On July 7, 1966, the said sum of P275,000.00 was returned by the
defendant to the plaintiff.
 On January 30, 1967, in accordance with the letter of the plaintiff, thru counsel, dated January 26,
1967, the construction equipment of the plaintiff were pulled out from the construction site, for which
the plaintiff incurred hauling expenses.

The negotiations of the parties for the settlement of plaintiff's claims out of court proved to be futile;
hence, the present action was instituted by plaintiff against the defendant." (Pp. 249-256, Rec. on
Appeal).

It may be added that the Instructions to Bidders on the basis of which the bid and award in question were submitted
and made contained, among others, the following provisions:  têñ.£îhqwâ£

198

IB 113.4 The acceptance of the Proposal shall be communicated in writing by the Owner and no
other act of the Owner shall constitute the acceptance of the Proposal. The acceptance of a
Proposal shall bind the successful bidder to execute the Contract and to be responsible for
liquidated damages as herein provided. The rights and obligations provided for in the Contract shall
become effective and binding upon the parties only with its formal execution.

xxx xxx xxx

IB 114.1 The bidder whose proposal is accepted will be required to appear at the Office of the
Owner in person, or, if a firm or corporation, a duly authorized representative shall so appear, and to
execute that contract within five (5) days after notice that the contract has been awarded to him.
Failure or neglect to do so shall constitute a breach of agreement effected by the acceptance of the
Proposal.

xxx xxx xxx

IB 118.1 The Contractor shall commence the work within ten (10) calendar days from the date he
receives a copy of the fully executed Contract, and he shall complete the work within the time
specified." (Pp. 18-19 & 58-59, Petitioner-Appellant's Brief.)

In the light of these facts, petitioner has made the following assignment of errors: têñ.£îhqwâ£

I. THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS A PERFECTED

CONTRACT BETWEEN PETITIONER CENTRAL BANK OF THE PHILIPPINES AND
RESPONDENT ABLAZA CONSTRUCTION & FINANCE CORPORATION FOR THE GENERAL
CONSTRUCTION WORK OF PETITIONER'S REGIONAL OFFICE BUILDING AT SAN
FERNANDO, LA UNION.

II. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAS COMMITTED A
BREACH OF CONTRACT.

III. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAD GIVEN ITS
APPROVAL TO THE WORK DONE BY RESPONDENT ABLAZA CONSTRUCTION & FINANCE
CORPORATION.

IV. THE COURT OF APPEALS ERRED IN HOLDING THAT THE AWARD OF ACTUAL AND
COMPENSATORY DAMAGES, ATTORNEY'S FEES AND RETAINING FEE IS FAIR AND
REASONABLE, AND IN HOLDING THAT PETITIONER IS LIABLE FOR COSTS." (Pp. A & B,
Petitioner-Appellant's Brief.)

Under the first assigned error, petitioner denotes the major part of its effort to the discussion of its proposition that
there could be no perfected contract in this case, (contrary to the conclusion of the courts below) because there is
no showing of compliance, and in fact, there has been no compliance with the requirement that there must be a
certification of the availability of funds by the Auditor General pursuant to Section 607 of the Revised Administrative
Code which provides thus:  têñ.£îhqwâ£

Section 607. Certificate showing appropriation to meet contract. — Except in the case of a contract
for personal service or for supplies to be carried in stock, no contract involving an expenditure by the
National Government of three thousand pesos or more shall be entered into or authorized until the
Auditor General shall have certified to the officer entering into such obligation that funds have been
duly appropriated for such purpose and that the amount necessary to cover the proposed contract is
available for expenditure on account thereof. When application is made to the Auditor General for
the certificate herein required, a copy of the proposed contract or agreement shall be submitted to
him accompanied by a statement in writing from the officer making the application showing all
obligations not yet presented for audit which have been incurred against the appropriation to which
 the contract in question would be chargeable; and such certificate, when signed by the Auditor, shall
be attached to and become a part of the proposed contract, and the sum so certified shall not
thereafter be available for expenditure for any other purposes until the Government is discharged
from the contract in question.

Except in the case of a contract for supplies to be carried in stock, no contract involving the
expenditure by any province, municipality, chartered city, or municipal district of two thousand pesos
or more shall be entered into or authorized until the treasurer of the political division concerned shall
have certified to the officer entering into such contract that funds have been duly appropriated for
such purpose and that the amount necessary to cover the proposed contract is available for
198
expenditure on account thereof. Such certificate, when signed by the said treasurer, shall be
attached to and become part of the proposed contract and the sum so certified shall not thereafter
be available for expenditure for any other purpose until the contract in question is lawfully abrogated
or discharged.

For the purpose of making the certificate hereinabove required ninety per centum of the estimated
revenues and receipts which should accrue during the current fiscal year but which are yet
uncollected, shall be deemed to be in the treasury of the particular branch of the Government
against which the obligation in question would create a charge." (Pp. 23-25, Petitioner-Appellant's
Brief.)

It is contended that in view of such omission and considering the provisions of Section 608 of the same code to the
effect that "a purported contract entered into contrary to the requirements of the next preceding section hereof shall
be wholly void", "no contract between the petitioner and respondent Ablaza Construction and Finance Corporation
for the general construction of the proposed regional office building of the Central Bank in San Fernando, La Union,
was ever perfected because only the first stage, that is the award of the contract to the lowest responsible bidder,
respondent Ablaza Construction and Finance Corporation, was completed." (p. 29, Petitioner-Appellant's Brief.) And
in support of this pose, petitioner relies heavily on Tan C. Tee & Co. vs. Wright thus:  têñ.£îhqwâ£

The aforesaid requirements of the Revised Administrative Code for the perfection of government
contracts have been upheld by this Honorable Court in the case of Tan C. Tee Co. vs. Wright, 53
Phil. 172, in which case it was held that the award of the contract to the lowest bidder does not
amount to entering into the contract because of the requirement of Section 607 of the Revised
Administrative Code that a copy of the proposed contract shall be submitted to the Auditor General
together with a request for the availability of funds to cover the proposed contract. Thus, this
Honorable Court held:  têñ.£îhqwâ£

'To award the contract to the lowest responsible bidder is not the equivalent of
entering into the contract. Section 607 of the Administrative Code requires that a
copy of the proposed contract shall be submitted along with the request for the
certificate of availability of funds, but there could be no proposed contract to be
submitted until after the award was made.'

And to guide government authorities in the letting of government contracts, this Honorable Court, in
said case of Tan C. Tee vs. Wright, supra, laid down the procedure which should be followed, as
follows: 
têñ.£îhqwâ£

`PROCEDURE WHICH SHOULD BE FOLLOWED IN THE LETTING OF

CONTRACTS FOR INSULAR WORKS. — The procedure which should be followed
in the letting of contracts for Insular works is the following: First, there is an award of
the contract by the Director of Public Works to the lowest responsible bidder.
Second, there is a certificate of availability of funds to be obtained from the Insular
Auditor, and in some cases from the Insular Treasurer, to cover the proposed
contract. And third, there is a contract to be executed on behalf of the Government
by the Director of Public Works with the approval of the department head.'" (Pp. 27-
28, Petitioner-Appellant's Brief.)

The contention is without merit. To start with, the record reveals that it is more of an afterthought. Respondent never
raised this question whether in its pleadings or at the hearings in the trial court. We have also read its brief in the
appellate court and no mention is made therein of this point. Not even in its memorandum submitted to that court in
lieu of oral argument is there any discussion thereof, even as it appears that emphasis was given therein to various
portions of the Revised Manual of Instructions to Treasurers regarding the perfection and constitution of public
contracts. In fact, reference was made therein to Administrative Order No. 290 of the President of the Philippines,
dated February 5, 1959, requiring "all contracts of whatever nature involving P10,000 or more to be entered into by
all bureaus and offices, ... including the ... Central Bank ... shall be submitted to the Auditor General for examination
and review before the same are perfected and/or consummated, etc.", without mentioning, however, that said
administrative order was no longer in force, the same having been revoked on January 17, 1964 by President
Macapagal under Administrative Order No. 81, s. 1964.

Hence, if only for the reason that it is a familiar rule in procedure that defenses not pleaded in the answer may not
be raised for the first time on appeal, petitioner's position cannot be sustained. Indeed, in the Court of Appeals,
petitioner could only bring up such questions as are related to the issues made by the parties in their pleadings,
particularly where factual matters may be involved, because to permit a party to change his theory on appeal "would
be unfair to the adverse party." (II, Moran, Rules of Court, p. 505, 1970 ed.) Furthermore, under Section 7 of Rule
51, the appellate court cannot consider any error of the lower court "unless stated in the assignment of errors and
properly argued in the brief."
198

Even prescinding from this consideration of belatedness, however, it is Our considered view that contracts entered
into by petitioner Central Bank are not within the contemplation of Sections 607 and 608 cited by it. Immediately to
be noted, Section 607 specifically refers to "expenditure(s) of the National Government" and that the term "National
Government" may not be deemed to include the Central Bank. Under the Administrative Code itself, the term
"National Government" refers only to the central government, consisting of the legislative, executive and judicial
departments of the government, as distinguished from local governments and other governmental entities and is not
synonymous, therefore, with the terms "The Government of the Republic of the Philippines" or "Philippine
Government", which are the expressions broad enough to include not only the central government but also the
provincial and municipal governments, chartered cities and other government-controlled corporations or agencies,
like the Central Bank. (I, Martin, Administrative Code, p. 15.)

To be sure the Central Bank is a government instrumentality. But it was created as an autonomous body corporate
to be governed by the provisions of its charter, Republic Act 265, "to administer the monetary and banking system of
the Republic." (Sec. 1) As such, it is authorized "to adopt, alter and use a corporate seal which shall be judicially
noticed; to make contracts; to lease or own real and personal property, and to sell or otherwise dispose of the same;
to sue and be sued; and otherwise to do and perform any and all things that may be necessary or proper to carry
out the purposes of this Act. The Central Bank may acquire and hold such assets and incur such liabilities as result
directly from operations authorized by the provisions of this Act, or as are essential to the proper conduct of such
operations." (Sec. 4) It has capital of its own and operates under a budget prepared by its own Monetary Board and
otherwise appropriates money for its operations and other expenditures independently of the national budget. It
does not depend on the National Government for the financing of its operations; it is the National Government that
occasionally resorts to it for needed budgetary accommodations. Under Section 14 of the Bank's charter, the
Monetary Board may authorize such expenditures by the Central Bank as are in the interest of the effective
administration and operation of the Bank." Its prerogative to incur such liabilities and expenditures is not subject to
any prerequisite found in any statute or regulation not expressly applicable to it. Relevantly to the issues in this
case, it is not subject, like the Social Security Commission, to Section 1901 and related provisions of the Revised
Administrative Code which require national government constructions to be done by or under the supervision of the
Bureau of Public Works. (Op. of the Sec. of Justice No. 92, Series of 1960) For these reasons, the provisions of the
Revised Administrative Code invoked by the Bank do not apply to it. To Our knowledge, in no other instance has the
Bank ever considered itself subject thereto.

In Zobel vs. City of Manila, 47 Phil. 169, this Court adopted a restrictive construction of Section 607 of the
Administrative Code thus:

The second question to be considered has reference to the applicability of section 607 of the Administrative Code to
contracts made by the City of Manila. In the second paragraph of said section it is declared that no contract
involving the expenditure by any province, municipality, township, or settlement of two thousand pesos or more shall
be entered into or authorized until the treasurer of the political division concerned shall have certified to the officer
entering into such contract that funds have been duly appropriated for such purpose and that the amount necessary
to cover the proposed contract is available for expenditure on account thereof. It is admitted that no such certificate
was made by the treasurer of Manila at the time the contract now in question was made. We are of the opinion that
the provision cited has no application to contracts of a chartered city, such as the City of Manila. Upon examining
said provision (sec. 607) it will be found that the term chartered city, or other similar expression, such as would
include the City of Manila, is not used; and it is quite manifest from the careful use of terms in said section that
chartered cities were intended to be excluded. In this connection the definitions of "province," "municipality," and
"chartered city," given in section 2 of the Administrative Code are instructive. The circumstance that for certain
purposes the City of Manila has the status both of a province and a municipality (as is true in the distribution of
revenue) is not inconsistent with this conclusion."1

We perceive no valid reason why the Court should not follow the same view now in respect to the first paragraph of
the section by confirming its application only to the offices comprised within the term National Government as above
defined, particularly insofar as government-owned or created corporations or entities having powers to make
expenditures and to incur liabilities by virtue of their own corporate authority independently of the national or local
legislative bodies, as in the case of the petitioner herein, are concerned. Whenever necessary, the Monetary Board,
like any other corporate board, makes all required appropriations directly from the funds of the Bank and does not
need any official statement of availability from its treasurer or auditor and without submitting any papers to, much
less securing the approval of the Auditor General or any outside authority before doing so. Indeed, this is readily to
be inferred from the repeal already mentioned earlier of Administrative Order No. 290, s. 1959, which petitioner tried
to invoke, overlooking perhaps such repeal. In other words, by that repeal, the requirement that the Central Bank
should submit to the Auditor General for examination and review before contracts involving P10,000 or more to be
entered into by it "before the same are perfected and/or consummated" had already been eliminated at the time the
transaction herein involved took place. Consequently, the point of invalidity pressed, belatedly at that, by petitioner
has no leg to stand on.

The other main contention of petitioner is that the purported or alleged contract being relied upon by respondent
never reached the stage of perfection which would make it binding upon the parties and entitle either of them to sue
198
for specific performance in case of breach thereof. In this connection, since the transaction herein involved arose
from the award of a construction contract  by a government corporation and the attempt on its part to discontinue
2

with the construction several months after such award had been accepted by the contractor and after the latter had
already commenced the work without any objection on the part of the corporation, so much so that entry into the site
for the purpose was upon express permission from it, but before any written contract has been executed, it is
preferable that certain pertinent points be clarified for the proper resolution of the issue between the parties here
and the general guidance of all who might be similarly situated.

Petitioner buttresses its position in regard to this issue on the provisions earlier quoted in this opinion of the
Instruction to Bidders: 
têñ.£îhqwâ£

IB 113.4 The acceptance of the Proposal shall be communicated in writing by the Owner and no
other act of the Owner shall constitute the acceptance of the Proposal. The acceptance of a
Proposal shall bind the successful bidder to execute the Contract and to be responsible for
liquidated damages as herein provided. The rights and obligations provided for in the Contract shall
become effective and binding upon the parties only with its formal execution.

xxx xxx xxx

IB 118.1 The Contractor shall commence the work within ten (10) calendar days from the date he
receives a copy of the fully executed Contract, and he shall complete the work within the time
specified." (Pp. 18-19, Petitioner-Appellant's Brief.)

Petitioner insists that under these provisions, the rights and obligations of the Bank and Ablaza could become
effective and binding only upon the execution of the formal contract, and since admittedly no formal contract has yet
been signed by the parties herein, there is yet no perfected contract to speak of and respondent has, therefore, no
cause of action against the Bank. And in refutation of respondent's argument that it had already started the work
with some clearing job and foundation excavations, which has never been stopped by petitioner who had previously
given express permission to respondent to enter the jobsite, build a temporary shelter and enclosures thereon,
petitioner counters that under the above instructions, respondent is supposed to commence the work "within ten
(10) calendar days from the date he receives a copy of the fully executed Contract," and for said respondent to have
started actual construction work before any contract has been signed was unauthorized and was consequently
undertaken at his own risk, all the above circumstances indicative of estoppel notwithstanding.

We are not persuaded that petitioner's posture conforms with law and equity. According to Paragraph IB 114.1 of
the Instructions to Bidders, Ablaza was "required to appear in the office of the Owner (the Bank) in person, or, if a
firm or corporation, a duly authorized representative (thereof), and to execute the contract within five (5) days after
notice that the contract has been awarded to him. Failure or neglect to do so shall constitute a breach of agreement
effected by the acceptance of the Proposal." There can be no other meaning of this provision than that the Bank's
acceptance of the bid of respondent Ablaza effected an actionable agreement between them. We cannot read it in
the unilateral sense suggested by petitioner that it bound only the contractor, without any corresponding
responsibility or obligation at all on the part of the Bank. An agreement presupposes a meeting of minds and when
that point is reached in the negotiations between two parties intending to enter into a contract, the purported
contract is deemed perfected and none of them may thereafter disengage himself therefrom without being liable to
the other in an action for specific performance.

The rather ambiguous terms of Paragraph IB 113.4 of the Instructions to Bidders relied upon by petitioner have to
be reconciled with the other paragraphs thereof to avoid lack of mutuality in the relation between the parties. This
invoked paragraph stipulates that "the acceptance of (respondent's) Proposal shall bind said respondent to execute
the Contract and to be responsible for liquidated damages as herein provided." And yet, even if the contractor is
ready and willing to execute the formal contract within the five (5) day period given to him, petitioner now claims that
under the invoked provision, it could refuse to execute such contract and still be absolutely free from any liability to
the contractor who, in the meantime, has to make necessary arrangements and incur expenditures in order to be
able to commence work "within ten (10) days from the date he receives a copy of the fully executed Contract," or be
responsible for damages for delay. The unfairness of such a view is too evident to be justified by the invocation of
the principle that every party to a contract who is sui juris and who has entered into it voluntarily and with full
knowledge of its unfavorable provisions may not subsequently complain about them when they are being enforced,
if only because there are other portions of the Instruction to Bidders which indicate the contrary. Certainly, We
cannot sanction that in the absence of unavoidable just reasons, the Bank could simply refuse to execute the
contract and thereby avoid it entirely. Even a government owned corporation may not under the guise of protecting
the public interest unceremoniously disregard contractual commitments to the prejudice of the other party.
Otherwise, the door would be wide open to abuses and anomalies more detrimental to public interest. If there could
be instances wherein a government corporation may justifiably withdraw from a commitment as a consequence of
more paramount considerations, the case at bar is not, for the reasons already given, one of them.

As We see it then, contrary to the contention of the Bank, the provision it is citing may not be considered as
determinative of the perfection of the contract here in question. Said provision only means that as regards the
198
violation of any particular term or condition to be contained in the formal contract, the corresponding action therefor
cannot arise until after the writing has been fully executed. Thus, after the Proposal of respondent was accepted by
the Bank thru its telegram and letter both dated December 10, 1965 and respondent in turn accepted the award by
its letter of December 15, 1965, both parties became bound to proceed with the subsequent steps needed to
formalize and consummate their agreement. Failure on the part of either of them to do so, entities the other to
compensation for the resulting damages. To such effect was the ruling of this Court in Valencia vs. RFC 103 Phil.
444. We held therein that the award of a contract to a bidder constitutes an acceptance of said bidder's proposal
and that "the effect of said acceptance was to perfect a contract, upon notice of the award to (the bidder)". (at p.
450) We further held therein that the bidder's "failure to (sign the corresponding contract) do not relieve him of the
obligation arising from the unqualified acceptance of his offer. Much less did it affect the existence of a contract
between him and respondent". (at p. 452)

It is neither just nor equitable that Valencia should be construed to have sanctioned a one-sided view of the
perfection of contracts in the sense that the acceptance of a bid by a duly authorized official of a government-owned
corporation, financially and otherwise autonomous both from the National Government and the Bureau of Public
Works, insofar as its construction contracts are concerned, binds only the bidder and not the corporation until the
formal execution of the corresponding written contract.

Such unfairness and inequity would even be more evident in the case at bar, if We were to uphold petitioner's pose.
Pertinently to the point under consideration, the trial court found as follows:

To determine the amount of damages recoverable from the defendant, plaintiff's claim for actual damages in the
sum of P298,433.35, as hereinabove stated, and the recommendation of Messrs. Ambrosio R. Flores and Ricardo
Y. Mayuga, as contained in their separate reports (Exhs. "13" and "15"), in the amounts of P154,075.00 and
P147,500.00, respectively, should be taken into account.

There is evidence on record showing that plaintiff incurred the sum of P48,770.30 for the preparation of the jobsite,
construction of bodegas, fences field offices, working sheds, and workmen's quarters; that the value of the
excavation work accomplished by the plaintiff at the site was P113,800.00; that the rental of the various construction
equipment of the plaintiff from the stoppage of work until the removal thereof from the jobsite would amount to
P78,540.00 (Exhs. "K" - "K-l"); that the interest on the cash bond of P275,000.00 from November 3, 1965 to July 7,
1966 at 12% per annum would be P22,000.00; that for removing said construction equipment from the jobsite to
Manila, plaintiff paid a hauling fee of P700.00 (Exhs. "L" - "L-1" ); that for the performance bond that the plaintiff
posted as required under its contract with the defendant, the former was obliged to pay a premium of P2,216.55;
and that the plaintiff was likewise made to incur the sum of P32,406.50, representing the 3% contractor's tax (Exhs.
"AA" - "A-l"). The itemized list of all these expenditures, totalling P298,433.35 is attached to the records of this case
(Annex "B", Complaint) and forms part of the evidence of the plaintiff. Mr. Nicomedes G. Ablaza, the witness for the
plaintiff, properly identified said document and affirmed the contents thereof when he testified during the hearing.
The same witness likewise explained in detail the various figures contained therein, and identified the corresponding
supporting papers.

It is noteworthy, in this connection, that there is nothing in the records that would show that the defendant assailed
the accuracy and/or reasonableness of the figures presented by the plaintiff; neither does it appear that the
defendant offered any evidence to refute said figures.

While it is claimed by the defendant that the plaintiff incurred a total expense of only P154,075.00 according to the
report of Mr. Ambrosio R. Flores, or P147,500.00, according to the report of Mr. Ricardo Y. Mayuga, the Court finds
said estimates to be inaccurate. To cite only an instance, in estimating, the value of the excavation work, the
defendant merely measured the depth, length and width of the excavated, area which was submerged in water,
without ascertaining the volume of rock and the volume of earth actually excavated as was done by the plaintiff who
prepared a detailed plan showing the profile of the excavation work performed in the site (Exh. "B"). Likewise, the
unit measure adopted by the defendant was in cubic meter while it should be in cubic yard. Also the unit price used
by the defendant was only P8.75 for rock excavation while it should be P10.00 per cubic yard; and only P4.95 for
earth excavation while it should be P5.50 per cubic yard as clearly indicated in plaintiff's proposal (Annex "A",
Complaint; same as Annex "1", Answer). The Court, therefore, can not give credence to defendant's,
aforementioned estimates in view of their evident inaccuracies.
The Court finds from the evidence adduced that Plaintiff claim for actual damages in the sum of P298,433.35 is
meritorious.

The Bulk of plaintiffs claims consists of expected profit which it failed to realize due to the breach of the contract in
question by the defendant. As previously stated, the plaintiff seeks to recover the amount of P814,190.00 by way of
unrealized expected profit. This figure represents 18% of P4,523,275.00 which is the estimated direct cost of the
subject project.

As it has been established by the evidence that the defendant in fact was guilty of breach of contract and, therefore,
liable for damages (Art. 1170, New Civil Code), the Court finds that the plaintiff is entitled to recover from the 198
defendant unrealized expected profit as part of the actual or compensatory damages. Indemnification for damages
shall comprehend not only the value of the loss suffered, but also that of the profits which the obligee failed to obtain
(Art. 2200, New Civil Code).

Where a party is guilty of breach of contract, the other party is entitled to recover the profit which the latter would
have been able to make had the contract been performed (Paz P. Arrieta, et al., plaintiffs-appellees, vs. National
Rice Corporation defendant-appellant, G.R. No. L-15645, promulgated on January 31, 1964; Vivencio Cerrano,
plaintiff-appellee, vs. Tan Chuco, defendant-appellant, 38 Phil. 392).

Regarding the expected profit, a number of questions will have to be answered: Is the 18% unrealized expected
profit being claimed by the plaintiff reasonable? Would the plaintiff be entitled to the whole amount of said expected
profit although there was only partial performance of the contract? Would the 18% expected profit be based on the
estimated direct cost of the subject in the amount of P4,523,275.00, or on plaintiff's bid proposal of P3,749,000.00?

On the question of reasonableness of the 18% expected profit, the Court noted that according to defendant's own
expert witness, Mr. Ambrosio R. Flores, 25% contractor's profit for a project similar in magnitude as the one involved
in the present case would be ample and reasonable. Plaintiff's witness, Mr. Nicomedes G. Ablaza, an experienced
civil engineer who has been actively engaged in the construction business, testified that 15% to 20% contractor's
profit would be in accordance with the standard engineering practice. Considering the type of the project involved in
this case, he stated, the contractor's profit was placed at 18%. Taking into consideration the fact that this
percentage of profit is even lower than what defendant's witness considered to be ample and reasonable, the Court
believes that the reasonable percentage should be 18% inasmuch as the actual work was not done completely and
the plaintiff has not invested the whole amount of money called for by the project." (Pp. 263-268, Record on
Appeal.)

These findings have not been shown to Us to be erroneous. And additional and clarificatory details, which We find
to be adequately supported by the record, are stated in Respondents' brief thus:  têñ.£îhqwâ£

23. In a letter dated January 4, 1966, petitioner Central Bank, through the same Mr. Mendoza, to this
request of respondent Ablaza. (Annex "D-1" to the Partial Stipulation of Facts, R.A., p. 146).

24. Acting upon this written permission, respondent Ablaza immediately brought its men and
equipment from Manila to the construction site in San Fernando, La Union, and promptly
commenced construction work thereat. This work, consisted of the setting up of an enclosure around
the site, the building of temporary shelter for its workmen, and the making of the necessary
excavation works. (Commissioner's Report, R.A., p. 181).

25. Following the commencement of such construction work, petitioner Central Bank, through a letter
dated February 8, 1966, formally requested respondent Ablaza to submit to petitioner the following: têñ.£îhqwâ£

(a) A schedule of deliveries of material which, under the terms of respondent

Ablaza's approved proposal, were to be furnished by petitioner.

(b) A time-table for the accomplishment of the construction work.

In short, as early as February 8, 1966, or more than three months prior to petitioner's
repudiation of the contract in question the latter (petitioner) already took the above
positive steps it compliance with its own obligations under the contract.

26. Acting upon petitioner's above letter of February 8, 1966, on February 16, 1966, respondent
Ablaza submitted the schedule of deliveries requested by petitioner. (Commissioner's Report, R.A.,
p. 182; Decision id., 252; also Exhs. "D" to "D-7", inclusive.)

27. During the period of actual construction, respondent Ablaza, on several occasions, actually
discussed the progress of the work with Mr. Mendoza. In addition, in March 1966, the latter (Mr.
Mendoza) personally visited the construction site. There he saw the work which respondent had by
that time already accomplished which consisted of the completion of approximately 20% of the
necessary excavation works. (Commissioner's Report, R.A., p. 182; Decision, id., p. 252).

28. Following Mr. Mendoza's visit at the construction site, or more specifically on March 22, 1966,
the latter (Mendoza) wrote to respondent Ablaza, instructing the latter to formally designate the
person to represent the corporation at the signing of the formal construction contract. (Exh. "H"; also
t.s.n., pp. 119-121, December 18, 1967).

29. By a letter dated March 24, 1966, respondent Ablaza promptly complied with the above request.
(Exh. "I"; also t.s.n., pp 121-123, December 18, 1967). 198

30. Subsequently, respondent Ablaza posted the required performance guaranty bond in the total
amount of P962,250.00, consisting of (a) a cash bond in the amount of P275,000.00, and (b) a
surety bond, PSIC Bond No. B-252-ML, dated May 19, 1966, in the amount of P687,250.00. In this
connection, it is important to note that the specific purpose of this bond was to guarantee "the faithful
Performance of the Contract" by respondent Ablaza. (Partial Stipulation of Facts, par. 6, R.A., p.
141). This performance guaranty bond was duly accepted by petitioner.(Id.)

31. However, on May 20, 1966, petitioner Central Bank called for a meeting with representatives of
respondent Ablaza and another contractor. This meeting was held at the Conference Room of the
Central Bank Building. At this meeting, then Finance Secretary Eduardo Romualdez, who acted as
the representative of petitioner, announced that the Monetary Board had decided to reduce the
appropriations for the various proposed Central Bank regional office buildings, including the one for
San Fernando, La Union.

32. In view of this decision, Secretary Romualdez informed respondent Ablaza that new plans and
designs for the proposed regional office building in San Fernando would have to be drawn up to take
account of the reduction in appropriation. Secretary Romualdez then advised respondent
to suspend work at the construction site in San Fernando in the meanwhile. (Decision, R.A., pp. 253-
254).

33. After making the above announcements, Secretary Romualdez proposed that all existing
contracts previously entered into between petitioner Central Bank and the several winning
contractors (among them being respondent Ablaza) be considered set aside.

34. Obviously to induce acceptance of the above proposal, Secretary Romualdez offered the
following concessions to respondent Ablaza:  têñ.£îhqwâ£

(a) That its cash bond in the amount of P275,000.00 be released immediately, and
that interest be paid thereon at the rate of 12% per annum.

(b) That respondent Ablaza be reimbursed for expenses incurred for the premiums
on the performance bond which it posted, and which petitioner had already accepted.
(Decision, R.A., pp. 253-254).

35. In addition, Secretary Romualdez also proposed the conclusion of a new contract with
respondent Ablaza for the construction of a more modest regional office building at San Fernando,
La Union, on a negotiated basis. However, the sincerity and feasibility of this proposal was rendered
dubious by a caveat attached to it, as follows:  têñ.£îhqwâ£

'4. Where auditing regulations would permit, the Central Bank would enter into a
negotiated contract with the said corporation (Ablaza) for the construction work on
the building on the basis of the revised estimates.' (Annex "8" to Answer, R.A., p. 95).

36. The revised cost fixed for this proposed alternative regional office building was fixed at a
maximum of P3,000,000.00 (compared to P3,749,000.00 under the contract originally awarded to
respondent). (Annex "6-A" to Answer, R.A., p. 87).

37. Needless perhaps to state, respondent Ablaza rejected the above proposals (pars. 34 and 35,
supra.), and on June 3, 1966, through counsel, wrote to petitioner demanding the formal execution
of the contract previously awarded to it, or in the alternative, to pay "all damages and expenses
suffered by (it) in the total amount of P1,181,950.00 ... "(Annex "7" to Answer, R.A., pp. 89-
91; Decision, id., p. 254).
 38. In a letter dated June 15, 1966, petitioner Central Bank, through Deputy Governor Amado R.
Brinas, replied to respondent Ablaza's demand denying any liability on the basis of the following
claim: têñ.£îhqwâ£

`(That, allegedly) in line with the agreement ... reached between the Central Bank
and Ablaza Construction and Finance Corporation at a meeting held ... on May 20,
1966,' "whatever agreements might have been previously agreed upon between
(petitioner and respondent) would be considered set aside." (Decision, R.A., p. 255;
Annex "8" to Answer, id., pp. 93-96.)
198
39. The above claim was, however, promptly and peremptorily denied by respondent Ablaza,
through counsel, in a letter dated June 16, 1966. (Partial Stipulation of Facts, par. 9, R.A., p. 142,
also Annex "G" thereof; Commissioner's Report, R.A., p. 185; Decision, id., p. 255.)" (Appellee's
Brief, pars. 23 to 39, pp. 14-19.)

None of these facts is seriously or in any event sufficiently denied in petitioner's reply brief.

Considering all these facts, it is quite obvious that the Bank's insistence now regarding the need for the execution of
the formal contract comes a little too late to be believable. Even assuming arguendo that the Revised Manual of
Instructions to Treasurers were applicable to the Central Bank, which is doubtful, considering that under the
provisions of its charter already referred to earlier, disbursements and expenditures of the Bank are supposed to be
governed by rules and regulations promulgated by the Monetary Board, in this particular case, the attitude and
actuations then of the Bank in relation to the work being done by Ablaza prior to May 20, 1966 clearly indicate that
both parties assumed that the actual execution of the written contract is a mere formality which could not materially
affect their respective contractual rights and obligations. In legal effect, therefore, the Bank must be considered as
having waived such requirement.

To be more concrete, from December 15, 1965, when Ablaza accepted the award of the contract in question, both
parties were supposed to have seen to it that the formal contract were duly signed. Under the Instructions to
Bidders, Ablaza was under obligation to sign the same within five (5) days from notice of the award, and so, he
called on the Bank at various times for that purpose. The Bank never indicated until May, 1966 that it would not
comply. On the contrary, on February 8, 1966, Ablaza was requested to submit a "schedule of deliveries of
materials" which under the terms of the bid were to be furnished by the Bank. On March 22, 1966, Ablaza received
a letter from the Bank inquiring as to who would be Ablaza's representative to sign the formal contract. In the
meanwhile, no less than Mr. Rizalino Mendoza, the Chairman of the Management Building Committee of the Central
Bank who had been signing for the Bank all the communications regarding the project at issue, had visited the
construction site in March, 1966, just before he wrote the request abovementioned of the 22nd of that month for the
nomination of the representative to sign the formal contract, and actually saw the progress of the work and that it
was being continued, but he never protested or had it stopped. All these despite the fact that the Memorandum
Circular being invoked by the Bank was issued way back on December 31, 1965 yet. And when finally on May 20,
1966 the Bank met with the representatives of Ablaza regarding the idea of changing the plans to more economical
ones, there was no mention of the non-execution of the contract as entitling the Bank to back out of it
unconditionally. Rather, the talk, according to the findings of the lower courts, was about the possibility of setting
aside whatever agreement there was already. Under these circumstances, it appears that respondent has been
made to believe up to the time the Bank decided definitely not to honor any agreement at all that its execution was
not indispensable to a contract to be considered as already operating and respondent could therefore proceed with
the work, while the contract could be formalized later.

Petitioner contends next that its withdrawal from the contract is justified by the policy of economic restraint ordained
by Memorandum Circular No. 1. We do not see it that way. Inasmuch as the contract here in question was perfected
before the issuance of said Memorandum Circular, it is elementary that the same may not be enforced in such a
manner as to result in the impairment of the obligations of the contract, for that is not constitutionally permissible.
Not even by means of a statute, which is much more weighty than a mere declaration of policy, may the government
issue any regulation relieving itself or any person from the binding effects of a contract. (Section 1 (10), Article III,
Philippine Constitution of 1953 and Section 11, Article IV, 1973 Constitution of the Philippines.) Specially in the case
of the Central Bank, perhaps, it might not have been really imperative that it should have revised its plans,
considering that it has its own resources independent of those of the national government and that the funds of the
Central Bank are derived from its own operations, not from taxes. In any event, if the memorandum circular had to
be implemented, the corresponding action in that direction should have been taken without loss of time and before
the contract in question had taken deeper roots. It is thus clear that in unjustifiably failing to honor its contract with
respondent, petitioner has to suffer the consequences of its action.

The last issue submitted for Our resolution refers to the amount of damages awarded to Ablaza by the trial court and
found by the Court of Appeals to be "fair and reasonable." Again, after a review of the record, We do not find
sufficient ground to disturb the appealed judgment even in this respect, except as to attorney's fees.
There are three principal items of damages awarded by the courts below, namely: (1) compensation for actual work
done in the amount of P298,433.35, (2) unrealized profits equivalent to 18% of the contract price of P3,749,000 or
P674,820.00 and (3) 15% of the total recovery as attorney's fees in addition to the P5,000 already paid as retaining
fee. All of these items were the subject of evidence presented by the parties. According to the Court of Appeals:  têñ.£îhqwâ£

As regard the accuracy and reasonableness of the award for damages, both actual and
compensatory, it is to be noted that the trial court subjected the Commissioner's report and the
evidence adduced therein to a careful scrutiny. Thus, when the appellant called the trial court's
attention to the fact that the P814,190.00 unrealized expected profit being claimed by appellee
represented 18% of P4,523,275.00 which was the estimated cost of the project, while the contract
198
awarded to appellee was only in the amount of P3,749,000.00 as per its bid proposal, the Court
made the necessary modification. It is further to be noted that the amount of 18% of the estimated
cost considered in the said award is much less than that given by appellant's own expert witness,
Ambrosio R. Flores. He testified that 25% as contractor's profit "would be fair, ample and
reasonable." (T.s.n, p. 557, Batalla.)" (p. 17 A, Appellant's brief.)

Basically, these are factual conclusions which We are not generally at liberty to disregard. And We have not been
shown that they are devoid of reasonable basis.

There can be no dispute as to the legal obligation of petitioner to pay respondent the actual expenses it has incurred
in performing its part of the contract.

Upon the other hand, the legal question of whether or not the Bank is liable for unrealized profits presents no
difficulty. In Arrieta vs. Naric G.R. No. L-15645, Jan. 31, 1964, 10 SCRA 79, this Court sustained as a matter of law
the award of damages n the amount of U.S. $286,000, payable in Philippine Currency, measured in the rate of
exchange prevailing at the time the obligation was incurred (August, 1952), comprising of unrealized profits of the
plaintiff, Mrs. Paz Arrieta, in a case where a government-owned corporation, the Naric failed to proceed with the
purchase of imported rice after having accepted and approved the bid of Arrieta and after she had already closed
her contract with her foreign sellers.

Actually, the law on the matter is unequivocally expressed in Articles 2200 and 2201 of the Civil Code thus:  têñ.£îhqwâ£

ART. 2200. Identification for damages shall comprehend not only the value of the loss suffered, but
also that of the profits, which the obligee failed to obtain..

ART. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good
faith is liable shall be those that are the natural and probable consequences of the breach of the
obligation, and which the parties have forseen or could have reasonably foreseen at the time the
obligation was constituted.

In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages
which may be reasonably attributed to the non- performance of the obligation.

Construing these provisions, the following is what this Court held in Cerrano vs. Tan Chuco, 38 Phil. 392:  têñ.£îhqwâ£

.... Article 1106 (now 2200) of the Civil Code establishes the rule that prospective profits may be
recovered as damages, while article 1107 (now 2201) of the same Code provides that the damages
recoverable for the breach of obligations not originating in fraud (dolo) are those which were or might
have been foreseen at the time the contract was entered into. Applying these principles to the facts
in this case, we think that it is unquestionable that defendant must be deemed to have foreseen at
the time he made the contract that in the event of his failure to perform it, the plaintiff would be
damaged by the loss of the profit he might reasonably have expected to derive from its use.

When the existence of a loss is established, absolute certainty as to its amount is not required. The
benefit to be derived from a contract which one of the parties has absolutely failed to perform is of
necessity to some extent, a matter of speculation, but the injured party is not to be denied all remedy
for that reason alone. He must produce the best evidence of which his case is susceptible and if that
evidence warrants the inference that he has been damaged by the loss of profits which he might with
reasonable certainty have anticipated but for the defendant's wrongful act, he is entitled to recover.
As stated in Sedgwick on Damages (Ninth Ed., par. 177):

The general rule is, then, that a plaintiff may recover compensation for any gain which he can make
it appear with reasonable certainty the defendant's wrongful act prevented him from acquiring, ...'.
(See also Algarra vs. Sandejas, 27 Phil. Rep., 284, 289; Hicks vs. Manila Hotel Co., 28 Phil. Rep.,
325.) (At pp. 398-399.)
Later, in General Enterprises, Inc. vs. Lianga Bay Logging Co. Inc., 11 SCRA 733, Article 2200 of the Civil Code
was again applied as follows: têñ.£îhqwâ£

Regarding the actual damages awarded to appellee, appellant contends that they are unwarranted
inasmuch as appellee has failed to adduce any evidence to substantiate them even assuming
arguendo that appellant has failed to supply the additional monthly 2,000,000 board feet for the
remainder of the period agreed upon in the contract Exhibit A. Appellant maintains that for appellee
to be entitled to demand payment of sales that were not effected it should have proved (1) that there
are actual sales made of appellee's logs which were not fulfilled, (2) that it had obtained the best
price for such sales, (3) that there are buyers ready to buy at such price stating the volume they are
198
ready to buy, and (4) appellee could not cover the sales from the logs of other suppliers. Since these
facts were not proven, appellee's right to unearned commissions must fail.

This argument must be overruled in the light of the law and evidence on the matter. Under Article
2200 of the Civil Code, indemnification for damages comprehends not only the value of the loss
suffered but also that of the profits which the creditor fails to obtain. In other words, lucrum
cessans is also a basis for indemnification. The question then that arises is: Has appellee failed to
make profits because of appellant's breach of contract, and in the affirmative, is there here basis for
determining with reasonable certainty such unearned profits?

Appellant's memorandum (p. 9) shows that appellee has sold to Korea under the contract in question
the following board feet of logs, Breareton Scale:  têñ.£îhqwâ£

Months Board Feet

From June to August 1959 3,007,435

September, 1959 none
October, 1959 2,299,805
November, 1959 801,021
December, 1959 1,297,510

Total 7,405,861

The above figures tally with those of Exhibit N. In its brief (p. 141) appellant claims that in less than
six months' time appellee received by way of commission the amount of P117,859.54, while in its
memorandum, appellant makes the following statement:

`11. The invoice F.O.B. price of the sale through plaintiff General is P767,798.82 but the agreed
F.O.B. price was P799,319.00, the commission at 13% (F.O.B.) is P117,859.54. But, as there were
always two prices — Invoice F.O.B price and F.O.B. price as per contract, because of the sales
difference amounting to P31,920.18, and the same was deducted from the commission, actually paid
to plaintiff General is only P79,580.82.' " It appears, therefore, that during the period of June to
December, 1959, in spite of the short delivery incurred by appellant, appellee had been earning its
commission whenever logs were delivered to it. But from January, 1960, appellee had ceased to
earn any commission because appellant failed to deliver any log in violation of their agreement. Had
appellant continued to deliver the logs as it was bound to pursuant to the agreement it is reasonable
to expect that it would have continued earning its commission in much the same manner as it used
to in connection with the previous shipments of logs, which clearly indicates that it failed to earn the
commissions it should earn during this period of time. And this commission is not difficult to estimate.
Thus, during the seventeen remaining months of the contract, at the rate of at least 2,000,000 board
feet, appellant should have delivered thirty-four million board feet. If we take the number of board
feet delivered during the months prior to the interruption, namely, 7,405,861 board feet, and the
commission received by appellee thereon, which amounts to P79,580.82, we would have that
appellee received a commission of P.0107456 per board feet. Multiplying 34 million board feet by
P.0107456, the product is P365,350.40, which represents the lucrum cessans that should accrue to
appellee. The award therefore, made by the court a quo of the amount of P400,000.00 as
compensatory damages is not speculative, but based on reasonable estimate.

In the light of these considerations, We cannot say that the Court of Appeals erred in making the aforementioned
award of damages for unrealized profits to respondent Ablaza.

With respect to the award for attorney's fees, We believe that in line with the amount fixed in Lianga, supra., an
award of ten per centum (10%) of the amount of the total recovery should be enough.
PREMISES CONSIDERED, the decision of the Court of Appeals in this case is affirmed, with the modification that
the award for attorney's fees made therein is hereby reduced to ten per centum (10%) of the total recovery of
respondent Ablaza.

Costs against petitioner.

5. G.R. No. L-49711 November 7, 1979

ZAMBALES CHROMITE MINING CO., GONZALO P. NAVA, VIOLA S. NAVA, FEDERICO S. NAVA, PERLA
NAVA, HONORATO P. NAVA, ALEJANDRO S. NAVA, PURIFICACION SISON, A. TORDESILLAS, GUIDO 198
ADVINCULA, PEDRO ANGULO and TOMAS MARAMBA, petitioners-appellants,
vs.
COURT OF APPEALS, SECRETARY OF AGRICULTURE AND NATURAL RESOURCES, DIRECTOR OF
MINES, GREGORIO E. MARTINEZ, ALEJANDRO MENDEZ, NICANOR MARTY, VICENTE MISOLES,
GUILLERMO YABUT, ANDRES R. FIAGOY, MIGUEL A. MANIAGO, CASIMIRO N. EBIDO, ENRIQUE RIVERA,
SEVERINO MIVA, ELENITO B. MARTINEZ, LUCAS EDURAIN, FELIMON ENCIO, EMILIO ILOCO, DIOSDADO
MISOLA, ERNESTO VALVERDE, PABLO PABILONA, ARMANDO MINAS, BARTOLOME MARAVE and
CECILIO OOVILLA, respondents-appellees.

Tordesilla & Advincula for petitioners-appellants.

Mariano M. Lozada for private respondents-appellees.

AQUINO, J.:

This is a mining case. The petitioners appealed from the second decision of the Court of Appeals, reversing its first
decision and holding that it was improper from Benjamin M. Gozon, as Secretary of Agriculture and Natural
Resources, to affirm his own decision as Director of Mines.

The Court of Appeals further held that the trial court's judgment, confirming the Secretary's decision, should be set
aside and that the Minister of Natural Resources should review anew the decision of the Director of Mines "and,
thereafter, further proceedings will be taken in the trial court". The antecedental proceedings are as follows:

(1) In Mines Administrative Case No. V-227, Director Gozon issued an order dated October 5, 1960 wherein he
dismissed the case filed by the petitioners or protestants (Zambales Chromite Mining Co., Inc. or the group of
Gonzalo P. Nava). In that case, they sought to be declared the rightful and prior locators and possessors of sixty-
nine mining claims located in Santa Cruz, Zambales.

On the basis of petitioners' evidence (the private respondents did not present any evidence and they filed a
demurrer to the evidence or motion to dismiss the protest), Director Gozon found that the petitioners did not
discover any mineral nor staked and located mining claims in accordance with law.

In that same order, Director Gozon ruled that the mining claims of the groups of Gregorio Martinez and Pablo
Pabilona, now the private respondents-appellees, were duly located and registered (pp. 224-231, Record on
Appeal).

(2) The petitioners appealed from that order to the Secretary of Agriculture and Natural Resources. While the appeal
was pending, Director Gozon was appointed Secretary of Agriculture and Natural Resources. Instead of inhibiting
himself, he decided the appeal, DANR Case No. 2151, on August 16, 1963 as it he was adjudicating the case for
the first time. 'Thus, Secretary Gozon exercised appellate jurisdiction over a case which he had decided as Director
of Mines. He acted as reviewing authority in the appeal from his own decision. Or, to use another analogy, he acted
as trial judge and appellate judge in the same case.

He ruled that the petitioners had abandoned the disputed mining claims, while, on the other hand, the Martinez and
Pabilona groups had validly located the said claims. Hence, he dismissed the appeal from his own decision (pp.
340-341, Record on Appeal).

(3) On September 20, 1963, the petitioners filed a complaint in the Court of First Instance of Zambales, assailing
Secretary Gozon's decision and praying that they be declared the prior locators and possessors of the sixty-nine
mineral claims in question. Impleaded as defendants in the case were the Secretary of Agriculture and Natural
Resources, the Director of Mines and the members of the Martinez and Pabilona groups.

After hearing, the lower court sustained Secretary Gozon's decision and dismissed the case. It held that the
disqualification petition of a judge to review his own decision or ruling (Sec. 1, Rule 137, Rules of Court) does not
apply to administrative bodies; that there is no provision in the Mining Law, disqualifying the Secretary of Agriculture
and Natural Resources from deciding an appeal from a case which he had decided as Director of Mines;
that delicadeza is not a ground for disqualification; that the petitioners did not seasonably seek to disqualify
Secretary Gozon from deciding their appeal, and that there was no evidence that the Secretary acted arbitrarily and
with bias, prejudice, animosity or hostility to the petitioners (pp. 386-9, Record on Appeal).

(4) The petitioners appealed to the Court of Appeals. The Sixth Division of that Court (Pascual, Agcaoili and
Climaco, JJ.) in its decision dated February 15, 1978 reversed the judgment of the trial court and declared that the
petitioners were the rightful locators and possessors of the said sixty-nine mining claims and held as invalid the
mining claims overlapping the same.

That Division found that the petitioners (Nava group) had discovered minerals and had validly located the said sixty- 198
nine mining claims and that there was no sufficient basis for Secretary Gozon's finding that the mining claims of the
Martinez and Pabilona groups were validly located.

(5) The defendants, now the private respondents-appellees, filed a motion for reconsideration based principally on
the ground that the Court of Appeals should have respected the factual findings of the Director of Mines and the
Secretary of Agriculture and Natural Resources on the theory that the facts found in administrative decisions cannot
be disturbed on appeal to the courts, citing Republic Act No. 4388 which amended section 61 of the Mining Law
effective June 19, 1965; Pajo vs. Ago, 108 Phil. 905; Palanan Lumber & Plywood Co., Inc. vs. Arranz 65 O.G. 8473;
Timbancaya vs. Vicente, 119 Phil. 169, Ortua vs. Singson Encarnacion, 59 Phil. 440.

The defendants-movants prayed that the appeal be dismissed, meaning that the decisions of the lower court and of
Director and Secretary Gozon be affirmed.

The petitioners opposed that motion for reconsideration. In their opposition, they reiterated the contention in their
brief that Secretary Gozon's decision was void and, therefore, the factual findings therein are not binding on the
courts.

As already stated, the same Sixth Division (composed of Pascula, Agrava and Maco, JJ.) in its second decision of
October 13, 1978, set aside its first decision and granted the motion for curiously enough, the first decision was
reconsidered not on the ground advanced by the movants-defendants, now the private respondents (Martinez and
Pabilona groups), which was that the factual findings of the administrative officials should be upheld, but on the
ground raised in petitioners' opposition, namely, that Secretary Gozon's decision was void because he was
disqualified to review his own decision as Director of Mines.

So, as already noted, the Court of Appeals in its second decision remanded the case to the Minister of Natural
Resources for another review of Director Gozon's decision. This was the prayer of the petitioners in their brief but in
their opposition to the motion for reconsideration, they prayed that the first decision of the Court of Appeals in their
favor be maintained.

(6) The second decision did not satisfy the parties. They filed motions for reconsideration. The petitioners in their
motion reiterated their prayer that the first decision be reinstated. They abandoned their prayer that the case be
returned to the Minister of Natural Resources. On the other hand, the private respondents in their motion insisted
that the trial court's decision be affirmed on the basis of the factual findings of the Director of Mines and the
Secretary of Agriculture and Natural Resources. The Court of Appeals denied both motions in its resolutions of
December 27, 1978 and January 15, 1979.

Only the petitioners appealed from the second decision of the Court of Appeals. There is an arresting and
noteworthy peculiarity in the present posture of this case now on appeal to this Court (as arresting and noteworthy
as the peculiarity that Secretary Gozon reviewed his own decision as Director of Mines),

That twist or peculiarity is that while the petitioners (Nava group) in their appellants' brief in the Court of Appeals
prayed that Secretary Gozon's decision, alleged to be biased, be declared void and that the case be returned to the
Secretary of Agriculture and Natural Resources for another review of Director Gozon's order, in their appellants'
brief in this Court, they changed that relief and they now pray that the second decision of the Court of Appeals,
referring this case to the Minister of Natural Resources for another review, be declared void and that its first decision
be affirmed.

In contrast, the private respondents, who did not appeal from the second decision of the Court of Appeals, instead
of sustaining its holding that this case be referred to the Minister of Natural Resources or instead of defending that
second decision, they being appellees, pray for the affirmance of the trial court's judgment sustaining the decisions
of Director and Secretary Gozon.

The inconsistent positions of the parties, which were induced by the contradictory decisions of the Court of Appeals,
constitute the peculiar twist of this case in this Court.
We hold that Secretary Gozon acted with grave abuse of discretion in reviewing his decision as Director of Mines.
The palpably flagrant anomaly of a Secretary of Agriculture and Natural Resources reviewing his own decision as
Director of Mines is a mockery of administrative justice. The Mining Law, Commonwealth Act No. 13-i, provides:

SEC. 61. Conflicts and disputes arising out of mining locations shall be submitted to the Director of
Mines for decision:

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 the date of its receipt.
198
In case any one of the parties should disagree from the decision or order of the Director of Mines or
of the Secretary of Agriculture and Natural Resources, the matter may be taken to the court of
competent jurisdiction within thirty days from the receipt of such decision or order; otherwise the said
decision or order shag be final and binding upon the parties concerned. (As amended by Republic
Act No. 746 approved on June 18,1952).*

Undoubtedly, the provision of section 61 that the decision of the Director of Mines may be appealed to the Secretary
of Agriculture and Natural Resources contemplates that the Secretary should be a person different from the Director
of Mines.

In order that the review of the decision of a subordinate officer might not turn out to be a farce the reviewing officer
must perforce be other than the officer whose decision is under review; otherwise, there could be no  different
view or there would be no real review of the case. The decision of the reviewing officer would be a biased view;
inevitably, it would be the same view since being human, he would not admit that he was mistaken in his first view of
the case.

That is the obvious, elementary reason behind the disqualification of a trial judge, who is promoted to the appellate
court, to sit in any case wherein his decision or ruling is the subject of review (Sec. 1, Rule 137, Rules of Court:
secs. 9 and 27, Judiciary Law).

A sense of proportion and consideration for the fitness of things should have deterred Secretary Gozon from
reviewing his own decision as Director of Mines. He should have asked his undersecretary to undertake the review.

Petitioners-appellants were deprived of due process, meaning fundamental fairness, when Secretary Gozon
reviewed his own decision as Director of Mines. (See Amos Treat & Co. vs. Securities and Exchange Commission,
306 F. 2nd 260, 267.)

WHEREFORE, we set aside the order of the Secretary of Agriculture and Natural Resources dated August 16, 1963
as affirmed by the trial court as well as the first decision of the Court of Appeals.

We affirm its second decision, returning the case to the Minister of Natural Resources, with the directive that
petitioners' appeal to the Minister be resolved de novo with the least delay as provided for in Presidential Decree
No. 309, "establishing rules and procedures for the speedy disposition or settlement of conflicting mining claims".

We reverse the second part of that second decision stating that "thereafter, further proceedings will be taken in the
trial court". That portion is unwarranted because the trial court does not retain any jurisdiction over the case once it
is remanded to the Minister of Natural Resources. No costs.

SO ORDERED.

6. G.R. No. L-62270 May 21, 1984

CRISPIN MALABANAN, EVELIO JALOS, BEN LUTHER LUCAS, SOTERO LEONERO, and JUNE
LEE, petitioners,
vs.
THE HONORABLE ANASTACIO D. RAMENTO, in his capacity as the Director of the National Capital Region
of the Ministry of Education, Culture and Sports, THE GREGORIO ARANETA UNIVERSITY FOUNDATION;
CESAR MIJARES, in his capacity as the President of the Gregorio Araneta University Foundation,
GONZALO DEL ROSARIO, in his capacity as the Director for Academic Affairs of the Gregorio Araneta
University Foundation; TOMAS B. MESINA, in his capacity as the Dean of Student Affairs of the Gregorio
Araneta University Foundation; ATTY. LEONARDO PADILLA, in his capacity as Chief Legal Counsel &
Security Supervisor of the Gregorio Araneta University Foundation; ATTY. FABLITA AMMAY, ROSENDO
GALVANTE and EUGENIA TAYAO, in their capacities as members of the Ad Hoc Committee of the Gregorio
Araneta University Foundation, respondents.

Honesto N. Salcedo for petitioners.

The Solicitor General and Leonardo G. Padilla & Pablita G. Ammay for respondents.

FERNANDO, CJ.: 198

The failure to accord respect to the constitutional rights of freedom of peaceable assembly and free speech is the
grievance alleged by petitioners, students of the Gregorio Araneta University Foundation, in this certiorari,
prohibition and mandamus proceeding. The principal respondents are Anastacio D. Ramento, Director of the
National Capital Region of the Ministry of Education, Culture and Sports and the Gregorio Araneta University
Foundation. 1 The nullification of the decision of respondent Ramento affirming the action taken by respondent Gregorio Araneta University Foundation
finding petitioners guilty of illegal assembly and suspending them is sought in this petition.

The facts are not open to dispute. Petitioners were officers of the Supreme Student Council of respondent
University. They sought and were granted by tile school authorities a permit to hold a meeting from 8:00 A.M. to
12:00 P.M, on August 27, 1982. Pursuant to such permit, along with other students, they held a general assembly at
the Veterinary Medicine and Animal Science basketball court (VMAS), the place indicated in such permit, not in the
basketball court as therein stated but at the second floor lobby. At such gathering they manifested in vehement and
vigorous language their opposition to the proposed merger of the Institute of Animal Science with the Institute of
Agriculture. At 10:30 A.M., the same day, they marched toward the Life Science Building and continued their rally. It
was outside the area covered by their permit. They continued their demonstration, giving utterance to language
severely critical of the University authorities and using megaphones in the process. There was, as a result,
disturbance of the classes being held. Also, the non-academic employees, within hearing distance, stopped their
work because of the noise created. They were asked to explain on the same day why they should not be held liable
for holding an illegal assembly. Then on September 9, 1982, they were formed through a memorandum that they
were under preventive suspension for their failure to explain the holding of an illegal assembly in front of the Life
Science Building. The validity thereof was challenged by petitioners both before the Court of First Instance of Rizal
in a petition for mandamus with damages against private respondents   and before the Ministry of Education,
2

Culture, and Sports. On October 20, 1982, respondent Ramento, as Director of the National Capital Region, found
petitioners guilty of the charge of having violated par. 146(c) of the Manual for Private Schools more specifically their
holding of an illegal assembly which was characterized by the violation of the permit granted resulting in the
disturbance of classes and oral defamation. The penalty was suspension for one academic year. Hence this
petition.

On November 16, 1982, this Court issued the following resolution: "Acting on the urgent  ex-parte motion for the
immediate issuance of a temporary mandatory order filed by counsel for petitioners, dated November 12, 1982, the
Court Resolved to ISSUE A TEMPORARY RESTRAINING ORDER enjoining all respondents or any person or
persons acting in their place or stead from enforcing the order of the Ministry of' Education and Culture dated
October 20, 1982 finding the petitioners guilty of the charges against them and suspending them for one (1)
academic year with a stern warning that a commission of the same or another offense will be dealt with utmost
severity, effective as of this date and continuing until otherwise ordered by this Court, thus allowing them to enroll, if
so minded.  3

Both public and private respondents submitted their comments. Private respondents prayed for the dismissal of the
petition "for lack of factual and legal basis and likewise [prayed] for the lifting of the temporary restraining order
dated November 16, 1982."   Public respondent Ramento, on the other hand, through the Office of the Solicitor
4

General, prayed for the dismissal of the petition based on the following conclusion: "Consequently, it is respectfully
submitted that respondent Director of the MECS did not commit any error, much less abused his discretion, when he
affirmed the decision of respondent University finding petitioners guilty of violations of the provisions of the Manual
of Regulations for Private Schools and the Revised Student's Code of Discipline .and ordering their suspension for
one (1) academic school year. However, since said suspension has not been enforced except only briefly, thereby
enabling petitioners Leonero, Jr., Lucas and Malabanan to finish their courses, and allowing petitioners Lee and
Jalos to continue their schooling, if they so desire, this proceeding is now moot and academic.  5

With the submission of such comments considered as the answers of public and private respondents, the case was
ready for decision.

This petition may be considered moot and academic if viewed solely from the fact that by virtue of the temporary
restraining order issued by this Court petitioners were allowed to enroll in the ensuing semester, with three of them
doing so and with the other two equally entitled to do so. Moreover, there is the added circumstance of more than a
year having passed since October 20, 1982 when respondent Ramento issued the challenged decision suspending
them for one year. Nonetheless, with its validity having been put in issue, for being violative of the constitutional
rights of freedom of peaceable assembly and free speech, there is need to pass squarely on the question raised.

This Court accordingly rules that respect for the constitutional rights of peaceable assembly and free speech calls
for the setting aside of the decision of respondent Ramento, the penalty imposed being unduly severe. It is true that
petitioners held the rally at a place other than that specified in the permit and continued it longer than the time
allowed. Undeniably too, they did disturb the classes and caused the work of the non-academic personnel to be left
undone. Such undesirable consequence could have been avoided by their holding the assembly in the basketball
court as indicated in the permit. Nonetheless, suspending them for one year is out of proportion to their misdeed.
The petition must be granted and the decision of respondent Ramento nullified, a much lesser penalty being
198
appropriate.

1. As is quite clear from the opinion in Reyes v. Bagatsing,   the invocation of the right to freedom of peaceable
6

assembly carries with it the implication that the right to free speech has likewise been disregarded. Both are
embraced in the concept of freedom of expression which is Identified with the liberty to discuss publicly and
truthfully, any matter of public interest without censorship or punishment and which "is not to be limited, much less
denied, except on a showing ... of a clear and present danger of a substantive evil that the state has a right to
prevent."  7

2. In the above case, a permit was sought to hold a peaceful march and rally from the Luneta public park to the
gates of the united States Embassy, hardly two blocks away, where in an open space of public property, a short
program would be held. Necessarily then, the question of the use of a public park and of the streets leading to the
United States Embassy was before this Court. We held that streets and parks have immemorially been held in trust
for the use of the public and have been used for purposes of assembly to communicate thoughts between citizens
and to discuss public issues.  8

3. The situation here is different. The assembly was to be held not in a public place but in private premises, property
of respondent University. There is in the Reyes opinion as part of the summary this relevant excerpt: "The
applicants for a permit to hold an assembly should inform the licensing authority of the date, the public
place where and the time when it will take place. If it were a private place, only the consent of the owner or the one
entitled to its legal possession is required."   Petitioners did seek such consent. It was granted. According to the
9

petition: "On August 27, 1982, by virtue of a permit granted to them by the school administration, the Supreme
Student Council where your petitioners are among the officers, held a General Assembly at the VMAS basketball
court of the respondent university." 10 There was an express admission in the Comment of private respondent University as to a permit having been
granted for petitioners to hold a student assembly. 11 The specific question to be resolved then is whether on the facts as disclosed resulting in the disciplinary
action and the penalty imposed, there was an infringement of the right to peaceable assembly and its cognate right of free speech.

4. Petitioners invoke their rights to peaceable assembly and free speech. They are entitled to do so. They enjoy like
the rest of the citizens the freedom to express their views and communicate their thoughts to those disposed to
listen in gatherings such as was held in this case. They do not, to borrow from the opinion of Justice Fortas in Tinker
v. Des Moines Community School District, 12 "shed their constitutional rights to freedom of speech or expression at the schoolhouse
gate." 13 While, therefore, the authority of educational institutions over the conduct of students must be recognized, it cannot go so far as to be violative of
constitutional safeguards. On a more specific level there is persuasive force to this formulation in the Fortas opinion: "The principal use to which the schools are
dedicated is to accommodate students during prescribed hours for the purpose of certain types of activities. Among those activities is personal intercommunication
among the students. This is not only an inevitable part of the process of attending school; it is also an important part of the educational process. A student's rights,
therefore, do not embrace merely the classroom hours. When he is in the cafeteria, or on the playing field, or on the campus during the authorized hours, he may
express his opinions, even on controversial subjects like the conflict in Vietnam, if he does so without 'materially and substantially interfer[ing] with the
requirements of appropriate discipline in the operation of the school' and without colliding with the rights of others. ... But conduct by the student, in class or out of
it, which for any reason — whether it stems from time, place, or type of behavior — materially disrupts classwork or involves substantial disorder or invasion of the
rights of others is, of course, not immunized by the constitutional guarantee of freedom of speech." 14

5. As tested by such a standard, what is the verdict on the complaint of petitioners that there was a disregard of their constitutional rights to peaceable assembly
and free speech. It must be in their favor, but subject to qualification in view of their continuing their demonstration in a place other than that specified in the permit
for a longer period and their making use of megaphones therein, resulting in the disruption of classes and the stoppage of work by the non-academic personnel in
the vicinity of such assembly.

6. Objection is made by private respondents to the tenor of the speeches by the student leaders. That there would
be a vigorous presentation of views opposed to the proposed merger of the Institute of Animal Science with the
Institute of Agriculture was to be expected. There was no concealment of the fact that they were against such a
move as it confronted them with a serious problem (iisang malaking suliranin.")  15 They believed that such a merger would result
in the increase in tuition fees, an additional headache for their parents ("isa na naman sakit sa ulo ng ating mga magulang."). 16 If in the course of such
demonstration, with an enthusiastic audience goading them on, utterances, extremely critical, at times even vitriolic, were let loose, that is quite understandable.
Student leaders are hardly the timid, diffident types. They are likely to be assertive and dogmatic. They would be ineffective if during a rally they speak in the
guarded and judicious language of the academe. At any rate, even a sympathetic audience is not disposed to accord full credence to their fiery exhortations. They
take into account the excitement of the occasion, the propensity of speakers to exaggerate, the exuberance of youth, They may give the speakers the benefit of
their applause, but with the activity taking place in the school premises and during the daytime, no clear and present danger of public disorder is discernible. This
is without prejudice to the taking of disciplinary action for conduct, which, to borrow from Tinker, "materially disrupts classwork or involves substantial disorder or
invasion of the rights of others."

7. Nor is this a novel approach to the issue raised by petitioners that they were denied the right to peaceable
assembly. In a 1907 decision, United States v. Apurado, 17 the facts disclosed that shortly before the municipal council of San Carlos,
Occidental Negros, started its session, some five hundred residents of the municipality assembled near the municipal building, and, upon the opening of the
session, a substantial number of such persons barged into the council chamber, demanding that the municipal treasurer, the municipal secretary, and the chief of
police be dismissed, submitting at the same time the proposed substitutes. The municipal council gave its conformity. Such individuals were wholly unarmed
except that a few carried canes; the crowd was fairly orderly and well-behaved except in so far as their pressing into the council chamber during a session of that
body could be called disorder and misbehavior. It turned out that the movement had its origin in religious differences. The defendant Filomeno Apurado and many
other participants were indicted and convicted of sedition in that they allegedly prevented the municipal government from freely exercising its duties. On appeal,
the Supreme Court reversed. Justice Carson, who penned the opinion, correctly pointed out that "if the prosecution be permitted to seize upon every instance of
such disorderly conduct by individual members of a crowd as an excuse to characterize the assembly as a seditious and tumultuous rising against the authorities,
then the right to assemble and to petition for redress of grievances would become a delusion and a snare and the attempt to exercise it on the most righteous
occasion and in the most peaceable manner would expose all those who took part therein to the severest form of punishment, if the purposes which they sought to
attain did not happen to be pleasing to the prosecuting authorities."  18 The principle to be followed is enunciated thus: "If instances of disorderly conduct occur on
such occasions, the guilty individuals should be sought out and punished therefor, but the utmost discretion must be exercised in drawing the line
between disorderly and seditious conduct and between an essentially peaceable assembly and a tumultuous uprising." 19 A careful reading of this decision is in
order before private respondents attach, as they did in their comments, a subversive character to the rally held by the students under the leadership of petitioners.

8. It does not follow, however, that petitioners can be totally absolved for the events that transpired. Admittedly,
there was a violation of the terms of the permit. The rally was held at a place other than that specified, in the second 198
floor lobby, rather than the basketball court, of the VMAS building of the University. Moreover, it was continued
longer than the period allowed. According to the decision of respondent Ramento, the "concerted activity [referring
to such assembly] went on until 5:30 p. m.   Private respondents could thus, take disciplinary action. On those facts,
20

however, an admonition, even a censure-certainly not a suspension-could be the appropriate penalty. Private
respondents could and did take umbrage at the fact that in view of such infraction considering the places where and
the time when the demonstration took place-there was a disruption of the classes and stoppage of work of the non-
academic personnel. They would not be unjustified then if they did take a much more serious view of the matter.
Even then a one-year period of suspension is much too severe. While the discretion of both respondent University
and respondent Ramento is recognized, the rule of reason, the dictate of fairness calls for a much lesser penalty. If
the concept of proportionality between the offense connoted and the sanction imposed is not followed, an element
of arbitrariness intrudes. That would give rise to a due process question. To avoid this constitutional objection, it is
the holding of this Court that a one-week suspension would be punishment enough.

9. One last matter. The objection was raised that petitioners failed to exhaust administrative remedies. That is true,
but hardly decisive. Here, a purely legal question is presented. Such being the case, especially so where a decision
on a question of law is imperatively called for, and time being of the essence, this Court has invariably viewed the
issue as ripe for adjudication. What cannot be too sufficiently stressed is that the constitutional rights to peaceable
assembly and free speech are invoked by petitioners. Moreover, there was, and very likely there will continue to be
in the future, militancy and assertiveness of students on issues that they consider of great importance, whether
concerning their welfare or the general public. That they have a right to do as citizens entitled to all the protection in
the Bill of Rights.

10. It would be most appropriate then, as was done in the case of Reyes v. Bagatsing,   for this Court to lay down 21

the principles for the guidance of school authorities and students alike. The rights to peaceable assembly and free
speech are guaranteed students of educational institutions. Necessarily, their exercise to discuss matters affecting
their welfare or involving public interest is not to be subjected to previous restraint or subsequent punishment unless
there be a showing of a clear and present danger to a substantive evil that the state, has a right to present. As a
corollary, the utmost leeway and scope is accorded the content of the placards displayed or utterances made. The
peaceable character of an assembly could be lost, however, by an advocacy of disorder under the name of dissent,
whatever grievances that may be aired being susceptible to correction through the ways of the law. If the assembly
is to be held in school premises, permit must be sought from its school authorities, who are devoid of the power to
deny such request arbitrarily or unreasonably. In granting such permit, there may be conditions as to the time and
place of the assembly to avoid disruption of classes or stoppage of work of the non-academic personnel. Even if,
however, there be violations of its terms, the penalty incurred should not be disproportionate to the offense.

WHEREFORE, the petition is granted. The decision dated October 20, 1982 of respondent Ramento imposing a
one-year suspension is nullified and set aside. The temporary restraining order issued by this Court in the resolution
of November 18, 1982 is made permanent. As of that date, petitioners had been suspended for more than a week.
In that sense, the one-week penalty had been served. No costs.

7. G.R. No. L-50141 January 29, 1988

BEAUTIFONT, INC. and AURA LABORATORIES, INC., petitioners,

vs.
COURT OF APPEALS, RUSTAN MARKETING CORP. and HOLIDAY COSMETICS, INC., respondents.

NARVASA, J.:

Nothing but the correctness of the denial al by the Manila Court of First Instance (regional trial court) of a preliminary injunction — and of the issuance by the Court
of Appeals of a temporary restraining order — sought by private respondents to restrain the issuance and/or enforcement of a certificate of authority by the Board
of Investments in the petitioners' favor, is at issue in the proceedings at bar.  1 Enforcement of the Appellate Court's temporary restraining order was in turn
inhibited by a temporary restraining order issued by this Court pursuant to its Resolution dated March 16, 1979. 2

The petitioners, Aura Laboratories, Inc. and Beautifont, Inc. are domestic corporations engaged, respectively, in the
manufacture of cosmetic products, and the marketing and distribution thereof In March, 1978 they both applied with
the Board of Investments for authority to accept permissible investments of two American-owned firms, Avon
Products, Inc. and Manila Manufacturing Co., Inc.   The applications were filed in accordance with Republic Act No.
3

5455, otherwise known as the "Permissible Investments Law," which requires the approval by said Board of
investments of a foreign national in a local corporation which would exceed 30% of its outstanding capital.

Their applications set out the following essential data: (1) they, Aura and Beautifont, were in the cosmetics
manufacture and distribution business, respectively; (2) the businesses in which the investments would be made
were existing (3) before investment. the enterprises were Filipino, with a total subscibed capital of P3,500,000.00
and P5,700,000.00, respectively, or "100% equity participation;" (4) after investment the enterprises would be non-
Filipino, with the same total subscribed capital; (5) the investments would be the result of transfers of stocks from
198
Philippine nationals to foreign investors; (6) that the value of shares to be purchased from Philippine nationals or
otherwise retired as regards Aura is P10,495,000. 00, and as regards Beautifont, P27,985,000.00; and (7) the
investors in Aura and Beautifont were, respectively Manila Manufacturing Company and Avon Products, Inc.,
American corporations based in New York, USA, their investments being in the amount of US$1,418,244.00 and
US$3,781,756.00.

Notice of the applications was prepared by the Board of Investments (hereafter, simply BOI). The notice followed the
standard form used in respect to other applications.   It Was publi shed in the Official Gazette and newspapers of
4

general circulation.   The notice, dated April 5, 1978,   read as follows:

5 6

Notice is hereby given that pursuant to Section 4 of Republic Act No. 5455, BEAUTIFONT, INC. and
AURA LABORATORIES, INC., both existing domestic corporations, with office address at c/o
Atienza, Tabora Del Rosario & Castillo, Antonino Building, T.M. Kalaw, Ermita, Manila, have filed
with the Board of Investments applications for authority to accept the permissible investments of
Avon Products, Inc. and Manila Manufacturing Co. in the total amount of US$3,781,756 or
P27,985,000 and US$1,418,244.0 or P10,495,000.00, respectively. The business of Beautifont, Inc.
is capitalized at P5,700,000.00 while the business of Aura Laboratories, Inc. is capitalized at
P3,500,000.00, Philippine currency.

If after fifteen (15) days from the last date of publication, no valid objection/opposition thereto is filed
with the same period, or the same is not revoked or withheld sooner by the Board, and upon
submission, of proofs of publication of this notice and compliance with the other requirements of
Republic Act No. 5455 and its implementing rules and regulations, the Board shall consider the
applications for formal approval. This is, further, subject to ... (certain specific) conditions: ...

For failure to undertake the publication of these applications as prescribed under Section 7 of
Republic Act No. 5455, as amended, the same shall be considered abandoned without prejudice,
however, to their refiling later.

To these applications an opposition was presented on May 4, 1978 by Rustan Marketing Corporation and Holiday
Cosmetics, inc., hereafter respectively referred to simply as Rustan and Holiday.   They contended that the
7

investments should be disallowed because they (1) would conflict with the Retail Trade Nationalization Act; (2)
would pose a clear and present danger of a monopoly in the cosmetics industry; (3) would be made in an enterprise
already adequately exploited by Philippine nationals 1(4) were inconsistent with the Government's Investment
Priorities Plans as well as declared national policies; and (5) would not contribute to a sound and balanced
development of the national economy.

The BOI set the applications for public hearing on June 27, 1978. The notice of hearing was not only directly served
on the parties — as well as the presidents of the Philippine Chamber of Cosmetics Industry, the Philippine Chamber
of Industries, the Philippine Chamber of Commerce and Industry, and the National Economic Practitioners
Association (NEPA)   it was also published in the "Daily Express."   The published notice contained a general
8 9

invitation to all interested parties of the following tenor; "All representatives of firms engaged in the manufacture and
distribution of cosmetics and other interested parties are invited to attend. The hearing of June 27, 1978 was
however postponed to July 11, 1978 at the instance of Rustan and Holiday through their counsel, Atty. D.R.
Santiago.10

At the July 11 hearing, the oppositors Rustan and Holiday inter alia drew attention to what they regarded as a fatal
jurisdictional defect in the proceedings. That defect, according to them, consisted in the violation by the BOI of
Section 7 of RA 5455 in that instead of requiring and causing publication of the applications themselves — which is
what in their view the cited provision directs — only notice thereof had actually been published and posted.   An 11

officer of the Philippine Chamber of Commerce and Industry also appeared to oppose the applications.   The 12

hearing was terminated after the BOI had granted the parties a period within which to file memoranda in
substantiation of their declared positions. The memoranda were in due course filed by the parties. That of the
oppositors dealt with the question of absence of jurisdiction on the part of the BOI resulting from the omission to
publish the applications themselves, as well as the merits of the applications, expatiating on the grounds set out in
their formal opposition date May 4, 1978, supra.  13
Thereafter, the BOI approved the applications for permissible investments of Beautifont and Aura.    The approval
14

was given at its meeting on July 27, 1978. At that meeting, the BOI also resolved that 'the applicants need not be
subjected to another publication requirement since additional conditions which are more restrictive are being
imposed on them."   At its next meeting on August 3, 1978, the BOI approved and confirmed the minutes of the
15

meeting of July 27, 1978 ."   On that same day, August 3, 1978, the BOI advised Atty. Santiago, the oppositors'
16

counsel, of the overruling of the opposition of Rustan and Holiday, as well as the reasons therefor.    Andon August
17

8, 1978, the BOI issued the Certificate of Authority for the acceptance by Beautifont and Aura of the permissible
investments of Avon Products, Inc. and Manila Manufacturing Co., Inc., respectively.  18

Pursuant to the certificate of authority, Beautifont and Aura accepted the foreign equity investments, and the
198
corresponding transfers of stock were made.

Rustan and Holiday went to court. They flied with the Manila Court of First Instance a petition for certiorari on August
10, 1978, praying for the invalidation of the proceedings before the BOI.   Their petition was accompanied by an
19

application for preliminary injunction to restrain the issuance of a certificate of authority to Beautifont and Aura. The
petition was later amended to pray instead that the BOI resolution granting the certificate of authority be annulled
and that the BOI be prohibited to approve the applications.   The petition was founded principally on the theory —
20

which they could not get the BOI to accept—that the BOI had never acquired jurisdiction over the case because of
its failure to publish and post the applications themselves, as provided by Section 7 of RA 5455, only the notice of
their filing having been so published and posted.

Beautifont and Aura, and the BOI, were required to and did promptly file answers to the petition.    An extensive
21

hearing was had on the application for preliminary injunction on August 21, 1978 at which the Solicitor General
appeared. Memoranda on the issue were thereafter submitted by the parties.   On September 18, 1978, the Court
22

promulgated an Order denying the motion for injunction. Rustan and Holiday moved for reconsideration. The motion
was opposed by Beautifont and Aura, and by the BOI. The Court set the motion for reconsideration for hearing on
November 15, 1978, but on movants' request, the hearing was postponed to December 12, 1978, and again to
January 15, 1979. The hearing was finally reset on January 31, 1979 upon agreement of the parties.   On that day 23

the movants appeared, but only to ask that they be given ten (10) days to file a memorandum in support of their
motion for reconsideration; this, the Court granted. Subsequently, however, they filed a manifestation dated
February 20, 1979 stating that they were submitting their motion for reconsideration on the arguments and the
evidence already on record.  24

But Rustan and Holiday did not wait for the resolution of their motion for reconsideration. They proceeded to apply
for relief directly with the Court of Appeals, about two weeks after filing their manifestation on February 20, 1979.
They filed with that Court on March 8, 1979, a petition for certiorari with prayer for preliminary injunction upon
substantially the same allegations and arguments set forth by them in their petition with the Court of First Instance. 25

On March 9, 1979, the Court of Appeals issued a temporary restraining order, enjoining the enforcement of the
Certificate of Authority issued by the BOI on August 8, 1978, and prohibiting Beautifont and Aura to allow
intervention by Avon Products, Inc. and Manila Manufacturing, Inc. in the management and operation of their
business, and to sell, advertise, promote or appoint dealers or representatives of Avon products, goods or
merchandise.  26

Beautifont and Aura, for their part, lost no time in coming to this Court, to seek abrogation of the restraining order of
the Court of Appeals. They filed with this Court a petition for certiorari against the Appellate Court, Rustan and
Holiday, as well as a motion for a preliminary injunction.   By Resolution dated March 16, 1979, this Court (1)
27

required the respondents (a) to file their comments on the petition and application for injunction not later than March
22, 1979, and (b) to appear at the nearing set on March 23, 1979, at 3 o'clock in the afternoon and argue on the
merits of the petition and the injunction application; and, as already stated in this opinion's opening paragraph (2)
directed the issuance of a temporary restraining order, stopping the enforcement of the Order of the Court of
Appeals dated March 9, 1979 until further orders.   This resolution was followed by another, dated March 19, 1979,
28

directing that the BOI be impleaded and that the Solicitor General comment, appear and argue, at the same time as
the respondents.   The comments were submitted,   and the hearing held in due course. The hearing culminated in
29 30

the agreement of the parties to present memoranda, after which the case would be deemed submitted for
decision.   All the parties' memoranda have long since been filed, as also various other pleadings, motions,
31

manifestations and documents.

Among the many pleadings and motions filed in this case was a "manifestation and motion" by respondents Rustan
and Holiday advising that administrative cognizance had been taken by the "Office of the President/Prime Minister"
of the petitioners' applications for authority to accept permissible investments, and praying that because of this
development, the proceedings be suspended.   Suspension of the proceedings in fact consequently ensued for a
32

time, despite the petitioners' objections, which suspension was twice extended upon subsequent motions by the
respondents.  33

In the meantime, through its counsel's letter dated April 30, 1981, Avon sought approval from the Office of the
President of its proposal 'to find a Filipino buyer and sell 30% of its equity in Beautifont ... and Aurax ... to said
buyer," so that "the BOI decision in the Avon case be affirmed.   Approval was given, and was communicated
34

through a letter dated September 4, 1981 sent by Minister J. Capiendo Tuvera to Atty. R. J. Romulo, in which it was
further stated that that approval "confirms the BOI decision on the Avon case." 35

Rustan and Holiday were quick to assail Minister Tuvera's statement — that the approval thus given "confirms the
BOI decision on the Avon case" — as a "gratuitous conclusion." They pointed out that the President was still
awaiting the recommendation of the NEDA based on public hearings on the matter.   Furthermore, they argued, the
36

reduction of Avon's holdings to 70% did not resolve the economic issues posed by its entry into the local market.

As should by now be apparent, the case turns mainly upon the sufficiency of the BOI's compliance with the 198
provisions of Section 7 of the Permissible Investments Law, RA 5455.

SEC. 7. Publication and Posting of Notices. — Immediately after the filing of any application under
this act, the Secretary of the Board of Investments shall publish the same at the expense of the
application once a week for thre consecutive weeks in the Official Gazette and in one of the
newspapers of general circulation in the province or city where the applicant has its principal office
and post copies of said application in conspicuous places, in the office of the Board of Investments
or in the building where said office is located, setting forth in such copies the name of the applicant,
the business in which it is engaged or proposes to engaged or invest, and such other data and
information as maybe required by the Board of Investments. No approval or certificate shall be valid
without the publication and posting of notices as herein provided.

It is the respondents' theory, to repeat, that this provision requires the publication and posting of
the application itself, rather than simply of a notice thereof. The theory cannot be sustained. While there is some
imprecision in the provision, which does create the impression that it is indeed the application that should be
published — it says, the "Secretary of the Board of Investments shall publish the same," the antecedent being "any
application under this Act" — other parts of the section make clear that it is the notice of the application that is
meant to be so published and posted. To begin with, the sub-head or title unmistakably refers to the notice; it reads,
"Publication and Posting of Notices." The last sentence also speaks of notices; it says that "No approval or
certificate shall be valid without the publication and posting of notices as herein provided." Finally, describing the
matter to be so published and posted, the provision declares that what shall be set forth are "the name of the
applicant, the business in which it is engaged or proposes to engage or invest, and such other data and information
as may be required by the Board of Investments" — an unmistakable indication that it is not the application itself that
is contemplated, but an abstract or summary thereof, comprehending the items mentioned, There would be no need
to itemize these few particulars if it were the application itself that was meant to be published and posted; and the
phrase, "such other data and information as may be required by the Board would in that case be clearly a
superfluity, obviously without relevance to an application already filed. The proceedings before the Board of
Investments cannot therefore be declared void merely by reason of the publication and posting of a notice of the
petitioners' applications for authority to accept permissible investments, instead of the applications themselves.

Now, the notice published and posted by the Board with reference to the applications of Beautifont and Aura, sets
out their names and addresses; the fact that they are both "existing domestic corporations;' the amount at which
their businesses are respectively capitalized; the foreign corporations proposing to invest in their businesses and
the amounts of said investments, expressed in both American and Philippine currencies. It does not however state
the business in which they are engaged, which is a detail mentioned in Section 7 of the law above-quoted. Be this
as it may, the omission cannot be deemed of so serious a character as to negate the notice altogether and prevent
the Board's acquisition of jurisdiction over the applications. The notice was drawn up by people whose business it
was to draw it up, Government officers in fact charged with preparing such notices and who presumably had the
requisite familiarity with the relevant legal provisions and procedures, acting under the authority of a body vested by
law with discretion and power precisely to prescribe the data and information to be contained in such notices. It was
patterned after a standard form used in other similar cases.   There is no showing, withal, that any significant
37

prejudice was caused to any person whatsoever by the omission of that detail; it was a detail that could have been
most easily and quickly ascertained by anyone reading the published or posted notice. It was, in fine, an innocent,
innocuous omission, if not indeed a deliberate one; and it cannot be taken against the petitioners who have not
been shown to have had any participation in the drafting of the notice by the Secretary of the Board and/or his staff.
An omission of this sort, even if characterized as a mistake, cannot in any sense be accounted as an error so
grievous as to frustrate the acquisition of jurisdiction by the Board of Investments over the case, specially where, as
here, the Court has not been cited to any prejudice whatever that has thereby been caused to any one. If error it
was, it was a harmless error, a procedural one, and not affecting the substantial rights of the parties. It may and
should be clisregarded. 38

No grave abuse of discretion or reversible error may therefore be ascribed to the Board of Investments in overruling
the objections of Rustan and Holiday to its assumption of jurisdiction grounded on the supposedly defective
publication and posting only of a notice of the applications rather than the applications themselves.

Neither may grave abuse of discretion be attributed to the Board of Investments in making an adjudgment that,
contrary to respondents' views, the investments in question (1) would not constitute an infringement of the Retail
Trade Nationalization Act, (2) would not pose a clear and present danger of a monopoly in the cosmetics industry,
(3) would not be made in an enterprise already adequately exploited by Philippine nationals, (4) were not
inconsistent with the Government's Investment Priorities Plans as well as declared national policies; and (5) would
contribute to a sound and balanced development of the national economy. That adjudgment was made after due
notice and hearing, on the basis of the facts of record, inclusive of the evidence adduced by the parties, and after
due assessment thereof in relation to the relevant legal provisions; and it does not appear incorrect.

There is moreover so strong a presumption respecting the correctness of the acts and determinations of
administrative agencies like the BOI, that the policy has been adopted for courts not to interfere therewith unless
there be a clear showing of arbitrary action or palpable and serious error. The legal presumption is that official duty
198
has been duly performed;   and it is particularly strong as regards administrative agencies ... vested with powers
39

said to be quasi-judicial in nature, in connection with the enforcement of laws affecting particular fields of activity, the
proper regulations and/or promotion of which requires a technical or special training, aside from a good knowledge
and grasp of the overall conditions, relevant to said field, obtaining in the nation (Pangasinan Transportation vs.
Public Utility Commission, 70 Phil. 221). The consequent policy and practice underlying our Administrative Law is
that courts of justice should respect the findings of fact of said administrative agencies, unless there is absolutely no
evidence in support thereof or such evidence is clearly, manifestly and patently insubstantial (Heacock vs. NLU, 95
Phil. 553).   Hence, "(c)ourts of justice will not generally interfere with purely administrative matters which are
40

addressed to the sound discretion of government agencies unless there is a clear showing that the latter acted
arbitrarily or with grave abuse of discretion or when they have acted in a capricious and whimsical manner such that
their action may amount to an excess or lack of jursdiction."  41

The claim may be made, not entirely without plausibility, that the Court of Appeals did not in truth gravely abuse its
discretion in granting a temporary restraining order 'until ... (it shall) have considered and acted on whether to give
due course to the petition."   It acted on the basis of the application for injunction embodied in the petition, both of
42

which on their faces might concededly appear to have merit, prima facie, at least; and it qqqicted at a time when all
the relevant facts had not yet been laid before it. But all those relevant facts are now before this Court. And those
facts dictate the rendition of a verdict in the petitioners' favor. There is therefore no point in referring the case back
to the Court of Appeals. The facts and the legal propositions involved will not change, nor should the ultimate
judgment. Considerable time has already elapsed and, to serve the ends of justice, it is time that the controversy is
finally laid to rest.   "Sound practice seeks to acommodate the theory which avoids waste of time, effort and
43

expense, both to the parties and the Government, not to speak of delay in the disposal of the case ( cf. Fernandez v.
Garcia, 92 Phil. 592, 597). A marked characteristic of our judicial set-up is that where the dictates of justice so
demand ... the Supreme Court should act, and act with finality.   In this case, the dictates of justice do demand that
44

this Court act, and act with finality.

WHEREFORE, the temporary restraining order issued by the Court of Appeals on March 9, 1979 in CA-G.R. No.
09005-SP is nullified and set aside; and the decision of the Board of Investments on July 27, 1978 approving the
petitioners' applications for permissible investments under Republic Act No. 5455, and, the Certificate of Authority
issued on August 8, 1978 for the acceptance by petitioners Beautifont and Aura of the permissible investments of
Avon Products, Inc. and Manila Manufacturing Co., Inc. are confirmed as being in accord with the facts and law.
Costs against private respondents.

8. G.R. No. 80719 September 26, 1989

HILDA RALLA ALMINE, petitioner,

vs.
HONORABLE COURT OF APPEALS, MINISTRY OF AGRARIAN REFORM (MAR) AND SULPICIO
BOMBALES respondents.

GANCAYCO, J.:

This case involves the issue of the power of review of the Court of Appeals over the administrative decision on the
transfer of the land to the tenant-farmer under Presidential Decree No. 27 and the amendatory and related decrees.

The facts are few and simple. On December 25, 1975, petitioner filed a sworn application for retention of her
riceland or for exemption thereof from the Operation Land Transfer Program with the then Ministry of Agrarian
Reform (MAR), Regional Office in Tabaco, Albay. After due hearing, Atty. Cidarminda Arresgado of the said office
filed an investigation report dated June 26, 1980 for the cancellation of the Certificate of Land Transfer (CLT) of
private respondent who appears to be petitioner's tenant over her riceland. Upon failure of the Ministry to take the
necessary action, petitioner reiterated her application sometime in 1979-1985 alleging that her tenant deliberately
failed and refused to deliver her landowner's share from 1975 up to the time of the filing of the said application and
that the latter had distributed his landholding to his children. A reinvestigation was conducted this time by Atty. Seth
Evasco who on October 31, 1985 filed his report recommending the cancellation of private respondent's CLT Said
report was elevated to the MAR. In an endorsement dated November 25, 1985, Regional Director Salvador Pejo
manifested his concurrence with the report of Atty. Evasco holding that the properties of the petitioner consist of
4.3589 hectares as evidenced by Transfer Certificates of Title Nos. 27167, 27168 and 27344 and hence not
covered by the Operation Land Transfer Program. Juanito L. Lorena, the Officer-in-Charge of MAR likewise
concurred therewith. However, in the order dated February 13, 1986, then Minister Conrado Estrella denied
petitioner's application for retention.

On April 17, 1986, petitioner appealed to the then Intermediate Appellate Court (IAC) The case was entitled  Hilda
Ralla Almine vs. MAR and docketed as AC-G.R. SP No. 08550. Private respondent filed a motion to dismiss the
appeal. However, it was denied in an order dated May 28, 1986. A motion for reconsideration thereof was likewise
denied. After the parties filed their respective pleadings, the Court of Appeals rendered a decision dated June 29,
1987   dismissing the appeal on the ground of lack of jurisdiction holding that questions as to whether a landowner
1

should or should not be allowed to retain his land-holdings, if administratively administratively by the Minister of
198
Agrarian Reform, are appealable and could be reviewed only by the Court of Agrarian Relations and now by the
Regional Trial Courts pursuant to Batas Pambansa Blg. 129, otherwise known as the Judiciary Reorganization Act
of 1980.   Petitioner filed a motion for reconsideration but the same was denied in a resolution dated October 22,
2

1987.  3

Hence, the present petition.

Petitioner's posture is that it is an error for the respondent appellate court to dismiss the appeal on the ground of
lack of jurisdiction since under Section 9 of Batas Pambansa Blg. 129, said appellate court is vested with the
exclusive appellate jurisdiction over all decisions, resolutions, or orders of quasi-judicial agencies except those
falling within the appellate jurisdiction of the Supreme Court. Petitioner argues that since the appeal involves both
calibration of the evidence and the determination of the laws applicable thereto, then an appeal to the Court of
Appeals is the appropriate remedy and hence her appeal should not have been dismissed. Petitioner argues further
that on the assumption that the Court of Appeals has no jurisdiction on the matter, still the appeal should not have
been dismissed but should have been certified to the proper court citing Section 3 of Rule 50 of the Revised Rules
of Court.

The Court of Agrarian Relations has original and exclusive jurisdiction as follows:

Jurisdiction over Subject matter. — The Courts of Agrarian Relations shall have original and
exclusive jurisdiction over:

a) Cases involving the rights and obligations of persons in the cultivation and use of agricultural land
except those cognizable by the National Labor Relations Commission; Provided, That no case
involving the determination of rentals over any kind of tenanted agricultural land shall be taken
cognizance of by the Courts of Agrarian Relations unless there has been a prior fixing of provisional
rental by the Department of Agrarian Reform, except that the tenant-farmer may directly bring the
case for immediate determination by the Courts of Agrarian Relations;

b) Questions involving rights granted and obligations imposed by laws, Presidential Decrees,
Orders, Instructions, Rules and Regulations issued and promulgated in relation to the agrarian
reform program; Provided, however, That matters involving the administrative implementation of the
transfer of the land to the tenant-farmer under Presidential Decree No. 27 and amendatory and
related decrees, orders, instructions, rules and regulations, shall be exclusively cognizable by the
Secretary of Agrarian Reform, namely:

(1) classification and identification of landholdings;

(2) identification of tenant-farmers and landowners, and determination of their tenancy relationship;

(3) parcellary mapping;

(4) determination of the total production and value of the land to be transferred to the tenant-farmer;

(5) issuance, recall or cancellation of certificates of land transfer in cases outside the purview of
Presidential Decree No. 816;

(6) right of retention of the landowner;

xxx xxx xxx

Provided, further, That the decision of the Secretary of Agrarian Reform may be appealed to the President of the
Philippines.  4
A perusal of the provision above cited reveals that questions as to whether a landowner should or should not be
allowed to retain his landholdings are exclusively cognizable by the Minister (now Secretary) of Agrarian Reform
whose decision may be appealed to the Office of the President and not to the Court of Agrarian Relations. These
cases are thus excluded from those cognizable by the then CAR, now the Regional Trial Courts. There is no appeal
from a decision of the President. However, the said decision may be reviewed by the courts through a special civil
action for certiorari, prohibition or mandamus, as the case may be under Rule 65 of the Rules of Court.

Thus, the respondent appellate court erred in holding that it has no jurisdiction over the petition for review by way
of certiorari brought before it of a decision of the Minister of Agrarian Reform allegedly made in grave abuse of his
discretion and in holding that this is a matter within the competence of the Court of Agrarian Reform. The Court of
198
Appeals has concurrent jurisdiction with this Court and the Regional Trial Court over petitions seeking the
extraordinary remedy of certiorari, prohibition or mandamus.  5

The failure to appeal to the Office of the President from the decision of the Minister of Agrarian Reform in this case
is not a violation of the rule on exhaustion of administrative remedies as the latter is the alter ego of the President . 
6

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated June 29, 1987 and its
resolution dated October 22, 1987, in CA-G.R. SP No. 08550 are set aside and the records of the case are
remanded to said appellate court for further proceedings. No costs. SO ORDERED.

9. [G.R. No. 79886. November 22, 1989.]

QUALITRANS LIMOUSINE SERVICE, INC., Petitioner, v. ROYAL CLASS LIMOUSINE SERVICE, LAND

TRANSPORTATION COMMISSION, COURT OF APPEALS, Respondents.

[G.R. No. 79887. November 22, 1989.]

QUALITRANS LIMOUSINE SERVICE, INC., Petitioner, v. ROYAL CLASS LIMOUSINE SERVICE, JUDGE

PERPETUA COLOMA, and COURT OF APPEALS, Respondents.

DECISION

SARMIENTO, J.:

These two petitions, in the nature of appeals by certiorari, from a joint judgment of the Court of Appeals, were
brought by Qualitrans Limousine Service, Inc., grantee of a certificate of public convenience issued by the
defunct Board of Transportation to operate a "garage (tourist) air-conditioned service" 1 in Manila to any point
in the island of Luzon. By our Resolution of September 7, 1988, we consolidated the twin cases. We also gave
due course thereto.

The facts, never disputed, are stated in the decision of the Court of Appeals. We quote:

x       x       x

On June 22, 1982, the then Board of Transportation, now the Land Transportation Commission, rendered a
Decision granting petitioner a certificate of public convenience to operate a garage (tourist) air-conditioned
service within the City of Manila and from said place to any point in Luzon, and vice-versa (Annex A, CA-G.R.
SP No. 10049).

On June 25, 1982, said Decision was amended by converting petitioner’s certificate of public convenience for
garage service into one for limousine tourist service for the transportation of all outgoing passengers of the
Manila International Airport (Annex B, CA-G.R. SP No. 10049).

On October 14, 1985, a Deed of Absolute Sale (Annex 1 of both Records) was executed by private respondent
with Transcare, Inc., a duly licensed limousine service operator and likewise, a holder of a certificate of public
convenience (Annex 2 of both Records). By virtue of said sale, the franchise granted to Transcare, Inc. for the
use of 40 units of tourist cars was sold to private Respondent.

On December 27, 1985, upon application filed for the approval of aforementioned sale, an Order was issued by
the Land Transportation Commission granting a provisional permit in favor of private respondent (Annexes C
and 3 CA-G.R. SP No. 10049); Annexes B and 3, CA G.R. No. 10370-SP). The prefatory portion thereof
states:

"The application filed in this case is for the approval of sale made by TRANSCARE, INC., in favor of ROYAL
CLASS LIMOUSINE SERVICE of the Certificate of Public Convenience issued in Case Nos. 81-4405 and 82-
415 authorizing the operation of a TOURIST CAR (AIR-CONDITIONED) SERVICE within the New Manila
International Airport and from said place to any point in the Island of Luzon accessible to motor vehicle traffic
and vice-versa, involving the right to operate forty (40) units authorized therein . . ." (Emphasis supplied).
198
On June 17, 1986, petitioner filed a motion for reconsideration before the Land Transportation Commission to
correct the route specified in the prefatory portion of its December 27, 1986 Order (Annex 4 of both Records).
Petitioner argues that the application filed by private respondent was for the route from the "New Manila
International Airport to hotels and from said hotels to any point in Luzon accessible to vehicular traffic and vice-
versa", and not from the "New Manila International Airport . . . to any point in the Island of Luzon . . ." (ibidem).
Petitioner claims that respondent has been soliciting passengers from the New Manila International Airport to
transport them to any point in Luzon to the prejudice of petitioner’s business.

On September 1, 1986, petitioner filed Civil Case No. 4275-P before the Pasay City Regional Trial Court for
damages with prayer for issuance of a writ of mandatory injunction against private respondent (Annex D, CA-
G.R. SP No. 10049: Annex 5, CA-G.R. SP No. 10370).

On same date, Hon. Fermin A. Martin. Jr., Vice-Executive Judge of the Pasay City Regional Trial Court, issued
a Restraining Order directing private respondent to desist from ferrying passengers from the New Manila
International Airport to their residences (Annex E, CA-G.R. SP No. 10049; Annex 6, CA-G.R. SP No. 10370).
The petition for preliminary injunction was set for hearing on September 5, 1986.

On September 3, 1986, private respondent, defendant in Civil Case No. 4275, filed an Urgent Motion to
Dissolve/Lift Restraining Order issued by Hon. Fermin A. Martin, Jr. (Annex F, CA-G.R. SP No. 10049).
Thereafter, same respondent filed an Opposition to petitioner’s application for a writ of preliminary mandatory
injunction (Annex G, CA-G.R. SP No. 10049).

In the hearing of September 5, 1986, respondent Hon. Perpetua D. Coloma, in whose Branch the civil case
was raffled, gave petitioner up to September 8, 1986 within which to file an opposition, if any, to respondent
urgent motion.

On September 8, 1986, petitioner filed the required opposition (Annex I, CA-G.R. SP No. 10049). On that same
date, respondent Judge ruled on said urgent motion and petitioner’s earlier prayer for the issuance of a
preliminary mandatory injunction. Pertinent portions of respondent Judge’s Order read as follows:

"After a careful examination of the arguments of both parties to support their respective claims, this Court
believes that the defendant’s contention finds justification under the doctrine of exhaustion of Administrative
remedies.

x       x       x

"Further, this Court doesn’t have jurisdiction over this case under Sec. 19 BP Blg. 129.

RTC shall have Exclusive jurisdiction. — SEC. 19, BP Blg. 129.

6. In all cases not within the exclusive jurisdiction of any Court, Tribunal, person or body exercising judicial or
quasi-judicial functions.

IN VIEW OF ALL THE FOREGOING, this Court is constrained to Lift as it does lift the Restraining Order dated
September 1, 1986 and hereby denies the Issuance of Preliminary Mandatory." (Sic) (Annex H, CA-G.R. SP
No. 10049; Annex 8, CA-G.R. SP No. 10370).

On September 16, 1986, petitioner filed a Motion for Reconsideration (Annex J, CA-G.R. SP No. 10049) which
was denied by respondent Court on September 19, 1986.
In the meantime, private respondent filed in respondent Commission a Petition for Declaratory Relief (sic)
requestioning the latter to declare the extent of its rights under its provisional authority (Annex C, CA-G.R. SP
No. 10370).

On September 17, 1986, petitioner was able to secure from respondent Commission an Order directing private
respondent "to immediately cease and desist from operating its units from the New Manila International Airport
to any point in Luzon" (Annexes D and 9, CA-G.R. SP No. 10370). Two days later, however, this Order was
lifted by respondent Commission upon motion of private respondent (Annex 5, CA-G.R. SP No. 10049;
Annexes 10 and 11, CA-G.R. SP No. 10370).cralawnad 198

On September 23, 1986, petitioner filed before this Court CA-G.R. SP No. 10049 praying, among others, that a
Restraining Order issue to prevent implementation of the September 8, and 19, 1986 Orders of respondent
Court and to direct said Court to grant the injunction prayed for therein.

On October 1, 1986, petitioner filed its Opposition to private respondent’s Petition for Declaratory Relief
pending before respondent Commission (Annex F, CA-G.R. SP No. 10370).

On October 9, 1986, respondent Commission acted on private respondent’s Petition for Declaratory Relief
ruling that the provisional authority granted to private respondent was "to transport passengers from the New
Manila International Airport and from said place to any point in the Island of Luzon . . ." (Annex G, CA-G.R. SP
No. 10370).

On October 15, 1986, petitioner filed a motion for respondent Commission to reconsider its Order of October 9,
1986 (Annex H, CA-G.R. SP No. 10370). This was denied by said Commission in its Order dated October 17,
1986 (Annex I, CA-G.R. SP No. 10370). 2

x       x       x

The Court of Appeals dismissed both of Qualitrans’ petitions and directed it to respect the issuance of a
certificate of public convenience (CPC) in favor of Royal Class Limousine Service. The petitioner now holds the
Appellate Court to be in error, in these respects:chanrob1es virtual 1aw library

THE COURT OF APPEALS ERRED IN RULING THAT THE LAND TRANSPORTATION COMMISSION HAD
JURISDICTION OVER PETITIONS FOR DECLARATORY RELIEF.

II

THE COURT OF APPEALS ERRED IN RULING THAT THE PETITION FOR DECLARATORY RELIEF OF
PRIVATE RESPONDENT WAS PROPER.

III

THE COURT OF APPEALS ERRED IN NOT RULING THAT THE DECISIONS OF THE LAND
TRANSPORTATION COMMISSION IN CASES NOS. 81-4405 AND 82-416 ARE VOID FOR BEING
CONTRARY TO MINISTRY ORDER NO. 81-054.

IV

THE COURT OF APPEALS ERRED IN NOT RULING THAT THE LAND TRANSPORTATION COMMISSION
DENIED PETITIONER DUE PROCESS OF LAW, BECAUSE IT ADVANCED THE TIME OF THE HEARING
WITHOUT NOTICE TO PETITIONER.

V
THE COURT OF APPEALS ERRED IN RULING THAT THE ORDERS OF OCTOBER 9 AND 17, 1986 OF
THE LAND TRANSPORTATION COMMISSION WAS SUPPORTED BY THE EVIDENCE, WHEN NONE WAS
EVER ADDUCED.

VI

THE COURT OF APPEALS ERRED IN NOT RULING THAT PRIVATE RESPONDENT IS NOT AUTHORIZED
TO TRANSPORT PASSENGERS DIRECTLY FROM THE MANILA INTERNATIONAL AIRPORT TO
DESTINATIONS OTHER THAN HOTELS. 3
198

Anent the said Appellate Court’s affirmance of the Regional Trial Court’s Order 4 dismissing Qualitrans’
complaint for injunction and damages, Qualitrans assigns the following errors:

I
THE REGIONAL TRIAL COURT HAS JURISDICTION OVER CIVIL CASE NO. 4275-P.

II

THE DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES IS NOT APPLICABLE TO THIS

CASE.

III

PETITIONER IS ENTITLED TO THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION. 5

We sustain the Court of Appeals in both cases.

I (G.R. No 79886)

1. As to claims that the Land Transportation Commission can not entertain suits for declaratory relief, there is
merit in the ruling under question to the effect that the Commission, under its enabling law, Executive Order
No. 1011, has ample powers to modify certificates of public convenience, including the grant of latitudinarian
franchises in favor of public utilities. We quote:

. . . The (Land Transportation) Commission shall have, among others, the following powers and functions:

(a) Quasi-judicial powers and functions which require notice and hearing —

x       x       x

(2) To issue, amend, revise, suspend or cancel Certificates of Public Convenience or permits authorizing the
operation of public land transportation services provided by motorized vehicles, and to prescribe the
appropriate terms and conditions therefor; 6

x       x       x

Royal Class’ application is, quintessentially, a petition for an expanded route, over which the Board exercises
jurisdiction under its charter. If it seemed like an "action for declaratory relief", it is only a coincidence, for the
nature of an action is to be determined by what the petition alleges and not by the appellation the parties have
attached to their pleadings. 7 Whether it is a petition for declaratory relief or for revision or grant or cancellation
of an existing CPC, the authority of the Commission to act is justified, so long as it has been properly invoked.

The fact that Qualitrans had, meanwhile, commenced suit in the Regional Trial Court (RTC) does not oust the
Commission of its jurisdiction. The Commission had a primacy of authority to take cognizance of Royal Class’
inquiry. It is to be noted, indeed, that the very trial court, by its order of September 8, 1986, 8 denied the
issuance of preliminary injunctive relief sought by Qualitrans, in deference, precisely, to the Board’s primal and
preferential jurisdiction.

2. Of course, the Commission’s action must have been preceded by due notice and hearing, 9 and precisely, it
is Qualitrans’ complaint that it had been deprived of due process for failure of the transportation body to give it
notice and hearing (in particular, of Royal Class’ motion to lift cease and desist order). The records show,
however, that the decision of the Board is founded on substantial evidence. 10 Moreover, in administrative 198
cases, "notice" is not indispensable, but the deprivation of opportunity to be heard. That is not the case here.
The reality is that on October 1, 1986, Qualitrans opposed Royal Class’ application for "declaratory relief." 11 It
can not therefore be heard to say that the Commission had acted without giving the petitioner an avenue to air
its side of the story.

3. Anent charges that the Commission issued the questioned certificate of public convenience without
evidence, suffice it to say that:chanrob1es virtual 1aw library

x       x       x

". . . the courts cannot or will not determine a controversy involving a question which is within the jurisdiction of
an administrative tribunal prior to the decision of that question by the administrative tribunal, where the
question demands the exercise of sound administrative discretion requiring the special knowledge, experience,
and services of the administrative tribunal to determine technical and intricate matters of fact, and a uniformity
of ruling is essential to comply with the purposes of the regulatory statute administered." Recently, this Court
speaking thru Mr. Chief Justice Claudio Teehankee said:

"In this era of clogged court dockets, the need for specialized administrative boards or commissions with the
special knowledge, experience and capability to hear and determine promptly disputes on technical matters or
essentially factual matters, subject to judicial review in case of grave abuse of discretion, has become well nigh
indispensable." 12

The records also reveal that there were sound reasons for the lifting of the Commission’s cease and desist
order, to wit:chanrob1es virtual 1aw library

x       x       x

1. Complaint’s (sic) Motion for Reconsideration of the order dated December 27, 1985, in Case No. 85-9619
filed on June 17, 1986, has not yet been resolved by this Commission;

2. Respondent’s Petition for Declaratory Relief filed on September 15, 1986, is still pending resolution by this
Commission;

3. Considerable losses and irreparable injury will be sustained by respondent, not to mention the loss of
income of its drivers/employees whose only source of livelihood is dependent on the present and continuous
operation of respondent; and

4. Above all, public interest and convenience will suffer and be prejudiced if respondent is restrained from
ferrying passengers from the New MIA directly to their respective residences;

5. Likewise, a restraining order should be granted only where there is a clear showing that there is indeed a
flagrant violation on (sic) the property right of another. Absence of which or in case of ambiguity, a restraining
order is unavailing. And in the present case there is really that ambiguity attendant to the issues involved,
which this Commission shall have to resolve on the merits so as not to prejudice either party. 13

3. As to charges that the certificate of public convenience of the private respondent had allowed it to transport
clients from the Ninoy Aquino International Airport only to hotels but not to any other destination, the Court is
agreed that the controlling jurisprudence is Carmelo and Oriol v. Monserrat, 14 in which we held:chanrob1es
virtual 1aw library

x       x       x

Everything else being equal, the real, primary question involved is whether it is better and more convenient for
the travelling public in the City of Manila to have two taxicab companies in operation than it is to have one, and
whether in truth and in fact the granting of another similar license to the petitioners would operate as a real
injury to Monserrat. He is the first in the field and so long as he maintains good and efficient service and meets
198
the demand of the public, it is fair to assume that he will hold his present customers and would have nothing to
fear from the granting of a license to the petitioners, and if for any reason he does not give the required kind of
service or satisfy the needs of the public, then he would have no right to complain.

x       x       x

That is to say, taxies are not operated on any schedule or over any certain route or between certain points or in
any direction, and that the certificate granted to Monserrat is in the nature of a blanket franchise to operate a
taxicab service over any and all of the streets and alleys of the city, in any direction, from any place, and at any
time, subject to the call and wish of the customer only both as to time, place, and route of travel. That is to say,
it is in the sole discretion of the person desiring to travel whether he shall call a taxi or an auto garage car, and
as to when he shall call it, and where he shall go, and in the operation of an autobus line, the operator must
maintain a fixed schedule over a specified route between certain points, and must make his trips with or
without passengers. 15

The abovestated doctrine applies with equal force to the case under consideration. For although Monserrat
involved a fleet of taxicabs, the taxicab business is no different, fundamentally, from a limousine service
because both have very broad destinations.chanroblesvirtualawlibrary

That Royal Class had, itself, admitted that its franchise covered the NAIA-hotel route alone, does not weaken
the Commission’s ruling. The yardstick, so Monserrat tells us, is that:chanrob1es virtual 1aw library

x       x       x

In the granting or refusal of a certificate of public convenience, all things considered, the question is what is for
the best interests of the public. 16

Like Monserrat, the Court finds it "hard to conceive how it would be for the best interests of the public" 17 to
have one line only, "and how the public would be injured by the granting of the certificate in question, for it
must be conceded that two companies in the field would stimulate the business . . ." 18

It is simply bellyaching to say that Royal Class had transcended the bounds of the certificate of public
convenience granted to it. What Qualitrans is plainly carping about is the threat the Royal Class’ certificate of
public convenience poses on its foothold in the "limo" service business. This is monopolism, plainly and simply,
and we can not tolerate it. The constitutional mandate is for "a more equitable distribution of opportunities,
income, and wealth" 19 and for the State to regulate or prohibit monopolies." 20

As we have held furthermore, a provisional authority is given on showing of public need. 21 Thus, it may be
issued ex-parte.

II (G.R. No. 79887)

1. For the same reasons, the above appeal must also fail. The Regional Trial Court (RTC) had acted correctly
in dismissing Qualitrans’ damage suit.

Ramos v. Court of First Instance of Tayabas, 22 in which we sustained the jurisdiction of the CFI (now, RTC) at
the expense of Public Service Commission (now, the Land Transportation Commission), has no application. In
that case, the aggrieved party had denounced his adversary’s action before the PSC. The latter, however, had
failed to act. We stamped our imprimatur on the CFI’s jurisdiction because of temporal constraints. ("Damages
pile up day by day as infringement continues. The Public Service Commission has been afforded an
opportunity to give relief and has not done so." 23

In addition, there is a need to square the functioning of administrative bodies vis-a-vis contemporary realities.
As we have observed, the increasing pattern of law and legal development has been to entrust "special cases"
to "special bodies" rather than the courts. As we have also held, the shift of emphasis is attributed to the need 198
to slacken the encumbered dockets of the judiciary and so also, to leave "special cases" to specialists and
persons trained therefor.chanrobles.com.ph : virtual law library

There is no merit in the claims that Royal Class has been guilty of unfair competition. For starters, its CPC has
been duly issued. It (CPC) can not therefore be said to have been acquired through duress or deceit to warrant
such a charge.

2. Failure to exhaust administrative remedies is arrayed against Qualitrans. Hence, it can not validly revoke our
ruling in Arrow Transportation Corp. v. Board of Transportation. 24 That case was impelled by urgent need,
which the courts could address more swiftly It is not the case here. Not much is at stake in the "limo" business.
We hold that the Commission should have better been left alone to discharge its duty without court
interference.

3. We are not impressed that Qualitrans has successfully shown that it is entitled to the injunctive writ. Its
appeal to "ruinous competition" 25 is not well-taken. Under the Constitution, the national economy stands for,
"competi[tion] in both domestic and foreign markets." 26 Obviously, not every kind of competition is "ruinous
competition." All things considered and all things equal, competition is a healthy thing. Besides, there is no
showing that Qualitrans stood to lose its capital investment with the approval of Royal Class’ franchise. 27 Our
considered opinion is that Qualitrans should improve its services as a counterbalance to Royal Class’ own
toehold in the market. And let that be its challenge.chanrobles virtual lawlibrary

WHEREFORE, the petitions are DENIED. The decision appealed from is AFFIRMED in toto. No costs. SO
ORDERED.

G.R. No. 88550               April 18, 1990

INDUSTRIAL ENTERPRISES, INC., petitioner,

vs.
THE HON. COURT OF APPEALS, MARINDUQUE MINING & INDUSTRIAL CORPORATION, THE HON.
GERONIMO VELASCO in his capacity as Minister of Energy and PHILIPPINE NATIONAL BANK, respondents.

Manuel M. Antonio and Dante Cortez for petitioner.

Pelaez, Adriano & Gregorio for respondent MMIC.
The Chief Legal Counsel for respondent PNB.

MELENCIO-HERRERA, J.:

This petition seeks the review and reversal of the Decision of respondent Court of Appeals in CA-G.R. CV No.
12660,   which ruled adversely against petitioner herein.
1

Petitioner Industrial Enterprises Inc. (IEI) was granted a coal operating contract by the Government through the
Bureau of Energy Development (BED) for the exploration of two coal blocks in Eastern Samar. Subsequently, IEI
also applied with the then Ministry of Energy for another coal operating contract for the exploration of three
additional coal blocks which, together with the original two blocks, comprised the so-called "Giporlos Area."
IEI was later on advised that in line with the objective of rationalizing the country's over-all coal supply-demand
balance . . . the logical coal operator in the area should be the Marinduque Mining and Industrial Corporation
(MMIC), which was already developing the coal deposit in another area (Bagacay Area) and that the Bagacay and
Giporlos Areas should be awarded to MMIC (Rollo, p. 37). Thus, IEI and MMIC executed a Memorandum of
Agreement whereby IEI assigned and transferred to MMIC all its rights and interests in the two coal blocks which
are the subject of IEI's coal operating contract.

Subsequently, however, IEI filed an action for rescission of the Memorandum of Agreement with damages against
MMIC and the then Minister of Energy Geronimo Velasco before the Regional Trial Court of Makati, Branch
150,   alleging that MMIC took possession of the subject coal blocks even before the Memorandum of Agreement
2

198
was finalized and approved by the BED; that MMIC discontinued work thereon; that MMIC failed to apply for a coal
operating contract for the adjacent coal blocks; and that MMIC failed and refused to pay the reimbursements agreed
upon and to assume IEI's loan obligation as provided in the Memorandum of Agreement ( Rollo, p. 38). IEI also
prayed that the Energy Minister be ordered to approve the return of the coal operating contract from MMIC to
petitioner, with a written confirmation that said contract is valid and effective, and, in due course, to convert said
contract from an exploration agreement to a development/production or exploitation contract in IEI's favor.

Respondent, Philippine National Bank (PNB), was later impleaded as co-defendant in an Amended Complaint when
the latter with the Development Bank of the Philippines effected extra-judicial foreclosures on certain mortgages,
particularly the Mortgage Trust Agreement, dated 13 July 1981, constituted in its favor by MMIC after the latter
defaulted in its obligation totalling around P22 million as of 15 July 1984. The Court of Appeals eventually dismissed
the case against the PNB (Resolution, 21 September 1989).

Strangely enough, Mr. Jesus S. Cabarrus is the President of both IEI and MMIC.

In a summary judgment, the Trial Court ordered the rescission of the Memorandum of Agreement, declared the
continued efficacy of the coal operating contract in favor of IEI; ordered the reversion of the two coal blocks covered
by the coal operating contract; ordered BED to issue its written affirmation of the coal operating contract and to
expeditiously cause the conversion thereof from exploration to development in favor of IEI; directed BED to give due
course to IEI's application for a coal operating contract; directed BED to give due course to IEI's application for three
more coal blocks; and ordered the payment of damages and rehabilitation expenses (Rollo, pp. 9-10).

In reversing the Trial Court, the Court of Appeals held that the rendition of the summary judgment was not proper
since there were genuine issues in controversy between the parties, and more importantly, that the Trial Court had
no jurisdiction over the action considering that, under Presidential Decree No. 1206, it is the BED that has the power
to decide controversies relative to the exploration, exploitation and development of coal blocks (Rollo, pp. 43-44).

Hence, this petition, to which we resolved to give due course and to decide.

Incidentally, the records disclose that during the pendency of the appeal before the Appellate Court, the suit against
the then Minister of Energy was dismissed and that, in the meantime, IEI had applied with the BED for the
development of certain coal blocks.

The decisive issue in this case is whether or not the civil court has jurisdiction to hear and decide the suit for
rescission of the Memorandum of Agreement concerning a coal operating contract over coal blocks. A corollary
question is whether or not respondent Court of Appeals erred in holding that it is the Bureau of Energy Development
(BED) which has jurisdiction over said action and not the civil court.

While the action filed by IEI sought the rescission of what appears to be an ordinary civil contract cognizable by a
civil court, the fact is that the Memorandum of Agreement sought to be rescinded is derived from a coal-operating
contract and is inextricably tied up with the right to develop coal-bearing lands and the determination of whether or
not the reversion of the coal operating contract over the subject coal blocks to IEI would be in line with the
integrated national program for coal-development and with the objective of rationalizing the country's over-all coal-
supply-demand balance, IEI's cause of action was not merely the rescission of a contract but the reversion or return
to it of the operation of the coal blocks. Thus it was that in its Decision ordering the rescission of the Agreement, the
Trial Court, inter alia, declared the continued efficacy of the coal-operating contract in IEI's favor and directed the
BED to give due course to IEI's application for three (3) IEI more coal blocks. These are matters properly falling
within the domain of the BED.

For the BED, as the successor to the Energy Development Board (abolished by Sec. 11, P.D. No. 1206, dated 6
October 1977) is tasked with the function of establishing a comprehensive and integrated national program for the
exploration, exploitation, and development and extraction of fossil fuels, such as the country's coal resources;
adopting a coal development program; regulating all activities relative thereto; and undertaking by itself or through
service contracts such exploitation and development, all in the interest of an effective and coordinated development
of extracted resources.
Thus, the pertinent sections of P.D. No. 1206 provide:

Sec. 6. Bureau of Energy Development. There is created in the Department a Bureau of Energy
Development, hereinafter referred to in this Section as the Bureau, which shall have the following powers
and functions, among others:

a. Administer a national program for the encouragement, guidance, and whenever necessary, regulation of
such business activity relative to the exploration, exploitation, development, and extraction of fossil fuels
such as petroleum, coal, . . .
198
The decisions, orders, resolutions or actions of the Bureau may be appealed to the Secretary whose
decisions are final and executory unless appealed to the President. (Emphasis supplied.)

That law further provides that the powers and functions of the defunct Energy Development Board relative to the
implementation of P.D. No. 972 on coal exploration and development have been transferred to the BED, provided
that coal operating contracts including the transfer or assignment of interest in said contracts, shall require the
approval of the Secretary (Minister) of Energy (Sec. 12, P.D. No. 1206).

Sec. 12. . . . the powers and functions transferred to the Bureau of Energy Development are:

x x x           x x x          x x x

ii. The following powers and functions of the Energy Development Board under PD No. 910 . . .

(1) Undertake by itself or through other arrangements, such as service contracts, the active exploration,
exploitation, development, and extraction of energy resources . . .

(2) Regulate all activities relative to the exploration, exploitation, development, and extraction of fossil and
nuclear fuels . . .

(P.D. No. 1206) (Emphasis supplied.)

P.D. No. 972 also provides:

Sec. 8. Each coal operating contract herein authorized shall . . . be executed by the Energy Development
Board.

Considering the foregoing statutory provisions, the jurisdiction of the BED, in the first instance, to pass upon any
question involving the Memorandum of Agreement between IEI and MMIC, revolving as its does around a coal
operating contract, should be sustained.

In recent years, it has been the jurisprudential trend to apply the doctrine of primary jurisdiction in many cases
involving matters that demand the special competence of administrative agencies. It may occur that the Court has
jurisdiction to take cognizance of a particular case, which means that the matter involved is also judicial in character.
However, if the case is such that its determination requires the expertise, specialized skills and knowledge of the
proper administrative bodies because technical matters or intricate questions of facts are involved, then relief must
first be obtained in an administrative proceeding before a remedy will be supplied by the courts even though the
matter is within the proper jurisdiction of a court. This is the doctrine of primary jurisdiction. It applies "where a claim
is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution
of issues which, under a regulatory scheme, have been placed within the special competence of an administrative
body, in such case the judicial process is suspended pending referral of such issues to the administrative body for
its view" (United States v. Western Pacific Railroad Co., 352 U.S. 59, Emphasis supplied).

Clearly, the doctrine of primary jurisdiction finds application in this case since the question of what coal areas should
be exploited and developed and which entity should be granted coal operating contracts over said areas involves a
technical determination by the BED as the administrative agency in possession of the specialized expertise to act on
the matter. The Trial Court does not have the competence to decide matters concerning activities relative to the
exploration, exploitation, development and extraction of mineral resources like coal. These issues preclude an initial
judicial determination. It behooves the courts to stand aside even when apparently they have statutory power to
proceed in recognition of the primary jurisdiction of an administrative agency.

One thrust of the multiplication of administrative agencies is that the interpretation of contracts and the
determination of private rights thereunder is no longer a uniquely judicial function, exercisable only by our
regular courts (Antipolo Realty Corp. vs. National Housing Authority, 153 SCRA 399, at 407).
The application of the doctrine of primary jurisdiction, however, does not call for the dismissal of the case below. It
need only be suspended until after the matters within the competence of the BED are threshed out and determined.
Thereby, the principal purpose behind the doctrine of primary jurisdiction is salutarily served.

Uniformity and consistency in the regulation of business entrusted to an administrative agency are secured,
and the limited function of review by the judiciary are more rationally exercised, by preliminary resort, for
ascertaining and interpreting the circumstances underlying legal issues, to agencies that are better equipped
than courts by specialization, by insight gained through experience, and by more flexible procedure (Far
East Conference v. United States, 342 U.S. 570).
198
With the foregoing conclusion arrived at, the question as to the propriety of the summary judgment rendered by the
Trial Court becomes unnecessary to resolve.

WHEREFORE, the Court Resolved to DENY the petition. No costs. SO ORDERED.

G.R. No. 92008 July 30, 1990

RAMON P. BINAMIRA, petitioner,
vs.
PETER D. GARRUCHO, JR., respondent.

Ledesma, Saludo & Associates for petitioner.

CRUZ, J.:

In this petition for quo warranto, Ramon P. Binamira seeks reinstatement to the office of General Manager of the Philippine Tourism Authority from which he claims
to have been removed without just cause in violation of his security of tenure.

The petitioner bases his claim on the following communication addressed to him by the Minister of Tourism on April
7, 1986:

MEMORANDUM TO: MR. RAMON P. BINAMIRA

You are hereby designated General Manager of the Philippine Tourism Authority, effective
immediately.

By virtue hereof, you may qualify and enter upon the performance of the duties of the office.

(Sgd.) JOSE ANTONIO GONZALES Minister of Tourism and Chairman, P.T.A. Board

Pursuant thereto, the petitioner assumed office on the same date.

On April 10, 1986, Minister Gonzales sought approval from President Aquino of the composition of the Board of
Directors of the PTA, which included Binamira as Vice-Chairman in his capacity as General Manager. This approval
was given by the President on the same date.  1

Binamira claims that since assuming office, he had discharged the duties of PTA General Manager and Vice-
Chairman of its Board of Directors and had been acknowledged as such by various government offices, including
the Office of the President.

He complains, though, that on January 2, 1990, his resignation was demanded by respondent Garrucho as the new
Secretary of Tourism. Binamira's demurrer led to an unpleasant exchange that led to his filing of a complaint against
the Secretary with the Commission on Human Rights. But that is another matter that does not concern us here.

What does is that on January 4, 1990, President Aquino sent respondent Garrucho the following
memorandum,   copy furnished Binamira:
2

4 January 1990

MEMORANDUM TO: Hon. Peter D. Garrucho, Jr.. Secretary of Tourism

 It appearing from the records you have submitted to this Office that the present General Manager of
the Philippine Tourism Authority was designated not by the President, as required by P.D. No. 564,
as amended, but only by the Secretary of Tourism, such designation is invalid. Accordingly, you are
hereby designated concurrently as General Manager, effective immediately, until I can appoint a
person to serve in the said office in a permanent capacity.

Please be guided accordingly.

(Sgd.) CORAZON C. AQUINO

198
cc: Mr. Ramon P. Binamira Philippine Tourism Authority Manila

Garrucho having taken over as General Manager of the PTA in accordance with this memorandum, the petitioner
filed this action against him to question his title. Subsequently, while his original petition was pending, Binamira filed
a supplemental petition alleging that on April 6, 1990, the President of the Philippines appointed Jose A. Capistrano
as General Manager of the Philippine Tourism Authority. Capistrano was impleaded as additional respondent.

The issue presented in this case is starkly simple.

Section 23-A of P.D. 564, which created the Philippine Tourism Authority, provides as follows:

SECTION 23-A. General Manager-Appointment and Tenure. — The General Manager shall be

appointed by the President of the Philippines and shall serve for a term of six (6) years unless
sooner removed for cause; Provided, That upon the expiration of his term, he shall serve as such
until his successor shall have been appointed and qualified. (As amended by P.D. 1400)

It is not disputed that the petitioner was not appointed by the President of the Philippines but only designated by the
Minister of Tourism. There is a clear distinction between appointment and designation that the petitioner has failed
to consider.

Appointment may be defined as the selection, by the authority vested with the power, of an individual who is to
exercise the functions of a given office.   When completed, usually with its confirmation, the appointment results in
3

security of tenure for the person chosen unless he is replaceable at pleasure because of the nature of his office.
Designation, on the other hand, connotes merely the imposition by law of additional duties on an incumbent
official,   as where, in the case before us, the Secretary of Tourism is designated Chairman of the Board of Directors
4

of the Philippine Tourism Authority, or where, under the Constitution, three Justices of the Supreme Court are
designated by the Chief Justice to sit in the Electoral Tribunal of the Senate or the House of Representatives.   It is
5

said that appointment is essentially executive while designation is legislative in nature.

Designation may also be loosely defined as an appointment because it likewise involves the naming of a particular
person to a specified public office. That is the common understanding of the term. However, where the person is
merely designated and not appointed, the implication is that he shall hold the office only in a temporary capacity and
may be replaced at will by the appointing authority. In this sense, the designation is considered only an acting or
temporary appointment, which does not confer security of tenure on the person named.

Even if so understood, that is, as an appointment, the designation of the petitioner cannot sustain his claim that he
has been illegally removed. The reason is that the decree clearly provides that the appointment of the General
Manager of the Philippine Tourism Authority shall be made by the President of the Philippines, not by any other
officer. Appointment involves the exercise of discretion, which because of its nature cannot be delegated. Legally
speaking, it was not possible for Minister Gonzales to assume the exercise of that discretion as an alter ego of the
President. The appointment (or designation) of the petitioner was not a merely mechanical or ministerial act that
could be validly performed by a subordinate even if he happened as in this case to be a member of the Cabinet.

An officer to whom a discretion is entrusted cannot delegate it to another, the presumption being that
he was chosen because he was deemed fit and competent to exercise that judgment and discretion,
and unless the power to substitute another in his place has been given to him, he cannot delegate
his duties to another. 6

In those cases in which the proper execution of the office requires, on the part of the officer, the
exercise of judgment or discretion, the presumption is that he was chosen because he was deemed
fit and competent to exercise that judgment and discretion, and, unless power to substitute another
in his place has been given to him, he cannot delegate his duties to another.  7

Indeed, even on the assumption that the power conferred on the President could be validly exercised by the
Secretary, we still cannot accept that the act of the latter, as an extension or "projection" of the personality of the
President, made irreversible the petitioner's title to the position in question. The petitioner's conclusion that Minister
Gonzales's act was in effect the act of President Aquino is based only on half the doctrine he vigorously invokes.
Justice Laurel stated that doctrine clearly in the landmark case of Villena v. Secretary of the Interior,    where he 8

described the relationship of the President of the Philippines and the members of the Cabinet as follows:

... 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
198
regular course of business, are, unless disapproved or reprobated by the Chief Executive,
presumptively the acts of the Chief Executive.

The doctrine presumes the acts of the Department Head to be the acts of the President of the Philippines when
"performed and promulgated in the regular course of business," which was true of the designation made by Minister
Gonzales in favor of the petitioner. But it also adds that such acts shall be considered valid only if not 'disapproved
or reprobated by the Chief Executive," as also happened in the case at bar.

The argument that the designation made by Minister Gonzales was approved by President Aquino through her
approval of the composition of the Board of Directors of the PTA is not persuasive. It must be remembered that
Binamira was included therein as Vice- Chairman only because of his designation as PTA General Manager by
Minister Gonzales. Such designation being merely provisional, it could be recalled at will, as in fact it was recalled
by the President herself, through the memorandum she addressed to Secretary Garrucho on January 4, 1990.

With these rulings, the petitioner's claim of security of tenure must perforce fall to the ground. His designation being
an unlawful encroachment on a presidential prerogative, he did not acquire valid title thereunder to the position in
question. Even if it be assumed that it could be and was authorized, the designation signified merely a temporary or
acting appointment that could be legally withdrawn at pleasure, as in fact it was (albeit for a different reason). In i•t•c-aüsl 

either case, the petitioner's claim of security of tenure must be rejected.

The Court sympathizes with the petitioner, who apparently believed in good faith that he was being extended a
permanent appointment by the Minister of Tourism. After all, Minister Gonzales had the ostensible authority to do so
at the time the designation was made. This belief seemed strengthened when President Aquino later approved the
composition of the PTA Board of Directors where the petitioner was designated Vice-Chairman because of his
position as General Manager of the PTA. However, such circumstances fall short of the categorical appointment
required to be made by the President herself, and not the Minister of Tourism, under Sec. 23 of P.D. No. 564. We
must rule therefore that the petitioner never acquired valid title to the disputed position and so has no right to be
reinstated as General Manager of the Philippine Tourism Authority.

WHEREFORE, the petition is DISMISSED, with costs against the petitioner. It is so ordered.

G.R. No. L-57665 July 2, 1990

ALEJA SIBAYAN VDA. DE PINEDA, CLARA SIBAYAN VDA. DE GADDI, and MIGUELA SIBAYAN
RAMENTO, petitioners,
vs.
The HON. TEODORO PEÑA, MINISTER OF NATURAL RESOURCES; The HON. JUANITO FERNANDEZ,
DIRECTOR OF MINES & GEO-SCIENCES; and the KM. 21 MINING EXPLORATION CORPORATION; The
BAGUIO GOLD MINING COMPANY, INC.; ELVIRA DE CARMELO and JOSEPH PALENGAOAN, respondents.

Rodolfo D. Dela Cruz for petitioners.

Emiliano L. Gayo and Honorato Y. Aquino for private respondents.

CORTES, J.:

Assailed in this petition for certiorari and prohibition is that part of the decision of the Director of Mines, affirmed by the Minister of Natural Resources, which
declared that petitioners have abandoned and lost their rights over their mining claim.

This case originated from a protest case for alleged overlapping or encroachment between two mining claims.

The relevant facts are as follows:

The "Ped" mining claim was located by Pedro Sibayan in January, 1932. After Sibayan's death, his heirs Miguela
and Aleja Sibayan executed a Deed of Extra-Judicial Settlement wherein they waived their rights and interest over
the "Ped" claim, among others, in favor of co-heir Feliza Sibayan. Feliza then transferred said claims to Sofia Reyes.

The "Ullmann" mining claim was located by Elvira Carmelo in February, 1932, and was subsequently transferred to
Joseph Palengaoan.

In 1962, Reyes, Palengaoan and several others formed the KM. 21 Mining Association, later converted into the KM.
21 Exploration Corporation, to which the members conveyed their respective mining claims, including the "Ped" and
"Ullmann" claims. Ultimately, the claims were assigned to the Baguio Gold Mining Company for operation. 198

During this time, an amended declaration of location for the "Ullmann" claim was registered.

On November 23, 1972, petitioners instituted Civil Case No. Q-17136 against Feliza Sibayan, Sofia Reyes, KM. 21
Mining Exploration Corporation, et. al., with the Court of First Instance, Quezon City, Branch IX. Petitioners claimed
that the Deed of Extra-Judicial Settlement from which private respondents derived their ownership and possession
over the "Ped" claim was maliciously falsified [Annex "I" to the Petition; Rollo, pp. 78-79] and prayed for annulment
of all subsequent transfers involving the mining claims.

During the pre-trial of Civil Case No. Q-17136, the parties entered into an amicable settlement, agreeing that: (1)
private respondents win return to petitioners the disputed mining claims, including the "Ped" claim; (2) petitioners will
reimburse private respondents all expenses, like assessment taxes, incurred in the preservation of the claims; and
(3) private respondents shall execute the necessary documents to reconvey the mining claims to petitioners (Annex
"I" to the Petition, pp. 4-5; Rollo, p. 78-79].

Thus, the Court of First Instance rendered a decision on November 11, 1974 ordering the parties to comply with the
above settlement [Decision of the Minister of Natural Resources, p. 4; Annex "E" to the Petition; Rollo, p. 52].

On July 20, 1974, petitioners filed with the Bureau of Mines a letter-complaint (Mines Administrative Case No. V-
784) against private respondents for alleged overlapping and encroachment of the "Ullmann" claim over the "Ped"
claim.

On January 10, 1977, the Director of Mines rendered a decision declaring that there was no conflict between the
"Ped" and "Ullmann" claims, the dispositive portion of which reads:

VIEWED IN THE LIGHT OF THE FOREGOING, the protest and complaint-in-intervention should be,
as hereby they are DISMISSED. Accordingly, respondents are hereby given the preferential right to
possess, explore, develop, exploit and operate the area covered by their "Ullmann" claim. [Decision
of the Director of Mines, p. 4; Rollo, p. 32].

Since the protest case was filed after Pres. Decree No. 463 (Mineral Resources Development Decree of 1974) took
effect on May 17, 1974, the provisions of the law were made applicable to petitioners. Pres. Decree No. 463
mandates compliance with certain requirements in order for subsisting mining claims, such as the "Ped" claim, to
avail of the benefits granted under the Decree. Otherwise, mining rights to the claim will be lost. The requirements
are embodied in Sections 100 and 101, and Section 180 of the implementing regulations, quoted as follows:

Sec. 100. Old Valid Mining Rights May Come Under This Decree. — Holders of valid and subsisting
mining locations and other rights under other laws, irrespective of the areas covered, may avail of
the rights and privileges granted under this Decree by making the necessary application therefor and
approval thereof by the Director within a period of two (2) years from the date of approval of this
Decree.

Sec. 101. Recognition and Survey of Old Subsisting Mining Claims. — All mining grants, patents,
locations, leases and permits subsisting at the time of the approval of this Decree shall be
recognized if registered pursuant to Section 100 hereof. Provided, that Spanish Royal Grants and
unpatented mining claims located and registered under the Act of the United States Congress of July
1, 1902, as amended, otherwise known as the "Philippine Bill", shall be surveyed within one (1) year
from the approval of this Decree: Provided, further, That no such mining rights shall be recognized if
there is failure to comply with the fundamental requirements of the respective grants:  And provided,
finally, That such grants, patents, locations, leases or permits as may be recognized by the Director
after proper investigation, shall comply with the applicable provisions of this Decree, more
particularly with the annual work obligations, submittal of reports, fiscal provisions and other
obligations. [Emphasis supplied].

Sec. 180. Failure to File Application to Avail of the Rights and Privileges Under the Decree — Mining
grants, patents, locations, leases, permits and other mining rights subsisting at the time of the
 approval of the Decree for which no corresponding application under Section 100 and 101 of the
Decree has been filed with the period provided in Section 176 hereof shall be considered to have
lapsed, and the area covered thereby, shall be open to relocation as if no grant, patent, location,
lease, permit and other mining rights have been made or granted thereon.

Finding that petitioners failed to comply with the above-cited provisions, respondent director declared in the
impugned portion of the decision that:

The records of this case show that respondents submitted in evidence (Exhibit 16) a certification
dated August 24, 1976 issued by our Mines Regional Officer in Baguio City to the effect 198
that protestants [petitioners] failed to file the required application to avail for "Ped" mineral claim.
Under the circumstances, and considering that the period for the filing of said application has already
expired as of May 17, 1976, protestants [petitioners] have lost whatever rights they have over their
mining claim involved in this case. Moreover, protestants [petitioners] failed to perform the required
annual assessment work since 1952 as evidenced by the certification issued by the Mining Recorder
of Benguet (Exh. 17). Needless to state that failure to perform the required annual assessment
work constitutes abandonment of the mining claim [Emphasis supplied; Decision of the Director of
Mines, pp. 3-4; Annex "C" to the Petition; Rollo, pp. 31-32].

On appeal to the Minister of Natural Resources, petitioners argued that respondent Director was without jurisdiction
or exceeded his jurisdiction in ruling that they have lost their rights over the "Ped" mining claim, since the case was
only for overlapping or encroachment and the question of whether they complied with the provisions of Pres. Decree
No. 463 was never placed at issue in the pleadings.

On November 19, 1980, then Minister of Natural Resources Jose J. Leido disposed of the appeal thus:

PREMISES CONSIDERED, the instant appeal is hereby dismissed and the decision, dated January
10, 1977, of the Director of Mines affirmed.

SO ORDERED.

[Decision of Secretary of Natural Resources, p. 10; Annex "E" to the Petition; Rollo, p. 58].

Petitioner's motion for reconsideration was likewise denied by respondent Minister in an Order dated July 10, 1981
[Order, p. 2; Annex "L" to the Petition; Rollo, p. 110]. Hence, this petition for certiorari and prohibition.

Petitioners pray for an order to (1) annul that portion of the decision which declared them to have abandoned and
lost their rights on their "Ped" claim; (2) require public respondents to recognize petitioners' vested rights on their
"Ped" mining claim; (3) enjoin private respondents to confine themselves within the boundaries of their "Ullmann"
claim; and (4) require private respondents to return to petitioners' possession the "Ped" mineral claim [Petition, p.
18; Rollo, p. 19].

Private respondents and the Solicitor General filed their respective Comments, the Solicitor General adopting
petitioners' position. Private respondents then filed their Comment to the Solicitor General's Comment. Thereafter,
the Solicitor General submitted his Reply. Whereupon, the case was deemed submitted for decision.

Petitioners reiterate that the portion of the decision which declared petitioners to have lost and/or abandoned their
rights to the "Ped" mining claim was issued without jurisdiction, in violation of due process and in grave abuse of
discretion.

As counter-argument, private respondents assert that under Section 49 of Pres. Decree No. 463, when petitioners
filed their protest case for overlapping of mining claims, they automatically subjected their "Ped" claim to questions
on the validity of its location and on the locator's having complied with all the requirements of the Decree.

The issues to be resolved in this case are (1) whether or not public respondents have jurisdiction to pass upon the
validity of the "Ped" claim in a protest case of overlapping of mining claims; and (2) should public respondents have
such jurisdiction, whether or not they committed grave abuse of discretion or excess of jurisdiction in declaring
petitioners to have abandoned their mining claim.

On the issue of jurisdiction, petitioners contend that public respondents may not validly and legally take cognizance
of an issue not raised in the complaint, i.e., the issue of the validity of the "Ped" mining claim.

This assertion is mistaken. Petitioners had filed the protest case pursuant to Pres. Decree No. 463 which vests the
Bureau of Mines with jurisdiction over protests involving mining claims [Section 48, Pres. Decree No. 463].
Under the same Decree, Section 90 confers upon the Secretary of Natural Resources, upon recommendation of the
Director of Mines, the authority to issue rules, regulations and orders necessary to carry out the provisions and
purposes of the Decree. In accordance with the statutory grant of rule-making power, the Department Secretary on
May 17, 1975 issued the Consolidated Mines Administrative Order Implementing Pres. Decree No. 463, which was
published in the Official Gazette on June 16, 1975.

One such implementing rule is Section 128, which respondent Minister of Natural Resources relied upon in his
decision to dispose of the jurisdictional issue raise d by petitioners. Section 128 provides:

Sec. 128. Issues Joined . . . 198

The Director, or the Secretary, in case of appeals, may motu proprio look into the validity of mining
claims, whether raised as an issue or not.

It is established in jurisprudence that Congress may validly delegate to administrative agencies the authority to
promulgate rules and regulations to implement a given legislation and effectuate its policies [People v. Exconde,
101 Phil. 1125 (1957); Director of Forestry v. Munoz, G.R. No. L-24796, June 28, 1968, 23 SCRA 1183]. In order to
be valid, the administrative regulation must be germane to the objects and purposes of the law, conform to the
standards that the law prescribes [People v. Exconde, supra, citing Calalang v. Williams, 70 Phil. 727 (1940);
Pangasinan Transportation v. Public Service Commission, 70 Phil. 221 (1940)], and must relate solely to carrying
into effect the general provisions of the law [U.S. v. Tupasi Molina, 29 Phil. 119 (1914)].

With these guidelines, Section 128 of the implementing rules invoked by public respondents as basis for their
jurisdiction cannot be tainted with invalidity. First, it was issued by the Department Head pursuant to validly
delegated rule-making powers. Second, it does not contravene the provisions of Pres. Decree No. 463, nor does it
expand the coverage of the Decree. Section 128 merely prescribes a procedural rule to implement the general
provisions of the enabling law. It does not amend or extend the provisions of the statute [People v. Maceren, G.R.
No. L-32166, October 18, 1977, 79 SCRA 450, citing University of Santo Tomas v. Board of Tax Appeals, 93 Phil.
376 (1953)].

Neither can it be maintained that such an implementing rule results in a denial of procedural due process, for it is
axiomatic in administrative law that what the law prohibits is not the absence of previous notice, but the absolute
absence thereof and lack of opportunity to be heard [Catura v. Court of Industrial Relations, G.R. No. L-27392,
January 30,1971, 37 SCRA 303, citing De Borja v. Tan, 93 Phil. 167 (1953)]. In this case, petitioners were afforded
the opportunity to be heard on the validity of the "Ped" mining claim when they submitted rebuttal evidence on
appeal.

Section 128, being a valid implementing rule, has the force and effect of law. Thus, public respondents were duly
empowered to inquire into the validity of the mining claims involved in the protest case, even if not raised in issue.

Having resolved the question of jurisdiction, the Court shall next determine if public respondents acted within their
jurisdiction, or if they committed grave abuse of discretion which would warrant the issuance of the writs prayed for.

As a rule, the courts will not interfere with purely administrative matters involving the exercise of judgment and
discretion, and findings of fact, of the administrative agency. The exception is when there is a clear showing that the
agency acted arbitrarily or with grave abuse of discretion or when it acted in a capricious manner such that its action
may amount to an excess or lack of jurisdiction [Pajo v. Ago, 108 Phil. 905 (1960); Ganitano v. Secretary of
Agriculture, G.R. No. L-21167. March 31, 1966, 16 SCRA 543; Beautifont, Inc. v. Court of Appeals, G.R. No. 50141,
January 29, 1988, 157 SCRA 481].

The petition is impressed with merit.

Public respondents found that petitioners failed to comply with the requirements set by law, and thus declared
petitioners to have abandoned and lost their rights over the "Ped" claim.

However, respondent director's finding that petitioners failed to file the availment-application was based solely on
evidence submitted by private respondents. This consisted of a certification issued by the Mines Regional Officer in
Baguio City dated August 24, 1976 stating that petitioners failed to file the availment-application for the "Ped" claim
within the period provided by law. The finding is effectively contradicted by the rebuttal evidence submitted by
petitioners on appeal consisting of an "Affidavit to Avail of Benefits" and an "Application for Order of Survey of
Mining Claim" (Appeal-Annex "B" and "B-1", Rollo, pp. 47-48) filed by petitioners with the Bureau of Mines office in
Manila on May 12, 1975.

The certification issued by the Mines Regional Officer of Baguio City cannot prevail over the documents clearly
evidencing the petitioners' filing the application. Not only was the application filed within the prescriptive period, it
was also duly filed with the Bureau of Mines Office in Manila, the venue specified under Section 176 of the
implementing rules.

Private respondents argue that the documents were not filed at the proper time since they were not formally offered
in evidence when the case was still before the respondent Director, and were only submitted on appeal.

The contention is clearly untenable. Petitioners precisely were unaware that the validity of the "Ped" claim would be
passed upon in the protest case since such was not raised as an issue. Hence it was only after the decision in the
protest case was rendered that petitioners found the need to present evidence on appeal relating to the validity of
the "Ped" claim. 198

Clearly, respondent Minister gravely abused his discretion when he disregarded the rebuttal evidence submitted by
petitioners which otherwise would have had the effect of reversing respondent Director's finding.

As to petitioners' supposed failure to perform annual work obligations on the "Ped" claim since 1952, the conclusion
is only partly correct. Annual work obligations, consisting of payment of assessment and taxes, had in fact been paid
up to the year 1975, although not by petitioners. The record shows that the payor was the Baguio Gold Mining
Company, to which the "Ped" claim, among others, had been assigned by private respondents for operation ( Rollo,
pp. 93-98.) And subsequent to 1975, petitioners paid the taxes due up to 1981, in compliance with the law's
mandate (Rollo, pp. 100-101.) All the documents showing these decisive facts were annexed to petitioners'
"Rejoinder to Motion to Strike Out Appellants' Motion for Reconsideration" dated February 25, 1981, and submitted
to respondent Minister [Annex "I" to the Petition, pp. 8-9; Rollo, pp. 81-82].

That petitioners were not the actual payors of the assessment due up to 1975 can be attributed to the fact that
possession of the subject claim, even up to the date when the present petition was submitted for decision, remained
with private respondents, and its ownership had been in dispute in Civil Case No. Q-17136. By the terms of the
amicable settlement contained in the November 11, 1974 decision in said civil case, which had long attained finality,
private respondent promised to return possession of the "Ped" claim to petitioners, subject to reimbursement by
petitioners of all assessments and necessary expenses paid for by private respondents. Petitioners therefore cannot
be faulted with non-payment of the assessment works, since such payment was in fact made, at least until 1975, by
the party to which such payment pertained. Consequently, such payment inures to the benefit of petitioners.

Respondent Minister evidently knew of the existence of the amicable settlement, since he discussed the terms
thereof in his decision [Decision of the Minister of Natural Resources, p. 4; Annex "E" to the Petition;  Rollo, p. 52].
Nevertheless, respondent Minister overlooked the fact that from the terms of the settlement, petitioners clearly were
not liable to pay the assessment works for the years in question, and that consequently there was no basis for a
finding of abandonment of the "Ped" claim by petitioners.

Considering the foregoing, the Court holds that public respondents had the authority to ascertain the validity of the
"Ped" claim. Nevertheless, in affirming that portion of the decision of the Director of Mines declaring petitioners to
have "abandoned and lost their rights" over the "Ped" claim, respondent Minister committed grave abuse of
discretion amounting to lack of jurisdiction.

WHEREFORE, the petition is granted. That part of the decision of the Director of Mines dated January 10, 1977 in
Mines Administrative Case No. V-784 declaring petitioners to have "abandoned and lost their rights" over the "Ped"
mineral claim is hereby declared NULL and VOID and SET ASIDE. SO ORDERED.

EN BANC

[G.R. No. 89483. August 30, 1990.]

REPUBLIC OF THE PHILIPPINES THRU: THE PRESIDENTIAL COMMISSION ON GOOD

GOVERNMENT (PCGG), AFP ANTI-GRAFT BOARD, COL. ERNESTO A. PUNSALANG and PETER
T. TABANG, Petitioners, v. HON. EUTROPIO MIGRINO, as Presiding Judge, Regional Trial
Court, NCJR, Branch 151, Pasig, Metro Manila and TROADIO TECSON, Respondents.

The Solicitor General, for Petitioners.

Pacifico B. Advincula for Private Respondent.

DECISION
CORTES, J.:

This case puts in issue the authority of the Presidential Commission on Good Government (PCGG),
through the New Armed Forces of the Philippines Anti-Graft Board (hereinafter referred to as the
"Board"), to investigate and cause the prosecution of petitioner, a retired military officer, for violation
of Republic Acts Nos. 3019 and 1379.
198
Assailed by the Republic in this petition for certiorari, prohibition and/or mandamus with prayer for
the issuance of a writ of preliminary injunction and/or temporary restraining order are the orders of
respondent judge in Civil Case No. 57092 Branch 151 of the Regional Trial Court of Pasig, Metro
Manila: (1) dated June 23, 1989, denying petitioners’ Motion to Dismiss and Opposition, and (2)
dated June 26, 1989, granting private respondent’s application for the issuance of a writ of
preliminary injunction. Thus, the petition seeks the annulment of the two orders, the issuance of an
injunction to enjoin respondent judge from proceeding with Civil Case No. 57092 and, finally, the
dismissal of the case before the trial court.

The controversy traces its roots to the order of then PCGG Chairman Jovito R. Salonga, dated May
13, 1986, which created the New Armed Forces of the Philippines Anti-Graft Board. The Board was
created to "investigate the unexplained wealth and corrupt practices of AFP personnel, both retired
and in active service." The order further stated that" [t]he Board shall be primarily charged with the
task of investigating cases of alleged violations of the Anti-Graft and Corrupt Practices Act (Republic
Act No. 3019, as amended) and shall make the necessary recommendations to appropriate
government agencies and instrumentalities with respect to the action to be taken thereon based on
its findings."cralaw virtua1aw library

Acting on information received by the Board, which indicated the acquisition of wealth beyond his
lawful income, private respondent Lt. Col. Troadio Tecson (ret.) was required by the Board to submit
his explanation/comment together with his supporting evidence by October 31, 1987 [Annex "B",
Petition]. Private respondent requested, and was granted, several postponements, but was unable to
produce his supporting evidence because they were allegedly in the custody of his bookkeeper who
had gone abroad.

Just the same, the Board proceeded with its investigation and submitted its resolution, dated June
30, 1988, recommending that private respondent be prosecuted and tried for violation of Rep. Act
No. 3019, as amended, and Rep. Act No. 1379, as amended. chanrobles lawlibrary : rednad

The case was set for preliminary investigation by the PCGG. Private respondent moved to dismiss the
case on the following grounds: (1) that the PCGG has no jurisdiction over his person; (2) that the
action against him under Rep. Act No. 1379 has already prescribed; (3) that E.O. No. 14, insofar as it
suspended the provisions of Rep. Act No. 1379 on prescription of actions, was inapplicable to his
case; and (4) that having retired from the AFP on May 9, 1984, he was now beyond the reach of Rep.
Act No. 3019. The Board opposed the motion to dismiss.

In a resolution dated February 8, 1989, the PCGG denied the motion to dismiss for lack of merit.
Private respondent moved for reconsideration but this was denied by the PCGG in a resolution dated
March 8, 1989. Private respondent was directed to submit his counter-affidavit and other
controverting evidence on March 20, 1989 at 2:00 p.m.

On March 13, 1989, private respondent filed a petition for prohibition with preliminary injunction with
the Regional Trial Court in Pasig, Metro Manila. The case was docketed as Case No. 57092 and raffled
to Branch 151, respondent judge’s court. Petitioner filed a motion to dismiss and opposed the
application for the issuance of a writ of preliminary injunction on the principal ground that the
Regional Trial Court had no jurisdiction over the Board, citing the case of PCGG v. Peña, G.R. No.
77663, April 12, 1988, 159 SCRA 556. Private respondent opposed the motion to dismiss. Petitioner
replied to the opposition.

On June 23, 1989, respondent judge denied petitioner’s motion to dismiss. On June 26, 1989,
respondent judge granted the application for the issuance of a writ of preliminary injunction,
enjoining petitioners from investigating or prosecuting private respondent under Rep. Acts Nos. 3019
and 1379 upon the filing of a bond in the amount of Twenty Thousand Pesos (P20,000.00).
Hence, the instant petition.

On August 29, 1989, the Court issued a restraining order enjoining respondent judge from enforcing
his orders dated June 23, 1989 and June 26, 1989 and from proceeding with Civil Case No. 57092.

Private respondent filed his comment, to which petitioners filed a reply. A rejoinder to the reply was
filed by private Respondent. The Court gave due course to the petition and the parties filed their
memoranda. Thereafter, the case was deemed submitted.

The issues raised in the petition are as follows: chanrob1es virtual 1aw library

198

I.

WHETHER OR NOT RESPONDENT JUDGE GRAVELY ABUSED HIS DISCRETION OR ACTED WITHOUT
OR IN EXCESS OF JURISDICTION IN ASSUMING JURISDICTION OVER AND INTERFERING WITH THE
ORDERS AND FUNCTIONS OF THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT.

II.

WHETHER, OR NOT RESPONDENT JUDGE GRAVELY ABUSED HIS DISCRETION OR ACTED WITHOUT
OR IN EXCESS OF JURISDICTION IN ISSUING THE ASSAILED ORDER DATED JUNE 26, 1989
ENJOINING PETITIONERS FROM INVESTIGATING AND PROSECUTING PRIVATE RESPONDENT FOR
VIOLATION OF REPUBLIC ACT NO. 3019, OTHERWISE KNOWN AS ANTI-GRAFT AND CORRUPT
PRACTICES ACT AND REPUBLIC ACT NO. 1379, OTHERWISE KNOWN AS AN ACT FOR THE
FORFEITURE OF UNLAWFULLY ACQUIRED PROPERTY [Rollo, p. 19].

As to the first issue, petitioner contends that following the ruling of the Court in PCGG v. Peña the
Board, being a creation and/or extension of the PCGG, is beyond the jurisdiction of the Regional Trial
Court. On the second issue, petitioner strongly argues that the private respondent’s case falls within
the jurisdiction of the PCGG.

The pivotal issue is the second one. On this point, private respondent’s position is as follows: chanrob1es virtual 1aw library

1. . . . he is not one of the subordinates contemplated in Executive Orders 1 , 2 , 14 and 14-A as the
alleged illegal acts being imputed to him, that of alleged amassing wealth beyond his legal means
while Finance Officer of the Philippine Constabulary, are acts of his own alone, not connected with his
being a crony, business associate, etc. or subordinate as the petition does not allege so. Hence the
PCGG has no jurisdiction to investigate him.

If indeed private respondent amassed wealth beyond his legal means, the procedure laid down by
Rep. Act 1379 as already pointed out before be applied. And since, he has been separated from the
government more than four years ago, the action against him under Republic Act 1379 has already
prescribed.

2. . . . no action can be filed anymore against him now under Republic Act 1379 for recovery of
unexplained wealth for the reason that he has retired more than four years ago.

3. . . . The order creating the AFP Anti-Graft Board (Annex "A", Petition) is null and void. Nowhere in
Executive Orders 1, 2, 14 and 14-A is there any authority given to the commission, its chairman and
members, to create Boards or bodies to be invested with powers similar to the powers invested with
the commission .. [Comment, pp. 6-7; Rollo, pp. 117-118].

1. The most important question to be resolved in this case is whether or not private respondent may
be investigated and caused to be prosecuted by the Board, an agency of the PCGG, for violation of
Rep. Acts Nos. 3019 and 1379. According to petitioners, the PCGG has the power to investigate and
cause the prosecution of private respondent because he is a "subordinate" of former President
Marcos. They cite the PCGG’s jurisdiction over —

(a) The recovery of all ill-gotten wealth accumulated by former President Ferdinand E. Marcos, his
immediate family, relatives, subordinates and close associates, whether located in the Philippines or
abroad, including the takeover or sequestration of all business enterprises and entities owned or
controlled by them, during his administration, directly or through nominees, by taking undue
advantage of their public office and/or using their powers, authority, influence, connections or
relationship. [E.O. No. 1, sec. 2.].

Undoubtedly, the alleged unlawful accumulation of wealth was done during the administration of
Pres. Marcos. However, what has to be inquired into is whether or not private respondent acted as a
"subordinate" of Pres. Marcos within the contemplation of E.O. No. 1, the law creating the PCGG,
when he allegedly unlawfully acquired the properties.

A close reading of E. O. No. 1 and related executive orders will readily show what is contemplated
within the term "subordinate." cralaw virtua1aw library

198
The Whereas Clauses of E. O. No. 1 express the urgent need to recover the ill-gotten wealth amassed
by former President Ferdinand E. Marcos, his immediate family, relatives, and close associates both
here and abroad.

E.O. No. 2 freezes "all assets and properties in the Philippines in which former President Marcos
and/or his wife, Mrs. Imelda Romualdez Marcos, their close relatives, subordinates, business
associates, dummies, agents, or nominees have any interest or participation." cralaw virtua1aw library

Applying the rule in statutory construction known as ejusdem generis, that is —

[W]here general words follow an enumeration of persons or things, by words of a particular and
specific meaning, such general words are not to be construed in their widest extent, but are to be
held as applying only to persons or things of the same kind or class as those specifically mentioned
[Smith, Bell & Co., Ltd. v. Register of Deeds of Davao, 96 Phil. 53, 58 (1954), citing Black on
Interpretation of Laws, 2nd Ed., 203].

the term "subordinate" as used in E.O. Nos. 1 and 2 would refer to one who enjoys a close
association or relation with former Pres. Marcos and/or his wife, similar to the immediate family
member, relative, and close associate in E.O. No. 1 and the close relative, business associate,
dummy, agent, or nominee in E.O. No. 2.

Thus, as stated by the Court in Bataan Shipyard & Engineering Co., Inc. v. PCGG, G.R. No. 75885,
May 27, 1987, 150 SCRA 181, 205-206.

The situations envisaged and sought to be governed [by Proclamation No. 3 and E.O. Nos. 1, 2 and
14] are self-evident, these being: chanrob1es virtual 1aw library

1) that" (i)ll gotten properties (were) amassed by the leaders and supporters of the previous regime"
;

a) more particularly, that" (i)ll-gotten wealth (was) accumulated by former President Ferdinand E.
Marcos, his immediate family, relatives, subordinates, and close associates, . . . located in the
Philippines or abroad, xx (and) business enterprises and entities (came to be) owned or controlled by
them, during . . . (the Marcos) administration, directly or through nominees, by taking undue
advantage of their public office and/or using their powers, authority, influence, connections or
relationship;"

b) otherwise stated, that "there are assets and properties pertaining to former President Ferdinand E.
Marcos, and/or his wife Mrs. Imelda Romualdez Marcos, their close relatives, subordinates, business
associates, dummies, agents or nominees which had been or were acquired by them directly or
indirectly, through or as a result of the improper or illegal use of funds or properties owned by the
Government of the Philippines or any of its branches, instrumentalities, enterprises, banks or
financial institutions, or by taking undue advantage of their office, authority, influence, connections
or relationship, resulting in their unjust enrichment and causing grave damage and prejudice to the
Filipino people and the Republic of the Philippines" ;

c) that "said assets and properties are in the form of bank accounts, deposits, trust accounts, shares
of stocks, buildings, shopping centers, condominiums, mansions, residences, estates, and other kinds
of real and personal properties in the Philippines and in various countries of the world;" and.

2) that certain "business enterprises and properties (were) taken over by the government of the
Marcos Administration or by entities or persons close to former President Marcos." [Footnotes
deleted].
It does not suffice, as in this case, that the respondent is or was a government official or employee
during the administration of former Pres. Marcos. There must be a prima facie showing that the
respondent unlawfully accumulated wealth by virtue of his close association or relation with former
Pres. Marcos and/or his wife. This is so because otherwise the respondent’s case will fall under
existing general laws and procedures on the matter. Rep. Act No. 3019, the Anti-Graft and Corrupt
Practices Act, penalizes the corrupt practices of any public officer. Under Rep. Act No. 1379 (An Act
Declaring Forfeited in Favor of the State Any Property Found to Have Been Unlawfully Acquired By
Any Public Officer or Employee and Providing for the Procedure Therefor), whenever any public officer
or employee has acquired during his incumbency an amount of property which is manifestly out of
proportion to his salary as such public officer or employee and to his other lawful income and the 198
income from legitimately acquired property, said property shall be presumed prima facie to have
been unlawfully acquired [Sec. 2]. The Solicitor General shall file the petition and prosecute the case
in behalf of the Republic, after preliminary investigation by the provincial or city prosecutor [Ibid].

Moreover, the record shows that private respondent was being investigated for unlawfully acquired
wealth under Rep. Acts Nos. 3019 and 1379, and not under E.O. Nos. 1, 2, 14 and 14-A.

Since private respondent was being investigated by the PCGG through the AFP Anti-Graft Board it
would have been presumed that this was under Rep. Acts Nos. 3019 and 1379 in relation to E.O.
Nos. 1, 2, 14 and 14-A. But the record itself belies this presumption: chanrob1es virtual 1aw library

(a) The letter of the chairman of the AFP Anti-Graft Board to private respondent, dated October 16,
1987, states: "This letter is in connection with the alleged information received by the AFP Anti-Graft
Board indicating your acquisition of wealth beyond legal means of income in violation of Rep. Act No.
3019 known as the Anti-Graft and Corrupt Practices Act." [Rollo, p. 39].

(b) The Resolution dated June 30, 1988 of the Board categorically states: chanrob1es virtual 1aw library

I. PRELIMINARY STATEMENT: chanrob1es virtual 1aw library

This refers to the case against Col Troadio B. Tecson PC (Ret) for alleged unexplained wealth
pursuant to R.A. 3019, as amended, otherwise known as Anti-Graft and Corrupt Practices Act and
R.A. 1379, as amended, otherwise known as the "Act for Forfeiture of Unlawfully Acquired Property."
[Rollo, p. 43].

The resolution alleges that private respondent unlawfully accumulated wealth by taking advantage of
his office as Finance Officer of the Philippine Constabulary. No attempt is made in the Board’s
resolution to link him or his accumulation of wealth to former Pres. Marcos and/or his wife.

(c) The letter of the Board chairman to the chairman of the PCGG, dated July 28, 1988, is clear: chanrob1es virtual 1aw library

Respectfully transmitted herewith for the prosecution before the Sandiganbayan is the case folder of
COLONEL TROADIO TECSON (Ret) who after preliminary investigation of the case by the Board,
found a prima facie evidence against subject officer for violating Section 8, R.A. 3019, as amended
by BP 195, otherwise known as the Anti-Graft and Corrupt Practices Act and R.A. 1379, otherwise
known as an Act for the Forfeiture of Unlawfully Acquired Property." [Rollo, p. 46].

Moreover, from the allegations of petitioner in its memorandum, it would appear that private
respondent accumulated his wealth for his own account. Petitioner quoted the letter of Ignacio
Datahan, a retired PC sergeant, to General Fidel Ramos, the material portion of which reads: chanrob1es virtual 1aw library

. . . After an official in the military unit received an Allotment Advice the same signed a cash advance
voucher, let us say in the amount of P5,000.00. Without much ado, outright, Col. Tecson paid the
amount. The official concerned was also made to sign the receipt portion on the voucher the amount
of which was left blank. Before the voucher is passed for routine processing by Mrs. Leonor Cagas,
clerk of Col. Tecson and its facilitator, the maneuver began. The amount on the face of the cash
advance voucher is altered or superimposed. The original amount of P5,000.00 was now made say,
P95,000.00. So it was actually the amount of P95,000.00 that appeared on the records. The
difference of P90,000.00 went to the syndicate.

. . . Boy Tanyag, bookkeeper in Col. Tecson’s office took care of the work.

. . . In the liquidation of the altered cash advance amount, names of persons found in the
Metropolitan Manila Telephone Directory with fictitious addresses appeared as recipients or payees.
Leonor and Boy got their shares on commission basis of the looted amount while the greater part
went to Col. Tecson. [Rollo, pp. 184-185.].

Clearly, this alleged unlawful accumulation of wealth is not that contemplated in E.O. Nos. 1, 2, 14
and 14-A.

2. It will not do to cite the order of the PCGG Chairman, dated May 13, 1986, creating the Board and
authorizing it to investigate the unexplained wealth and corrupt practices of AFP personnel, both
retired and in active service, to support the contention that PCGG has jurisdiction over the case of
private Respondent. The PCGG cannot do more than what it was empowered to do. Its powers are 198
limited. Its task is limited to the recovery of the ill-gotten wealth of the Marcoses, their relatives and
cronies. The PCGG cannot, through an order of its chairman, grant itself additional powers — powers
not contemplated in its enabling law.

3. Petitioner assails the trial court’s cognizance of the petition filed by private  Respondent.
Particularly, petitioner argues that the trial court cannot acquire jurisdiction over the PCGG. This
matter has already been settled in Peña, supra, where the Court ruled that those who wish to
question or challenge the PCGG’s acts or orders must seek recourse in the Sandiganbayan, which is
vested with exclusive and original jurisdiction. The Sandiganbayan’s decisions and final orders are in
turn subject to review on certiorari exclusively by this Court. [Ibid, at pp. 564-565].

The ruling in Peña was applied in PCGG v. Aquino, G.R. No. 77816, June 30, 1988, 163 SCRA 363,
Soriano III v. Yuson, G.R. No. 74910 (and five other cases), August 10, 1988, 164 SCRA 226 and
Olaguer v. RTC, NCJR, Br. 48, G.R. No. 81385, February 21, 1989, 170 SCRA 478, among others, to
enjoin the regional trial courts from interfering with the actions of the PCGG.

Respondent judge clearly acted without or in excess of his jurisdiction when he took cognizance of
Civil Case No. 57092 and issued the writ of preliminary injunction against the PCGG.

4. Thus, we are confronted with a situation wherein the PCGG acted in excess of its jurisdiction and,
hence, may be enjoined from doing so, but the court that issued the injunction against the PCGG has
not been vested by law with jurisdiction over it and, thus, the injunction issued was null and void.

The nullification of the assailed order of respondent judge issuing the writ of preliminary injunction is
therefore in order. Likewise, respondent judge must be enjoined from proceeding with Civil Case No.
57092.

But in view of the patent lack of authority of the PCGG to investigate and cause the prosecution of
private respondent for violation of Rep. Acts Nos. 3019 and 1379, the PCGG must also be enjoined
from proceeding with the case, without prejudice to any action that may be taken by the proper
prosecutory agency. The rule of law mandates that an agency of government be allowed to exercise
only the powers granted it.

5. The pronouncements made above should not be taken to mean that the PCGG’s creation of the
AFP Anti-Graft Board is a nullity and that the PCGG has no authority to investigate and cause the
prosecution of members and former members of the Armed Forces of the Philippines for violations of
Rep. Acts Nos. 3019 and 1379. The PCGG may investigate and cause the prosecution of active and
retired members of the AFP for violations of Rep. Acts Nos. 3019 and 1379 only in relation to E.O.
Nos. 1, 2, 14 and 14-A, i.e., insofar as they involve the recovery of the ill-gotten wealth of former
Pres. Marcos and his family and "cronies." But the PCGG would not have jurisdiction over an ordinary
case falling under Rep. Acts Nos. 3019 and 1379, as in the case at bar. E.O. Nos. 1, 2, 14 and 14-A
did not envision the PCGG as the investigator and prosecutor of all unlawful accumulations of wealth.
The PCGG was created for a specific and limited purpose, as we have explained earlier, and
necessarily its powers must be construed with this in mind.

6. n his pleadings, private respondent contends that he may no longer be prosecuted because of
prescription. He relies on section 2 of Rep. Act No. 1379 which provides that" [t]he right to file such
petition [for forfeiture of unlawfully acquired wealth] shall prescribe within four years from the date
of resignation, dismissal or separation or expiration of the term of the officer or employee
concerned." He retired on May 9, 1984, or more than six (6) years ago. However, it must be pointed
out that section 2 of Rep. Act No. 1379 should be deemed amended or repealed by Article XI, section
15 of the 1987 Constitution which provides that" [t]he right of the State to recover properties
unlawfully acquired by public officials or employees, from them or from their nominees or
transferees, shall not be barred by prescription, laches, or estoppel." Considering that sec. 2 of Rep.
Act No. 1379 was deemed amended or repealed before the prescriptive period provided therein had
lapsed insofar as private respondent is concerned, we cannot say that he had already acquired a
vested right that may not be prejudiced by a subsequent enactment.

Moreover, to bar the Government from recovering ill-gotten wealth would result in the validation or
legitimization of the unlawful acquisition, a consequence at variance with the clear intent of Rep. Act
No. 1379, which provides: chanrobles virtual lawlibrary

SEC. 11. Laws on prescription. — The laws concerning acquisitive prescription and limitation of
actions cannot be invoked by, nor shall they benefit the respondent, in respect to any property 198
unlawfully acquired by him.

Thus, we hold that the appropriate prosecutory agencies, i.e., the city or provincial prosecutor and
the Solicitor General under sec. 2 of Rep. Act No. 1379, may still investigate the case and file the
petition for the forfeiture of unlawfully acquired wealth against private respondent, now a private
citizen. (On the other hand, as regards respondents for violations of Rep. Acts Nos. 3019 and 1379
who are still in the government service, the agency granted the power to investigate and prosecute
them is the Office of the Ombudsman [Rep. Act No. 6770]). Under Presidential Decree No. 1606, as
amended, and Batas Pambansa Blg. 195 violations of Rep. Acts Nos. 3019 and 1379 shall be tried by
the Sandiganbayan.

7. The Court hastens to add that this decision is without prejudice to the prosecution of private
respondent under the pertinent provisions of the Revised Penal Code and other related penal laws.

WHEREFORE, the order of respondent judge dated June 26, 1989 in Civil Case No. 57092 is
NULLIFIED and SET ASIDE. Respondent judge is ORDERED to dismiss Civil Case No. 57092. The
temporary restraining order issued by the Court on August 29, 1989 is MADE PERMANENT. The PCGG
is ENJOINED from proceeding with the investigation and prosecution of private respondent in I.S. No.
37, without prejudice to his investigation and prosecution by the appropriate prosecutory agency. SO
ORDERED.

G.R. No. 89920 October 18, 1990

UNIVERSITY OF STO. TOMAS, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, UST FACULTY UNION, respondents.

Abad, Leaño & Associates for petitioner.

Eduardo J. Mariño, Jr. for private respondent.

GUTIERREZ, JR., J.:

May a university, pending resolution by the National Labor Relations Commission (NLRC) of its labor dispute with its union, comply with a readmission order by
granting substantially equivalent academic assignments, in lieu of actual reinstatement, to dismissed faculty members?

On June 19, 1989, the University of Sto. Tomas (UST), through its Board of Trustees, terminated the employment of
all sixteen union officers and directors of respondent UST Faculty Union on the ground that "in publishing or causing
to be published in Strike Bulletin No. 5 dated August 4, 1987, the libelous and defamatory attacks against the Father
Rector, (each of them) has committed the offenses of grave misconduct, serious disrespect to a superior and
conduct unbecoming a faculty member." (Rollo p. 41)

As a result of the dismissal of said employees, some faculty members staged mass leaves of absence on June 28,
1989 and several days thereafter, disrupting classes in all levels at the University. (Rollo, pp. 53, 92)

On July 5, 1989, the faculty union filed a complaint for illegal dismissal and unfair labor practice with the Department
of Labor and Employment. (Rollo, p. 42)

On July 7, 1989, the labor arbiter, on a prima facie showing that the termination was causing a serious labor
dispute, certified the matter to the Secretary of Labor and Employment for a possible suspension of the effects of
termination. (Rollo, p. 51)
Secretary Franklin Drilon subsequently issued an order dated July 11, 1989, the decretal portion of which reads as
follows:

WHEREFORE, ABOVE PREMISES CONSIDERED, and in the interest of industrial peace and
pursuant to Section 33 (b) of RA 6715, the effects of the termination of Ma. Melvyn Alamis, Eduardo
Marino, Jr., Urbano Agalabia, Anthony Cura, Norma Collantes, Fulvio Guerrero, Corinta Barranco,
Porfirio Jose Guico, Lily Matias, Rene Sison, Henedino Brondial, Myrna Hilario, Ronaldo Asuncion,
Nilda Redoblado, Zenaida Burgos, and Milagros Nino are hereby suspended and management is
likewise ordered to accept them back to work under the same terms and conditions prevailing prior
to their dismissal.
198

In furtherance of this Order, all faculty members are directed to immediately report back for work and
for management to accept them back under the same terms and conditions prevailing prior to the
strike.

Labor Arbiter Nieves de Castro is hereby directed to proceed with the case pending before her and
to expedite the resolution of the same.

Pending resolution, the parties are directed to cease and desist, from committing any and all acts
that might exacerbate the situation. (Rollo, p. 54)

Petitioner UST filed a motion for reconsideration on July 12, 1989 asking the Secretary of Labor and Employment to
either assume jurisdiction over the present case or certify it to the National Labor Relations Commission (NLRC) for
compulsory arbitration without suspending the effects of the termination of the 16 dismissed faculty members.
(Rollo, pp. 55-64)

On July 18, 1989, Secretary Drilon, acting on said motion for reconsideration, issued another order modifying his
previous order. The dispositive portion of the new order is quoted below:

WHEREFORE, ABOVE PREMISES CONSIDERED, the Order dated 11 July 1989 is hereby
modified. Accordingly, this Office hereby certifies the labor dispute to the National Labor Relations
Commission for compulsory arbitration pursuant to Article 263(g) of the Labor Code, as amended by
Section 27 of RA 6715.

In accordance with the above, the University of Santo Tomas is hereby ordered to readmit all its
faculty members, including the sixteen (16) union officials, under the same terms and conditions
prevailing prior to the present dispute.

The NLRC is hereby instructed to immediately call the parties and expedite the resolution of the
dispute.

The directive to the parties to cease and desist from committing any act that will aggravate the
situation is hereby reiterated. (Rollo, p. 81)

The petitioner filed a motion for clarification dated July 20, 1989 which was subsequently withdrawn. (Rollo, p. 94)

On July 27, 1989, Secretary Drilon issued another order that contained the following dispositive portion:

WHEREFORE, ABOVE PREMISES CONSIDERED, the Order dated 18 July 1989 directing the
readmission of all faculty members, including the 16 union officials, under the same terms and
conditions prevailing prior to the instant dispute is hereby affirmed.

The NLRC is hereby ordered to immediately call the parties and ensure the implementation of this
Order.

No further motion of this and any nature shall be entertained. (Rollo, p. 103)

The NLRC subsequently caned the parties to a conference on August 11, 1989 before its Labor Arbiter Romeo Go.
(Rollo, p. 9)

On August 14, 1989, the respondent union filed before the NLRC a motion to implement the orders of the Honorable
Secretary of Labor and Employment dated July 11, 18 and 27, 1989 and to cite Atty. Joselito Guianan Chan (the
petitioner's in-house counsel) for contempt. (Rollo, p. 104) The petitioner, on August 25, 1989, filed its opposition to
the private respondent's motion. (Rollo, p. 112)
On September 6, 1989, the NLRC issued a resolution, which is the subject of this petition for certiorari, set forth
below:

Certified Case No. 0531 IN RE: LABOR DISPUTE at the University of Santo Tomas. — Acting on
the Motion to Implement the Orders of the Honorable Secretary of Labor and Employment dated July
11, 18, and 27, 1989 and to cite Joselito Guianan Chan for Contempt dated August 14, 1989 and the
Urgent Ex-parte Motion to Implement Certification Orders of the Honorable Secretary of Labor and
Employment dated July 18 and 17, (Sic) 1989 and the subsequent Manifestation dated September
4, 1989, all filed by the UST Faculty Union; and considering the Opposition to Union's Motion to Cite
Atty. Joselito Guianan Chan for Contempt and Comments on its Motion to Implement the Orders of
198
the Honorable Secretary of Labor and Employment dated July 11, 18 and 27, 1989 filed on August
25, 1989 by UST through its counsel, the Commission, after deliberation, resolved, to wit:

a) The University is hereby directed to comply and faithfully abide with the July 11, 18 and 27, 1989
Orders of the Secretary of Labor and Employment by immediately reinstating or readmitting the
following faculty members under the same terms and conditions prevailing prior to the present
dispute or merely reinstate them in the payroll:

a) Ronaldo Asuncion

b) Lily Matias

c) Nilda Redoblado

d) Zenaida Burgos

e) Eduardo Marino, Jr.

f) Milagros Nino

g) Porfirio Guico

b) To fully reinstate, by giving him additional units or through payroll reinstatement, Prof. Urbano
Agalabia who was assigned only six (6) units;

c) To fully reinstate or reinstate through payroll, Prof. Fulvio Guerrero, who was assigned only three
(3) units;

d) The University is directed to pay the above-mentioned faculty members full backwages starting
from July 13, 1989, the date the faculty members presented themselves for reinstatement up to the
date of actual reinstatement or payroll reinstatement.

e) The payroll reinstatement of the above-named faculty members is hereby allowed only up to the
end of the First semester 1989; Next semester, the University is directed to actually reinstate the
faculty members by giving them their normal teaching loads;

f) The University is directed to cease and desist from offering the aforementioned faculty members
substantially equivalent academic assignments as this is not compliance in good faith with the
Orders of the Secretary of Labor and Employment. (Rollo, pp. 30-31)

Acting on an urgent motion for the issuance of a writ of preliminary injunction and/or restraining order, the Court
resolved to issue a temporary restraining order dated October 25, 1989 enjoining respondents from enforcing or
executing the assailed NLRC resolution. (Rollo, p. 160)

The petitioner assigns the following errors:

THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION (NLRC) GRAVELY ABUSED ITS
DISCRETION IN A MANNER AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT ISSUED THE
ASSAILED RESOLUTION WHICH ORDERS THE ALTERNATIVE REMEDIES OF ACTUAL REINSTATEMENT OR
PAYROLL REINSTATEMENT OF THE DISMISSED FACULTY MEMBERS.

II
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT DIRECTED THE UNIVERSITY TO PAY SOME
OF THE DISMISSED FACULTY MEMBERS ASSIGNED TO HANDLE SUBSTANTIALLY EQUIVALENT
ACADEMIC ASSIGNMENTS, 'FULL BACKWAGES STARTING FROM JULY 13, 1989, THE DATE THE FACULTY
MEMBERS PRESENTED THEMSELVES FOR REINSTATEMENT UP TO THE DATE OF ACTUAL
REINSTATEMENT OR PAYROLL REINSTATEMENT.

III

THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED GRAVE ABUSE OF 198
DISCRETION AMOUNT ING TO LACK OR EXCESS OF JURISDICTION WHEN IT CONSIDERED AS 'NOT
COMPLIANCE IN GOOD FAITH WITH THE ORDERS OF THE SECRETARY OF LABOR AND EMPLOYMENT'
THE UNIVERSITY'S ACT OF GRANTING TO SOME OF THE DISMISSED FACULTY MEMBERS,
SUBSTANTIALLY EQUIVALENT ACADEMIC ASSIGNMENTS.

IV

THE HONORABLE NLRC GRAVELY ABUSED ITS DISCRETION WHEN IT ARROGATED UPON ITSELF THE
EXERCISE OF THE RIGHT AND PREROGATIVES REPOSED BY LAW TO THE PETITIONER UNIVERSITY IN
THE LATTER'S CAPACITY AS EMPLOYER. (Rollo, pp. 9-10)

We shall deal with the first and third assignment of errors jointly because they are interrelated.

The petitioner states in its petition that: a) It has already actually reinstated six of the dismissed faculty members,
namely: Professors Alamis, Collantes, Hilario, Barranco, Brondial and Cura; b) As to Professors Agalabia and
Guerrero, whose teaching assignments were partially taken over by new faculty members, they were given back
their remaining teaching loads (not taken by new faculty members) but were likewise given substantially equivalent
academic assignments corresponding to their teachings loads already taken over by new faculty members; c) The
remaining seven faculty members, to wit: Professors Asuncion, Marino Jr., Matias, Redoblado, Burgos, Nino and
Guico, were given substantially equivalent academic assignments in lieu of actual teaching loads because all of
their teaching loads originally assigned to them at the start of the first semester of school year 1989-1990 were
already taken over by new faculty members; d) One dismissed faculty member Rene Sison, had been "absent
without official leave" or AWOL as early as the start of the first semester. (Rollo, pp. 11-12).

The petitioner advances the argument that its grant of substantially equivalent academic assignments to some of
the dismissed faculty members, instead of actual reinstatement, is well-supported by just and valid reasons. It
alleges that actual reinstatement of the dismissed faculty members whose teaching assignments were previously
taken over by new faculty members is not feasible nor practicable since this would compel the petitioner university
to violate and terminate its contracts with the faculty members who were assigned to and had actually taken over
the courses. The petitioner submits that it was never the intention of the Secretary of Labor to force it to break
employment contracts considering that those ordered temporarily reinstated could very well be accommodated with
substantially equivalent academic assignments without loss in rank, pay or privilege. Likewise, it claims that to
change the faculty member when the semester is about to end would seriously impair and prejudice the welfare and
interest of the students because dislocation, confusion and loss in momentum, if not demoralization, will surely
ensue once the change in faculty is effected. (Rollo, pp. 13-14)

The petitioner also avers that the faculty members who were given substantially equivalent academic assignments
were told by their respective deans to report to the Office of Academic Affairs and Research for their academic
assignments but the said faculty members failed to comply with these instructions. (Rollo, p. 118) Thus, the
petitioner postulates, mere payroll reinstatement which would give rise to the obligation of the University to pay
these faculty members, even if the latter are not working, would squarely run counter to the principle of "No Work,
No Pay". (Rollo, p. 15)

The respondent UST Faculty Union, on the other hand, decries that the petitioner is using the supposed
substantially equivalent academic assignments as a vehicle to embarrass and degrade the union leaders and that
the refusal of the petitioner to comply with the return-to-work order is calculated to deter, impede and discourage the
union leaders from pursuing their union activities. (Rollo, pp. 246, 254)

It also claims that the dismissed faculty members were hired to perform teaching functions and, indeed, they have
rendered dedicated teaching service to the University students for periods ranging from 12 to 39 years. Hence, they
maintain, their qualifications are fitted for classroom activities and the assignment to them of non-teaching duties,
such as (a) book analysis; (b) syllabi-making or revising; (c) test questions construction; (d) writing of monographs
and modules for students' use in learning "hard to understand" topics on the lectures; (e) designing modules,
transparencies, charts, diagrams for students' use as learning aids; and (f) other related assignments, is oppressive.
(Rollo, pp. 243-244)
In resolving the contentions of both parties, this Court refers to Article 263 (g), first paragraph, of the Labor Code, as
amended by Section 27 of Republic Act No. 6715, which provides:

(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in
an industry indispensable to the national interest, the Secretary of Labor and Employment may
assume jurisdiction over the dispute and decide it or certify the same to the Commission for
compulsory arbitration. Such assumption or certification shall have the effect of automatically
enjoining the intended or impending strike or lockout as specified in the assumption or certification
order. If one has already taken place at the time of assumption or certification, all striking or locked
out employees shall immediately return to work and the employer shall immediately resume
198
operations and readmit all workers under the same terms and conditions prevailing before the strike
or lockout. The Secretary of Labor and Employment or the Commission may seek the assistance of
law enforcement agencies to ensure compliance with this provision as well as with such orders as he
may issue to enforce the same. (Emphasis supplied.)

It was in compliance with the above provision that Secretary Drilon issued his July 18, 1989 order to "readmit all its
faculty members, including the sixteen (16) union officials, under the same terms and conditions prevailing prior to
the present dispute." (Rollo, p. 81) And rightly so, since the labor controversy which brought about a temporary
stoppage of classes in a university populated by approximately 40,000 students affected national interest.

After the petitioner filed a motion for clarification which, however, was subsequently withdrawn, Secretary Drilon
issued another order dated July 27, 1989 affirming his July 18 order and directing the NLRC to immediately call the
parties and "ensure the implementation of this order" (Rollo, p. 103)

The NLRC was thereby charged with the task of implementing a valid return-to-work order of the Secretary of Labor.
As the implementing body, its authority did not include the power to amend the Secretary's order. Since the
Secretary's July 18 order specifically provided that the dismissed faculty members shall be readmitted under the
same terms and conditions prevailing prior to the present dispute, the NLRC should have directed the actual
reinstatement of the concerned faculty members. It therefore erred in granting the alternative remedy of payroll
reinstatement which, as it turned, only resulted in confusion. The remedy of payroll reinstatement is nowhere to be
found in the orders of the Secretary of Labor and hence it should not have been imposed by the public respondent
NLRC. There is no showing that the facts called for this type of alternative remedy.

For the same reason, we rule that the grant of substantially equivalent academic assignments can not be sustained.
Clearly, the giving of substantially equivalent academic assignments, without actual teaching loads, cannot be
considered a reinstatement under the same terms and conditions prevailing before the strike. Within the context of
Article 263(g), the phrase "under the same terms and conditions" contemplates actual reinstatement or the return of
actual teaching loads to the dismissed faculty members. There are academic assignments such as the research and
writing of treatises for publication or full-time laboratory work leading to exciting discoveries which professors yearn
for as badges of honor and achievement. The assignments given to the reinstated faculty members do not fall under
such desirable categories.

Article 263(g) was devised to maintain the status quo between the workers and management in a labor dispute
causing or likely to cause a strike or lockout in an industry indispensable to the national interest, pending
adjudication of the controversy. This is precisely why the Secretary of Labor, in his July 11, 1989 order, stated that
"Pending resolution, the parties are directed to cease and desist from committing any and all acts that might
exacerbate the situation." (Rollo, p. 54) And in his order of July 18, he decreed that "The directive to the parties to
cease and desist from committing any act that will aggravate the situation is hereby reiterated." (Rollo, p. 81)

The grant of substantially equivalent academic assignments of the nature assigned by the petitioner would evidently
alter the existing status quo since the temporarily reinstated teachers will not be given their usual teaching loads. In
fact, the grant thereof aggravated the present dispute since the teachers who were assigned substantially
equivalent academic assignments refused to accept and handle what they felt were degrading or unbecoming
assignments, in turn prompting the petitioner University to withhold their salaries. (Rollo, p. 109)

We therefore hold that the public respondent NLRC did not commit grave abuse of discretion when it ruled that the
petitioner should "cease and desist from offering the aforementioned faculty members substantially equivalent
academic assignments as this is not compliance in good faith with the order of the Secretary of Labor and
Employment."

It was error for the NLRC to order the alternative remedies of payroll reinstatement or actual reinstatement.
However, the order did not amount to grave abuse of discretion. Such error is merely an error of judgment which is
not correctible by a special civil action for certiorari. The NLRC was only trying its best to work out a satisfactory ad
hoc solution to a festering and serious problem. In the light of our rulings on the impropriety of the substantially
equivalent academic assignments and the need to defer the changes of teachers until the end of the first semester,
the payroll reinstatement will actually minimize the petitioners problems in the payment of full backwages.
As to the second assignment of error, the petitioner contends that the NLRC committed grave abuse of discretion in
awarding backwages from July 13, 1989, the date the faculty members presented themselves for work, up to the
date of actual reinstatement, arguing that the motion for reconsideration seasonably filed by the petitioner had
effectively stayed the Secretary's order dated July 11, 1989.

The petitioner's stand is unmeritorious. A return-to-work order is immediately effective and executory despite the
filing of a motion for reconsideration by the petitioner. As pointed out by the Court in Philippine Air Lines Employees
Association (PALEA) v. Philippine Air Lines, Inc. (38 SCRA 372 [1971]):

The very nature of a return-to-work order issued in a certified case lends itself to no other 198
construction. The certification attests to the urgency of the matter affecting as it does an industry
indispensable to the national interest. The order is issued in the exercise of the court's compulsory
power of arbitration, and therefore must be obeyed until set aside. To say that its effectivity must
wait affirmance in a motion for reconsideration is not only to emasculate it but indeed to defeat its
import, for by then the deadline fixed for the return-to-work would, in the ordinary course, have
already passed and hence can no longer be affirmed insofar as the time element is concerned.

Additionally, although the Secretary's order of July 11 was modified by the July 18 order, the return-to-work portion
of the earlier order which states that "the faculty members should be admitted under the same terms and conditions
prevailing prior to the dispute" was affirmed.

We likewise affirm the NLRC's finding that the dismissed teachers presented themselves for reinstatement on July
13, 1989 since the factual findings of quasi-judicial agencies like the NLRC are generally accorded not only respect
but even finality if such findings are supported by substantial evidence. (Mamerto v. Inciong, 118 SCRA 265 [1982];
Baby Bus, Inc. v. Minister of Labor, 158 SCRA 221 [1988]; Packaging Products Corporation v. National Labor
Relations Commission, 152 SCRA 210 [1987]; Talisay Employees' and Laborers Association (TELA) v. Court of
Industrial Relations, 143 SCRA 213 [1986]). There is no showing that such substantial evidence is not present.

The petitioner, however, stresses that since the faculty members who were given substantially equivalent academic
assignments did not perform their assigned tasks, then they are not entitled to backwages. (Rollo, p. 19) The
petitioner is wrong. The reinstated faculty members' refusal to assume their substantially equivalent academic
assignments does not contravene the Secretary's return-to-work order. They were merely insisting on being given
actual teaching loads, on the return-to-work order being followed. We find their persistence justified as they are
rightfully and legally entitled to actual reinstatement. Since the petitioner University failed to comply with the
Secretary's order of actual reinstatement, we adjudge that the NLRC's award of backwages until actual
reinstatement is correct.

With respect to the fourth assignment of error, the petitioner expostulates that as employer, it has the sole and
exclusive right and prerogative to determine the nature and kind of work of its employees and to control and
manage its own operations. Thus, it objects to the NLRC's act of substituting its judgment for that of the petitioner in
the conduct of its affairs and operations. (Rollo, pp. 23-24)

Again, we cannot sustain the petitioner's contention. The hiring, firing, transfer, demotion and promotion of
employees are traditionally Identified as management prerogatives. However, these are not absolute prerogatives.
They are subject to limitations found in law, a collective bargaining agreement, or general principles of fair play and
justice. (Abbott Laboratories [Phil.] Inc. v. NLRC, 154 SCRA 713 [1987])

Article 263(g) is one such limitation provided by law. To the extent that Art. 263(g) calls for the admission of all
workers under the same terms and conditions prevailing before the strike, the petitioner University is restricted from
exercising its generally unbounded right to transfer or reassign its employees. The public respondent NLRC is not
substituting its own judgment for that of the petitioner in the conduct of its own affairs and operations; it is merely
complying with the mandate of the law.

The petitioner manifests the fear that if the temporarily reinstated faculty members will be allowed to handle actual
teaching assignments in the classroom, the latter would take advantage of the situation by making the classroom
the forum not for the purpose of imparting knowledge to the students but for the purpose of assailing and lambasting
the administration. (Rollo, p. 330) There may be a basis for such a fear. We can even state that such concern is not
entirely unfounded nor farfetched. However, such a fear is speculative and does not warrant a deviation from the
principle that the dismissed faculty members must be actually reinstated pending resolution of the labor dispute.
Unpleasant situations are sometimes aftermaths of bitter labor disputes. It is the function of Government to fairly
apply the law and thereby minimize the dispute's harmful effects. It is in this light that the return to work order should
be viewed and obeyed.

One thing has not escaped this Court's attention. Professors Alamis, Cura, Collantes, Barranco, Brondial and Hilario
were already reinstated by the petitioner in compliance with the Secretary's return-to-work order. Knowing this to be
a fact, the NLRC, in its assailed resolution, dealt only with the fate of the remaining faculty members who were given
substantially equivalent academic assignments. The names of the aforementioned faculty members appear
nowhere in the disputed NLRC order. Inasmuch as these faculty members actually reinstated were not covered by
the NLRC resolution, then it follows that they were likewise not covered by the Court's temporary restraining order
enjoining respondents from enforcing or executing the NLRC resolution. The effects of the temporary restraining
order did not extend to them. Yet, after the Court issued the temporary restraining order, the petitioner lost no time
in recalling their actual teaching assignments and giving them, together with the rest of the dismissed faculty
members, substantially equivalent academic assignments.

The petitioner's dogmatic insistence in issuing substantially equivalent academic assignments stems from the fact
that the teaching loads of the dismissed professors have already been assigned to other faculty members. It wants
198
us to accept this remedy as one resorted to in good faith. And yet, the petitioner's employment of the temporary
restraining order as a pretext to enable it to substitute substantially equivalent academic assignments even for those
who were earlier already reinstated to their actual teaching loads runs counter to the dictates of fair play.

With respect to the private respondent's allegation of union busting by the petitioner, we do not at this time pass
upon this issue. Its determination falls within the competence of the NLRC, as compulsory arbitrator, before whom
the labor dispute is under consideration. We are merely called upon to decide the propriety of the petitioner
University's grant of substantially equivalent academic assignments pending resolution of the complaint for unfair
labor pratice and illegal dismissal filed by the private respondent.

Although we pronounce that the dismissed faculty members must be actually reinstated while the labor dispute is
being resolved, we have to take into account the fact that at this time, the first semester for schoolyear 1990-1991 is
about to end. To change the faculty members around the time of final examinations would adversely affect and
prejudice the students whose welfare and interest we consider to be of primordial importance and for whom both the
University and the faculty union must subordinate their claims and desires. This Court therefore resolves that the
actual reinstatement of the non-reinstated faculty members, pending resolution of the labor controversy before the
NLRC, may take effect at the start of the second semester of the schoolyear 1990-1991 but not later. With this
arrangement, the petitioner's reasoning that it will be violating contracts with the faculty members who took over the
dismissed professors' teaching loads becomes moot considering that, as it alleges in its petition, it operates on a
semestral basis.

Under the principle that no appointments can be made to fill items which are not yet lawfully vacant, the contracts of
new professors cannot prevail over the right to reinstatement of the dismissed personnel. However, we apply
equitable principles for the sake of the students and order actual reinstatement at the start of the second semester.

WHEREFORE, the petition is hereby DISMISSED. However, the NLRC resolution dated September 6, 1989 is
MODIFIED and the petitioner University of Sto. Tomas is directed to temporarily reinstate, pending and without
prejudice to the outcome of the labor dispute before the National Labor Relations Commission, the sixteen (16)
dismissed faculty members to their actual teaching assignments, at the start of the second semester of the
schoolyear 1990-1991. Prior to their temporary reinstatement to their actual teaching loads, the said faculty
members shall be entitled to fall wages, backwages, and other benefits. The Temporary Restraining Order dated
October 25, 1989 is hereby LIFTED. SO ORDERED.

G.R. No. L-46218 October 23, 1990

JOVENTINO MADRIGAL, petitioner-appellant,
vs.
PROV. GOV. ARISTEO M. LECAROZ, VICE-GOVERNOR CELSO ZOLETA, JR., PROVINCIAL BOARD
MEMBERS DOMINGO RIEGO AND MARCIAL PRINCIPE; PROV. ENGR. ENRIQUE M. ISIDRO, ABRAHAM T.
TADURAN AND THE PROVINCE OF MARINDUQUE, respondents-appellees.

F.S. Rivera Jr. for petitioner.

MEDIALDEA J.:

This case was certified to US by the Court of Appeals since it raises pure questions of law (pp. 66-68, Rollo).

The issue raised in this case are certainly far from novel. We shall, therefore, simply reiterate well established
jurisprudential rules on the prescriptive period within which to file a petition for mandamus to compel reinstatement
to a government office and a claim for back salaries and damages related thereto.
The antecedent facts are as follows:

On November 25, 1971, public respondents Governor Aristeo M. Lecaroz, Vice-Governor Celso Zoleta, Jr.,
Provincial Board of Marinduque members Domingo Riego and Marcial Principe abolished petitioner-appellat
Joventino Madrigal's possitionas a permanent construction capataz in the office of the Provincial Engineer from the
annual Roads Bridges Fund Budget for fiscal year 1971-1972 (p.2, Records) by virtue of Resolution No. 204. The
abolition was allegedly due to the poor financial condition of the province and it appearing that his position was not
essential (p. 6, Records).

On April 22, 1972, Madrigal appealed to the Civil Service Commission. On August 7, 1973, he transmitted a follow- 198
up letter to the Commission regarding his appela. On January 7, 1974, the Commission in its 1st Indorsement
declared the removal of Madrigal from the service illegal (pp. 7-8, Records).

On April 26, 1974, public respondent Governor Aristeo M. Lecaroz moved for a reconsideration of said resolution.
On February 10, 1975, the Commission denied the motion for reconsideration (pp. 9-10, Records).

On August 4, 1975, Madrigal sent a letter to the Provincial Board requesting implementation of the resolution of the
Commission and consequently, reinstatement to his former posistion.

On August 18, 1975, the Provincial Board, through Resolution No. 93, denied Madrigal's request for reinstatement
because his former posistion no longer exists. In the same resolution, it ordered the appropriation of the amount of
P4,200.00 as his back salaries covering the preiod December 1, 1971 up to June 30, 1973 (p. 47, Records).

On December 15, 1975, Madrigal filed a petition before the Court of First Instance (now Regional Trial Court) of
Marinduque against public respondents Governor Aristeo M. Lecaroz, Vice-Governor Celso Zoleta, Jr., Provincial
Board Members Domingo Riego and Marcial Principe, Provincial Engineer Enrique M. Isidro, Abraham I. Taduran
and the Province of Marinduque for mandamus and damages seeking, inter alia, (1) restoration of his abolished
position in the Roads and Bridges Fund Budget of the Province; (2) reinstatement to such position; and (3) payment
of his back salaries plus damages (pp. 1-5, Records).

On March 16, 1976, the trial court issued an order dismissing the petition on the ground that Madrigal's cause of
action was barred by laches. The trial court rationalized its judgment as follows (pp. 31-33, Rollo):

It is beyond question that herein petitioner was separated from the service on November 25, 1971,
and it was only on December 15, 1975, or FOUR (4) YEARS and TWENTY (20) DAYS after, that he
filed this case for "Mandamus and Damages" with the principal aim of causing his reinstatement to
the public position from where his service was terminated.

Much as the petitioner might have had a good cause of action, it is unfortunate that (sic) the same is
now barred by laches.

A person claiming right to a position in the civil service should file his action for
reinstatement within one year from his illegal removal from office, otherwise he is
considered as having abandoned the same (Gonzales vs. Rodriguez, L-12976,
March 24, 1961, 1 SCRA 755; Cebu Portland Cement Co. vs. CIR, L-17897, Aug. 31,
1962, 5 SCRA 1113; Alipio vs. Rodriguez, L-17336, Dec. 26, 1963, 9 SCRA 752).

The rationale for the aforecited doctrine on time limitation of a cause of action in a judicial tribunal by
one seeking reinstatement in the civil service is that the suitor thereby is guilty of LACHES (National
Shipyards and Steel Corporation vs. CIR, L-21675, May 23, 1967, 20 SCRA 134).

The ruling is no doubt inspired by the provision of Section 16, Rule 66 of the Revised Rules of Court
on "Quo Warranto", pertinent portion of which reads:

Sec. 16. Limitations. — Nothing contained in this rule shall be construed to authorize an action ...
against a public officer or employee for his ouster from office unless the same be commenced within
one (1) year after the cause of such ouster, or the right of the plaintiff to hold such office or position,
arose ....

and to the established jurisprudence interpreting the aforequoted rule to the effect that the period of
one year fixed therein is a condition precedent to the existence of the cause of action for  quo
warranto (Bumanglag vs Fernandez, L-11482, Nov. 29, 1960; Tañada vs. Yulo, 61 Phil. 515; Ortiz
Oiroso vs. de Guzman, 49 Phil. 371; Tumulak vs. Egay, 82 Phil. 828).

That the instant case is one for MANDAMUS, and not QUO WARRANTO, is not of any significance,
for the same principle applies as held in these cases:
 An action for reinstatement, by a public official, whether it be quo warranto
or mandamus, should be filed in court within one year from removal or separation,
otherwise the action will be barred, (Morales, Jr. vs. Patriarca, L-21280, April 30,
1965, 13 SCRA 766; emphasis supplied).

..... We hold that as petitioner was dismissed on June 16, 1953 and did not file
his petition for mandamus for his reinstatement until July 1, 1954 or after a period of
one year, he is deemed to have abandoned his right to his former position and is not
entitled to reinstatement therein by mandamus (Unabia vs. City Mayor, L-8759, May
25, 1956, 53 O.G. 132; emphasis supplied).
198

On April 27, 1976, the motion for reconsideration was denied (pp. 37-39, Rollo).

Madrigal assigns as errors the following:

1) the trial court erred in dismissing the petition for mandamus and damages on the ground of laches; and

2) assuming arguendo that his claim for reinstatement was not filed seasonably, the trial court erred in not
proceeding with the trial of the case on the merits to determine the claim for back salaries and damages.

As regards the first assignment of error, Madrigal alleges that the one (1) year period prescribed in an action for quo
warranto is not applicable in an action for mandamus because Rule 65 of the Rules of Court does not provide for
such prescriptive period. The declaration by the trial court that the pendency of administrative remedies does not
operate to suspend the period of one (1) year within which to file the petition for mandamus, should be confined to
actions for quo warranto only. On the contrary, he contends that exhaustion of administrative remedies is a
condition sine qua non before one can petition for mandamus.

On the part of public respondents, they aver that it has become an established part of our jurisprudence, being a
public policy repeatedly cited by the courts in myriad of mandamus cases, that actions for reinstatement should be
brought within one year from the date of dismissal, otherwise, they will be barred by laches. The pendency of an
administrative remedy before the Commission does not stop the running of the one (1) year period within which
a mandamus case for reinstatement should be filed.

The unbending jurisprudence in this jurisdiction is to the effect that a petition for quo
warranto and mandamus affecting titles to public office must be filed within one (1) year from the date the petitioner
is ousted from his position (Galano, et al. v. Roxas, G.R. No. L-31241, September 12, 1975, 67 SCRA 8; Cornejo v.
Secretary of Justice, G.R. No. L-32818, June 28, 1974, 57 SCRA 663; Sison v. Pangramuyen, etc., et al., G.R. No.
L-40295, July 31, 1978, 84 SCRA 364; Cui v. Cui, G.R. No. L-18727, August 31, 1964, 11 SCRA 755; Villaluz v.
Zaldivar, G.R. No. L-22754, December 31, 1965,15 SCRA 710; Villegas v. De la Cruz, G.R. No. L-23752, December
31, 1965,15 SCRA 720; De la Maza v. Ochave, G.R. No. L-22336, May 23, 1967,20 SCRA 142; Alejo v. Marquez,
G.R. No. L-29053, February 27, 1971, 37 SCRA 762). The reason behind this being was expounded in the case of
Unabia v. City Mayor, etc., 99 Phil. 253 where We said:

..... [W]e note that in actions of quo warranto involving right to an office, the action must be instituted within the
period of one year. This has been the law in the island since 1901, the period having been originally fixed in Section
216 of the Code of Civil Procedure (Act No. 190). We find this provision to be an expression of policy on the part of
the State that persons claiming a right to an office of which they are illegally dispossessed should immediately take
steps to recover said office and that if they do not do so within a period of one year, they shall be considered as
having lost their right thereto by abandonment. There are weighty reasons of public policy and convenience that
demand the adoption of a similar period for persons claiming rights to positions in the civil service. There must be
stability in the service so that public business may (sic) be unduly retarded; delays in the statement of the right to
positions in the service must be discouraged. The following considerations as to public officers, by Mr. Justice
Bengzon, may well be applicable to employees in the civil service:

Furthermore, constitutional rights may certainly be waived, and the inaction of the officer for one
year could be validly considered as waiver, i.e., a renunciation which no principle of justice may
prevent, he being at liberty to resign his position anytime he pleases.

And there is good justification for the limitation period; it is not proper that the title to public office
should be subjected to continued uncertainly (sic), and the peoples" interest require that such right
should be determined as speedily as practicable (Tumulak vs. Egay, 46 Off. Gaz., [8], 3693, 3695.)

Further, the Government must be immediately informed or advised if any person claims to be
entitled to an office or a position in the civil service as against another actually holding it, so that the
Government may not be faced with the predicament of having to pay the salaries, one, for the
person actually holding the office, although illegally, and another, for one not actually rendering
 service although entitled to do so. We hold that in view of the policy of the State contained in the law
fixing the period of one year within which action for quo warranto may be instituted, any person
claiming right to position in the civil service should also be required to file his petition for
reinstatement within the period of one year, otherwise he is thereby considered as having
abandoned his office.

The fatal drawback of Madrigal's cause is that he came to court out of time. As aforestated, it was only after
four (4) years and twenty (20) days from the abolition of his position that he file the petition
for mandamus and damages. This single circumstance has closed the door for any judicial remedy in his
favor.
198

And this one (1) year period is not interrupted by the prosecution of any administrative remedy (Torres v. Quintos,
88 Phil. 436). Actually, the recourse by Madrigal to the Commission was unwarranted. It is fundamental that in a
case where pure questions of law are raised, the doctrine of exhaustion of administrative remedies cannot apply
because issues of law cannot be resolved with finality by the administrative officer. Appeal to the administrative
officer of orders involving questions of law would be an exercise in futility since administrative officers cannot decide
such issues with finality (Cebu Oxygen and Acetylene Co., Inc. v. Drilon, et al., G.R. No. 82849, August 2, 1989,
citing Pascual v. Provincial Board of Nueva Ecija, 106 Phil. 466; Mondano v. Silvosa, 97 Phil. 143). In the present
case, only a legal question is to be resolved, that is, whether or not the abolition of Madrigal's position was in
accordance with law.

With respect to the second assignment of error, Madrigal asserts that despite (1) the ruling of the Commission
declaring his removal from office illegal; (2) Resolution No. 93 of the Provincial Board; and (3) Provincial Voucher
No. 714 covering the appropriation for the sum of P3,667.29, representing his back salaries for said period, the trial
court still refused to grant his money claim.

In answer thereto, public respondents contend that the court cannot pass upon Madrigal's right to back salaries
without passing upon the validity of the abolition of his position which is a matter that cannot now be a subject of
judicial inquiry. This is so because the question of back salaries and damages is only incidental to the issues
involving the validity of said abolition and his request for reinstatement.

Again, We uphold the view advanced by public respondents. Madrigal loses sight of the fact that the claim for back
salaries and damages cannot stand by itself. The principal action having failed, perforce, the incidental action must
likewise fail. Needless to state, the claim for back salaries and damages is also subject to the prescriptive period of
one (1) year (see Gutierrez v. Bachrach Motor Co., Inc., 105 Phil. 9).

ACCORDINGLY, the appeal is hereby DENIED. The orders of the Court of First Instance of Marinduque dated
March 16, 1976 and April 27, 1976 are AFFIRMED. SO ORDERED.

16.

G.R. No. 72477 October 16, 1990

NATIONAL POWER CORPORATION, petitioner,

vs.
HON. PRESIDING JUDGE, REGIONAL TRIAL COURT, 10TH JUDICIAL REGION BRANCH XXV, CAGAYAN DE
ORO CITY, PROVINCE OF MISAMIS ORIENTAL, MUNICIPALITY OF JASAAN, MISAMIS ORIENTAL AND
BARANGAY APLAYA, JASAAN, MISAMIS ORIENTAL, respondents.

Pantaleon Z. Salcedo for respondent Barangay Aplaya.

The Provincial Attorney for respondent Misamis Oriental and Municipality of Jasaan.

FERNAN, C.J.:

In this Special Civil Action for Certiorari, petitioner National Power Corporation (NAPOCOR for brevity) questions the jurisdiction of the Regional Trial Court of
Cagayan de Oro City, Branch XXV to hear Civil Case No. 9901 filed by respondents Province of Misamis Oriental and Municipality of Jasaan for the collection of
real property tax and special education fund tax from petitioner covering the years 1978 to 1984. The antecedent facts are as follows:

On October 10, 1984, the Province of Misamis Oriental filed a complaint   with the Regional Trial Court of Cagayan
1

de Oro City, Branch XXV against NAPOCOR for the collection of real property tax and special education fund tax in
the amounts of P11,105,008.10 and P11,104,658.10, respectively, covering the period 1978 to 1984. Petitioner
NAPOCOR then defendant therein, filed a motion to dismiss   dated January 12, 1985 on the grounds that the court
2

has no jurisdiction over the action or suit and that it is not the proper forum for the adjudication of the case. In
support of this motion NAPOCOR cited Presidential Decree No. 242 dated July 9, 1973 which provides that disputes
between agencies of the government including govemment-owned or controlled corporations shall be
administratively settled or adjudicated by the Secretary of Justice.

The court through Judge Pablito C. Pielago issued an order   dated January 28, 1985 denying the motion to dismiss.
3

NAPOCOR filed a supplemental motion to dismiss   on February 22, 1985 citing a resolution of the Fiscal Incentive
4

Review Board, No. 10-85 effective January 11, 1984, restoring the tax and duty exemption privileges of petitioner.
198
On March 27, 1985, NAPOCOR filed its answer to the complaint with counterclaim. Treating the same as a second
motion to dismiss and finding the affirmative defenses therein stated to be unmeritorious, the court  a quo issued an
order on June 27, 1985, denying the second motion to dismiss and requiring both parties to appear before the court
for the purpose of submitting a stipulation of facts.

On July 23, 1985, Barangay Aplaya, Municipality of Jasaan, Misamis Oriental filed a complaint in
intervention   contending that non-payment by NAPOCOR of real property taxes would adversely affect its interest
5

since under the law, ten percent (10%) of the real property tax collected on properties within its jurisdiction shall
accrue to the general fund of the barangay. Thereafter, the case was set for trial pursuant to the court's order dated
August 20, 1985.  6

On October 30, 1985, petitioner NAPOCOR filed before this Court the present special civil action for
certiorari   setting forth the following issues, to wit:
7

1) Respondent Court acted without or in excess of jurisdiction and with grave abuse of discretion
when it issued the orders dated January 28, 1985, June 27, 1985 and August 20, 1985, denying
petitioner's motions to have Civil Case No. 9901 dismissed on the grounds of lack of jurisdiction
and/or improper venue.

2) Petitioner is exempt from payment of real property taxes.

Relied upon by NAPOCOR in assailing the jurisdiction of the lower court and/or the venue of the action are Sections
2 and 3 of Presidential Decree No. 242, entitled "PRESCRIBING THE PROCEDURE FOR ADMINISTRATIVE
SETTLEMENT OR ADJUDICATION OF DISPUTES, CLAIMS AND CONTROVERSIES BETWEEN OR AMONG
GOVERNMENT OFFICES, AGENCIES AND INSTRUMENTALITIES, INCLUDING GOVERNMENT-OWNED OR
CONTROLLED CORPORATIONS, AND FOR OTHER PURPOSES" dated on July 9, 1973. Sections 2 and 3 of this
Decree provide:

Section 2. In all cases involving only questions of law, the same shall be submitted to and settled or
adjudicated by the Secretary of Justice, as Attorney General and ex officio legal adviser of all
government-owned or controlled corporations and entities, in consonance with section 83 of the
Revised Administrative Code. His ruling or determination of the question in each case shall be
conclusive and binding upon all the parties concerned.

Section 3. Cases involving mixed questions of law and of fact or only factual issues shall be
submitted to and settled or adjudicated by:

(a) The Solicitor General, with respect to disputes or claims or controversies between or among the
departments, bureaus, offices and other agencies of the National Government;

(b) The Govermnent Corporate Counsel, with respect to disputes or claims or controversies between
or among the government-owned or controlled corporations or entities being served by the office of
the Government Corporate Counsel and

(c) The Secretary of Justice, with respect to all other disputes or claims or controversies which do
not fall under the categories mentioned in paragraphs (a) and (b). (Emphasis supplied)

In upholding the lower court's jurisdiction, respondent municipal corporations, on the other hand, rely on Presidential
Decree No. 464, entitled "THE REAL PROPERTY TAX CODE" enacted on July 1, 1974, specifically Section 82
thereof which provides:

Section 82. Collection of real property tax through the courts. — The delinquent real property tax
shall constitute a lawful indebtedness of the taxpayer to the province or city and collection of the tax
may be enforced by civil action in any court of competent jurisdiction. The civil action shall be filed by
the Provincial or City Fiscal within fifteen days after receipt of the statement of delinquency certified
 to by the provincial or city treasurer. This remedy shall be in addition to all other remedies provided
by law.

It is indeed desirable and beneficial to the Judiciary's ongoing program of decongesting court dockets that intra-
governmental disputes such as this be settled administratively. Unfortunately, our consideration of the legal
provisions involved leads us to a different conclusion. In reconciling these two conflicting provisions of P.D. 242 and
P.D. 464 on the matter of jurisdiction, we are guided by the basic rules on statutory construction.

An examination of these two decrees shows that P.D. 242 is a general law which deals with administrative
settlement or adjudication of disputes, claims and controversies between or among government offices, agencies 198
and instrumentalities, including government-owned or controlled corporations. The coverage is broad and sweeping,
encompassing all disputes, claims and controversies.

P.D. 464 on the other hand, governs the appraisal and assessment of real property for purposes of taxation by
provinces, cities and municipalities, as wen as the levy, collection and administration of real property tax. It is a
special law which deals specifically with real property taxes.

It is a basic tenet in statutory construction that between a general law and a special law, the special law prevails.
GENERALIA SPECIALIBUS NON DEROGANT.  8

Where a later special law on a particular subject is repugnant to, or inconsistent with, a prior general law on the
same subject, a partial repeal of the latter win be implied to the extent of the repugnancy or an exception grafted
upon the general law.

A special law must be intended to constitute an exception to the general law in the absence of special
circumstances forcing a contrary conclusion.  9

The conflict in the provisions on jurisdiction between P.D. 242 and P.D. 464 should be resolved in favor of the latter
law, since it is a special law and of later enactment. P.D. 242 must yield to P.D. 464 on the matter of who or which
tribunal or agency has jurisdiction over the enforcement and collection of real property taxes. Therefore, respondent
court has jurisdiction to hear and decide Civil Case No. 9901.

On the question of whether or not NAPOCOR is liable to pay real property taxes and special education fund taxes
for the years 1978 to 1984, we rule in the affirmative.

Presidential Decree No. 1177, entitled "REVISING THE BUDGET PROCESS IN ORDER TO INSTITUTIONALIZE
THE BUDGETARY INNOVATIONS OF THE NEW SOCIETY" was passed on July 30, 1977. Section 23 thereof
provides:

Section 23. Tax and Duty Exemptions. — All units of govemment, including government-owned or
controlled corporations, shall pay income taxes, customs duties and other taxes and fees as are
imposed under revenue laws; provided, that organizations otherwise exempted by law from the
payment of such taxes/duties may ask for a subsidy from the General Fund in the exact amount of
taxes/duties due; provided, further, that a procedure shag be established by the Secretary of
Finance and the Commissioner of the Budget, whereby such subsidies shall automatically be
considered as both revenue and expenditure of the General Fund. (Emphasis supplied)

Petitioner alleges that what has been withdrawn is its exemption from taxes, duties, and fees which are payable to
the national government while its exemption from taxes, duties and fees payable to government branches, agencies
and instrumentalities remains unaffected. Considering that real property taxes are payable to the local government,
NAPOCOR maintains that it is exempt therefrom.

We find the above argument untenable. It reads into the law a distinction that is not there. It is contrary to the clear
intent of the law to withdraw from all units of government, including government-owned or controlled corporations
their exemptions from all kinds of taxes. Had it been otherwise, then the law would have said so. Not having
distinguished as to the kinds of tax exemptions withdrawn, the plain meaning is that all tax exemptions are covered.
There the law does not distinguish, neither must we.

Moreover, Presidential Decree No. 1931 entitled "DIRECTING THE RATIONALIZATION OF DUTY AND TAX
EXEMPTION PRIVILEGES GRANTED TO GOVERNMENT-OWNED OR CONTROLLED CORPORATIONS AND
ALL OTHER UNITS OF GOVERNMENT" which was passed on June 11, 1984, categorically states:

WHEREAS, Presidential Decree No. 1177 has already expressly repealed the grunt of tax privileges
to any government-owned or controlled corporation and all other units of government. (Emphasis
supplied )
Thus, any dubiety on NAPOCOR'S liability to pay taxes, duties and fees should be considered unequivocably
resolved by the above provision.

In the case of National Power Corporation vs. The Province of Albay, et. al.,   herein petitioner was held liable for
10

real property taxes to the provincial government of Albay for the period June 11, 1984 to March 10, 1987, when it
claims to have been enjoying tax exemptions under Resolutions Nos. 10-85, 1-86 and 17-87 of the Fiscal Incentives
Review Board (FIRB). It must be noted that Resolution 10-85 was the same resolution cited by petitioner in its
supplemental motion to dismiss   in Civil Case No. 9901. If the attempt (found ineffective for lack of authority in the
11

above-cited case of NPC vs. The Province of Albay) to restore petitioner's tax exemptions began only in 1985 with
the issuance of FIRB Resolution No. 10-85, it stands to reason that prior thereto, i.e., from 1977 when P.D. 1177
198
was promulgated up to 1984, petitioner did not enjoy any tax privilege as would exempt it from the payment of the
taxes under consideration.

In the same case of NPC vs. The Province of Albay,   this Court had occasion to state:
12

Actually, the State has no reason to decry the taxation of NAPOCOR's properties, as and by way of
real property taxes. Real property taxes, after all, form part and parcel of the financing apparatus of
the Government in development and nation-building, particularly in the local government level.

xxx xxx xxx

To all intents and purposes, real property taxes are funds taken by the State with one hand and
given to the other. In no measure can the Government be said to have lost anything.

The proceeds of the real property tax are divided among the province, city or municipality where the property subject
to the tax is situated and shall be applied by the respective local government unit for its own use and benefit. Even
the barrio where the property is situated shares in the real property tax collections. Likewise, the entire proceeds of
the additional one per cent (1%) real property tax levied for the Special Education Fund created under R.A. 5447,
are divided among the province, city and municipalities where the property is situated.

WHEREFORE, the petition is DISMISSED. Petitioner having been found liable for the taxes being collected in Civil
Case No. 9901, the respondent court is hereby directed to proceed with deliberate dispatch in hearing the case for
the purpose of determining the exact liability of petitioner. No Costs. SO ORDERED.

[G.R. No. 74223. November 27, 1990.]

JUNE PRILL BRETT, assisted by her husband, JAMES BRETT, Petitioners, v. INTERMEDIATE

APPELLATE COURT, MINISTER OF NATURAL RESOURCES, HEIRS OF JOHN GUILLES, SR. and
MARIA GUILLES, POLAR MINES, INC., and ITOGON-SUYOC MINES, INC., Respondents.

[G.R. No. 77098. November 27, 1990.]

HEIRS OF JOHN GUILLES, SR. and MARIA GUILLES, Petitioners, v. THE HONORABLE COURT
OF APPEALS, THE HONORABLE MINISTER OF NATURAL RESOURCES and JUNE PRILL
BRETT, Respondents.

Atienza, Tabora, Del Rosario & Castillo for respondent Polar Mines, Inc.

Vicente D. Millora for petitioners in G.R. No. 77098.

Arthur E. Galace for June Brill Brett.

Joy B. Labiaga for Heirs of Guilles.

Sycip, Salazar, Hernandez & Gatmaitan for Itogon-Suyoc Mines, Inc.

SYLLABUS

1. POLITICAL LAW; ADMINISTRATIVE LAW; DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE

REMEDIES; RULE AND EXCEPTION; CASE AT BAR. — It is true that in our jurisdiction, unless
otherwise provided by law or required by public interest, before bringing an action in or resorting to
the courts of justice, all remedies of administrative character affecting or determinative of the
controversy at that level should first be exhausted by the aggrieved party. (Miguel, Et. Al. v. Vda. de
Reyes, Et Al., 93Phil. 542 [1953]; Pestañas, Et. Al. v. Dyogi, Et. Al.,81 SCRA 574 [1978]). It is
likewise true, however, that the doctrine of exhaustion of administrative remedies is not a hard and
fast rule. (Fernandez, Et Al., v. Cuneta, etc., Et Al., 108 Phil. 427 [1960]; National Development
Company, Et Al., v. Collector of Customs of Manila, 118 Phil. 1265 [1963]). Foremost among the
exceptions is when the assailed act, order or decision is patently illegal or was performed or issued
without jurisdiction or in excess of jurisdiction. (Visca v. Secretary of Agriculture and Natural
Resources, Et Al., 173 SCRA 222 [1989]). In the case at bar, it is our considered opinion that the
decision in question, dated June 25, 1984, is of such a defective nature. The decision it superseded, 198
dated October 6, 1982, was already final and executory, the belated motions for reconsideration by
all the private respondents in G.R. No. 74223 being patently time-barred. Of course, the aforesaid
heirs of John and Maria Guilles did file a timely appeal but they likewise failed to prosecute the same.
It is obvious and indisputable, therefore, that respondent Minister Peña gravely abused his discretion
in reversing his original decision which precisely prompted June Prill Brett to forthwith invoke the
jurisdiction of the courts.

2. ID.; ID.; ID.; FAILURE TO APPEAL THE DECISION OF THE MINISTER TO THE OFFICE OF THE
PRESIDENT, NOT A VIOLATION OF THE RULE UNDER THE DOCTRINE OF QUALIFIED POLITICAL
AGENCY. — Going back to the subject of non-exhaustion of administrative remedies, June Prill Brett’s
failure to appeal to the Office of the President from the decision of Minister Peña cannot also be
considered a violation of the rule as the latter is the alter ego of the President and, under the
doctrine of qualified political agency, his action is deemed to be that of the President. (Gonzales v.
Hechanova, etc., Et Al., 9 SCRA 230 [1963]; Santos, etc., Et Al., v. Secretary of Public Works and
Communications, 19 SCRA 637 [1967]; Almine v. Court of Appeals, Et Al., G.R. No. 80719,
September 26, 1989).

3. REMEDIAL LAW; JUDGMENT; RULE ON FINALITY THEREOF, APPLICABLE TO DECISIONS

RENDERED BY ADMINISTRATIVE BODIES. — Indeed, as therein petitioner June Prill Brett pointed
out, the necessity of giving finality to judgments that are not void is self-evident. The interests of
society impose it. The opposing view might make litigation more unendurable than the wrongs it is
intended to redress. It would create doubt, real or imaginary, and controversy would constantly arise
as to what the judgment or order was. Public policy and sound practice demand that, at the risk of
occasional errors, judgments of courts should become final and executory at some definite time fixed
by law; and this rule holds true over decisions rendered by administrative bodies exercising quasi-
judicial powers. (San Luis, Et Al., v. Court of Appeals, Et Al., 174 SCRA 258 [1989]). It is noteworthy
that none of the private respondents in G.R. No. 74223 ever mentioned anything in their pleadings
filed with this Court nor squarely met June Prill Brett’s allegation that Minister Peña’s decision of
October 6, 1982 had become final and executory. They were obviously avoiding the issue, mindful
that the same would be detrimental to their case. That allegation of the decision being final and
executory was, however, established as a fact by respondent court. We certainly cannot gloss over
such finding which has remained uncontroverted and undisputed by said private respondents.

4. ID.; SPECIAL CIVIL ACTIONS; CERTIORARI; RESORT THERETO IN LIEU OF THE APPEAL,
JUSTIFIED IN THE CASE AT BAR. — Parenthetically, while the original action for  certiorari cannot be
made a substitute for appeal, (Lobete v. Sundiam, etc., Et Al., 123 SCRA 95 [1983]) Minister Peña’s
lack of jurisdiction to render the questioned decision, (Aguilar v. Tan, Et Al., 31 SCRA 205 [1970];
Bautista, Et. Al. v. Sarmiento, etc., Et. Al.,138 SCRA 587 [1985] as well as the nullity of the decision
itself, (Marcelo v. De Guzman, Et. Al. 114 SCRA 657 [1982]) constitute the exceptions which would
justify June Prill Brett’s resort to the special civil action for certiorari in lieu of the appeal provided for
by Section 50 of Presidential Decree No. 463. We may also add to these considerations the urgency
for judicial intervention (Vda. de Saludes v. Pajarillo, Et Al., 78 Phil. 754 [1947]) called for by the
fact that, as specifically provided in said provision itself, the decision of respondent Minister of
Natural Resources becomes executory despite an appeal to the Office of the President.

5. ID.; DOCTRINE OF PRIMARY JURISDICTION; COURTS CANNOT AND WILL NOT DETERMINE A
CONTROVERSY INVOLVING A QUESTION WHICH IS WITHIN THE JURISDICTION OF AN
ADMINISTRATIVE TRIBUNAL. — Even conceding that the pleading filed by the heirs of John Guilles,
Sr. with this Court was only a manifestation and not a petition to annul the order of Minister Maceda,
it is of record that said heirs have a perfected and pending appeal with the Office of the President.
Whether the appeal was perfected by filing a formal notice of appeal or a mere unsworn and
unsubscribed personal letter is of no moment. The fact is that the Office of the President has taken
cognizance of the case as one for its appellate review and has in fact ordered the parties to file their
respective memoranda therein. Under the doctrine of primary jurisdiction, courts cannot and will not
determine a controversy involving a question which is within the jurisdiction of an administrative
tribunal, especially where the question demands the exercise of sound administrative discretion
requiring the special knowledge, experience and services of the administrative tribunal to determine
technical and intricate matters of fact and where a uniformity of ruling is essential to comply with the
purposes of the regulatory statute administered. (Qualitrans Limousine Service, Inc. v. Royal Class
Limousine Service, Et Al., G.R. Nos. 79886-87, November 22, 1989). Applying the principle in the
case at bar, respondent court correctly dismissed the petition for certiorari of the heirs of John
Guilles, Sr. on the ground that there is a pending appeal filed by said heirs in the Office of the
President. Indeed, the award of mining claims is more of an executive, and less of a judicial,
function. Also, the issue as to the validity of the authority under which then respondent Minister 198
Ernesto Maceda issued the order of June 10, 1986, which reversed the void decision of June 25,
1984, can be competently determined by the executive department at the initial stage of the quasi-
judicial proceeding therein.

DECISION

REGALADO, J.:

These two consolidated petitions for renew on certiorari under Rule 45 seek to annul the following
decisions of respondent court, to wit: (1) In G.R. No. 74223, the decision 1 dated January 15, 1986
in AC-G.R. SP No. 05589 dismissing therein petitioner’s original action for certiorari for failure to
exhaust administrative remedies; and (2) In G.R. No. 77098, the decision 2 dated October 24, 1986
in CA-G.R. SP No. 09349 dismissing therein petitioners’ petition for certiorari on the ground that
there is a pending appeal by petitioners in the Office of the President and another similar petition
pending with this Court.

I. The antecedental facts which spawned the filing of the cases below are hereinunder set forth as
synthesized by respondent court in the assailed decisions. 3

1. G.R. No. 74223

On September 2, 1980, the Director of Mines and Geo-Sciences rendered a decision declaring and
recognizing the preferential right of therein petitioner June Prill Brett to explore, develop, exploit and
lease the area covered by her "MAMAKAR" mining claims situated at Sitio Palasaan, Barrio Suyoc,
Municipality of Mankayan, Benguet. This decision was appealed by private respondents to the then
Ministry of Natural Resources.

On October 6, 1982, respondent Minister of Natural Resources dismissed the appeal. From this
dismissal, private respondents heirs of John and Maria Guilles interposed an appeal on November 4,
1982 to the Office of the President, docketed therein as MNR Case No. 5096, but failed to prosecute
the same. Private respondents later filed their respective motions for reconsideration which,
however, proved to be belated as the decision of respondent Minister had already become final and
executory.

The finality of the decision notwithstanding, respondent Minister of Natural Resources rendered
another decision in the same MNR Case No. 5096 on June 25, 1984, reversing and setting aside the
decision of October 6, 1982 and declaring petitioner’s "MAMAKAR" claims as null and void ab initio.

On July 25, 1984, petitioner sought the reconsideration of the decision and prayed for a status quo
order. The Assistant Secretary for Legal Affairs of the Office of the Minister of Natural Resources
issued the status quo order on August 20, 1984 and directed the respondents to answer the motion
within five (5) days from receipt of the order. However, none of the respondents complied therewith.

On February 19, 1985, with the motion for reconsideration still unresolved, petitioner filed a petition
for certiorari and prohibition, with a prayer for preliminary injunction, before this Court, docketed as
G.R. No. 69937, for the nullification of the decision of respondent Minister of Natural Resources dated
June 25, 1984 and to restrain public respondent from further proceeding in said case. Petitioner
contended that respondent Minister acted with grave abuse of discretion amounting to lack of
jurisdiction in rendering said decision. cralawnad
On February 27, 1985, this Court resolved to refer the case to the Court of Appeals (then
Intermediate Appellate Court) for determination. On March 7, 1985, respondent court initially
dismissed the petition for being premature inasmuch as petitioner had an unresolved motion for
reconsideration pending in the Office of the Minister of Natural Resources.

On March 27, 1985, petitioner prayed for the reconsideration of the dismissal and informed
respondent court that her motion for reconsideration had been denied by the Minister of Natural
Resources on January 31, 1985, notice of which she received only on February 25, 1985. Petitioner
also filed with this Court on March 1, 1985 an addendum to the petition giving the same information,
not knowing that said petition had been referred to respondent court. 198

On April 10, 1985, respondent court reconsidered its decision dismissing the petition. Nevertheless, it
thereafter ruled against petitioner, holding that petitioner failed to exhaust administrative remedies
and for which the petition must be dismissed. It cited Section 50, Presidential Decree No. 463, as
authority for its ruling, as follows: jgc:chanrobles.com.ph

"Sec. 50. Appeals. — Any party not satisfied with the decision or order of the Director may within five
(5) days from receipt thereof, appeal to the Secretary. Decisions of the Secretary are likewise
appealable within five (5) days from receipt thereof by the affected party to the President of the
Philippines whose decision shall be final and executory."cralaw virtua1aw library

x           x          x

Corollarily, respondent court declared that it had no authority to grant petitioner’s prayer for the
issuance of a writ of preliminary injunction to enjoin the implementation of the questioned decision
as it is precluded from doing so by Presidential Decree No. 605, thus: jgc:chanrobles.com.ph

"SECTION 1. No court of the Philippines shall have jurisdiction to issue any restraining order,
preliminary injunction or preliminary mandatory injunction in any case involving or growing out of the
issuance, approval or disapproval, revocation or suspension of, or any action whatsoever by the
proper administrative official or body on concessions, licenses, permits, patents or public grants of
any kind in connection with the disposition, exploitation, utilization, exploration and/or development
of the natural resources of the Philippines." cralaw virtua1aw library

Hence, the instant petition.

2. G.R. No. 77098

On March 24, 1986, after the Brett spouses filed the abovementioned petition in this Court, James
Brett wrote a letter to the newly appointed Minister of Natural Resources Ernesto Maceda praying
that the former minister’s decision of June 25, 1984 be rectified. In an order dated June 10, 1986,
respondent Minister Maceda did set aside Minister Teodoro Peña’s aforesaid decision and reinstated
the ministry’s original decision of October 6, 1982 and that of the Director of Mines in favor of Brett.

Upon being notified of Minister Maceda’s decision against them, on June 19, 1986 petitioners filed
with this Court in the pending case G.R. No. 74223 a petition to declare the order of June 10, 1986
issued by respondent Minister Maceda ineffectual, null, void and illegal for having been issued
without jurisdiction.

Four days later, or on June 23, 1986, they also filed before respondent court a petition for certiorari,
docketed as CA-G.R. SP No. 09349, praying that respondents therein be enjoined from enforcing the
order and that the same be declared null and void.

Petitioners likewise sent an appeal to the Office of the President, docketed as O.P. Case No. 3360,
praying for the reversal of the order of June 10, 1986. Acting thereon, said office, through Assistant
Executive Secretary Magdangal Elma, ordered the Ministry to elevate the records of MNR Case No.
5096, the appellant to pay the appeal fee of P50.00, and the parties to file their respective
memoranda. chanrobles virtual lawlibrary

Subsequently ruling on the petition in CA-G.R. SP No. 09349 in a decision dated October 24, 1986,
respondent court found merit in said petition but nonetheless dismissed the same, taking note of the
fact that there is an appeal by petitioners of respondent minister’s decision pending in the Office of
the President. Furthermore, it cited Section 17 of the Interim Rules of Court which provides that "no
petition for certiorari may be filed in the Intermediate Appellate Court if another similar petition has
been filed or is still pending in the Supreme Court," a violation of the rule being a ground for the
dismissal of both petitions.

On these facts rests this second petition.

II. Shorn of unnecessary details, the issues formulated and raised by the parties in the aforesaid two
petitions, and their respective contentions thereon, are succinctly discussed hereunder seriatim.

1. G.R. No. 74223

198
In her so-called assignment of errors, June Prill Brett faults respondent court for not holding that
respondent minister acted without or in excess of jurisdiction and with grave abuse of discretion and
asks us to resolve —

(a) Whether or not respondent court erred in dismissing petitioner’s original action for certiorari on
the ground of non-exhaustion of administrative remedies; and

(b) Whether or not respondent court erred in invoking Presidential Decree No. 605 to deny
petitioner’s prayer for the issuance of a writ of preliminary injunction. 4

In amplification of her plaint, June Prill Brett contends that the case at bar is an instance where
resort to administrative remedies was no longer necessary and advisable since it is one where the
recognized exceptions to the doctrine come into play. She manifestly refers to, among the other
exceptions, Minister Peña’s alleged patent lack of jurisdiction in reversing his previous decision which
she claims had already become final and executory. Concerning respondent court’s invocation of
Presidential Decree No. 605, she submits that the same does not authorize the courts to shed or
abdicate their inherent judicial authority.

On the other hand, all of the private respondents make the riposte that Section 50, Presidential
Decree No. 463 provides for and thereby constitutes a plain, speedy and adequate remedy to contest
and seek a review and reversal of the decision of Minister Peña. June Prill Brett having failed to avail
of the same, she cannot invoke the jurisdiction of the courts. As an offshoot, private respondents
point out that her failure to perfect a timely appeal to the Office of the President rendered the June
25, 1984 decision of Minister Peña final and executory. Minister Maceda, therefore, overstepped his
authority in rendering the June 10, 1986 decision which should be declared null and void ab initio.

2. G.R. No. 77098

On their part, the heirs of John Guilles, Sr. desire a resolution on whether or not respondent court
erred in dismissing their original action for certiorari on the ground of the pendency of their appeal in
the Office of the President and a similar petition with this Court. 5

Said heirs explain that what they did was only to write a personal letter to the President complaining
about the alleged unwarranted action by respondent Minister Maceda. The letter, so it is alleged, was
unsubscribed and unsworn and, therefore, should not be considered as "a remedy in the course of
law." With regard to the petition filed with this Court, these heirs of John Guilles, Sr. claim that the
same was intended only to be a manifestation but was erroneously captioned as a "petition." In any
event, they insist that their case falls under the exceptions to the doctrine of exhaustion of
administrative remedies, the order of June 10, 1986 having been issued without jurisdiction and
without giving them an opportunity to be heard.

June Prill Brett, on the other hand, adheres to the findings of respondent court. She moreover adopts
the explanation made by Minister Maceda in his comment filed in G.R. No. 74223 to the effect that
the order of June 10, 1986 was issued in the exercise of his office’s inherent power to correct its
orders so as to make them conformable to law and justice and under respondent minister’s authority
as alter ego of the President pursuant to Section 2, Article IV of Proclamation No. 3, otherwise known
as the "Freedom Constitution of the Philippines," to review all contracts, concessions, permits or
other forms of privileges for the exploration, development, exploitation or utilization of natural
resources entered into, granted, issued or acquired before the date of said proclamation, and when
the national interest required, to amend, modify or revoke them. chanrobles law library : red

III. We find merit in and consequently sustain the petition in G.R. No. 74223.

It is true that in our jurisdiction, unless otherwise provided by law or required by public interest,
before bringing an action in or resorting to the courts of justice, all remedies of administrative
character affecting or determinative of the controversy at that level should first be exhausted by the
aggrieved party. 6

It is likewise true, however, that the doctrine of exhaustion of administrative remedies is not a hard
and fast rule. 7 Foremost among the exceptions is when the assailed act, order or decision is patently
illegal or was performed or issued without jurisdiction or in excess of jurisdiction. 8

In the case at bar, it is our considered opinion that the decision in question, dated June 25, 1984, is
of such a defective nature. The decision it superseded, dated October 6, 1982, was already final and 198
executory, the belated motions for reconsideration by all the private respondents in G.R. No. 74223
being patently time-barred. Of course, the aforesaid heirs of John and Maria Guilles did file a timely
appeal but they likewise failed to prosecute the same. It is obvious and indisputable, therefore, that
respondent Minister Peña gravely abused his discretion in reversing his original decision which
precisely prompted June Prill Brett to forthwith invoke the jurisdiction of the courts.

The circumstance that the June 25, 1984 decision was rendered without jurisdiction is itself
confirmed by respondent court in CA-G.R. SP No. 09349 which is the subject of our review in G.R.
No. 77098, to wit: jgc:chanrobles.com.ph

"The decision dated October 6, 1982 of the Minister of Natural Resources in MNR Case No. 5096
which the Heirs of Guilles received on October 25, 1982, became final on October 30, 1982 since it
was not appealed to the Office of the President pursuant to Section 50 of P.D. No. 463, which
provides:chanrob1es virtual 1aw library

‘Sec. 50. Any party not satisfied with the decision or order of the Director may, within five (5) days
from receipt thereof, appeal to the Secretary. Decisions of the Secretary are likewise appealable
within five (5) days from receipt thereof by the affected party to the President of the Philippines
whose decision shall be final and executory. (P.D. 463)’

"Instead of pursuing their appeal in the Office of the President, the petitioners filed a belated motion
for reconsideration in the Ministry after Minister Peña had lost jurisdiction to review, revise, or
reverse his decision because it had already become final. Consequently, his amended decision of
June 25, 1984 was void for lack of jurisdiction." 9

Indeed, as therein petitioner June Prill Brett pointed out, the necessity of giving finality to judgments
that are not void is self-evident. The interests of society impose it. The opposing view might make
litigation more unendurable than the wrongs it is intended to redress. It would create doubt, real or
imaginary, and controversy would constantly arise as to what the judgment or order was. Public
policy and sound practice demand that, at the risk of occasional errors, judgments of courts should
become final and executory at some definite time fixed by law; 10 and this rule holds true over
decisions rendered by administrative bodies exercising quasi-judicial powers. 11

It is noteworthy that none of the private respondents in G.R. No. 74223 ever mentioned anything in
their pleadings filed with this Court nor squarely met June Prill Brett’s allegation that Minister Peña’s
decision of October 6, 1982 had become final and executory. They were obviously avoiding the issue,
mindful that the same would be detrimental to their case. That allegation of the decision being final
and executory was, however, established as a fact by respondent court. We certainly cannot gloss
over such finding which has remained uncontroverted and undisputed by said private respondents.

Going back to the subject of non-exhaustion of administrative remedies, June Prill Brett’s failure to
appeal to the Office of the President from the decision of Minister Peña cannot also be considered a
violation of the rule as the latter is the alter ego of the President and, under the doctrine of qualified
political agency, his action is deemed to be that of the President. 12

Parenthetically, while the original action for certiorari cannot be made a substitute for appeal, 13
Minister Peña’s lack of jurisdiction to render the questioned decision, 14 as well as the nullity of the
decision itself, 15 constitute the exceptions which would justify June Prill Brett’s resort to the special
civil action for certiorari in lieu of the appeal provided for by Section 50 of Presidential Decree No.
463. We may also add to these considerations the urgency for judicial intervention 16 called for by
the fact that, as specifically provided in said provision itself, the decision of respondent Minister of
Natural Resources becomes executory despite an appeal to the Office of the President.

We shall not, for the nonce, pass judgment on respondent court’s refusal to restrain the execution of
respondent Minister Peña’s decision under the authority of Presidential Decree No. 605 since the
resolution of the issue raised by June Prill Brett on the matter, i.e., that it does not authorize the
court to divest itself of its inherent judicial authority, would entail an inquiry into the constitutional
validity of the decree which we are not disposed to do in the present case since the controversy can
be resolved on grounds other than constitutional. 17 For that matter under our disposition of these
cases there is no necessity for resolving this issue.
chanrobles law library : red

All told, we hold that respondent court erred in dismissing June Prill Brett’s action for certiorari for
failure to exhaust administrative remedies.
198
IV. We are, on the other hand, constrained to reject and deny the petition in G.R. No. 77098 for
being devoid of merit.

Even conceding that the pleading filed by the heirs of John Guilles, Sr. with this Court was only a
manifestation and not a petition to annul the order of Minister Maceda, it is of record that said heirs
have a perfected and pending appeal with the Office of the President. Whether the appeal was
perfected by filing a formal notice of appeal or a mere unsworn and unsubscribed personal letter is of
no moment. The fact is that the Office of the President has taken cognizance of the case as one for
its appellate review and has in fact ordered the parties to file their respective memoranda therein.

Under the doctrine of primary jurisdiction, courts cannot and will not determine a controversy
involving a question which is within the jurisdiction of an administrative tribunal, especially where the
question demands the exercise of sound administrative discretion requiring the special knowledge,
experience and services of the administrative tribunal to determine technical and intricate matters of
fact and where a uniformity of ruling is essential to comply with the purposes of the regulatory
statute administered. 18

Applying the principle in the case at bar, respondent court correctly dismissed the petition
for certiorari of the heirs of John Guilles, Sr. on the ground that there is a pending appeal filed by
said heirs in the Office of the President. Indeed, the award of mining claims is more of an executive,
and less of a judicial, function. Also, the issue as to the validity of the authority under which then
respondent Minister Ernesto Maceda issued the order of June 10, 1986, which reversed the void
decision of June 25, 1984, can be competently determined by the executive department at the initial
stage of the quasi-judicial proceeding therein.

While it may plausibly be contended that the case for the heirs of John Guilles, Sr. could also fall
under the exceptions to the doctrine of exhaustion of administrative remedies, just like that of June
Prill Brett in G.R. No. 74223 and thereby justify their immediate coming to court, there is a marked
difference in their respective positions. Petitioner June Prill Brett, in G.R. No. 74223, never appealed
to the Office of the President, unlike the heirs of John Guilles, Sr. in G.R. No. 77098. This spelled the
difference.

In any event, the order of respondent Minister Maceda is only confirmatory of the decision of October
6, 1982. It in fact reinstated the said decision and noted that it had become final and executory for
which reason the June 25, 1984 decision was void and of no force and effect. chanrobles law library

WHEREFORE, judgment is hereby rendered AFFIRMING the assailed decision of respondent Court of
Appeals in G.R. No. 77098 and ANNULLING its decision in G.R. No. 74223. The decision of
respondent Minister Teodoro Peña, dated October 6, 1982, is also hereby REINSTATED without
prejudice to the appeal in the Office of the President taking its due course and the consequent
adjudication thereof. SO ORDERED.

Brett vs. IAC, GR. #74223, Nov.27,1990 ( same with above #17)

[G.R. No. 78623 : December 17, 1990.]

192 SCRA 326

DR. OFELIA P. TRISTE, Petitioner, vs. LEYTE STATE COLLEGE BOARD OF TRUSTEES, namely: Hon.
Lourdes R. Quisumbing, Secretary of the Department of Education, Culture and Sports and Chairman of the
Board and/or Dr. Minda C. Sutaria as the authorized representative; Dr. Purificacion M. Flores, President of the
Leyte State College and Vice-Chairman of the Board; Director Venancio Baclagon, National Economic and
Development Authority, Regional Office No. VIII and Member of the Board; HON. SEDFREY A. ORDOÑEZ,
Secretary of Justice and Chairman of the Review Committee under Executive Order No. 17; and DR. CRES V.
CHAN-GONZAGA, Respondents.

198

DECISION

FERNAN, J.:

The instant petition for Certiorari focuses on the vice-presidency of the Leyte State College in Tacloban City. It
seeks to annul and set aside the decision of the Board of Trustees of said College ousting and replacing herein
petitioner with private respondent as Vice-President thereof, as well as the resolution of the Review Committee
under Executive Order No. 17 dismissing petitioner's appeal thereto.

The Leyte State College, formerly the Leyte Normal School, one of the eight normal schools established in the
Philippines as a teacher-training institution serving Eastern Visayas, Masbate and Surigao, became a
chartered state college by virtue of Presidential Decree No. 944 dated June 14, 1976 (72 O.G. 7207). Section
4 of the decree provides that "the governance and administration of each College and the exercise of its
corporate powers shall be vested exclusively in the Board of Trustees and in the President of the College
insofar as authorized by said Board". In addition to its general powers of administration, Section 6 provides that
the Board shall have the power and duty:

"(c) To appoint, on recommendation of the President of each College, a Vice-President for Academic Affairs
and Development with a position next in rank to the President of the College who shall assist in the
administration and supervision of the College and who shall automatically assume the presidency of the
College in an acting capacity, with full powers and duties, in the absence of the President or when the office of
the president is vacant." (Italics supplied)

Under Section 9 of the same decree, the vice-president for academic affairs shall also be a member of the
College Council which is vested with the powers to prescribe the curricula and the rules of discipline subject to
the approval of the Board of Trustees; to fix the requirements for admission to the college as well as for
graduation and the receiving of a degree; to recommend students or others to be the recipients of degrees or
honors; and, through its president or committee, to have disciplinary control over the students within the
prescribed rules of discipline approved by the Board of Trustees.: nad

Two years later or on June 10, 1978, Presidential Decree No. 1437 (74 O.G. 5733-LLLLL Supp.) was 198
promulgated to define the composition and powers of the governing boards of chartered state universities and
colleges and the term of office of the presidents thereof. Said governing boards shall be composed of the
Secretary of Education and Culture as chairman, the president of the university or college as vice-chairman,
and a representative of the National Economic and Development Authority (NEDA) and two (2) prominent
citizens as members.

One of the governing board's specific powers as laid out in Section 3 of P.D. 1437 is the following:

"f. To confirm appointments of vice-presidents, deans, directors, registrars, heads of departments, professors,
and other officials and employees of the university or college made by the president, to fix their compensation,
hours of service, and such other duties and conditions as the governing boards may promulgate, in
accordance with the provisions of existing laws; to remove them for cause after investigation and hearing."
(Emphasis supplied)

Under the foregoing legal milieu, on February 3, 1984, the Leyte State College Board of Trustees (hereinafter
referred to as the Board) took up the matter of the designation of herein petitioner as vice-president of the
college with a basic salary of P39,288 plus representation and transportation allowances. It passed Resolution
No. 53 "confirming the designation of Professor Ofelia TRISTE as vice-president of LSC to include allowances
normally extended to the office of vice-president subject to the usual auditing and accounting regulations." 1
Accordingly, the acting chairman of the Board issued the following document:

"Republic of the Philippines

MINISTRY OF EDUCATION CULTURE AND SPORTS

Metro Manila

February 3, 1984

KNOW ALL MEN BY THESE PRESENTS:

Pursuant to Section 6, paragraph "C" of PD 944 known as the LSC Charter, DR. OFELIA P. TRISTE is hereby
designated/appointed Vice-President for Academic Affairs and Development of the Leyte State College,
Tacloban City, Philippines.

The Board of Trustees Leyte

198
State College

Tacloban City

By: (SGD.) VEDASTO G. SUAREZ

Acting Chairman" 2

As petitioner was then holding an appointment of Professor 6, the president of the college sought clarification
from the Minister of the Budget on the total compensation of the vice-president. The then Minister of Budget,
Manuel S. Alba, in a letter dated June 22, 1984, opined that "(p)ursuant to Sections 4.1 and 4.4 of NCC No.
12-B, a Vice-President may be designated in lieu of a permanent plantilla position, provided that the designee's
basic salary plus honorarium shall not exceed the salary prescribed for a permanently appointed Vice-
President, as specified by NCC No. 12." Hence, the total compensation of petitioner should consist of the basic
salary of P41,292 and an honorarium of P4,548 or the total amount of P45,840. In addition to that amount, the
vice-president was authorized to receive commutable transportation and representation allowances of P475
per month subject to conditions stated therein. 3

In October, 1984, the Office of Compensation and Position Classification furnished the then President of the
college, Magdalena S. Ramo, with an advance copy of the personnel services itemization of the college which
would be the basis for the preparation of its plantilla of personnel for calendar year 1984. 4 The position of
vice-president does not appear in said itemization. 5 However, per the college's plantilla of personnel for 1984,
petitioner's position was designated and classified as "Professor 6 (Vice-Pres.)" receiving an actual salary of
P54,600 as of June 30, 1984 but which salary was adjusted to P55,644 effective July 1, 1984. 6

For more than two years, petitioner discharged her duties and functions as vice-president of the college.

In February 1986, there was a total revamp in the composition of the Board of Trustees of the Leyte State
College. Among others, Dr. Purificacion M. Flores was designated officer-in-charge and later appointed as the
new College President vice Magdalena S. Remo who retired as president of the college on May 1, 1986.

Anticipating moves to replace her as vice-president, on July 18, 1986, petitioner submitted to the Board of
Trustees a position paper ** asserting that the Board could not appoint a vice-president because the position
was not vacant, the vice-president's term was not co-terminous with that of the recommending president who
had retired, and the incumbent was not replaceable at the pleasure of the Board. In fact, she stated therein that
she is qualified for the college presidency. 7

Petitioner's apprehensions were proved right by later developments. She was not named to any of the
committees formed by Dr. Flores when the latter became the officer-in-charge of the office of the president. 8
On August 21, 1986, petitioner received a letter from President Flores assigning her the job of director of the
198
college's research program. 9 A week later, petitioner received another letter from President Flores. It states:

"August 29, 1986

Dr. Ofelia P. Triste

Leyte State College

Tacloban City

Dear Dr. TRISTE:

This is to inform you that Resolution No. 42, s. 1986 was approved by the Board of Trustees of the College at
its Board Meeting last August 19, 1986 at MECS, Manila and confirmed August 27, 1986, to wit:

RES. NO. 42, s. 1986

APPROVING THE DESIGNATION OF DR. CRES GONZAGA AS VICE-PRESIDENT OF THE LEYTE STATE
COLLEGE EFFECTIVE AUGUST 19, 1986.

APPROVED

This information is intended to clarify actions taken by this office on designations.

Very truly yours,

(SGD.)

PURIFICACION M. FLORES
President" 10

Alleging that the appointment of Dr. Crescencia (Cres) V. Chan-Gonzaga to the position of vice-president in
effect eased her out of said position, petitioner filed before the Board a petition for reconsideration. She
contended that her constitutional and legal rights to security of tenure had been violated. 11 In response
thereto, the Board Secretary informed petitioner's counsel through a letter dated October 29, 1986 that her
petition was "noted and discussed" by the Board but that the members present at the meeting, namely, Dr.
198
Minda Sutaria, Dr. Flores and Director Venancio Baclagon, arrived at the consensus that the position of vice-
president being "honorific," the incumbent president of the college had the prerogative to recommend for the
vice-presidency the nominee of the executive council. The letter added that the position being "considered co-
terminous with that of the President of the college," pursuant to Executive Order No. 17, petitioner's services
as vice-president were in effect terminated with the Board's approval of the appointment of Dr. Gonzaga to
said position. 12

From November 26, 1986 to January 7, 1987, petitioner's counsel wrote three letters to the secretary of the
Board and a letter to President Flores herself, all requesting for official copies of the board resolution
terminating the services of petitioner as college vice-president, the board resolution appointing Dr. Gonzaga as
vice-president, and the board resolution or decision denying petitioner's petition for reconsideration, for the
purpose of filing an appeal to the Minister of Justice. 13 Said letter-requests were unheeded.:-cralaw

On January 12, 1987, petitioner interposed an appeal despite non-receipt of the requested documents, to the
Review Committee of the Ministry of Justice which was organized to implement Executive Order No. 17
prescribing rules and regulations for the implementation of Section 2, Article III of the Freedom Constitution.
She alleged therein that since her ouster as vice-president, she had been demoted to the position of Director of
Research and that the 20% salary increase granted to all academic personnel of government schools was not
given to her because under the plantilla approved by the Office of Budget and Management, her salary was
reduced by one step since she was no longer the college vice-president. She argued that she was terminated
and stripped of her rank and status without legal cause and due process; that the Board's claim that the
position of vice-president is "honorific" is not supported by law; that said position is not co-terminous with the
position of president not only because the charter is silent on the matter but also because the charter provides
that a vice-president automatically assumes the presidency when it is vacant; and that the Board may not
designate or appoint anyone to the position of vice-president as the same was not vacant.

The therein respondent Board not having filed any responsive pleading to the brief filed by petitioner before the
Review Committee, she filed three successive motions for judgment on the pleadings. It turned out, however,
that on January 23, 1987, the Review Committee *** had issued a resolution on petitioner's appeal but a copy
of the same was furnished her through the mail only on March 31, 1987. 14

In said resolution, the Review Committee dismissed petitioner's petition on the ground that it was filed beyond
the 10-day period provided for in Section 6 of Executive Order No. 17. 15

After her requests for certified copies of the designation of Dr. Gonzaga as vice-president and the board
resolution denying her petition for reconsideration remained unacted upon, Dr. Ofelia P. TRISTE filed the
instant petition for Certiorari.
A preliminary point to consider is the propriety of the instant petition. Private respondent Gonzaga asserts that
petitioner, not having appealed to the president, had not exhausted all administrative remedies available to her
before she filed the instant judicial remedy.

As we earlier held, exhaustion of administrative remedies is not an iron-clad rule. It is not necessary when,
from the facts of the case, petitioner has to look to the courts for speedy relief; when the question presented is 198
"purely a legal one," the controverted act is "patently illegal" and "nothing of an administrative nature is to be or
can be done;" and when petitioner was denied due process. 16 Each of these exceptions may exempt the
petitioner from the rule on exhaustion of administrative remedies before filing a court action. Considering that
all these exceptions are present in this case, petitioner may avail herself of the instant remedy.:-cralaw

Although the petition is captioned "petition for review on Certiorari" 17 thereby creating the impression that the
same was filed under Rule 45 of the Rules of Court, we shall consider it as one for Certiorari under Rule 65 it
having been alleged that the respondents have abused their discretion in their questioned actions. 18

The resolution of the issue on whether petitioner was illegally ousted from her position as vice-president of the
Leyte State College hinges on the determination of her status as such official. Private respondent Dr. Gonzaga
and public respondent Dr. Flores **** contend that petitioner was merely "designated" and not "appointed" to
the college vice-presidency. They aver that petitioner's "designation" to said position was "purely an internal
arrangement which does not require the approval or confirmation by the Civil Service Commission." 19 They
maintain that petitioner's term of office being co-terminous with that of the retired college president, petitioner
may not complain that she was illegally dismissed from the vice-presidency. On the other hand, petitioner
asserts that she was the duly appointed vice-president of the college and hence, her right to security of tenure
may not be unceremoniously abridged.

In Borromeo v. Mariano, 20 this Court, through Justice Malcolm, noted that "(a)ll authorities unite in saying that
the term 'appoint' is well-known and whether regarded in its legal or in its ordinary acceptation, is applied to the
nomination or designation of an individual." We defined "appointment" in Aparri v. Court of Appeals 21 as the
"act of designation by the executive officer, board or body, to whom that power has been delegated, of the
individual who is to exercise the functions of a given office." On the other hand, there is jurisprudence to the
effect that the word "designate," when used by the appointing power in making an appointment to office, is
equivalent to the word "appoint." 22

Common usage, however, oftentimes puts a distinction between the terms "appointment" and designation".
Perhaps, the reason for this is that the word "appointment" connotes permanency while "designation" implies
temporariness. Thus, to "designate" a public officer to another position may mean to vest him with additional
duties while he performs the functions of his permanent office. Or, in some cases, a public officer may be
"designated" to a position in an acting capacity as when an Undersecretary is designated to discharge the
functions of a Secretary pending the appointment of a permanent Secretary.

The provisions of Presidential Decrees Nos. 944 and 1437, specifically the aforequoted sections, contemplate
of a duly appointed vice-president by the Board of Trustees, who would be a working vice-president with full
powers and duties and whose compensation, hours of service and other duties and conditions of employment
should be set by said Board.

Thus, P.D. 1437 specifically provides among others, the following:

"Section 3 . . . the governing board shall have the following specific powers and duties: 198

x x x

f. to confirm the appointments of vice-presidents, . . . in accordance with the provisions of existing laws; to
remove them for cause after investigation and hearing."

It appears that these provisions of law notwithstanding, it was not until February 3, 1984 that a Vice-President
for Leyte State College was named with the designation of herein petitioner to said position. The mode of
authorization was by "designation" inasmuch as the position of Vice-President did not appear in the College's
Personnel Services Itemization for the year 1984. 23 This omission was, however, corrected in the Plantilla of
Personnel and Salary Adjustment Form of the Leyte State College for the same calendar year 1984, which
listed as Item No. 2-1 the position of "Professor 6 (Vice-President)." Herein petitioner was listed as the
incumbent with an actual salary as of June 30, 1984 of P45,600.00 per annum and an adjusted salary effective
July 1, 1984 per NCC #33 of P55,644.00 per annum. It is to be noted that the College Plantilla carried other
Professor 6 items, i.e. Items Nos. 2-2, 2-4 and 2-5, with an actual salary of P43,392.00 per annum as of June
30, 1984 and an adjusted salary of P52,944.00 as of July 1, 1984. 24

Thereafter, on December 27, 1985, herein petitioner was extended an appointment as "Professor 6" . . . "with
compensation at the rate of FIFTY FIVE THOUSAND SIX HUNDRED FORTY FOUR (55,644) ONLY pesos
per annum effective July 01, 1984." The position to be filled was listed as "Old Item No. 2-1 Page 1 Approp.
Act 230 Page CY 1983, New Item No. 2-1 Page 1 Approp. Act (illegible) CY 1984," which is equivalent to the
item designated as "Professor 6 (Vice-President)" in the Plantilla of Personnel for 1984. Said appointment was
issued "By authority of the Board of Trustees" and approved by the Civil Service Commission as permanent.
25

From the foregoing, it becomes clear that while initially petitioner was discharging the powers and functions of
Vice-President upon a designation made on February 3, 1984, by July 1 of the same year, she was doing so
by virtue of an appointment. For while her appointment paper mentioned only "Professor 6" as the position to
which she was being appointed, the clear intent to appoint her "Professor 6 (Vice-President)," as distinguished
from the other Professor 6 items is manifest from the rate of compensation and Item Number specifically given
in the appointment paper. Moreover, there appears no reason why she should be given another appointment to
the position of Professor 6 if the intention was for her to remain merely as Professor 6. The only plausible
explanation is that it was an appointment to a new item of Vice-President. And as adverted to earlier, said
appointment was approved by the Civil Service Commission as permanent.- nad

Although under Section 8 of P.D. 1437, the term of a state college president is six (6) years, the same law is
silent as to that of the vice-president. Such silence, however, should not be interpreted to mean that the law
intends to give the vice-president the same term as that of a president. On the contrary, there are indications in
the decrees themselves that the vice-president is a career official whose term of office may outlast that of the
president. Thus, under Section 6(c) of P.D. 944, the vice-president is next in ranks to the president. He or she
shall assist the president in the administration and supervision of the college. He or she shall "assume the
presidency of the College in an acting capacity, with full powers and duties in the absence or when the office of
the president is vacant." Whoever is holding the position of vice-president shall remain as such until, under
Section 3(f) of P.D. 1437 above-quoted, the Board finds a reason or reasons to remove him "for cause after
investigation and hearing."

The contention of respondents Gonzaga and Flores that petitioner was not a permanently appointed vice-
198
president since she was merely receiving an honorarium for the job, is likewise without merit. Under the same
Section 3(f) of P.D. 1437, the Board has the power to fix the compensation of the vice-president. Accordingly,
during its meeting on February 3, 1984, the Board set petitioner's basic salary as vice-president at P39,288
plus representation and transportation allowances. However, since petitioner was then holding an appointment
as Professor 6, the then college president sought the aforestated opinion of the Minister of Budget granting
petitioner an honorarium of P4,548. Such inquiry, it must be noted, was done in connection with Resolution No.
5, s. 1984, or while petitioner was discharging the functions of Vice-President upon a designation. In contrast,
her compensation as Professor 6 (Vice-President) was specifically stated in her appointment paper. The
allegation of private respondents that petitioner was receiving only an honorarium and not a regular salary as
Vice-President is therefore true only for the period February 3 to June 30, 1984. Thereafter, by virtue of her
appointment, petitioner began receiving a compensation of P55,644.00 per annum as Professor 6 (Vice-
President).

Mechem states that "(l)ike the requirement of an oath, the fact of the payment of a salary and/or fees may aid
in determining the nature of a position, but it is not conclusive, for while a salary or fees are usually annexed to
the office, it is not necessarily so. As in the case of the oath, the salary or fees are mere incidents and form no
part of the office. Where a salary or fees are annexed, the office is often said to be coupled with an interest;
where neither is provided for it is a naked or honorary office, and is supposed to be accepted merely for the
public good." 26

In the case at bar, petitioner having been given the compensation attached to the Item Professor 6 (Vice-
President) as distinguished from the other Professor 6 items which carried a lower salary, we hold that her
appointment dated December 27, 1985, but retroactive to July 1, 1984 was in truth and in fact to the position of
Vice-President, rather than to the position of Professor 6.

This case should be distinguished from Laxamana v. Borlaza 27 wherein we held that petitioner was legally
removed because she was merely designated as Director of Publications and not by permanent appointment
since there was no position in the college plantilla to which a permanent appointment could be made. In said
case, there was no statutory basis for the inclusion of the position of Director of Publications in the plantilla of
the college as it was merely created by the Board. In the instant case, the position of vice-president is based
on a presidential decree which has the force and effect of law. But because said position was omitted in the
personnel services itemization, the college could do no more than classify petitioner's position as "Professor 6
(Vice-Pres.)"

The nature of petitioner's appointment having been established, we now consider the legality of her
replacement as vice-president of the Leyte State College.:-cralaw

Executive Order No. 17 was issued by the President on May 28, 1986 "to obviate unnecessary anxiety and
demoralization among the deserving officials and employees, particularly in the career civil service" (82 O.G.
2423-2424). Section 1 thereof provides that separation or replacement of officers and employees shall be
made "only for justifiable reasons". For its purposes, a state college is considered a ministry. Pertinent
provisions of the Order state:

"Sec. 2. The Ministry Head concerned, on the basis of such review and assessment, shall determine who shall
be separated from the service. Thereafter, he shall issue to the official or employee concerned a notice of
separation which shall indicate therein the reason/s or ground/s for such separation and the fact that the
separated official or employee has the right to file a petition for reconsideration pursuant to this Order.
198
Separation from the service shall be effective upon receipt of such notice, either personally by the official or
employee concerned or on his behalf by a person of sufficient discretion.

"SEC. 3. The following shall be the grounds for separation/replacement of personnel:

1) Existence of a case for summary dismissal pursuant to Section 40 of the Civil Service Law;

2) Existence of a probable cause for violation of the Anti-Graft and Corrupt Practices Act as determined by the
Ministry Head concerned;

3) Gross incompetence or inefficiency in the discharge of functions;

4) Misuse of public office for partisan political purposes;

5) Any other analogous ground showing that the incumbent is unfit to remain in the service or his
separation/replacement is in the interest of the service." (Emphasis supplied)

Petitioner learned of her removal as vice-president when it was already a fait accompli. Hence, all she could do
under the circumstances was to petition for the reconsideration of the Board resolution designating respondent
Gonzaga as her replacement and at the same time asserting her constitutional right to security of tenure.

The Board's "noting" of her petition is not a valid exercise of its power. 28 Although the Board Secretary's letter
stating that the petition for reconsideration was noted and discussed by the Board, the latter's reason for
replacing petitioner, to wit, the position of vice-president is "honorific" and co-terminous with that of the college
president is not within the purview of Section 3 aforequoted.- nad

Furthermore, respondent Flores and the Board had not complied with the procedure set forth in Section 2 of
Executive Order No. 17. They did not serve the notice of separation specified therein. In fact, the cavalier
manner by which petitioner was dislodged from the vice-presidency was matched by the college officials'
refusal to furnish petitioner with copies of the documents pertinent to her appeal. Even if respondent
Gonzaga's unsubstantial allegations on petitioner's association with the Romualdezes of Leyte 29 were true,
certainly, it is not within the spirit of Executive Order No. 17 to brush aside its due process requirements just to
implement its ultimate purpose which is to rid the government of misfits.
On top of these, the review committee seems to have been too technical in treating petitioner's appeal. Its
denial of petitioner's plea for reconsideration on the ground that the 10-day period specified in Section 6 of said
order had lapsed is tantamount to abuse of discretion it appearing that said period had not commenced to run.
We agree with the Solicitor General that the letters embodying the resolutions replacing petitioner as vice-
president, do not, in legal contemplation, constitute the notice of separation from which an appeal could be
made. 30 The existence of said resolutions should have been established by official or certified true copies but
unfortunately, respondent Flores herself and the Board secretary failed to heed petitioner's requests for them.

198

WHEREFORE, the petition for Certiorari is GRANTED and the IMMEDIATE REINSTATEMENT of petitioner
with backwages to the position of vice-president of the Leyte State College is hereby ordered. No costs. SO
ORDERED.

G.R. No. 69871 August 24, 1990

ANITA VILLA, petitioner,
vs.
MANUEL LAZARO, as Presidential Assistant for Legal Affairs, Office of the President, and the HUMAN
SETTLEMENTS REGULATORY COMMISSION, respondents.

Eliseo P. Vencer II for petitioner.

NARVASA, J.:

On January 18, 1980, Anita Villa was granted a building permit to construct a funeral parlor at Santiago Boulevard in Gen. Santos City. 1 The permit was issued by
the City Engineer after the application was "processed by Engineer Dominador Solana of the City Engineer's Office, and on the strength of the Certification of
Manuel Sales, City Planning and Development Coordinator that the "project was in consonance with the Land Use Plan of the City and within the full provision of
the Zoning Ordinance". 2 With financing obtained from the Development Bank of the Philippines, Villa commenced construction of the building.

In October of that same year, as the funeral parlor was nearing completion, a suit for injunction was brought against
Villa by Dr. Jesus Veneracion, the owner of St. Elizabeth Hospital, standing about 132.36 meters from the funeral
parlor.   The complaint sought the perpetual enjoinment of the construction because allegedly violative of the Zoning
3

Ordinance of General Santos City.   A status quo order was issued.

4

After appropriate proceedings and trial, judgment on the merits was rendered on November 17, 1981, dismissing
Veneracion's complaint as well as the counterclaim pleaded by Villa. The Trial Court found that there was
a falsified Zoning Ordinance, containing a provision governing funeral parlors, which had been submitted to and
ratified by the Ministry of Human Settlements, but that ordinance had never been passed by the Sangguniang
Panlungsod and that the genuine Zoning Ordinance of General Santos City contained no prohibition whatever
relative to such parlors' "distance from hospitals, whether public or private".   Villa then resumed construction of her
5

building and completed it.  6

Veneracion did not appeal from this adverse judgment which therefore became final. Instead, he brought the matter
up with the Human Settlements Regulatory Commission. He lodged a complaint with that commission praying "that
the funeral parlor be relocated because it was near the St. Elizabeth Hospital and Villa failed to secure the
necessary locational clearance".   The complaint, as will at once be noted, is substantially the same as that filed by
7

him with the Court of First Instance and dismissed after trial. Furthermore, neither he nor the Commission, as will
hereafter be narrated, ever made known this second complaint to Villa until much, much later, after the respondent
Commission had rendered several adverse rulings to her.  8

Two months after the rendition of the judgment against Veneracion, or more precisely on January 22, 1982, Villa
received a telegram dated January 21 from Commissioner Raymundo R. Dizon of the Human Settlements
Regulatory Commission reading as follows:  9

THE HUMAN SETTLEMENT REGULATORY COMMISSION REQUEST TRANSMITTAL OF PROOF OF

LOCATIONAL CLEARANCE GRANTED BY THIS OFFICE IMMEDIATELY UPON RECEIPT OF THIS . . NOT
LATER THAN 21ST JANUARY 1982 REGARDING YOUR ON GOING CONSTRUCTION OF A FUNERAL
PARLOR AT SANTIAGO STREET CORNER NATIONAL HIGHWAY GENERAL SANTOS CITY AN OFFICIAL
COMMUNICATION TO THE EFFECT FOLLOWS.
On the same day, January 22, 1982, Villa sent Dizon a reply telegram reading: "LOCATIONAL CLEARANCE
BASED ON CERTIFICATION OF CITY PLANNING AND DEVELOPMENT COORDINATOR AND HUMAN
SETTLEMENT OFFICER, COPIES MAIL . . ."   This she did on January 27,1982; under Registry Receipt No. 1227
10

(Gen. Santos City Post Office),   Villa sent to Dizon –

11

1) the certification dated October 24, 1980 of Josefina E. Alaba (Human Settlements Officer, Gen. Santos City) to
the following effect: 
12

. . that per scrutiny of the documents presented by Mrs. Anita Villa on her application for a Funeral Parlor and
inspection of lot No. 4997 along Santiago Boulevard where the building is to be constructed, the undersigned 198
guarantees that the application passed the criteria of this office for this purpose.

2) and the certification of Manuel O. Sales, City Planning and Development Coordinator, dated December 27,
1979,   that:
13

. . the proposed project (funeral Chapel) of Anita G. Villa, located at Lot No. 4997 along Santiago Boulevard is in
consonance with the land Use Plan of the City and within the full provision of the Zoning Ordinance.

On February 8, 1982 Villa received what was evidently the official communication" referred to in Commissioner
Dizon's telegram of January 21, 1982, supra, an "Order to Present Proof of Locational Clearance" dated January 20,
1982. Knowing this and "considering also that she . . (had) already sent the (required) locational clearance on
January 27, 1982," Villa made no response.  14

No doubt with no little discomfiture Villa received on June 2, 1982 a "Show Cause" Order dated April 28,1982,
signed by one Ernesto L. Mendiola in behalf of the Commission, requiring her to show cause why a fine should not
be imposed on her or a cease-and-desist order issued against her for her failure to show proof of locational
clearance.   The order made no reference whatever to the documents she had already sent by registered mail as
15

early as January 27, 1982. The following day Villa sent a telegram to Commissioner Dizon reading as follows:  16

LOCATIONAL CLEARANCE WAS MAILED THRU REGISTERED MAIL REGISTRY RECEIPT NUMBER 1227
DATED JANUARY 27, 1982, SENDING AGAIN THRU REGISTERED MAIL REGISTRY RECEIPT NO. 6899 JUNE
3, 1982.

On the same day, she also sent to Commissioner Dizon by registered mail (Reg Receipt No. 6899), as indicated in
her telegram, the same certifications earlier sent by her also by registered mail (Reg Receipt No. 1227), supra.

If she thought the affair had thus been satisfactorily ended, she was sadly in error, of which she was very shortly
made aware. On July 27, 1982, she received an Order of Commissioner Dizon dated June 29, 1982 imposing on
her a fine of P10,000.00 and requiring her to cease operations until further orders from his office.   The order made
17

no mention of the documents she had transmitted by registered mail on January 27, 1982 and June 3, 1982, or to
her telegrams on the matter. Villa forthwith went to see the Deputized Zoning Administrator of General Santos City,
Isidro M. Olmedo. The latter issued to her a "CERTIFICATE OF ZONING COMPLIANCE" No. 0087, dated July
28,1982, inter alia attesting that the land on which Villa's "proposed commercial building" was located in a vicinity in
which the "dominant land uses" were "commercial/institutional/residential," and the project conformed "WITH THE
LAND USE PLAN OF THE CITY."   This certificate Villa sent on the same day to Commissioner Dizon by registered
18

mail (Reg. Receipt No. 1365 [Gen. Santos City P.O.]).   It is noteworthy that this Certificate No. 0087 is entirely
19

consistent with the earlier certification dated November 27, 1979 of City Planning & Development Coordinator Sales
that Villa's funeral chapel was "in consonance with the Land Use Plan of the City and within the full provision of the
Zoning Ordinance," supra,   and that of Human Settlements Officer Alaba dated October 24, 1980, supra   that
20 21

Villa's "application for a Funeral Parlor . . passed the criteria of this office for this purpose." Villa could perhaps be
understandably considered justified in believing, at this time, that the matter had finally been laid to rest.

One can then only imagine her consternation and shock when she was served on November 16, 1982 with a writ of
execution signed by Commissioner Dizon under the date of October 19, 1982 in implementation of his Order of June
29, 1982, above mentioned, imposing a fine of P10,000.00 on her. Again, this Order, like the others issuing from
respondent Commission, made no advertence whatever to the documents Villa had already sent to respondent
Commission by registered mail on January 27, June 29, and July 28, 1982, or her telegrams Be this as it may, she
lost no time in moving for reconsideration, by letter dated November 22, 1982 to which she attached copies of the
documents she had earlier sent to Commissioner Dizon, viz.: her telegram of January 22, 1982,   (2) the certification
22

of the City Planning & Development Coordinator   (3) the certification of the Human Settlements Officer   (4) the
23 24

telegram dated June 3, 1982,  and (5) the Certificate of Zoning Compliance dated July 28, 1982.   In addition, Villa
25 26

executed a special power of attorney on December 10, 1982 authorizing Anastacio Basas to "deliver to the Human
Settlements Regulatory Commission . . all my papers or documents required by the said Commission as requisites
for the issuance to me and/or the Funeraria Villa . . (of) the locational clearance for the construction of my funeral
parlor along Santiago boulevard, General Santos City. . .   pursuant to which on December 15, 1982, said Basas
27
delivered to the Commission (Enforcement Office), thru one Betty Jimenez   copies of Villa's (1) building plan, (2)
28

building permit,   (3) occupancy permit,   and (4) "the decision of the Court case involving the funeral parlor". 
29 30 31

By Order dated January 21, 1983, Commissioner Dizon denied the reconsideration prayed for by Villa in her letter of
November 22, 1982, opining that the plea for reconsideration had been presented out of time,   and the order of
32

June 29, 1982 had become final and executory.  33

Villa then filed an appeal with "the Commission Proper, which denied it in an order dated September 7, 1983, also
on account of the finality of the order of the Commissioner for Enforcement. Her subsequent motion for
reconsideration . . (was also) denied in the order of June 7, 1984 . . 34
198

Villa then sought to take an appeal to the Office of the President. The matter was acted on by the Presidential
Assistant for Legal Affairs, respondent Manuel M. Lazaro. In a Resolution dated September 21, 1984, respondent
Lazaro denied the "appeal and (Villa's) motion for extension of time to submit an appeal memorandum".   It is 35

noteworthy that Lazaro's resolution, like the orders of Commissioner Dizon and respondent Commission, contains
no reference whatsoever to the telegrams and documents sent by Villa to the latter on various occasions evidencing
her prompt responses to the orders of Dizon and the Commission, and her substantial compliance with the general
requirement for her to present the requisite clearances or documents of authority for the erection of her funeral
parlor. The very skimpy narration of facts set out in the resolution limits itself merely to a citation of the orders of
Commissioner Dizon and the Commission; and on that basis, the resolution simplistically concludes that "no appeal
was seasonably taken by Mrs. Anita Villa from the order of June 29, 1982, of the HSRC . . (and) (a)ccordingly, said
order became final for which reason a writ of execution was issued . . (which) finality was confirmed in the
subsequent orders of HSRC, dated January 21, 1983, and September 7, 1983."

Villa filed a motion for reconsideration dated October 19, 1984, this time through counsel, contending that the
resolution of September 21, 1984 was "not in conformity with the law and the evidence" and deprived her of due
process of law.   But this, too, was denied (with finality) by respondent Lazaro, in a Resolution dated December 14,
36

1984 which again omitted to refer to the several attempts of Villa to comply with the order of Commissioner Dizon to
present the requisite documents of authority anent her funeral parlor and adverted merely to the orders emanating
from Dizon and the respondent Commission.  37

These facts present a picture of official incompetence of gross negligence and abdication of duty, if not of active
bias and partiality, that is most reprehensible. The result has been to subvert and put to naught the Judgment
rendered in a suit regularly tried and decided by a court of justice, to deprive one party of rights confirmed and
secured thereby and to accord her adversary, in a different forum, the relief he had sought and been denied in said
case.

There is no question that Dr. Jesus Veneracion had resorted to the proscribed practice of forum-shopping when,
following adverse judgment of the Court of First Instance in his suit to enjoin the construction of Villa's funeral parlor,
he had, instead of appealing that judgment, lodged a complaint with the respondent Commission on substantially
the same ground litigated in the action. Also undisputed is that while the respondent Commission took cognizance
of the complaint and by telegram required Villa to submit a locational clearance, said respondent did not then or at
any time before issuance of the order and writ of execution complained of bother to put her on notice, formally or
otherwise, of Veneracion's complaint. It was therefore wholly natural for Villa to assume, as it is apparent she did,
that no formal adversarial inquiry was underway and that the telegram was what it purported to be on its face: a
routinary request, issued motu proprio, to submit proof of compliance with locational requirements. And such
assumption was doubtless fortified by petitioner's knowledge that she already had in her favor a judgment on the
subject against which her opponent had taken no recourse by appeal or otherwise.

Neither is there any serious dispute about what transpired thereafter, as already recounted and, in particular, about
the fact that in response to that first and the subsequent demands sent by Commissioner Dizon, Villa  not once but
thrice furnished the Commission by registered mail with copies, variously, of official documents certifying to her
compliance with the pertinent locational, zoning and land use requirements and plans. None of these documents
appears to have made any impression on Commissioner Dizon, whose show-cause order of April 28, 1982 and
order of June 29, 1982 imposing a P10,000.00 fine on petitioner made no mention of them whatsoever. Not even
Villa's submission of said documents a fourth time to support her motion for reconsideration of a writ of execution
could move Commissioner Dizon to stop acting as if said documents did not exist at all. True, only copies had been
submitted, but ordinary prudence and fairness dictated at least some inquiry into their authenticity, and this would
not have posed any great difficulty considering their purportedly official origins.

The mischief done by Commissioner Dizon's baffling failure (or obdurate refusal) even to acknowledge the existence
of the documents furnished by petitioner was perpetuated by the "Commissioner proper" and respondent Lazaro
(Presidential Assistant on Legal Affairs), who threw out petitioner's appeals with no reference whatsoever thereto
and thereby kept in limbo evidence that would have been decisive. The Solicitor General's brief Comment of
September 3,
1985   neither admits nor denies Villa's claim of having submitted the required documents; it avoids any reference
38

thereto and deals mainly with the question of the timeliness of her appeal to the respondent Commission and the
propriety of the present petition. From such silence and upon what the record otherwise clearly shows, the Court
remains in no doubt of the verity of said petitioner's claim that she had more than once submitted those requisite
documents.

There was absolutely no excuse for initiating what is held out as an administrative proceeding against Villa without
informing her of the complaint which initiated the case; for conducting that inquiry in the most informal manner by
means only of communications requiring submission of certain documents, which left the impression that
compliance was all that was expected of her and with which directives she promptly and religiously complied;
assuming that one of the documents thus successively submitted had been received, but given the fact that on at
least two occasions, their transmission had been preceded by telegrams announcing that they would follow by mail,
198
for failing to call Villa's attention to their non-receipt or to make any other attempt to trace their whereabouts; for
ruling against Villa on the spurious premise that she had failed to submit the documents required; and for
maintaining to the very end that pretense of lack of compliance even after being presented with a fourth set of
documents and the decision in the court case upholding her right to operate her funeral parlor in its questioned
location.

Whether born of ineptitude negligence, bias or malice, such lapses are indefensible. No excuse can be advanced
for avoiding all mention or consideration of certifications issued by respondent Commission's own officials in
General Santos City, which included the very relevant one executed by Human Settlements Officer Josefina E.
Alaba that petitioner's application for a funeral parlor at the questioned location had . . passed the criteria of this
office for this purpose.   It was thus not even necessary for petitioner to bring that document to the notice of the
39

Commission which, together with Commissioner Dizon, was chargeable with knowledge of its own workings and of
all acts done in the performance of duty by its officials and employees. Petitioner is plainly the victim of either gross
ignorance or negligence or abuse of power, or a combination of both. All of the foregoing translate to a denial of due
process against which the defense of failure to take timely appeal will not avail. Well-esconced in our jurisprudence
is the rule:

. . that administrative proceedings are not exempt from the operation of certain basic and fundamental procedural
principles, such as the due process requirements in investigations and trials. And this administrative due process is
recognized to include (a) the right to notice, be it actual or constructive, of the institution of the proceedings that may
affect a person's legal right; (b) reasonable opportunity to appear and defend his rights, introduce witnesses and
relevant evidence in his favor, (c) a tribunal so constituted as to give him reasonable assurance of honesty and
impartiality, and one of competent jurisdiction; and (d) a finding or decision by that tribunal supported by substantial
evidence presented at the hearing, or at least contained in the records or disclosed to the parties affected.  40

and, it being clear that some, at least, of those essential elements did not obtain or were not present in the
proceedings complained of, any judgment rendered, or order issued, therein was null and void, could never become
final, and could be attacked in any appropriate proceeding.

The Court finds no merit in the proposition that relief is foreclosed to Villa because her motion for reconsideration of
November 22, 1982 was filed out of time. The very informal character of the so-called administrative proceedings,
an informality for which Commissioner Dizon himself was responsible and which he never sought to rectify, militates
against imposing strict observance of the limiting periods applicable to proceedings otherwise properly initiated and
regularly conducted. Indeed, considering the rather "off-the-cuff" manner in which the inquiry was carried out, it is
not even certain that said petitioner is chargeable with tardiness in connection with any incident thereof. What the
record shows is that she invariably responded promptly, at times within a day or two of receiving them, to orders of
communications sent to her. At any rate, the Court will not permit the result of an administrative proceeding riddled
with the serious defects already pointed out to negate an earlier judgment on the merits on the same matter
regularly rendered by competent court.

WHEREFORE, the petition is GRANTED. The proceedings complained of are ANNULLED and all orders, writs and
resolutions issued in the course thereof, beginning with the show cause order of June 2, 1982 up to and including
the challenged Resolutions of September 21, 1984 and December 14, 1984 of respondent Presidential Assistant
Manuel Lazaro are VACATED and SET ASIDE, for having been taken and/or issued in violation of petitioner's right
to due process, without pronouncement as to costs. SO ORDERED.

G.R. No. 85156             February 5, 1991

HON. LOURDES R. QUISUMBING in her official capacity as Secretary of Education, Culture and Sports
(DECS), HON. TEOFILO GOMEZ and CRISANTO B. DELAMIN, petitioners,
vs.
HON. MANUEL LUIS GUMBAN, Presiding Judge of the Regional Trial Court, Br. 23 –– General Santos City,
South Cotabato, and ESTHER B. YAP, respondents.

Vencer Purisima & Associates for private respondent.

PARAS, J.:
198
This petition seeks to annul and set aside; the order* dated August 17, 1987 of the Regional Trial Court, Branch 23,
General Santos City, in a Special Civil Case No. 230 for prohibition, entitled Esther B. Yap vs. Hon. Lourdes
Quisumbing, et al.", denying the Omnibus Motion to Dismiss filed by the petitioners herein; the order dated August
25, 1987, granting the Writ of Preliminary Injunction; and, the order dated April 15, 1988, denying the petitioners'
motion for Reconsideration.

On or before 1979, private respondent Esther B. Yap was appointed District Supervisor of the Bureau of Public
Schools and assigned to the District of Glan, South Cotabato (Rollo, p. 2).

On February 11, 1987, in view of the agitation of teachers and concerned citizens of Glan, then Secretary Lourdes
Quisumbing issued a Memorandum Order, directing Regional Director Teofilo E. Gomez to reassign or transfer
Esther B. Yap to another district (Rollo, p. 24), which was effected by Director Teofilo E. Gomez in his Memorandum
Order dated February 12, 1987, ordering the transfer of private respondent Esther B. Yap as a public school district
supervisor from Glan District to Malapatan District and for Crisanto B. Delamin, another public school district
supervisor, to assume that of respondent's position at Glan (Rollo p. 25). The latter in turn issued a Memorandum
Order to the principals and headteachers of different public schools at Glan informing them of his assumption of
office (Rollo, p. 26).

However, private respondent Esther B. Yap defied the orders of her superiors and she continued to perform the
functions of public school district supervisor of Glan (Rollo, p. 5).

On February 20, 1987, Yap filed a petition (docketed as Special Civil Case No. 230) for prohibition with prayer for
preliminary injunction/restraining order with the Regional Trial Court, Branch 23m, General Santos City against the
Hon. Lourdes R. Quisumbing, et al. (Rollo, pp. 27-33) who filed an Omnibus Motion to Dismiss (Rollo, pp. 45-47),
which was denied by respondent Judge Manuel Luis Gumban in his order dated August 17, 1987. On August 25,
1987, said Judge issued another order granting the Writ of Preliminary injunction (Rollo, p. 57) and denied
Quisumbing et al.'s motion for reconsideration (Rollo, p. 65).

Quisumbing, et al. assailed the aforesaid orders on three (3) counts: (a) that the transfer of respondent Yap is not
violative of law, since it was made in the interest of public service (Rollo, pp. 8-13); (b) that it was done outside the
election ban period (Rollo, pp. 14-17); and (c) that Esther B. Yap failed to exhaust all available administrative
remedies (Rollo, pp. 17-19).

On the other hand, Yap argued that: (a) the assailed orders are plainly interlocutory in nature, hence, not correctible
by certiorari (Rollo, pp. 74-75-b); (b) the order to transfer Mrs. Esther B. Yap is a clear and open violation of the
election law and was done as a political accommodation (Rollo, pp. 76-81.) and (e) that the doctrine of non-
exhaustion of administrative remedies is not applicable to the case at bar as the Memorandum Order issued by the
petitioners, Lourdes Quisumbing and Teofilo Gomez dated February 11, 1987 and February 12, 1987, respectively,
would readily show that the basis for the issuance of the orders are the unverified demands of alleged concerned
citizens without the benefit of investigation (Rollo, pp. 81-82).

After a careful scrutiny of the records, it is to be underscored that the appointment of private respondent Yap is
simply that of a District Supervisor of the Bureau of Public Schools which does not indicate a specific station (Rollo,
p. 13). As such, she could be assigned to any station and she is not entitled to stay permanently at any specific
station (Bongbong v. Parado, 57 SCRA 623 [1974]; Department of Education Culture and Sports v. Court of Appeals
(G.R. 81032, March 22,1990), citing Brillantes v. Guevarra (27 SCRA 138 [1969]).

Since the election period for the May 11, 1987 election had already elapsed, the issue whether or not the transfer of
private respondent is in violation of the election ban has become moot and academic (Rollo, p. 17).

Finally, the lower court did not err in taking cognizance of the case. The doctrine of exhaustion of administrative
remedies is not a hard and fact rule. It has been repeatedly held that the requiring previous exhaustion of
administrative remedies is not applicable where the question in dispute is purely a legal one: where the controverted
act is patently illegal or was performed without jurisdiction or in excess of jurisdiction; where the respondent is a
department secretary, whose acts as an alter ego of the President, bear the implied or assumed approval of the
latter; where there are circumstances indicating the urgency of judicial intervention; or where the respondent has
acted in utter disregard of due process. The rule does not apply where insistence on its observance would result in
nullification of the claim being asserted; and when the rule does not provide a plain, speedy and adequate remedy
(Laganapan v. Asedillo, 154 SCRA 377 [1987]).

While generally, an order denying a motion to dismiss is interlocutory and cannot be the subject of a petition
for certiorari unless the court acts without or in excess of jurisdiction or with grave abuse of discretion (Cojuangco v.
Romillo, Jr., 167 SCRA 751 [1988]), still in the instant case We deem it more felicitous and expedient to resolve the
same on the merits to avoid multiplicity of suits since after all the circumstances warrant a final disposition of this
petition, namely the granting thereof because private respondent had previously been appointed as district
supervisor, without indicating any specific place as her permanent station. Her status was therefore akin to that of
198
a district supervisor at large. Her transfer was neither whimsical, arbitrary, or capricious.

Accordingly, this petition is hereby GRANTED, and all the Orders complained of are SET ASIDE and REVERSED.
SO ORDERED.

G.R. Nos. L-55963 & 61045             February 27, 1991

SPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, petitioners,

vs.
HONORABLE INOCENCIO D. MALIAMAN and NATIONAL IRRIGATION ADMINISTRATION, respondents.

NATIONAL IRRIGATION ADMINISTRATION, appellant,

vs.
SPOUSES JOSE FONTANILLA and VIRGINIA FONTANILLA, appellees.

RESOLUTION

PARAS, J.:

In its Motion for Reconsideration  of the Court's Second Division decision in G.R. No. 55963 and G.R. No. 61045,
1

the National Irrigation Administration (NIA, for brevity), through the Solicitor General, maintains that, on the strength
of Presidential Decree No. 552 (which amended certain provisions of Republic Act 3601, the law creating the NIA)
and the case of Angat River Irrigation System, et al. vs. Angat River Workers' Union, et al., 102 Phil. 790 "the NIA
does not perform solely and primarily proprietary functions but is an agency of the government tasked with
governmental functions, and is therefore not liable for the tortious act of its driver Hugo Garcia, who was not its
special agent."

Although the majority opinion in the cited case of Angat System declares that the Angat System (like the NIA)
exercised a governmental function because the nature of the powers and functions of said agency does not show
that it was intended to "bring to the Government any special corporate benefit or pecuniary profit," there is a strong
dissenting opinion penned by then Associate Justice and later Chief Justice Roberto Concepcion and concurred in
by then Associate Justice J.B.L. Reyes which held the contrary view that the Angat River System is a government
entity exercising proprietary functions. To buttress said stand, the former Chief Justice cited some authorities which
will be useful in the proper resolution of this case.

Quoting from said dissenting opinion which cited McQuillin's The Law of Municipal Corporations, 3rd ed., Vol. 18,
pp. 423424:

In undertaking to supply water at price, municipality is not performing governmental function but is engaged in trade,
and is liable first as private company would be for any negligence in laying out of its pipes, in keeping them in repair,
or in furnishing potable water through them. Harvard Furniture Co., Inc. vs. City of Cambridge, 320 Mass. 227, 68
N.E. (2d) 684.

Municipality in contracting to provide water supply acts under its proprietary power and not under its legislative,
public or governmental powers. Farmers' State Bank vs. Conrad, 100 Mont. 415,47 P. (2d) 853.
In this connection, the opinion is that irrigation districts in the United States are basically identical to our irrigation
systems under Act No. 2152. Because of such similarity, it is found appropriate to consider certain doctrines from
American jurisprudence, which are as follows, to wit:

An irrigation district is a public quasi corporation, organized, however, to conduct a business for the private benefit
of the owners of land within its limits. They are members of the corporation, control its affairs, and alone are
benefited by its operations. It is, in the administration of its business, the owner of its system in a proprietary rather
than a public capacity, and must assume and bear the burdens of proprietary ownership. (Nampa vs. Nampa & M.
Irrig. Dist. 19 Idaho, 779,115 Pac. 979)
198
. . . the plaintiff sought damages for injuries to crops on his land during 1923, 1924, 1925, and 1926, caused by
water seeping, percolating, and escaping from the defendant's canal. The defendant contended that irrigation
districts were agencies of the state, and were, therefore, not liable for the negligent construction or operation of their
canals or ditches. The court, after a careful review of the authorities defining an irrigation district, conceded that
such a quasi public corporation possessed some governmental powers and exercised some governmental
functions, but held that the construction and operation of its irrigation canals and ditches was a proprietary rather
than a governmental function, and hence the district was responsible in damages for the negligent construction or
operation of its canal system. (69 A.L.R., p. 1233)

It may not be amiss to state at this point that the functions of government have been classified into governmental or
constituent and proprietary or ministrant. The former involves the exercise of sovereignty and considered as
compulsory; the latter connotes merely the exercise of proprietary functions and thus considered as optional. The
Solicitor General argues that the reasons presented by P.D. 552 for the existence of the NIA (the WHEREAS
clauses of said decree) indubitably reveal that the responsibility vested in said agency concerns public welfare and
public benefit, and is therefore an exercise of sovereignty. On the contrary, We agree with the former Chief Justice
Concepcion in saying that the same purpose such as public benefit and public welfare may be found in the
operation of certain enterprises (those engaged in the supply of electric power, or in supplying telegraphic,
telephonic, and radio communication, or in the production and distribution of prime necessities, etc.) yet it is certain
that the functions performed by such enterprises are basically proprietary in nature. Thus, as held in Holderbaum vs.
Hidalgo County Water Improvement District (297 S.W. 865, aff'd in 11 S.W. [2d] 506) — cited in the dissenting
opinion by Justice Concepcion:

. . . Primarily, a water improvement district is in no better position than a city is when exercising its purely local
powers and duties. Its general purposes are not essentially public in their nature, but are only incidentally so; those
purposes may be likened to those of a city which is operating a waterworks system, or an irrigation system. . . . A
water improvement district can do nothing, it has and furnishes no facilities, for the administration of the sovereign
government. Its officers have no power or authority to exercise any of the functions of the general government, or to
enforce any of the laws of the state or any of its other subdivisions, or collect taxes other than those assessed by
the district. They have no more power or authority than that of the officers of a private corporation organized for like
purposes. As a practical matter, the primary objects and purposes of such district are of a purely local nature, for the
district is created and operated for the sole benefit of its own members, and an analysis of those objects and
purposes discloses that they directly benefit only the landowners who reside within and whose lands form a part of
the district, to the exclusion of all other residents therein. It is true, of course, that the state and the general public
are greatly benefited by the proper operation of the district, and to that extent its objects and accomplishments are
public in their nature, but this characteristic is only incidental to the primary and chief object of the corporation, which
is the irrigation of lands forming a part of the district. It is obvious, then, that the purposes and duties of such districts
do not come within the definition of public rights, purposes, and duties which would entitle the district to the
exemption raised by the common law as a protection to corporations having a purely public purpose and performing
essentially public duties.

Of equal importance is the case of National Waterworks and Sewerage Authority (NAWASA) vs. NWSA
Consolidated Unions, 11 SCRA 766, which propounds the thesis that "the NAWASA is not an agency performing
governmental functions; rather it performs proprietary functions . . . ." The functions of providing water supply and
sewerage service are regarded as mere optional functions of government even though the service rendered caters
to the community as a whole and the goal is for the general interest of society. The business of furnishing water
supply and sewerage service, as held in the case of Metropolitan Water District vs. Court of Industrial Relations, et
al., 91 Phil. 840, "may for all practical purposes be likened to an industry engaged in by coal companies, gas
companies, power plants, ice plants, and the like." Withal, it has been enunciated that "although the State may
regulate the service and rates of water plants owned and operated by municipalities, such property is not employed
for governmental purposes and in the ownership and operation thereof the municipality acts in its proprietary
capacity, free from legislative interference." (1 McQuillin, p. 683)

Like the NAWASA, the National Irrigation Administration was not created for purposes of local government. While it
may be true that the NIA was essentially a service agency of the government aimed at promoting public interest and
public welfare, such fact does not make the NIA essentially and purely a "government-function" corporation. NIA
was created for the purpose of "constructing, improving, rehabilitating, and administering all national irrigation
systems in the Philippines, including all communal and pump irrigation projects." Certainly, the state and the
community as a whole are largely benefited by the services the agency renders, but these functions are only
incidental to the principal aim of the agency, which is the irrigation of lands.

We must not lose sight of the fact that the NIA is a government agency invested with a corporate personality
separate and distinct from the government, thus is governed by the Corporation Law. Section 1 of Republic Act No.
3601 provides:

Sec. 1. Name and Domicile — A body corporate is hereby created which shall be known as the National Irrigation
Administration. . . . which shall be organized immediately after the approval of this Act. It shall have its principal seat
of business in the City of Manila and shall have representatives in all provinces, for the proper conduct of its 198
business. (Emphasis for emphasis).

Besides, Section 2, subsection b of P.D. 552 provides that:

(b) To charge and collect from the beneficiaries of the water from all irrigation systems constructed by or under its
administration, such fees or administration charges as may be necessary to cover the cost of operation,
maintenance and insurance, and to recover the cost of construction within a reasonable period of time to the extent
consistent with government policy; to recover funds or portions thereof expended for the construction and/or
rehabilitation of communal irrigation systems which funds shall accrue to a special fund for irrigation development
under section 2 hereof;

Unpaid irrigation fees or administration charges shall be preferred liens first, upon the land benefited, and then on
the crops raised thereon, which liens shall have preference over all other liens except for taxes on the land, and
such preferred liens shall not be removed until all fees or administration charges are paid or the property is levied
upon and sold by the National Irrigation Administration for the satisfaction thereof. . . .

The same section also provides that NIA may sue and be sued in court. Thus,

b) . . . Judicial actions for the collection of unpaid irrigation fees or charges, drainage fees or other charges which
the National Irrigation Administration is authorized to impose and collect, shall henceforth be governed by the
provisions of the Rules of Court of the Philippines for similar actions, the provisions of other laws to the contrary
notwithstanding.

x x x           x x x          x x x

(e) . . . .

x x x           x x x          x x x

All actions for the recovery of compensation and damages against the National Irrigation Administration under
paragraphs (1), (2), and (3) hereof, shall be filed with a competent court within five (5) years from the date of entry of
the land or destruction of the improvements or crops, after which period, the right of possession and/or ownership of
the National Irrigation Administration shall be considered vested and absolute. All other actions for the recovery of
compensation and damages to private property and improvements occasioned by the construction, operation and
maintenance of irrigation facilities and other hydraulic structures under the administration of the National Irrigation
Administration, which have accrued ten (10) or more years prior to the approval of this decree are deemed to have
prescribed and are barred forever.

It has its own assets and liabilities. It also has corporate powers to be exercised by a Board of Directors. To quote
Section 2, subsection (f):

(f) . . . and to transact such business, as are directly or indirectly necessary, incidental or conducive to the
attainment of the above powers and objectives, including the power to establish and maintain subsidiaries, and  in
general, to exercise all the powers of a corporation under the Corporation Law, insofar as they are not inconsistent
with the provisions of this Act. (Emphasis supplied).

On the basis of the foregoing considerations, We conclude that the National Irrigation Administration is a
government agency with a juridical personality separate and distinct from the government. It is not a mere agency of
the government but a corporate body performing proprietary functions. Therefore, it may be held liable for the
damages caused by the negligent act of its driver who was not its special agent.

ACCORDINGLY, the Motion for Reconsideration dated January 26, 1990 is DENIED WITH FINALITY. The decision
of this Court in G.R. No. 55963 and G.R. No. 61045 dated December 1, 1989 is hereby AFFIRMED.
[G.R. No. 79684. February 19, 1991.]

DIRECTOR OF LANDS and SECRETARY OF ENVIRONMENT AND NATURAL RESOURCES

(formerly Ministry of Natural Resources), Petitioners, v. THE COURT OF APPEALS (Third
Division) and B.A. GONZALES SURVEYING CO., INC., Respondents.

Ramon A. Gonzales for Private Respondent.

198
DECISION

SARMIENTO, J.:

This is a petition for review on certiorari assailing the decision dated April 3, 1987 of the respondent
court, 1 as well as its resolution dated August 27, 1987 denying the petitioners’ motion for
reconsideration, the dispositive portion of which decision reads as follows: chanrob1es virtual 1aw library

WHEREFORE, the instant Petition is hereby GRANTED. The restraining order promulgated by this
Court on November 3, 1986 restraining the public respondents from issuing any award to the private
respondents as the winning bidders in that public bidding held on October 24, 1986 or in any manner
implementing by the public and private respondents the results thereof, is hereby converted into a
preliminary injunction and upon the filing by the petitioner and approval by this Court of an
injunction bond in the amount of P30,000.00, the preliminary injunction shall remain permanent until
the Minister of Natural Resources shall have acted, as he is hereby directed to act, on the appeals of
the petitioner from the Orders of respondent Director of Lands dated June 20, 1977 (Numancia
project) and April 14, 1983 (Valderama project). With costs against private respondents.

SO ORDERED.

The facts are undisputed.

The petitioners Director of Lands and the Secretary of Environment and Natural Resources entered
into a contract on June 30, 1973 with the private respondent B.A. Gonzalez Surveying Company for
which the latter was bound to execute a public land subdivision mapping (Plsm) of the alienable and
disposable lands in the Municipality of Valderama, Antique, Blk. III, L.C. No. 819, for and in
consideration of the amount of P183,818.00. 2

On January 28, 1974, the private respondent was likewise contracted by the petitioners to do the
photo cadastral mapping (Pcadm) of Project PCADM-493-D in Numancia, Aklan, for the sum of
P130,000.00. 3 However, despite written demands from the Bureau of Lands to the private
respondent to commence the Numancia, Aklan Pcadm project, the latter failed to do so;
consequently, in an order dated February 7, 1977, the former cancelled the contract with regard to
the said project and declared the performance bond No. BCICI-3323 as forfeited. 4

On a motion for reconsideration filed by the private respondent, the Director of Lands reinstated the
said contract on June 20, 1977 without however granting the company’s request for a price
adjustment, which denial the private respondent seasonably appealed to the Secretary of
Environment and Natural Resources. This appeal is pending.

On April 14, 1983, the Director of Lands likewise scrapped the Valderama Plsm contract because of
the non-completion of the project despite the grant of repeated extensions totalling 1,200 days. 5

Similarly, the private respondent appealed the cancellation of the said contract to the Secretary of
Environment and Natural Resources, where the appeal also still remains pending.

Meanwhile, without both appeals being resolved, the Director of Lands conducted a public bidding for
the cadastral survey of several municipalities including the Municipality of Numancia, Aklan and the
Municipality of Valderama, Antique. In the said bidding, Armando Villamayor and Cristina Matuod
were declared as the successful bidders for the Numancia and Valderama projects, respectively. chanrobles virtual lawlibrary

Thereupon, the private respondent filed a petition for prohibition and mandamus with a prayer for a
temporary restraining order with the Court of Appeals docketed as CA-G.R. No. 10421, alleging that
the Director of Lands acted without or in excess of jurisdiction in awarding the said cadastral survey
projects to other persons while the appeals of the private respondent remain pending.

As adverted to at the outset, the respondent Court of Appeals in its decision dated April 3, 1987
granted the said petition and denied in a resolution dated August 27, 1987 the petitioners’ motion for
reconsideration.

Hence, this petition.

198
The petitioners assign the following errors 6 allegedly committed by the Court of Appeals: chanrob1es virtual 1aw library

RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT PUBLIC LAND SUBDIVISION MAPPING
(PLSM) AND PHOTO-CADASTRAL MAPPING (PCADM), ON ONE HAND, AND A REGULAR CADASTRAL
SURVEY, ON THE OTHER, "HAVE THE SAME PURPOSE OF REGISTERING TITLES AND AS SUCH, ONE
MAY SUBSTITUTE FOR THE OTHER" (Decision, p. 4, Annex "C").

II

RESPONDENT COURT OF APPEALS ERRED IN DISREGARDING THE OPINION OF THE DIRECTOR OF

LANDS ON A MATTER WITHIN HIS EXCLUSIVE COMPETENCE AND TECHNICAL EXPERTISE AS WELL
AS NLRC RULES AND REGULATIONS, TO THE EFFECT THAT GRAPHICAL TECHNICAL DESCRIPTIONS,
AS THOSE PRODUCED FROM A PLSM OR PCADM, CANNOT BE THE BASIS OF LAND REGISTRATION.

III

RESPONDENT COURT OF APPEALS ERRED IN ENJOINING THE AWARD OF THE CADASTRAL SURVEY
OF THE MUNICIPALITIES OF VALDERAMA AND NUMANCIA TO THE WINNING BIDDERS WHICH IS A
SURVEY ENTIRELY DIFFERENT FROM THE MAPPING SURVEY CONTRACTS OF THE COMPANY WITH
THE GOVERNMENT.

IV

RESPONDENT COURT OF APPEALS ERRED IN HOLDING, IN EFFECT, THAT THE COMPANY’S MAPPING
SURVEY CONTRACTS, WHICH HAD ALREADY BEEN CANCELLED, CONSTITUTE A BAR TO THE
CADASTRAL SURVEY OF THE MUNICIPALITIES OF VALDERAMA AND NUMANCIA, THEREBY PRE-
EMPTING THE SECRETARY OF ENVIRONMENT AND NATURAL RESOURCES IN DETERMINING THE
MERITS OF THE COMPANY’S APPEALS.

The petition is impressed with merit.

The four errors assigned by the Solicitor General appearing for the public officials-petitioners may be
integrated into the sole issue as to whether or not the respondent court erred in holding that the
Director of Lands acted without or in excess of his jurisdiction or with grave abuse of discretion in
allowing the award of the cadastral survey projects to new contractors involving lands subject to
prior mapping projects with another contractor (the private respondent) whose contracts are involved
in a pending appeal to the Secretary of Environment and Natural Resources. chanrobles.com.ph : virtual law library

The respondent court, in sustaining the private respondent, asseverated that while cadastral survey
on one hand, and the Pcadm and the Plsm projects on the other, are classified differently, i.e., the
former being numerical cadastre and the latter as graphical, both projects nonetheless "have the
same purpose of registering titles and as such, one may substitute for the other. Accordingly,
allowing the award of the cadastral survey projects to other contractors will render unnecessary the
pending mapping survey contracts of the government with the petitioner (private respondent herein),
as if the same were already awarded to others." 7

We do not think so. Given the premises that both projects, mapping and cadastral survey, have the
same purpose of registering titles and that one may substitute for the other, do not justify the
sweeping conclusion that the undertaking of one would render the other unnecessary.
The question on the necessity of either or both projects must be better addressed to the sound
discretion of the proper administrative officials who admittedly have the competence and technical
expertise on the matters, In the case at bar, the petitioner Director of Lands is "the official vested
with direct and executive control of the disposition of the lands of the public domain." 8 Specifically,
Section 4 of Commonwealth Act No. 141 provides that." . . [T]he Director of Lands shall have direct
executive control of the survey, classification, lease, sale, or any form of concession or disposition
and management of the public domain, and his decisions as to questions of fact shall be conclusive
when approved by the Secretary of Agriculture and Commerce (now the Secretary of Environment
and Natural Resources)."  chanrobles virtual lawlibrary

198

We likewise take cognizance of the wealth of jurisprudence on this doctrine of primary administrative
jurisdiction and exhaustion of administrative remedies. The Court has consistently held that "acts of
an administrative agency must not casually be overturned by a court, and a court should as a rule
not substitute its judgment for that of the administrative agency acting within the parameters of its
own competence," 9 unless "there be a clear showing of arbitrary action or palpable and serious
error." 10 In similar vein, we reiterated recently the rule that the findings of fact of quasi-judicial
agencies which have acquired expertise because their jurisdiction is confined to specific matters, in
the present case cadastral surveys and mappings and land registration, are accorded not only respect
but more often than not even finality. 11

On the other hand, the private respondent claims that his case is an exception and invokes Leongson
v. Court of Appeals 12 which states that "once the actuation of an administrative official or
administrative board or agency is tainted by a failure to abide by the command of the law, then, it is
incumbent on the court’s of justice to set matters right, with the Tribunal having the last say on the
matter."cralaw virtua1aw library

But ironically, it is precisely the "command of the law" that the Director of Lands sought to
implement when the respondent court enjoined the former from pushing through with the award of
the cadastral survey projects. We have quoted earlier the provisions of Section 4 of Commonwealth
Act No. 141 [The Public Land Law], which explicitly empower and command the Director of Lands to
have the direct executive control of the survey and classification, inter alia, of lands of the public
domain. Moreover, in the same law, in Section 6 thereof," [T]he Director of Lands, with the approval
of the Secretary of Agriculture and Commerce (now Secretary of Environment and Natural
Resources) shall prepare and issue such forms, instructions, rules, and regulations consistent with
this Act, as may be necessary and proper to carry into effect the provisions thereof and for the
conduct of proceedings arising under such provisions." cralaw virtua1aw library

Aside from these "command(s) of the law" giving to the Director of Lands the "direct executive
control" of the subject matter of the controversy in this case, the Land Registration Commission
(LRC) requires in its Circulars 13 Nos. 371 (1980), 394 (1981), and 32 (1983) the full and complete
technical description of lands prior to their registration. The said requirement can only be
accomplished through the conduct of a regular cadastral survey which, as aforesaid, is under the
direct executive control of the Director of Lands. chanrobles virtual lawlibrary

Moreover, the respondent court admits that mapping projects and cadastral surveys are classified
differently. That is correct because indeed there exists real distinctions between these mapping and
cadastral survey projects. Due to these distinctions, the mapping or graphical survey would apply
more to pre-cadastral operations and the numerical one to the regular cadastral survey proper.
These distinctions may be more easily appreciated by a scrutiny of the respective program of
activities in each of these three technical endeavors.

I. Photo-Cadastral Mapping Project (Pcadm)

1. sub-lot identification and delineation of tenanted private agricultural lands primarily devoted to
rice and/or corn (photo-sketching for land reform);

2. project controls of secondary precision only;

3. establishment of photo control points for every photograph by tertiary traverse from control
stations;

4. monumenting of lots claimed as private or public lands and sketching on photo-maps;

5. numerical survey of the residential, commercial and industrial lots in the poblacion and barrios,
preparation of cadastral maps from sketches on maps, and mapping by ground method of covered
areas;

6. establishment of political boundary monuments of secondary survey controls;

7. preparation of the complete mapping returns.

I-A. Public Land Subdivision Mapping Project (Plsm)

198
1. sub-lot identification and delineation and tenanted private agricultural lands primarily devoted to
rice and/or corn (sketching for land reform) and sketching of lots claimed as private or public lands;

2. project controls of tertiary precision only;

3. Monumenting of corners of lots claimed as private or public lands;

4. Numerical survey of the residential lots in the poblacion and barrios;

5. Establishment of political boundary monuments by tertiary survey controls;

6. The preparation of the complete mapping returns.

II. Scope of Work — Cadastral Survey Project

1. Sketching by transit and stadia or any acceptable method of lots claimed as private or public
lands;

2. Project controls shall be of primary precision;

3. Monumenting of corners of lots claimed as private, government or public land;

4. Numerical survey of all lots including parcels covered by Operation Land Transfer (OLT) whether or
not previously subjected to PMS;

5. Survey of foreshore areas as a strip indicating on the cadastral map areas covered by existing
lease applications;

6. Establishment of political boundary monuments and survey thereof by secondary control;

7. Accomplishment of land use maps, questionnaire for land use inventory and land use summary
report;

8. Preparation and submittal of the complete survey returns of the cases submitted for verification
and approval;

9. Preparation of overlays on drafting film of CMs containing OLT areas and list of claimants thereof.

An analysis of above list depicts that the greater bulk of the activities in Plsm and Pcadm projects is
sketching; whereas, in a regular cadastral survey, the entire area of the municipality is subjected to
a numerical survey. While Plsm and Pcadm projects lead to the preparation of mere graphical
sketches or maps, a cadastral survey results in the preparation of complete survey returns and
technical descriptions of individual lots necessary for registration purposes.14

But even granting arguendo that the Plsm and Pcadm projects on the one hand, and the cadastral
survey on the other, are similar activities, there is no legal bar for the private respondent, assuming
that the Secretary of Environment and Natural Resources resolves the appeals in its favor, to finish
the mapping projects and then demand the corresponding remuneration from the Director of Lands.
In the same way, compensation would be due to the winning bidders in question once their own
cadastral survey projects would have been accomplished. In case the Director of Lands fails to pay
upon fulfillment of the said contracts, then any contractor may validly resort to judicial action to
enforce its legitimate demands. chanrobles virtualawlibrary chanrobles.com:chanrobles.com.ph

Meanwhile, the proper remedy of the private respondent would be to pursue promptly its appeals
with the Secretary of Environment and Natural Resources as regards its cancelled and questioned
contracts rather than seek judicial imprimatur to its improper interference with administrative
prerogatives and thus provide a convenient cover-up for its breaches of its own contractual
obligations.

Notwithstanding the private respondent’s dubious attitude in not participating in the bidding in
question, he could have also appealed the conduct of the said bidding to the Secretary of
Environment and Natural Resources as was the case in his Plsm and Pcadm contracts with the
government and asserted therein that the same would be prejudicial to his interests.
198
In sum, the respondent court committed a reversible error in stopping the implementation of the
results of the bidding for the cadastral survey projects conducted by the Director of Lands. The said
injunction issued by the respondent court constitutes a violation of the doctrine of primary
administrative jurisdiction and defeats the very purpose thereof, which is, "not only to give the
administrative agency the opportunity to decide the controversy by itself correctly, but also to
prevent unnecessary and premature resort to the courts." 15

WHEREFORE, the petition is GRANTED and the injunction issued is hereby lifted; the Decision of the
Court of Appeals dated April 3, 1987, as well as its Resolution dated August 27, 1987, is hereby
ANNULLED and SET ASIDE. With costs against the private Respondent. chanrobles law library

SO ORDERED.

G.R. No. 87437             May 29, 1991

JOAQUIN M. TEOTICO, petitioner,
vs.
DEMOCRITO O. AGDA, SR., and HON. JUDGE IGNACIO M. CAPULONG, Regional Trial Court, Branch No.
134, Makati, Metro Manila, respondents.

Ramon M. Miranda for private respondent.

DAVIDE, JR., J.:

Petitioner, Administrator of the Fiber Industry Development Authority, assisted by the Office of the Solicitor General,
filed this original petition for certiorari and prohibition, with a prayer for a writ of preliminary injunction and for
temporary restraining order. He urges Us to annul the Orders of 16 and 29 December 1988 and 14 February 1989,
and the writ of injunction dated 11 May 1988 issued by respondent Judge of Branch 134 (Makati, Metro Manila) of
the Regional Trial Court, National Capital Judicial Region, in Civil Case No. 88-577;  to prohibit respondent Judge
1

from hearing said case; and to order the dismissal thereof for lack of cause of action as private respondent
(petitioner therein, and who shall hereafter be referred to as Agda) has not exhausted all administrative remedies
available to him.

In Our resolution of 12 April 1989  We required respondents to comment on the petition and issued a Temporary
2

Restraining Order effective as of that date and continuing until otherwise ordered by the Court.

The factual antecedents as culled from the Petition in this case and the Amended Petition of Agda in Civil Case No.
88-577 are as follows:

On 2 January 1984, Honorable Cesar Lanuza, then Administrator of the Fiber Development Authority (FIDA for
short), an agency attached to the Department of Agriculture, appointed Agda as CHIEF FIBER DEVELOPMENT
OFFICER (Range 73) of the FIDA effective upon assumption of office. 3

This appointment does not indicate any specific station or place of assignment.

Under Special Order No. 29, series of 1984, dated 2 January 1984, which was to take effect immediately and to
"remain in force until revoked," Administrator Lanuza designated Agda as "Acting Regional Administrator for FIDA
Regions I and II." 4

In Special Order No. 219 dated 13 November 1987, series of 1987, Administrator Lanuza "temporarily re-assigned"
Agda, "in the interest of the service," at the main office of the Administrator to perform special functions which may
be assigned to him, and one Mr. Epitacio Lanuza, Jr., Assistant Fiber Regional Administrator, was designated
Officer in Charge of FIDA Region I. 5

On 9 December 1987 Agda prepared for filing with the Civil Service Commission, the Secretary of the Department of
Agriculture, and the Commission on Audit an Urgent Petition To Stop Implementation and Nullify Special Order No.
219, s. '87, alleging therein that the Special Order is (a) devoid of legal basis as it does not preserve and maintain
a status quo before the controversy, (b) against the interest of public service considering that Epitacio Lanuza has
been cited for two cases both involving dishonesty, abuse of privileges and character unbecoming a government
official, (c) improper, inappropriate and devoid of moral justification, and (d) a violation of Civil Service rules and
regulation considering that it violates the rule on nepotism since Epitacio Lanuza and Administrator Lanuza are
198
cousins.  The copy of the Civil Service Commission was personally indorsed to it by Agda on 14 December 1987 for
6

its "proper resolution, perusal and appropriate action." The Merit Systems Protection Board indorsed it on 21
January 1988 to the Secretary of the Department of Agriculture for comment and/or appropriate action. 7

Earlier however, or on 11 December 1987, by Special Order No. 239, series of 1987, Administrator Lanuza
designated Mr. Wilfredo Seguritan, Supervising Fiber Development Officer, as Officer in Charge of FIDA Region I
vice Mr. Epitacio Lanuza, Jr., who was ordered relieved as such pending the final determination of the case filed
against him by the Board of Personnel Inquiry of the Department of Agriculture. 8

On 7 January 1988, herein petitioner (hereafter referred to as Teotico), as Acting Administrator of FIDA issued a
Memorandum to Agda directing him to immediately submit his development programs for Region I for the years
1988 to 1993 and his proposals concerning the potentials for sericulture and the maguey industry in the Region. 9

In his 1st indorsement of 12 January 1988, Agda returned the aforesaid Memorandum to Teotico with the comment
that it is in the best interest of the service that submission of the required proposals be deferred since Special Order
No. 219 had re-assigned him to FIDA Central Office where "he now reports up to the present," while Wilfredo
Seguritan, per Special Order No. 239, is the OIC of FIDA for the Region. He suggested, however, that if compliance
is imperative, Special Order No. 219 should be reconsidered and set aside. 10

On 2 March 1988 Teotico issued a Memorandum to Agda informing him that although Special Order No. 219
instructed him to report to the Office of the Administrator, he has neither been seen nor officially heard from during
the past several weeks and directing him to submit not later than 4 March 1988 an official clarification on his
whereabouts and accomplishments for the past three weeks. 11

In his Reply of 9 March 1988 Agda reminded Teotico that his urgent petition to stop the Implementation of Special
Order No. 219 is still unresolved; consequently, its implementation should be held in abeyance; and, as regards his
whereabouts, he referred Teotico to the logbook kept by the FIDA guard and certificates of appearance "attached
from the respective offices during the past three (3) weeks." 12

On 9 March 1988 FIDA Region I OIC, Mr. Seguritan, requested Teotico to require Agda to turn over to him
(Seguritan) the keys of the vault in FIDA Region I "for the safekeeping of our blank cheeks, official receipts,
approved checks but not yet issued to payee creditors, salaries and other vital official documents of the Region";  in 13

a routing slip dated 11 March 1988, Teotico referred the request to Agda with the note: "For immediate compliance
pls. so as not to hamper the conduct of our operations and service in Region I." 14

On 16 March 1988 Agda indorsed the above routing slip request to the Secretary of the Department of Agriculture
wherein he admits that he has the key of the safety vault, but impliedly asserts that he will not yield it to anybody
alleging that his petition to stop the implementation of Special Order No. 219 and to nullify it is still unresolved and,
besides, the intended re-assignment is merely temporary; hence, it would be in keeping with substantial justice if
a status quo of things be maintained. He also asks that the urgent petition be resolved and that meanwhile the
directive to turn over the keys be held in abeyance. 15

On 23 March 1988 Teotico formally charged Agda for insubordination and conduct prejudical to the best interest of
the service for, among others, his failure to comply with the memorandum of January 7, 1988 and with the routing
slip request of 11 March 1988. 16

On 4 April 1988 Teotico placed Agda under preventive suspension pursuant to his Special Order No. 74, to wit:

Pursuant to Section (sic) 41 and 42 of P.D. 807, Mr. Democrito Agda, Sr. is placed under preventive suspension for
the following reasons:

a) grave misconduct and gross insubordination—for refusal to turn over the keys to the safe in Region I. With the
considerable amount of cash advances being handled in the region, Mr. Agda's refusal to turn over said keys has
become prejudicial to the best interests of the service;
b) neglect in the performance of duty—for his refusal to report to the office of the Administrator and his refusal to
accept assignment claiming that it is a form of harassment since he still has a pending unresolved petition; and

c) pending an investigation in some instances involving falsification of public documents and instances of possible
malversation of funds for services and maintenance and operating expenses in Region I as per results of the recent
FIDA Management Audit.

In this regard, the cashier is instructed to withhold the salary of Mr. Agda.

This order takes effect upon receipt of this memorandum and shall remain in force unless earlier revoked or until the 198
cases involving Mr. Agda are resolved. 17

On 8 April 1988 Agda asked Teotico for an extension of twenty days from 11 April 1988 within which to submit his
answer to the formal charge;  however, in his memorandum of 11 April 1988, Teotico granted him an extension of
18

only five days from receipt thereof.  Also on 11 April, Teotico issued Special Order No. 26 reconstituting the
19

Committee on Adjudication of Cases FIDA-AC headed by Senior State Prosecutor Hipolita Ordinario of the
Department of Justice. 20

On 13 April 1988 counsel for Agda, Atty. Ramon Miranda, submitted a letter requesting for an extension of fifteen
days to file the answer.  In the letter of Senior State Prosecutor Ordinario of 14 April 1988, Agda, through his
21

counsel, was given until 21 April 1988 within which to file the answer. 22

It likewise appears that on 13 April 1988 Agda sent a letter to the Commission on Elections  inquiring if Special
23

Order No. 219, series of 1987, of Administrator Lanuza was referred and submitted to it for approval three days
before its implementation. In a letter dated 14 April 1988, Atty. Horacio SJ Apostol, Manager of the Law Department
of the Commission, informed private respondent that "as of this date, records of the Department do not show that
aforesaid Special Order was submitted or referred to this Commission for approval." 24

On 18 April 1988 Agda filed with the court below in Civil Case No. 88-577 his Amended Petition  for Certiorari,
25

Prohibition and Injunction with preliminary injunction and restraining order against Teotico and the three (3)
members of the FIDA-AC alleging, in substance, that Special Order No. 219 of 13 November 1987 issued by then
Fida Administrator Lanuza is null and void for having been issued in violation of Section 48 of P.D. No. 807 (Civil
Service Decree) which prohibits the detail or re-assignment of civil service personnel within three months before an
election and Section 261(h) of Batas Pambansa Blg 881 (The Omnibus Election Code) which prohibits transfer or
detail of officers and employees in the civil service within the election period except upon prior approval of the
Commission on Elections, and that all succeeding orders or memoranda issued in connection with or by reason of
such Special Order or in implementation thereof are likewise null and void. The election referred to was the January
18, 1988 local election. He further alleges therein that he "is filing" with the COMELEC criminal charges for violation
of Sections 3, 261(h) and 264 of B. P. No. 881 against former Administrator Lanuza and Teotico. He prays  inter alia,
that the court declare null and void and set aside Special Order No. 219, Teotico's Memoranda of 7 January, 2
March, and 11 March, 1988, the Formal Charges of 23 March, the preventive suspension of 4 April, Special Order
No. 86, the Memorandum of 11 April 1988, and Ordinario's letter of 14 April 1988, and the formal investigation to be
conducted on the charge against him.

On 18 April 1988 respondent Judge issued a restraining order directing respondents therein to refrain from
enforcing Annexes "E", "I", "M", "O", "R", "S", and "Z" of the amended petition until further orders of the court and
setting the hearing of the application for a writ of preliminary injunction on 26 April 1988.
26

On 2 May 1988 Teotico and his co-respondents in the court below filed, through the office of the Solicitor General, a
motion to dismiss the case and opposition to the issuance of a writ of preliminary injunction  alleging that the petition
27

is premature for failure to exhaust administrative remedies and patently lacks merit and is merely intended to derail
the administrative investigation against Agda. Movants set the hearing thereof on 5 May 1988.

On 4 May 1988 Agda filed an opposition to the motion to dismiss and memorandum in support of his application for
a writ of preliminary injunction. 28

On 11 May 1988 respondent Judge issued an Order granting the application for a writ of preliminary injunction upon
the filing of a bond of P50,000. 00  on the basis of the following findings:
29

x x x           x x x          x x x

After careful consideration of the pleadings and their annexes filed by the parties, this Court finds, to wit: the
petitioner was appointed on June 16, 1984, as Chief, Fiber Industry Development Authority by Cesar C. Lanuza,
former Administrator of FIDA and was assigned in Regions 1 and 2 with office at San Fernando, La Union; that on
November 13, 1987, three months before the local elections, which was held on January 18, 1987, the petitioner
was reassigned by former FIDA Administrator Lanuza to the FIDA main office and designated Epitacio E. Lanuza,
Jr. as officer-in-charge (OIC) of FIDA Region 1; that on December 15, 1987, petitioner requested the Civil Service
Commission (CSC) to stay the implementation of Special Order No. 219; that on January 7, 1988, respondent
Teotico implemented said Special Order 219, despite the fact that petitioner requested the Civil Service Commission
to stay implementation of the said Special Order 219; that on January 12, 1988, petitioner requested the respondent
Teotico to defer the implementation of said Special Order No. 219; that on March 2, 1988, respondent Teotico again
implemented Special Order 219, requiring petitioner to submit his accomplishment report; that on March 9, 1988,
petitioner requested respondent Teotico to defer the implementation of said special order, considering that the same
has not yet been resolved by the Secretary of Agriculture; that on December 11, 1987, former FIDA Administrator
designated Wilfredo G. Siguritan as officer-in-charge of FIDA Region 1; that on March 9, 1988, FIDA Region 1
administrator Siguritan requested the petitioner through respondent Teotico to require petitioner to turn over to him
the keys of the vault in FIDA Region 1; that on March 14, 1988, respondent Teotico implemented Special Order No. 198
219, requiring petitioner to turn over said keys to OIC Seguritan; that on March 16, 1988, petitioner requested the
Secretary of Agriculture to defer the implementation of said special order pending resolution of said office; that on
March 23, 1988, respondent Teotico implemented Special Order 219 by instituting administrative charges against
petitioner for insubordination prejudicial to the best interest of the service; that on April 4, 1988, respondent Teotico
placed the petitioner under preventive suspension, effective April 6, 1988; that on April 8, 1988, petitioner requested
respondent Teotico to give him twenty (20) days from April 11, 1988, within which to submit his explanation to the
formal administrative charges.

x x x           x x x          x x x

After careful consideration of the allegations of the facts in this case, this Court believes that petitioner was denied
due process of law. The fact that petitioner informed respondent Teotico to stay and/or defer the implementation of
Special Order No. 219, considering that the same is still pending before the Secretary of Agriculture, despite of
which, respondents, more particularly, Teotico, in grave abuse of discretion whimsical and capricious, tantamounting
(sic) to the denial of due process of law to the petitioner, implemented the same and aggravated by the fact that
respondents Teotico filed insubordination charges against the petitioner. This court believes, that actuations of the
respondents in railroading the request of the petitioner to stay the implementation of Special Order No. 219
tantamounts to the denial of due process of law as mandated by the new (C)onstitution, which falls under one of the
principle of exhaustion of administrative remedies. (New Filipino Maritime Agencies, Inc. vs. Rivera, L-5359-60,
June 15, 1978) (De Lara, et al. vs. Cloribin, et al., G.R. No. L-21763, May 31, 1965).

It does not appear from the records that Agda presented evidence at a hearing on the application for a writ of
preliminary injunction. On the contrary, as reflected in the above-quoted order of respondent Judge, the writ was
issued on the basis of his "consideration of the pleadings and their annexes filed by the parties."

On 17 May 1988, respondent Judge issued a Writ of Preliminary Preventive or Prohibitory Injunction  restraining 30

Teotico and his co-respondents from enforcing Annexes "E", "I", "K", "M", "O", "R", "S", and "Z" of the amended
petition.

On 2 June 1988 Teotico and his co-respondents below filed a motion, dated 31 May 1988, to reconsider the 11 May
Order alleging therein that the bases of the findings of denial of due process are not supported by facts; they set the
motion for hearing on 10 June 1988. 31

On 2 June 1988 Agda filed a motion to declare respondents below in contempt for refusing to comply with the writ .
 Then on 17 June 1988 he filed his opposition  to the motion for reconsideration.
32 33

Teotico and his co-respondents filed on 17 June 1988 their opposition to the motion to declare them in contempt of
court. 34

The motion for contempt was ultimately denied in the Order of respondent Judge of 8 September 1988. 35

On September 23, 1988 Agda filed a motion to reconsider the 8 September Order. 36

In his Order of 16 December 1988,  respondent Judge held that Teotico and his co-respondents cannot be held for
37

contempt; however they were directed to comply with the Order of 11 May 1988 and Teotico was specifically
ordered "to immediately reinstate the petitioner, Democrito O. Agda, Sr., from (sic) his previous position as Fiber
Regional Administrator, FIDA Region I, with full back wages and allowances mandated by law."

On 22 December 1988 Teotico and his co-respondents filed a motion to reconsider the above 16 December 1988
Order stating therein that it would be premature for the court to order them to comply with the 11 May Order before
their motion for reconsideration is finally resolved and they pray that the motion for reconsideration dated 2 June
1988 be resolved and that further action on its 16 December Order be deferred until resolution of the motion. 38
On 29 December 1988 respondent Judge issued an Order  denying the motion for reconsideration filed on 2 June
39

and the motion of 22 December 1988 and directing Teotico to comply with the Order of 16 December 1988
immediately upon receipt of said Order of 29 December.

On 5 January 1989 Teotico and his co-respondents filed a motion for reconsideration/clarification, alleging,  inter
alia, that there is no basis for ordering Teotico to reinstate Agda with full back wages and allowances since not even
the Order of 11 May granting the motion for preliminary injunction ordains the same.  But respondent Judge also
40

denied this motion in his Order of 14 February 1989. 41

Finding no other avenue of relief in the court below, petitioner filed this petition on 27 March 1989 submitting to Us 198
the following grounds:

Respondent Judge acted with grave abuse of discretion when he ordered petitioner, allegedly in compliance with
the writ of injunction issued, to reinstate respondent Agda to his previous position as Fiber Regional Administrator
FIDA Region I with full backwages and allowances notwithstanding that such act was not mandated or even
mentioned in the prohibitory injunctive writ.

II

Respondent Judge acted with grave abuse of discretion when he refused to dismiss respondent's petition in Civil
Case No. 88-577 despite his finding that respondent has already availed of an administrative remedy which is
pending resolution by the Civil Service Commission.

III

Respondent Judge acted with grave abuse of discretion when he issued a writ of preliminary injunction dated May
11, 1988 without hearing on the merits.

In compliance with Our resolution of 12 April 1989, herein respondents filed their Comment on 2 May 1989.

As We stated in the introductory portion of this Decision, in the resolution of 29 May 1989 We gave due course to
the petition and required the parties to submit their Memoranda, which they complied with.

The petition is impressed with merit.

Respondent Judge clearly acted with grave abuse of discretion in taking cognizance of Civil Case No. 88-577, in
deliberately failing to act on the motion to dismiss, in issuing a writ of preliminary injunction, and in ordering the
"reinstatement" of Agda, "as Fiber Regional Administrator, FIDA Region I, with full back wages and allowances
mandated by law."

Agda was not appointed as Fiber Regional Administrator, FIDA Region I, but as CHIEF FIBER DEVELOPMENT
OFFICER; he was not appointed to any specific station.  He was merely designated as Acting Regional
42

Administrator For FIDA Regions I and II.43

Not having been appointed to any specific station, he could be tranferred or assigned to any other place by the head
of office where in the opinion of the latter his services may be utilized more effectively.
44

In Ibañez vs. COMELEC,  ., We held:

45

Assayed upon the foregoing legal crucible the petitioner's case suffers an initial set back. The appointments upon
which they respectively anchor their claim state that they were merely appointed as "Election Registrars in the
Commission on Elections. . . . ." Therefore, there can be no gainsaying the fact that the petitioners were not
appointed to, and consequently, not entitled to any security of tenure or permanence in, any specific station. On the
general principle, they may be transferred as the exigencies of the service require. They ordinarily have no right to
complain against any change of assignment. 46

In the latest case of Department of Education, Culture and Sports, et al. vs. The Honorable Court of Appeals, et
al., 183 SCRA 555, 562, We held:

The appointment of Navarro as principal does not refer to any particular station or school. As such, she could be
assigned to any station and she is not entitled to stay permanently at any specific school. (Bongbong vs. Parado, 57
SCRA 623). When she was assigned to the Carlos Albert High School, it would not have been with the intention to
let her stay in said school permanently. Otherwise, her appointment would have so stated. Consequently, she may
be assigned to any station or school in Quezon City as the exigencies of public service require even without her
consent.

Moreover, it should be borne in mind that Special Order No. 29 of 2 January 1984 merely designated Agda
as Acting Regional Administrator for Regions I and II. Such being the case, the rule enunciated in Cuadra vs.
Cordova etc., 103 Phil. 391, on temporary appointments or appointments in an acting capacity that they are
terminable at the pleasure of the appointing authority, is applicable to Agda. He can neither claim a vested right to
the station to which he was assigned nor to security of tenure thereat.

Accordingly, private respondent could be re-assigned to any place and Special Order No. 219 dated 13 November 198
1987 reassigning private respondent at the Office of the Administrator of the FIDA "in the interest of the service" was
in order. Although denominated as "reassignment", it was in fact a mere detail in that office.

The Civil Service Decree, P.D. No. 807, allows transfer, detail and re-assignment.  If the employee concerned
47

believes that there is no justification therefore, he "may appeal his case to" the Civil Service Commission. Unless
otherwise ordered by the Commission, the decision to detail an employee shall be executory. Agda invoked the
appellate jurisdiction of the Commission when he filed his Urgent Petition To Stay Implementation and Nullify the
Special Order in question with the Civil Service Commission.  It does not, however, appear to Us that he exerted
48

genuine and sincere efforts to obtain an expeditious resolution thereof What appears to be clear is that he used its
pendency as an excuse for his refusal to comply with the memorandum of Teotico of 7 January 1988 and the
routing slip request of 11 March 1988 for the key to the safety vault.

We are not persuaded by Agda's claim that the questioned detail was done in violation of Section 261(h) of Batas
Pambansa Blg. 881 (Omnibus Election Code) Considering that (a) he raised this matter for the first time only in his
Amended Petition, or five (5) months after the issuance of the Special Order. No evidence has been presented, or
at least strongly and convincingly suggested, to prove or show that no prior approval was obtained by Administrator
Lanuza from the COMELEC for such detail, or that a case for violation of Section 261(h) was in fact filed against
Lanuza or Teotico. All that Agda can show are his alleged letter to the COMELEC to inquire if Special Order No. 219
had been referred to it and an alleged answer dated 14 April 1988 of Atty. Horacio SJ Apostol, Manager of the Law
Department of the Commission, to the effect that the records of the Department do not show, as of that date, that
the Special Order was submitted or referred to the Commission. The latter is not conclusive proof that no prior
authority was in fact obtained by Administrator Lanuza for the reassignment or detail of Agda. No law requires the
submission. to the COMELEC of special orders reassigning or detailing employees within the prohibited period.
What is needed is "prior authority," the request for which and its approval may be in separate documents or papers.

Moreover, although Agda alleges in his amended petition that:

11.20. Petitioner is filing criminal charges for violations of Secs. 3, 261(h) and 264 of B.P. 881 against former FIDA
Administrator Lanuza and respondent Teotico in the COMELEC." (Emphasis supplied)

none of his subsequent pleadings both before the lower court and before Us disclose that he had in fact filed such
charges. Obviously, said allegation was a clever attempt to show a semblance of a valid grievance.

Furthermore, even in the cases of transfer or detail within the probihited period prior to an election, an aggrieved
party is provided an appropriate administrative remedy. Section 6 of Rule VI of the Civil Service Rules on Personnel
Actions and Policies provides:

Sec. 6. Except when the exigencies of the service require, an official or employee of the government may not be
ordered detailed or reassigned during the three-month period before any local or national election, and if he believes
that the order for his detail or reassignment is due to harassment, coercion, intimidation, or other personal reasons,
he may appeal the order to the Commission. Until this is proven, however, the order is presumed to be in the
interest of the service and notwithstanding the appeal, the decision to detail or reassign him shall be executory, but
the Commission may order deferment of suspension of the detail or reassignment ex parte."

Agda made no attempt to avail of this remedy. In his Urgent Petition to Stay Implementation and Nullify Special
Order No. 219, nothing is mentioned about a violation of the ban on transfer or detail. The reason seems too
obvious. Until he filed the Amended Petition before the court below he did not consider his re-assignment per
Special Order No. 219 as a violation of the ban on transfer or detail during the three-month period before the
election.

Not having yet fully exhausted the existing adequate administrative remedy which he already took advantage of,
Agda cannot be permitted to abandon it at his chosen time and leisure and invoke the jurisdiction of regular courts.
As aptly summarized:

Within the administrative forum the law may provide for review of decisions by higher authorities. Before a party can
be allowed to invoke the jurisdiction of the courts of justice, he is expected to have exhausted all means of
administrative redress afforded him. There are both legal and practical reasons for this. The administrative process
is intended to provide less expensive and more speedy solutions to disputes. 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 opporturity to act and correct the errors
committed in the administrative forum. 49

The doctrine of exhaustion of administrative remedies is well-entrenched in this jurisdiction and a host of cases has
buttressed its stability.  There are, of course, recognized exceptions thereto, but, unfortunately, private respondent
50

cannot seek safe refuge under their protective mantle, for in respect to the remedy provided for in Section 24(c) of
198
P.D. No. 807, which is also the remedy provided for in Section 24(f), availment thereof is indispensable for the
viability of any judicial action. As we held in Department of Education, Culture and Sports, et al. vs. The Honorable
Court of Appeals, et al., supra:

Finally, respondent Navarro has not exhausted administrative remedies as she did not elevate the matter of her
transfer to the Civil Service Commission in accordance with Section 24(c), P.D. No. 807, otherwise known as the
Civil Service Decree, which provides:

x x x           x x x          x x x

By not appealing her case to the Civil Service Commission before filing Special Civil Action No Q-37025, respondent
Navarro is indubitably without cause of action.

Respondent Judge, as clearly shown in his Order of 11 May 1988, was fully aware of Agda's urgent petition before
the Civil Service Commission to suspend its implementation of Special Order No. 219 and to nullify the same. He
had, therefore, no other business to do except to grant the motion to dismiss. He should have, forthwith, stayed his
hands until the administrative processes had been completed.  Yet, for reasons only known to him, which We
51

cannot divine at, he did not do so. On the contrary, he granted the application for a writ of preliminary injunction and
issued the writ on 17 May 1988.

The writ was improvidently and capriciously issued. The issuance of the writ, although addressed to the sound
discretion of the court, is conditioned on the existence of a clear and positive right which should be
protected.  Considering that the amended petition should have been dismissed outright because Agda prematurely
52

invoked the jurisdiction of the court in view of his appeal to the Civil Service Commission, it follows that, even if he
had a right, no protection was available from the court below. But even if We disregard for the moment the above
weakness of the amended petition and consider, as the respondent Judge did, "the pleadings and their annexes,"
the inescapable action that should follow would be denial of the application for the issuance of the writ. The
pleadings and the annexes do not at all demonstrate a clear and positive right for Agda, for as discussed above, by
the very nature of his appointment he had no security of tenure in the station to where he was assigned on 2
January 1984; besides, his designation as acting Regional Administrator for FIDA Regions I and II was terminable at
any time at the pleasure of the head of office. Moreover, as could be gleaned from the annexes of the Amended
Petition, Agda impliedly accepted his re-assignment to the Control Office of FIDA To Teotico's Memorandum of
January 1988 addressed to Agda as "Regional Administrator" which required him to submit his development
programs for Region I (1988-1993) and his proposals for sericulture and the maguey industry in said Region, Agda,
in his indorsement of 12 January 1-988 claims and admits that "this representation was reassigned to FIDA Central
Office where he now reports up to the present" and that "Mr. Wilfredo Seguritan . . . remains up to the present as the
OIC of FIDA for the said Region." In this indorsement Agda wrote below his signature the following: (Detailed to
Central Office). To Teotico's Memorandum of 2 March 1988 requiring him to submit an official clarification on his
whereabouts and his accomplishments for the past three weeks since he had not been seen or officially heard from,
Agda referred the former to the record (log book) kept by the FIDA Guard and certificates of appearance. Clearly
then, as of the filing of the Amended Petition, Special Order No. 219 was a fait accompli. Acts already
consummated cannot be enjoined by preliminary injunction. 53

The respondent Judge did not stop there. As complained by Teotico, on 16 December 1988 the former issued an
Order wherein although he denied the motion for the reconsideration of his 8 September 1988 Order denying the
motion for contempt, he ordered Teotico to immediately reinstate Agda "from (sic) his previous position as Fiber
Regional Administrator, FIDA Region I, with full back wages and allowances mandated by law." This, in effect,
amounted to a mandatory injunction, issued without a hearing and in violation of Section 5 of Rule 58 of the Rules of
Court. There was no basis for its issuance. A mandatory injunction may only be issued upon a showing that the
invasion of the right is material and substantial; the right of complainant is clear and unmistakable; and there is an
urgent and permanent necessity for the writ to prevent serious damage.  They have not been shown to exist in this
54

case.

Even if the 16 December reinstatement order should be construed to be directed against the preventive suspension
order issued by Teotico on 4 April 1988, respondent Judge clearly capriciously breached the limits of his discretion
for nowhere in his amended petition has Agda attacked its validity or legality on any other ground than its being
issued to implement Special Order No. 219,  which he claims was issued in violation of the pertinent provisions of
55
the Omnibus Election Code and the Civil Service Decree prohibiting transfer or reassignment of civil service officials
and employees within three months before the local election of January 18, 1988. He assailed the suspension order
not on the ground that Teotico does not have the authority to file the formal charge and to preventively suspend him,
but solely on the basis of his self-serving claim that both were issued without or in excess of jurisdiction or with
grave abuse of discretion because they were meant to implement Special Order No. 219.

Preventive suspension is allowed under Section 41 of P.D. No. 807 which reads:

Sec. 41. Preventive Suspension. — The proper disciplining authority may preventively suspend any subordinate
officer or employee under his authority pending an investigation, if the charge against such officer or employee 198
involves dishonesty, oppression or grave misconduct, or neglect in the performance of duty, or if there are reasons
to believe that the respondent is guilty of charges which would warrant his removal from the service.

However, per Section 42 of the same decree, if the administrative cases against the suspended officer or employee,
who is not a Presidential appointee, is not finally decided by the disciplining authority within ninety days after date of
suspension, he shall be automatically reinstated in the service provided that when the delay in the disposition of the
case is due to the fault, negligence or petition of the respondent, the period of delay shall not be counted in
computing the period of suspension. 1âwphi1

In the instant case, by Agda's own act and the cooperation of respondent Judge, the administrative case against the
former is not yet even ready for hearing. He has not filed his Answer, although he was given until 21 April 1988
within which to do so.

Lastly, We hold that both the preliminary injunction and the reinstatement order issued by respondent Judge
practically granted the main relief prayed for by Agda even before the hearing on the case on the merits. In Obias,
et al., vs. Hon. Borja, et al., 136 SCRA 687, We ruled that respondent judge acted with grave abuse of discretion in
issuing a writ of preliminary injunction which in effect practically granted the principal relief sought in
the Mandamus case. The reason for this is that such issuance "would, in effect, be a prejudgment of the main case
and a reversal of the rule on the burden of proof since it would assume the proposition which the petitioner is
inceptively bound to prove. 56

The foregoing conclusions render unnecessary a discussion on other matters raised in this case.

WHEREFORE, the Petition is GRANTED. The Orders of respondent Judge of 11 May 1988, 16 December 1988, 29
December 1988 and 14 February 1989 and the Writ of Injunction issued on 17 May 1987 in Civil Case No. 88-577
entitled Democrito D. Agda, Sr., vs. Joaquin M. Teotico, et al., are SET ASIDE and said Civil Case is hereby
ordered DISMISSED. With costs against private respondent.

SO ORDERED.

G.R. No. 94115 August 21, 1992

RODOLFO E. AGUINALDO, petitioner,
vs.
HON. LUIS SANTOS, as Secretary of the Department of Local Government, and MELVIN VARGAS, as Acting
Governor of Cagayan, respondents.

Victor I. Padilla for petitioner.

Doroteo B. Laguna and Manuel T. Molina for private respondent.

NOCON, J.:

In this petition for certiorari and prohibition with preliminary mandatory injunction and/or restraining order, petitioner
Rodolfo E. Aguinaldo assails the decision of respondent Secretary of Local Government dated March 19,1990 in
Adm. Case No. P-10437-89 dismissing him as Governor of Cagayan on the ground that the power of the Secretary
of Local Government to dismiss local government official under Section 14, Article I, Chapter 3 and Sections 60 to
67, Chapter 4 of Batas Pambansa Blg. 337, otherwise known as the Local Government Code, was repealed by the
effectivity of the 1987 Constitution.

The pertinent facts are as follows: Petitioner was the duly elected Governor of the province of Cagayan, having
been elected to said position during the local elections held on January 17, 1988, to serve a term of four (4) years
therefrom. He took his oath sometimes around March 1988.
Shortly after December 1989 coup d'etat was crushed, respondent Secretary of Local Government sent a telegram
and a letter, both dated December 4, 1989, to petitioner requiring him to show cause why should not be suspended
or remove from office for disloyalty to the Republic, within forty-eight (48) hours from receipt thereof.

On December 7, 1989, a sworn complaint for disloyalty to the Republic and culpable violation of the Constitution
was filed by Veronico Agatep, Manuel Mamba and Orlino Agatep, respectively the mayors of the municipalities of
Gattaran, Tuao and Lasam, all in Cagayan, against petitioner for acts the latter committed during the coup.
Petitioner was required to file a verified answer to the complaint.

On January 5, 1990, the Department of Local Government received a letter from petitioner dated December 29, 198
1989 in reply to respondent Secretary's December 4, 1989 letter requiring him to explain why should not be
suspended or removed from office for disloyalty. In his letter, petitioner denied being privy to the planning of the
coup or actively participating in its execution, though he admitted that he was sympathetic to the cause of the rebel
soldiers. 
1

Respondent Secretary considered petitioner's reply letter as his answer to the complaint of Mayor Veronico Agatep
and others.   On the basis thereof, respondent Secretary suspended petitioner from office for sixty (60) days from
2

notice, pending the outcome of the formal investigation into the charges against him.

During the hearing conducted on the charges against petitioner, complainants presented testimonial and
documentary evidence to prove the charges. Petitioner neither presented evidence nor even cross-examined the
complainant's witnesses, choosing instead to move that respondent Secretary inhibit himself from deciding the case,
which motion was denied.

Thereafter, respondent Secretary rendered the questioned decision finding petitioner guilty as charged and ordering
his removal from office. Installed as Governor of Cagayan in the process was respondent Melvin Vargas, who was
then the Vice-Governor of Cagayan.

Petitioner relies on three grounds for the allowance of the petition, namely: (1) that the power of respondent
Secretary to suspend or remove local government official under Section 60, Chapter IV of B.P. Blg. 337 was
repealed by the 1987 Constitution; (2) that since respondent Secretary no longer has power to suspend or remove
petitioner, the former could not appoint respondent Melvin Vargas as Governor of Cagayan; and (3) the alleged act
of disloyalty committed by petitioner should be proved by proof beyond reasonable doubt, and not be a mere
preponderance of evidence, because it is an act punishable as rebellion under the Revised Penal Code.

While this case was pending before this Court, petitioner filed his certificate of candidacy for the position of
Governor of Cagayan for the May 11, 1992 elections. Three separate petitions for his disqualification were then filed
against him, all based on the ground that he had been removed from office by virtue of the March 19, 1990
resolution of respondent Secretary. The commission on Elections granted the petitions by way of a resolution dated
May 9, 1992. On the same day, acting upon a "Motion to Clarify" filed by petitioner, the Commission ruled that
inasmuch as the resolutions of the Commission becomes final and executory only after five (5) days from
promulgation, petitioner may still be voted upon as a candidate for governor pending the final outcome of the
disqualification cases with his Court.

Consequently, on May 13, 1992, petitioner filed a petition for certiorari with this Court, G.R. Nos. 105128-30,
entitled Rodolfo E. Aguinaldo v. Commission on Elections, et al., seeking to nullify the resolution of the Commission
ordering his disqualification. The Court, in a resolution dated May 14, 1992, issued a temporary restraining order
against the Commission to cease and desist from enforcing its May 9, 1992 resolution pending the outcome of the
disqualification case, thereby allowing the canvassing of the votes and returns in Cagayan to proceed. However, the
Commission was ordered not to proclaim a winner until this Court has decided the case.

On June 9, 1992, a resolution was issued in the aforementioned case granting petition and annulling the May 9,
1992 resolution of the Commission on the ground that the decision of respondent Secretary has not yet attained
finality and is still pending review with this Court. As petitioner won by a landslide margin in the elections, the
resolution paved the way for his eventual proclamation as Governor of Cagayan.

Under the environmental circumstances of the case, We find the petition meritorious.

Petitioner's re-election to the position of Governor of Cagayan has rendered the administration case pending before
Us moot and academic. It appears that after the canvassing of votes, petitioner garnered the most number of votes
among the candidates for governor of Cagayan province. As held by this Court in Aguinaldo v. Comelec et al.,
supra,:

. . . [T]he certified true xerox copy of the "CERTITICATE OF VOTES OF CANDIDATES", attached to the "VERY
URGENT MOTION FOR THE MODIFICATION OF THE RESOLUTION DATED MAY 14, 1992["] filed by petitioner
shows that he received 170,382 votes while the other candidates for the same position received the following total
number of votes: (1) Patricio T. Antonio — 54,412, (2) Paquito F. Castillo — 2,198; and (3) Florencio L. Vargas —
48,129.

x x x           x x x          x x x

Considering the fact narrated, the expiration of petitioner's term of office during which the acts charged were
allegedly committed, and his subsequent reelection, the petitioner must be dismissed for the reason that the issue
has become academic. In Pascual v. Provincial Board of Nueva Ecija, L-11959, October 31, 1959, this Court has
ruled:
198
The weight of authority, however, seems to incline to the ruled denying the right to remove from office because of
misconduct during a prior term to which we fully subscribe.

Offenses committed, or acts done, during a previous term are generally held not to furnish cause for removal and
this is especially true were the Constitution provides that the penalty in proceeding for removal shall not extend
beyond the removal from office, and disqualification from holding office for a term for which the officer was elected
or appointed. (6 C.J.S. p. 248, citing Rice v. State, 161 S.W. 2nd 4011; Montgomery v. Newell, 40 S.W. 23rd 418;
People ex rel Bashaw v. Thompson, 130 P. 2nd 237; Board of Com'rs Kingfisher County v. Shutler, 281 P. 222;
State v. Blake, 280 P. 388; In re Fedula, 147 A 67; State v. Wald, 43 S.W. 217)

The underlying theory is that each term is separate from other terms, and that the reelection to office operates as a
condonation of the officer's misconduct to the extent of cutting off the right to remove him therefor. (43 Am. Jur. p.
45, citing Atty. Gen. v. Kasty, 184 Ala. 121, 63 Sec. 599, 50 L.R.A. [NS] 553). As held in Comant v. Bregan [ 1887] 6
N.Y.S.R. 332, cited in 17 A.L.R. 63 Sec. 559, 50 [NE] 553.

The Court should ever remove a public officer for acts done prior to his present term of office. To do otherwise
would be to deprive the people of their right to elect their officers. When a people have elected a man to office, it
must be assumed that they did this with knowledge of his life and character, and that they disregarded or forgave
his fault or misconduct, if he had been guilty of any. It is not for the court, by reason of such fault or misconduct, to
practically overrule the will of the people. (Lizares v. Hechanova, et al., 17 SCRA 58, 59-60 [1966]) (See also
Oliveros v. Villaluz, 57 SCRA 163 [1974])  3

Clear then, the rule is that a public official can not be removed for administrative misconduct committed during a
prior term, since his re-election to office operates as a condonation of the officer's previous misconduct to the extent
of cutting off the right to remove him therefor. The foregoing rule, however, finds no application to  criminal cases
pending against petitioner for acts he may have committed during the failed coup.

The other grounds raised by petitioner deserve scant consideration. Petitioner contends that the power of
respondent Secretary to suspend or remove local government officials as alter ego of the President, and as
embodied in B.P. Blg. 337 has been repealed by the 1987 Constitution and which is now vested in the courts.

We do not agree. The power of respondent Secretary to remove local government officials is anchored on both the
Constitution and a statutory grant from the legislative branch. The constitutional basis is provided by Articles VII (17)
and X (4) of the 1987 Constitution which vest in the President the power of control over all executive departments,
bureaus and offices and the power of general supervision over local governments, and by the doctrine that the acts
of the department head are presumptively the acts of the President unless expressly rejected by him.   The statutory
4

grant found in B.P. Blg. 337 itself has constitutional roots, having been enacted by the then Batasan Pambansa
pursuant to Article XI of the 1973 Constitution, Section 2 of which specifically provided as follows —

Sec. 2. The National Assembly shall enact a local government code which may not thereafter be amended except
by a majority vote of all its Members, defining a more responsive and accountable local government structure with
an effective system of recall, allocating among the different local government units their powers, responsibilities, and
resources, and providing for the qualifications, election and removal, term, salaries, power, functions, and duties of
local government officials, and all other matters relating to the organization and operation of the local units.
However, any change in the existing form of local government shall not take effect until ratified by a majority of the
votes cast in the plebiscite called for the purpose. 
5

A similar provision is found in Section 3, Article X of the 1987 Constitution, which reads:

Sec. 3. The Congress shall enact a local government code which shall provided for a more responsive and
accountable local government structure instituted through a system of decentralization with effective mechanisms of
recall, initiative, and referendum, allocate among the different local government units their powers, responsibilities,
and resources, and provide for the qualifications, election, appointment, and removal, term and salaries, powers
and functions and duties of local officials, and all other matters relating to the organization and operation of the local
units.  6
Inasmuch as the power and authority of the legislature to enact a local government code, which provides for the
manner of removal of local government officials, is found in the 1973 Constitution as well as in the 1987
Constitution, then it can not be said that BP Blg. 337 was repealed by the effective of the present Constitution.

Moreover, in Bagabuyo et al. vs. Davide, Jr., et al.,   this court had the occasion to state that B.P. Blg. 337 remained
7

in force despite the effectivity of the present Constitution, until such time as the proposed Local Government Code
of 1991 is approved.

The power of respondent Secretary of the Department of Local Government to remove local elective government
officials is found in Secs. 60 and 61 of B.P. Blg. 337. 8 198

As to petitioner's argument of the want of authority of respondent Secretary to appoint respondent Melvin Vargas as Governor of Cagayan, We need but point to
Section 48 (1) of B.P. Blg 337 to show the fallacy of the same, to writ —

In case a permanent vacancy arises when a governor . . . refuses to assume office, fails to quality, dies or
is removed from office, voluntarily resigns, or is otherwise permanently incapacitated to discharge the functions of
his office, the vice-governor . . . shall assume the office for the unexpired term of the former.  9

Equally without merit is petitioner's claim that before he could be suspended or removed from office, proof beyond
reasonable doubt is required inasmuch as he is charged with a penal offense of disloyalty to the Republic which is
defined and penalized under Article 137 of the Revised Penal Code. Petitioner is not being prosecuted criminally
under the provisions of the Revised Penal Code, but administratively with the end in view of removing petitioner as
the duly elected Governor of Cagayan Province for acts of disloyalty to the Republic where the quantum of proof
required is only substantial evidence.  10

WHEREFORE, petitioner is hereby GRANTED and the decision of public respondent Secretary of Local
Government dated March 19, 1990 in Adm. Case No. P-10437-89, dismissing petitioner as Governor of Cagayan, is
hereby REVERSED. SO ORDERED.

G.R. No. 88291 June 8, 1993

ERNESTO M. MACEDA, petitioner,
vs.
HON. CATALINO MACARAIG, JR., in his capacity as Executive Secretary, Office of the President, HON.
VICENTE JAYME, ETC., ET AL., respondents.

Angara, Abello, Concepcion & Cruz for respondent Pilipinas Shell Petroleum Corporation.

Siguion Reyna, Montecillo & Ongsiako for Caltex.

NOCON, J.:

Just like lightning which does strike the same place twice in some instances, this matter of indirect tax exemption of
the private respondent National Power Corporation (NPC) is brought to this Court a second time. Unfazed by the
Decision We promulgated on May 31, 1991  petitioner Ernesto Maceda asks this Court to reconsider said Decision.
1

Lest We be criticized for denying due process to the petitioner. We have decided to take a second look at the
issues. In the process, a hearing was held on July 9, 1992 where all parties presented their respective arguments.
Etched in this Court's mind are the paradoxical claims by both petitioner and private respondents that their
respective positions are for the benefit of the Filipino people.

A Chronological review of the relevant NPC laws, specially with respect to its tax exemption provisions, at the risk of
being repetitious is, therefore, in order.

On November 3, 1936, Commonwealth Act No. 120 was enacted creating the National Power Corporation, a public
corporation, mainly to develop hydraulic power from all water sources in the Philippines.  The sum of P250,000.00 2

was appropriated out of the funds in the Philippine Treasury for the purpose of organizing the NPC and conducting
its preliminary work.  The main source of funds for the NPC was the flotation of bonds in the capital markets  and
3 4

these bonds
. . . issued under the authority of this Act shall be exempt from the payment of all taxes by the Commonwealth of the
Philippines, or by any authority, branch, division or political subdivision thereof and subject to the provisions of the
Act of Congress, approved March 24, 1934, otherwise known as the Tydings McDuffle Law, which facts shall be
stated upon the face of said bonds. . . . .
5

On June 24, 1938, C.A. No. 344 was enacted increasing to P550,000.00 the funds needed for the initial operations
of the NPC and reiterating the provision of the flotation of bonds as soon as the first construction of any hydraulic
power project was to be decided by the NPC Board.  The provision on tax exemption in relation to the issuance of
6

the NPC bonds was neither amended nor deleted.

198
On September 30, 1939, C.A. No. 495 was enacted removing the provision on the payment of the bond's principal
and interest in "gold coins" but adding that payment could be made in United States dollars.  The provision on tax
7

exemption in relation to the issuance of the NPC bonds was neither amended nor deleted.

On June 4, 1949, Republic Act No. 357 was enacted authorizing the President of the Philippines to guarantee,
absolutely and unconditionally, as primary obligor, the payment of any and all NPC loans.  He was also authorized
8

to contract on behalf of the NPC with the International Bank for Reconstruction and Development (IBRD) for NPC
loans for the accomplishment of NPC's corporate objectives  and for the reconstruction and development of the
9

economy of the country.   It was expressly stated that:

10

Any such loan or loans shall be exempt from taxes, duties, fees, imposts, charges, contributions and restrictions of
the Republic of the Philippines, its provinces, cities and municipalities. 
11

On the same date, R.A. No. 358 was enacted expressly authorizing the NPC, for the first time, to incur other types
of indebtedness, aside from indebtedness incurred by flotation of bonds.   As to the pertinent tax exemption
12

provision, the law stated as follows:

To facilitate payment of its indebtedness, the National Power Corporation shall be exempt from all taxes, duties,
fees, imposts, charges, and restrictions of the Republic of the Philippines, its provinces, cities and municipalities.  13

On July 10, 1952, R.A. No. 813 was enacted amending R.A. No. 357 in that, aside from the IBRD, the President of
the Philippines was authorized to negotiate, contract and guarantee loans with the Export-Import Bank of of
Washigton, D.C., U.S.A., or any other international financial institution.   The tax provision for repayment of these
14

loans, as stated in R.A. No. 357, was not amended.

On June 2, 1954, R.A. No. 987 was enacted specifically to withdraw NPC's tax exemption for real estate taxes. As
enacted, the law states as follows:

To facilitate payment of its indebtedness, the National Power Corporation shall be exempt from all taxes, except real
property tax, and from all duties, fees, imposts, charges, and restrictions of the Republic of the Philippines, its
provinces, cities, and municipalities.
15

On September 8, 1955, R.A. No. 1397 was enacted directing that the NPC projects to be funded by the increased
indebtedness   should bear the National Economic Council's stamp of approval. The tax exemption provision related
16

to the payment of this total indebtedness was not amended nor deleted.

On June 13, 1958, R.A. No. 2055 was enacted increasing the total amount of foreign loans NPC was authorized to
incur to US$100,000,000.00 from the US$50,000,000.00 ceiling in R.A. No. 357.   The tax provision related to the
17

repayment of these loans was not amended nor deleted.

On June 13, 1958, R.A. No. 2058 was enacting fixing the corporate life of NPC to December 31, 2000.    All laws or 18

provisions of laws and executive orders contrary to said R.A. No. 2058 were expressly repealed.  19

On June 18, 1960, R.A. No 2641 was enacted converting the NPC from a public corporation into a stock corporation
with an authorized capital stock of P100,000,000.00 divided into 1,000.000 shares having a par value of P100.00
each, with said capital stock wholly subscribed to by the Government.   No tax exemption was incorporated in said
20

Act.

On June 17, 1961, R.A. No. 3043 was enacted increasing the above-mentioned authorized capital stock to
P250,000,000.00 with the increase to be wholly subscribed by the Government.   No tax provision was incorporated
21

in said Act.

On June 17, 1967, R.A. No 4897 was enacted. NPC's capital stock was increased again to P300,000,000.00, the
increase to be wholly subscribed by the Government. No tax provision was incorporated in said Act.  22
On September 10, 1971, R.A. No. 6395 was enacted revising the charter of the NPC, C.A. No. 120, as amended.
Declared as primary objectives of the nation were:

Declaration of Policy. — Congress hereby declares that (1) the comprehensive development, utilization and
conservation of Philippine water resources for all beneficial uses, including power generation, and (2) the total
electrification of the Philippines through the development of power from all sources to meet the needs of industrial
development and dispersal and the needs of rural electrification are primary objectives of the nation which shall be
pursued coordinately and supported by all instrumentalities and agencies of the government, including the financial
institutions. 23

198
Section 4 of C.A. No. 120, was renumbered as Section 8, and divided into sections 8 (a) (Authority to incur
Domestic Indebtedness) and Section 8 (b) (Authority to Incur Foreign Loans).

As to the issuance of bonds by the NPC, Paragraph No. 3 of Section 8(a), states as follows:

The bonds issued under the authority of this subsection shall be exempt from the payment of all taxes by the
Republic of the Philippines, or by any authority, branch, division or political subdivision thereof which facts shall be
stated upon the face of said bonds. . . . 
24

As to the foreign loans the NPC was authorized to contract, Paragraph No. 5, Section 8(b), states as follows:

The loans, credits and indebtedness contracted under this subsection and the payment of the principal, interest and
other charges thereon, as well as the importation of machinery, equipment, materials and supplies by the
Corporation, paid from the proceeds of any loan, credit or indebtedeness incurred under this Act, shall also be
exempt from all taxes, fees, imposts, other charges and restrictions, including import restrictions, by the Republic of
the Philippines, or any of its agencies and political subdivisions. 
25

A new section was added to the charter, now known as Section 13, R.A. No. 6395, which declares the non-profit
character and tax exemptions of NPC as follows:

The Corporation shall be non-profit and shall devote all its returns from its capital investment, as well as excess
revenues from its operation, for expansion. To enable the Corporation to pay its indebtedness and obligations and in
furtherance and effective implementation of the policy enunciated in Section one of this Act, the Corporation is
hereby declared exempt:

(a) From the payment of all taxes, duties, fees, imposts, charges costs and service fees in any court or
administrative proceedings in which it may be a party, restrictions and duties to the Republic of the Philippines, its
provinces, cities, and municipalities and other government agencies and instrumentalities;

(b) From all income taxes, franchise taxes and realty taxes to be paid to the National Government, its provinces,
cities, municipalities and other government agencies and instrumentalities;

(c) From all import duties, compensating taxes and advanced sales tax, and wharfage fees on import of foreign
goods required for its operations and projects; and

(d) From all taxes, duties, fees, imposts and all other charges its provinces, cities, municipalities and other
government agencies and instrumentalities, on all petroleum products used by the Corporation in the generation,
transmission, utilization, and sale of electric power. 
26

On November 7, 1972, Presidential Decree No. 40 was issued declaring that the electrification of the entire country
was one of the primary concerns of the country. And in connection with this, it was specifically stated that:

The setting up of transmission line grids and the construction of associated generation facilities in Luzon, Mindanao
and major islands of the country, including the Visayas, shall be the responsibility of the National Power Corporation
(NPC) as the authorized implementing agency of the State.  27

xxx xxx xxx

It is the ultimate objective of the State for the NPC to own and operate as a single integrated system all generating
facilities supplying electric power to the entire area embraced by any grid set up by the NPC.  28

On January 22, 1974, P.D. No. 380 was issued giving extra powers to the NPC to enable it to fulfill its role under
aforesaid P.D. No. 40. Its authorized capital stock was raised to P2,000,000,000.00,   its total domestic
29

indebtedness was pegged at a maximum of P3,000,000,000.00 at any one time,   and the NPC was authorized to
30

borrow a total of US$1,000,000,000.00   in foreign loans.

31
The relevant tax exemption provision for these foreign loans states as follows:

The loans, credits and indebtedness contracted under this subsection and the payment of the principal, interest and
other charges thereon, as well as the importation of machinery, equipment, materials, supplies and services, by the
Corporation, paid from the proceeds of any loan, credit or indebtedness incurred under this Act, shall also
be exempt from all direct and indirect taxes, fees, imposts, other charges and restrictions, including import
restrictions previously and presently imposed, and to be imposed by the Republic of the Philippines, or any of its
agencies and political subdivisions.   (Emphasis supplied)
32

Section 13(a) and 13(d) of R.A. No 6395 were amended to read as follows: 198

(a) From the payment of all taxes, duties, fees, imposts, charges and restrictions to the Republic of the Philippines,
its provinces, cities, municipalities and other government agencies and instrumentalities including the taxes, duties,
fees, imposts and other charges provided for under the Tariff and Customs Code of the Philippines, Republic Act
Numbered Nineteen Hundred Thirty-Seven, as amended, and as further amended by Presidential Decree No. 34
dated October 27, 1972, and Presidential Decree No. 69, dated November 24, 1972, and costs and service fees in
any court or administrative proceedings in which it may be a party;

xxx xxx xxx

(d) From all taxes, duties, fees, imposts, and all other charges imposed directly or indirectly by the Republic of the
Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities, on all
petroleum products used by the Corporation in the generation, transmission, utilization and sale of electric
power.   (Emphasis supplied)
33

On February 26, 1970, P.D. No. 395 was issued removing certain restrictions in the NPC's sale of electricity to its
different customers.   No tax exemption provision was amended, deleted or added.
34

On July 31, 1975, P.D. No. 758 was issued directing that P200,000,000.00 would be appropriated annually to cover
the unpaid subscription of the Government in the NPC authorized capital stock, which amount would be taken from
taxes accruing to the General Funds of the Government, proceeds from loans, issuance of bonds, treasury bills or
notes to be issued by the Secretary of Finance for this particular purpose. 35

On May 27, 1976 P.D. No. 938 was issued

(I)n view of the accelerated expansion programs for generation and transmission facilities which includes nuclear
power generation, the present capitalization of National Power Corporation (NPC) and the ceilings for domestic and
foreign borrowings are deemed insufficient;  36

xxx xxx xxx

(I)n the application of the tax exemption provisions of the Revised Charter, the non-profit character of NPC has not
been fully utilized because of restrictive interpretation of the taxing agencies of the government on said provisions; 
37

xxx xxx xxx

(I)n order to effect the accelerated expansion program and attain the declared objective of total electrification of the
country, further amendments of certain sections of Republic Act No. 6395, as amended by Presidential Decrees
Nos. 380, 395 and 758, have become imperative;  38

Thus NPC's capital stock was raised to P8,000,000,000.00,   the total domestic indebtedness ceiling was increased
39

to P12,000,000,000.00,   the total foreign loan ceiling was raised to US$4,000,000,000.00   and Section 13 of R.A.
40 41

No. 6395, was amended to read as follows:

The Corporation shall be non-profit and shall devote all its returns from its capital investment as well as excess
revenues from its operation, for expansion. To enable the Corporation to pay to its indebtedness and obligations
and in furtherance and effective implementation of the policy enunciated in Section one of this Act, the Corporation,
including its subsidiaries, is hereby declared exempt from the payment of all forms of taxes, duties, fees, imposts as
well as costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any court or administrative
proceedings.  42

II

On the other hand, the pertinent tax laws involved in this controversy are P.D. Nos. 882, 1177, 1931 and Executive
Order No. 93 (S'86).
On January 30, 1976, P.D. No. 882 was issued withdrawing the tax exemption of NPC with regard to imports as
follows:

WHEREAS, importations by certain government agencies, including government-owned or controlled corporation,

are exempt from the payment of customs duties and compensating tax; and

WHEREAS, in order to reduce foreign exchange spending and to protect domestic industries, it is necessary to
restrict and regulate such tax-free importations.

NOW THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of the powers vested in me 198
by the Constitution, and do hereby decree and order the following:

Sec. 1. All importations of any government agency, including government-owned or controlled corporations which
are exempt from the payment of customs duties and internal revenue taxes, shall be subject to the prior approval of
an Inter-Agency Committee which shall insure compliance with the following conditions:

(a) That no such article of local manufacture are available in sufficient quantity and comparable quality at
reasonable prices;

(b) That the articles to be imported are directly and actually needed and will be used exclusively by the grantee of
the exemption for its operations and projects or in the conduct of its functions; and

(c) The shipping documents covering the importation are in the name of the grantee to whom the goods shall be
delivered directly by customs authorities.

xxx xxx xxx

Sec. 3. The Committee shall have the power to regulate and control the tax-free importation of government
agencies in accordance with the conditions set forth in Section 1 hereof and the regulations to be promulgated to
implement the provisions of this Decree. Provided, however, That any government agency or government-owned or
controlled corporation, or any local manufacturer or business firm adversely affected by any decision or ruling of the
Inter-Agency Committee may file an appeal with the Office of the President within ten days from the date of notice
thereof. . . . .

xxx xxx xxx

Sec. 6. . . . . Section 13 of Republic Act No. 6395; . . .. and all similar provisions of all general and special laws and
decrees are hereby amended accordingly.

x x x           x x x          x x x

On July 30, 1977, P.D. 1177 was issued as it was

. . . declared the policy of the State to formulate and implement a National Budget that is an instrument of national
development, reflective of national objectives, strategies and plans. The budget shall be supportive of and
consistent with the socio-economic development plan and shall be oriented towards the achievement of explicit
objectives and expected results, to ensure that funds are utilized and operations are conducted effectively,
economically and efficiently. The national budget shall be formulated within a context of a regionalized government
structure and of the totality of revenues and other receipts, expenditures and borrowings of all levels of government-
owned or controlled corporations. The budget shall likewise be prepared within the context of the national long-term
plan and of a long-term budget program.  43

In line with such policy, the law decreed that

All units of government, including government-owned or controlled corporations, shall pay income taxes, customs
duties and other taxes and fees are imposed under revenues laws: provided, that organizations otherwise exempted
by law from the payment of such taxes/duties may ask for a subsidy from the General Fund in the exact amount of
taxes/duties due: provided, further, that a procedure shall be established by the Secretary of Finance and the
Commissioner of the Budget, whereby such subsidies shall automatically be considered as both revenue and
expenditure of the General Fund.  44

The law also declared that —

[A]ll laws, decrees, executive orders, rules and regulations or parts thereof which are inconsistent with the
provisions of the Decree are hereby repealed and/or modified accordingly.  45
On July 11, 1984, most likely due to the economic morass the Government found itself in after the Aquino
assassination, P.D. No. 1931 was issued to reiterate that:

WHEREAS, Presidential Decree No. 1177 has already expressly repealed the grant of tax privileges to any
government-owned or controlled corporation and all other units of government;  46

and since there was a

. . . need for government-owned or controlled corporations and all other units of government enjoying tax privileges
to share in the requirements of development, fiscal or otherwise, by paying the duties, taxes and other charges due 198
from them.  47

it was decreed that:

Sec. 1. The provisions of special on general law to the contrary notwithstanding, all exemptions from the payment of
duties, taxes, fees, imposts and other charges heretofore granted in favor of government-owned or controlled
corporations including their subsidiaries, are hereby withdrawn.

Sec. 2. The President of the Philippines and/or the Minister of Finance, upon the recommendation of the Fiscal
Incentives Review Board created under Presidential Decree No. 776, is hereby empowered to restore, partially or
totally, the exemptions withdrawn by Section 1 above, any applicable tax and duty, taking into account, among
others, any or all of the following:

1) The effect on the relative price levels;

2) The relative contribution of the corporation to the revenue generation effort;

3) The nature of the activity in which the corporation is engaged in; or

4) In general the greater national interest to be served.

xxx xxx xxx

Sec. 5. The provisions of Presidential Decree No. 1177 as well as all other laws, decrees, executive orders,
administrative orders, rules, regulations or parts thereof which are inconsistent with this Decree are hereby
repealed, amended or modified accordingly.

On December 17, 1986, E.O. No. 93 (S'86) was issued with a view to correct presidential restoration or grant of tax
exemption to other government and private entities without benefit of review by the Fiscal Incentives Review Board,
to wit:

WHEREAS, Presidential Decree Nos. 1931 and 1955 issued on June 11, 1984 and October 14, 1984, respectively,
withdrew the tax and duty exemption privileges, including the preferential tax treatment, of government and private
entities with certain exceptions, in order that the requirements of national economic development, in terms of fiscals
and other resources, may be met more adequately;

xxx xxx xxx

WHEREAS, in addition to those tax and duty exemption privileges were restored by the Fiscal Incentives Review
Board (FIRB), a number of affected entities, government and private, had their tax and duty exemption privileges
restored or granted by Presidential action without benefit or review by the Fiscal Incentives Review Board (FIRB);

x x x           x x x          x x x

Since it was decided that:

[A]ssistance to government and private entities may be better provided where necessary by explicit subsidy and
budgetary support rather than tax and duty exemption privileges if only to improve the fiscal monitoring aspects of
government operations.

It was thus ordered that:

Sec. 1. The Provisions of any general or special law to the contrary notwithstanding, all tax and duty incentives
granted to government and private entities are hereby withdrawn, except:
a) those covered by the non-impairment clause of the Constitution;

b) those conferred by effective internation agreement to which the Government of the Republic of the Philippines is
a signatory;

c) those enjoyed by enterprises registered with:

(i) the Board of Investment pursuant to Presidential Decree No. 1789, as amended;

(ii) the Export Processing Zone Authority, pursuant to Presidential Decree No. 66 as amended; 198

(iii) the Philippine Veterans Investment Development Corporation Industrial Authority pursuant to Presidential
Decree No. 538, was amended.

d) those enjoyed by the copper mining industry pursuant to the provisions of Letter of Instructions No. 1416;

e) those conferred under the four basic codes namely:

(i) the Tariff and Customs Code, as amended;

(ii) the National Internal Revenue Code, as amended;

(iii) the Local Tax Code, as amended;

(iv) the Real Property Tax Code, as amended;

f) those approved by the President upon the recommendation of the Fiscal Incentives Review Board.

Sec. 2. The Fiscal Incentives Review Board created under Presidential Decree No. 776, as amended, is hereby
authorized to:

a) restore tax and/or duty exemptions withdrawn hereunder in whole or in part;

b) revise the scope and coverage of tax and/or duty exemption that may be restored;

c) impose conditions for the restoration of tax and/or duty exemption;

d) prescribe the date of period of effectivity of the restoration of tax and/or duty exemption;

e) formulate and submit to the President for approval, a complete system for the grant of subsidies to deserving
beneficiaries, in lieu of or in combination with the restoration of tax and duty exemptions or preferential treatment in
taxation, indicating the source of funding therefor, eligible beneficiaries and the terms and conditions for the grant
thereof taking into consideration the international commitment of the Philippines and the necessary precautions
such that the grant of subsidies does not become the basis for countervailing action.

Sec. 3. In the discharge of its authority hereunder, the Fiscal Incentives Review Board shall take into account any or
all of the following considerations:

a) the effect on relative price levels;

b) relative contribution of the beneficiary to the revenue generation effort;

c) nature of the activity the beneficiary is engaged; and

d) in general, the greater national interest to be served.

xxx xxx xxx

Sec. 5. All laws, orders, issuances, rules and regulations or parts thereof inconsistent with this Executive Order are
hereby repealed or modified accordingly.

E.O. No. 93 (S'86) was decreed to be effective   upon the promulgation of the rules and regulations, to be issued by
48

the Ministry of Finance.   Said rules and regulations were promulgated and published in the Official Gazette
49
on February 23, 1987. These became effective on the 15th day after promulgation    in the Official Gasetter,   which
50 51

15th day was March 10, 1987.

III

Now to some definitions. We refer to the very simplistic approach that all would-be lawyers, learn in their TAXATION
I course, which fro convenient reference, is as follows:

Classifications or kinds of Taxes:

198
According to Persons who pay or who bear the burden:

a. Direct Tax — the where the person supposed to pay the tax really pays it. WITHOUT transferring the burden to
someone else.

Examples: Individual income tax, corporate income tax, transfer taxes (estate tax, donor's tax), residence tax,
immigration tax

b. Indirect Tax — that where the tax is imposed upon goods BEFORE reaching the consumer who ultimately pays
for it, not as a tax, but as a part of the purchase price.

Examples: the internal revenue indirect taxes (specific tax, percentage taxes, (VAT) and the tariff and customs
indirect taxes (import duties, special import tax and other dues)  52

IV

To simply matter, the issues raised by petitioner in his motion for reconsideration can be reduced to the following:

(1) What kind of tax exemption privileges did NPC have?

(2) For what periods in time were these privileges being enjoyed?

(3) If there are taxes to be paid, who shall pay for these taxes?

Petitioner contends that P.D. No. 938 repealed the indirect tax exemption of NPC as the phrase "all forms of taxes
etc.," in its section 10, amending Section 13, R.A. No. 6395, as amended by P.D. No. 380, does not expressly
include "indirect taxes."

His point is not well-taken.

A chronological review of the NPC laws will show that it has been the lawmaker's intention that the NPC was to be
completely tax exempt from all forms of taxes — direct and indirect.

NPC's tax exemptions at first applied to the bonds it was authorized to float to finance its operations upon its
creation by virtue of C.A. No. 120.

When the NPC was authorized to contract with the IBRD for foreign financing, any loans obtained were to be
completely tax exempt.

After the NPC was authorized to borrow from other sources of funds — aside issuance of bonds — it was again
specifically exempted from all types of taxes "to facilitate payment of its indebtedness." Even when the ceilings for
domestic and foreign borrowings were periodically increased, the tax exemption privileges of the NPC were
maintained.

NPC's tax exemption from real estate taxes was, however, specifically withdrawn by Rep. Act No. 987, as above
stated. The exemption was, however, restored by R.A. No. 6395.

Section 13, R.A. No. 6395, was very comprehensive in its enumeration of the tax exemptions allowed NPC. Its
section 13(d) is the starting point of this bone of contention among the parties. For easy reference, it is reproduced
as follows:

[T]he Corporation is hereby declared exempt:

xxx xxx xxx

(d) From all taxes, duties, fees, imposts and all other charges imposed by the Republic of the Philippines, its
provinces, cities, municipalities and other government agencies and instrumentalities, on all petroleum products
used by the Corporation in the generation, transmission, utilization, and sale of electric power.

P.D. No. 380 added phrase "directly or indirectly" to said Section 13(d), which now reads as follows:

xxx xxx xxx

198
(d) From all taxes, duties, fees, imposts, and all other charges imposed directly or indirectly by the Republic of the
Philippines, its provinces, cities, municipalities and other government agencies and instrumentalities, on all
petroleum products used by the Corporation in the generation, transmission, utilization and sale of electric power.
(Emphasis supplied)

Then came P.D. No. 938 which amended Sec. 13(a), (b), (c) and (d) into one very simple paragraph as follows:

The Corporation shall be non-profit and shall devote all its returns from its capital investment as well as excess
revenues from its operation, for expansion. To enable the Corporation to pay its indebtedness and obligations and in
furtherance and effective implementation of the policy enunciated in Section one of this Act, the Corporation,
including its subsidiaries, is hereby declared exempt from the payment of ALL FORMS OF taxes, duties, fees,
imposts as well as costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any court or
administrative proceedings. (Emphasis supplied)

Petitioner reminds Us that:

[I]t must be borne in mind that Presidential Decree Nos. 380

and 938 were issued by one man, acting as such the Executive and Legislative.  53

xxx xxx xxx

[S]ince both presidential decrees were made by the same person, it would have been very easy for him to retain the
same or similar language used in P.D. No. 380 P.D. No. 938 if his intention were to preserve the indirect tax
exemption of NPC.  54

Actually, P.D. No. 938 attests to the ingenuousness of then President Marcos no matter what his fault were. It
should be noted that section 13, R.A. No. 6395, provided for tax exemptions for the following items:

13(a) : court or administrative proceedings;

13(b) : income, franchise, realty taxes;

13(c) : import of foreign goods required for its operations and projects;

13(d) : petroleum products used in generation of electric power.

P.D. No. 938 lumped up 13(b), 13(c), and 13(d) into the phrase "ALL FORMS OF TAXES, ETC.,", included 13(a)
under the "as well as" clause and added PNOC subsidiaries as qualified for tax exemptions.

This is the only conclusion one can arrive at if he has read all the NPC laws in the order of enactment or issuance
as narrated above in part I hereof. President Marcos must have considered all the NPC statutes from C.A. No. 120
up to its latest amendments, P.D. No. 380, P.D. No. 395 and P.D. No. 759, AND came up   with a very simple
55

Section 13, R.A. No. 6395, as amended by P.D. No. 938.

One common theme in all these laws is that the NPC must be enable to pay its indebtedness    which, as of P.D. No.
56

938, was P12 Billion in total domestic indebtedness, at any one time, and U$4 Billion in total foreign loans at any
one time. The NPC must be and has to be exempt from all forms of taxes if this goal is to be achieved.

By virtue of P.D. No. 938 NPC's capital stock was raised to P8 Billion. It must be remembered that to pay the
government share in its capital stock P.D. No. 758 was issued mandating that P200 Million would be appropriated
annually to cover the said unpaid subscription of the Government in NPC's authorized capital stock. And
significantly one of the sources of this annual appropriation of P200 million is TAX MONEY accruing to the General
Fund of the Government. It does not stand to reason then that former President Marcos would order P200 Million to
be taken partially or totally from tax money to be used to pay the Government subscription in the NPC, on one hand,
and then order the NPC to pay all its indirect taxes, on the other.
The above conclusion that then President Marcos lumped up Sections 13 (b), 13 (c) and (d) into the phrase "All
FORMS OF" is supported by the fact that he did not do the same for the tax exemption provision for the foreign
loans to be incurred.

The tax exemption on foreign loans found in Section 8(b), R.A. No. 6395, reads as follows:

The loans, credits and indebtedness contracted under this subsection and the payment of the principal, interest and
other charges thereon, as well as the importation of machinery, equipment, materials and supplies by the
Corporation, paid from the proceeds of any loan, credit or indebtedness incurred under this Act, shall also be
exempt from all taxes, fees, imposts, other charges and restrictions, including import restrictions, by the Republic of 198
the Philippines, or any of its agencies and political subdivisions. 
57

The same was amended by P.D. No. 380 as follows:

The loans, credits and indebtedness contracted this subsection and the payment of the principal, interest and other
charges thereon, as well as the importation of machinery, equipment, materials, supplies and services, by the
Corporation, paid from the proceeds of any loan, credit or indebtedness incurred under this Act, shall also be
exempt from all direct and indirect taxes, fees, imposts, other charges and restrictions, including import
restrictions previously and presently imposed, and to be imposed by the Republic of the Philippines, or any of its
agencies and political subdivisions.   (Emphasis supplied)
58

P.D. No. 938 did not amend the same   and so the tax exemption provision in Section 8 (b), R.A. No. 6395, as
59

amended by P.D. No. 380, still stands. Since the subject matter of this particular Section 8 (b) had to do only with
loans and machinery imported, paid for from the proceeds of these foreign loans, THERE WAS NO OTHER
SUBJECT MATTER TO LUMP IT UP WITH, and so, the tax exemption stood as is — with the express mention of
"direct
and indirect" tax exemptions. And this "direct and indirect" tax exemption privilege extended to "taxes, fees, imposts,
other charges . . . to be imposed" in the future — surely, an indication that the lawmakers wanted the NPC to be
exempt from ALL FORMS of taxes — direct and indirect.

It is crystal clear, therefore, that NPC had been granted tax exemption privileges for both direct and indirect taxes
under P.D. No. 938.

VI

Five (5) years on into the now discredited New Society, the Government decided to rationalize government receipts
and expenditures by formulating and implementing a National Budget.   The NPC, being a government owned and
60

controlled corporation had to be shed off its tax exemption status privileges under P.D. No. 1177. It was, however,
allowed to ask for a subsidy from the General Fund in the exact amount of taxes/duties due.

Actually, much earlier, P.D. No. 882 had already repealed NPC's tax-free importation privileges. It allowed, however,
NPC to appeal said repeal with the Office of the President and to avail of tax-free importation privileges under its
Section 1, subject to the prior approval of an Inter-Agency Committed created by virtue of said P.D. No. 882. It is
presumed that the NPC, being the special creation of the State, was allowed to continue its tax-free importations.

This Court notes that petitioner brought to the attention of this Court, the matter of the abolition of NPC's tax
exemption privileges by P.D. No. 1177   only in his Common Reply/Comment to private Respondents' "Opposition"
61

and "Comment" to Motion for Reconsideration, four (4) months AFTER the motion for Reconsideration had been
filed. During oral arguments heard on July 9, 1992, he proceeded to discuss this tax exemption withdrawal as
explained by then Secretary of Justice Vicente Abad Santos in opinion No. 133 (S '77).   A careful perusal of
62

petitioner's senate Blue Ribbon Committee Report No. 474, the basis of the petition at bar, fails to yield any mention
of said P.D. No. 1177's effect on NPC's tax exemption privileges.   Applying by analogy Pulido vs. Pablo,   the court
63 64

declares that the matter of P.D. No. 1177 abolishing NPC's tax exemption privileges was not seasonably
invoked   by the petitioner.
65

Be that as it may, the Court still has to discuss the effect of P.D. No. 1177 on the NPC tax exemption privileges as
this statute has been reiterated twice in P.D. No. 1931. The express repeal of tax privileges of any government-
owned or controlled corporation (GOCC). NPC included, was reiterated in the fourth whereas clause of P.D. No.
1931's preamble. The subsidy provided for in Section 23, P.D. No. 1177, being inconsistent with Section 2, P.D. No.
1931, was deemed repealed as the Fiscal Incentives Revenue Board was tasked with recommending the partial or
total restoration of tax exemptions withdrawn by Section 1, P.D. No. 1931.

The records before Us do not indicate whether or not NPC asked for the subsidy contemplated in Section 23, P.D.
No. 1177. Considering, however, that under Section 16 of P.D. No. 1177, NPC had to submit to the Office of the
President its request for the P200 million mandated by P.D. No. 758 to be appropriated annually by the Government
to cover its unpaid subscription to the NPC authorized capital stock and that under Section 22, of the same P.D. No.
NPC had to likewise submit to the Office of the President its internal operating budget for review due to capital
inputs of the government (P.D. No. 758) and to the national government's guarantee of the domestic and foreign
indebtedness of the NPC, it is clear that NPC was covered by P.D. No. 1177.

There is reason to believe that NPC availed of subsidy granted to exempt GOCC's that suddenly found themselves
having to pay taxes. It will be noted that Section 23, P.D. No. 1177, mandated that the Secretary of Finance and the
Commissioner of the Budget had to establish the necessary procedure to accomplish the tax payment/tax subsidy
scheme of the Government. In effect, NPC, did not put any cash to pay any tax as it got from the General Fund the
amounts necessary to pay different revenue collectors for the taxes it had to pay.
198
In his memorandum filed July 16, 1992, petitioner submits:

[T]hat with the enactment of P.D. No. 1177 on July 30, 1977, the NPC lost all its duty and tax exemptions, whether
direct or indirect. And so there was nothing to be withdrawn or to be restored under P.D. No. 1931, issued on June
11, 1984. This is evident from sections 1 and 2 of said P.D. No. 1931, which reads:

"Section 1. The provisions of special or general law to the contrary notwithstanding, all exemptions from the
payment of duties, taxes, fees, imports and other charges heretofore granted in favor of government-owned or
controlled corporations including their subsidiaries are hereby withdrawn."

Sec. 2. The President of the Philippines and/or the Minister of Finance, upon the recommendation of the Fiscal
Incentives Review Board created under P.D. No. 776, is hereby empowered to restore partially or totally, the
exemptions withdrawn by section 1 above. . . .

Hence, P.D. No. 1931 did not have any effect or did it change NPC's status. Since it had already lost all its tax
exemptions privilege with the issuance of P.D. No. 1177 seven (7) years earlier or on July 30, 1977, there were no
tax exemptions to be withdrawn by section 1 which could later be restored by the Minister of Finance upon the
recommendation of the FIRB under Section 2 of P.D. No. 1931. Consequently, FIRB resolutions No. 10-85, and 1-
86, were all illegally and validly issued since FIRB acted beyond their statutory authority by creating and not merely
restoring the tax exempt status of NPC. The same is true for FIRB Res. No. 17-87 which restored NPC's tax
exemption under E.O. No. 93 which likewise abolished all duties and tax exemptions but allowed the President upon
recommendation of the FIRB to restore those abolished.

The Court disagrees.

Applying by analogy the weight of authority that:

When a revised and consolidated act re-enacts in the same or substantially the same terms the provisions of the act
or acts so revised and consolidated, the revision and consolidation shall be taken to be a continuation of the former
act or acts, although the former act or acts may be expressly repealed by the revised and consolidated act; and all
rights
and liabilities under the former act or acts are preserved and may be enforced.  66

the Court rules that when P.D. No. 1931 basically reenacted in its Section 1 the first half of Section 23, P.D. No.
1177, on withdrawal of tax exemption privileges of all GOCC's said Section 1, P.D. No. 1931 was deemed to be a
continuation of the first half of Section 23, P.D. No. 1177, although the second half of Section 23, P.D. No. 177, on
the subsidy scheme for former tax exempt GOCCs had been expressly repealed by Section 2 with its institution of
the FIRB recommendation of partial/total restoration of tax exemption privileges.

The NPC tax privileges withdrawn by Section 1. P.D. No. 1931, were, therefore, the same NPC tax exemption
privileges withdrawn by Section 23, P.D. No. 1177. NPC could no longer obtain a subsidy for the taxes it had to pay.
It could, however, under P.D. No. 1931, ask for a total restoration of its tax exemption privileges, which, it did, and
the same were granted under FIRB Resolutions Nos. 10-85   and 1-86   as approved by the Minister of Finance.
67 68

Consequently, contrary to petitioner's submission, FIRB Resolutions Nos. 10-85 and 1-86 were both legally and
validly issued by the FIRB pursuant to P.D. No. 1931. FIRB did not created NPC's tax exemption status but merely
restored it. 
69

Some quarters have expressed the view that P.D. No. 1931 was illegally issued under the now rather infamous
Amendment No. 6   as there was no showing that President Marcos' encroachment on legislative prerogatives was
70

justified under the then prevailing condition that he could legislate "only if the Batasang Pambansa 'failed or was
unable to act inadequately on any matter that in his judgment required immediate action' to meet the 'exigency'.  71

Actually under said Amendment No. 6, then President Marcos could issue decrees not only when the Interim
Batasang Pambansa failed or was unable to act adequately on any matter for any reason that in his (Marcos')
judgment required immediate action, but also when there existed a grave emergency or a threat or thereof. It must
be remembered that said Presidential Decree was issued only around nine (9) months after the Philippines
unilaterally declared a moratorium on its foreign debt payments   as a result of the economic crisis triggered by loss
72

of confidence in the government brought about by the Aquino assassination. The Philippines was then trying to
reschedule its debt payments.   One of the big borrowers was the NPC   which had a US$ 2.1 billion white elephant
73 74

of a Bataan Nuclear Power Plant on its back.   From all indications, it must have been this grave emergency of a
75

debt rescheduling which compelled Marcos to issue P.D. No. 1931, under his Amendment 6 power.  76

The rule, therefore, that under the 1973 Constitution "no law granting a tax exemption shall be passed without the
concurrence of a majority of all the members of the Batasang Pambansa"   does not apply as said P.D. No. 1931
77

was not passed by the Interim Batasang Pambansa but by then President Marcos under His Amendment No. 6
198
power.

P.D. No. 1931 was, therefore, validly issued by then President Marcos under his Amendment No. 6 authority.

Under E.O No. 93 (S'86) NPC's tax exemption privileges were again clipped by, this time, President Aquino. Its
section 2 allowed the NPC to apply for the restoration of its tax exemption privileges. The same was granted under
FIRB Resolution No. 17-87   dated June 24, 1987 which restored NPC's tax exemption privileges effective, starting
78

March 10, 1987, the date of effectivity of E.O. No. 93 (S'86).

FIRB Resolution No. 17-87 was approved by the President on October 5, 1987.   There is no indication, however,
79

from the records of the case whether or not similar approvals were given by then President Marcos for FIRB
Resolutions Nos. 10-85 and 1- 86. This has led some quarters to believe that a "travesty of justice" might have
occurred when the Minister of Finance approved his own recommendation as Chairman of the Fiscal Incentives
Review Board as what happened in Zambales Chromate vs. Court of Appeals   when the Secretary of Agriculture
80

and Natural Resources approved a decision earlier rendered by him when he was the Director of Mines,    and 81

in Anzaldo vs. Clave   where Presidential Executive Assistant Clave affirmed, on appeal to Malacañang, his own
82

decision as Chairman of the Civil Service Commission.  83

Upon deeper analysis, the question arises as to whether one can talk about "due process" being violated when
FIRB Resolutions Nos. 10-85 and 1-86 were approved by the Minister of Finance when the same were
recommended by him in his capacity as Chairman of the Fiscal Incentives Review Board.  84

In Zambales Chromite and Anzaldo, two (2) different parties were involved: mining groups and scientist-doctors,
respectively. Thus, there was a need for procedural due process to be followed.

In the case of the tax exemption restoration of NPC, there is no other comparable entity — not even a single public
or private corporation — whose rights would be violated if NPC's tax exemption privileges were to be restored.
While there might have been a MERALCO before Martial Law, it is of public knowledge that the MERALCO
generating plants were sold to the NPC in line with the State policy that NPC was to be the State implementing arm
for the electrification of the entire country. Besides, MERALCO was limited to Manila and its environs. And as of
1984, there was no more MERALCO — as a producer of electricity — which could have objected to the restoration
of NPC's tax exemption privileges.

It should be noted that NPC was not asking to be granted tax exemption privileges for the first time. It was just
asking that its tax exemption privileges be restored. It is for these reasons that, at least in NPC's case, the
recommendation and approval of NPC's tax exemption privileges under FIRB Resolution Nos. 10-85 and 1-86, done
by the same person acting in his dual capacities as Chairman of the Fiscal Incentives Review Board and Minister of
Finance, respectively, do not violate procedural due process.

While as above-mentioned, FIRB Resolution No. 17-87 was approved by President Aquino on October 5, 1987, the
view has been expressed that President Aquino, at least with regard to E.O. 93 (S'86), had no authority to sub-
delegate to the FIRB, which was allegedly not a delegate of the legislature, the power delegated to her thereunder.

A misconception must be cleared up.

When E.O No. 93 (S'86) was issued, President Aquino was exercising both Executive and Legislative powers. Thus,
there was no power delegated to her, rather it was she who was delegating her power. She delegated it to the FIRB,
which, for purposes of E.O No. 93 (S'86), is a delegate of the legislature. Clearly, she was not sub-delegating her
power.

And E.O. No. 93 (S'86), as a delegating law, was complete in itself — it set forth the policy to be carried out   and it
85

fixed the standard to which the delegate had to conform in the performance of his functions,    both qualities having
86

been enunciated by this Court in Pelaez vs. Auditor General.  87

Thus, after all has been said, it is clear that the NPC had its tax exemption privileges restored from June 11, 1984
up to the present.
VII

The next question that projects itself is — who pays the tax?

The answer to the question could be gleamed from the manner by which the Commissaries of the Armed Forces of
the Philippines sell their goods.

By virtue of P.D. No. 83,   veterans, members of the Armed of the Philippines, and their defendants but groceries
88

and other goods free of all taxes and duties if bought from any AFP Commissaries.
198
In practice, the AFP Commissary suppliers probably treat the unchargeable specific, ad valorem and other taxes on
the goods earmarked for AFP Commissaries as an added cost of operation and distribute it over the total units of
goods sold as it would any other cost. Thus, even the ordinary supermarket buyer probably pays for the specific, ad
valorem and other taxes which theses suppliers do not charge the AFP Commissaries.  89

IN MUCH THE SAME MANNER, it is clear that private respondents-oil companies have to absorb the taxes they
add to the bunker fuel oil they sell to NPC.

It should be stated at this juncture that, as early as May 14, 1954, the Secretary of Justice renders an
opinion,   wherein he stated and We quote:
90

xxx xxx xxx

Republic Act No. 358 exempts the National Power Corporation from "all taxes, duties, fees, imposts, charges, and
restrictions of the Republic of the Philippines and its provinces, cities, and municipalities." This exemption is broad
enough to include all taxes, whether direct or indirect, which the National Power Corporation may be required to
pay, such as the specific tax on petroleum products. That it is indirect or is of no amount [should be of no moment],
for it is the corporation that ultimately pays it. The view which refuses to accord the exemption because the tax is
first paid by the seller disregards realities and gives more importance to form than to substance. Equity and law
always exalt substance over from.

xxx xxx xxx

Tax exemptions are undoubtedly to be construed strictly but not so grudgingly as knowledge that many impositions
taxpayers have to pay are in the nature of indirect taxes. To limit the exemption granted the National Power
Corporation to direct taxes notwithstanding the general and broad language of the statue will be to thwrat the
legislative intention in giving exemption from all forms of taxes and impositions without distinguishing between those
that are direct and those that are not. (Emphasis supplied)

In view of all the foregoing, the Court rules and declares that the oil companies which supply bunker fuel oil to NPC
have to pay the taxes imposed upon said bunker fuel oil sold to NPC. By the very nature of indirect taxation, the
economic burden of such taxation is expected to be passed on through the channels of commerce to the user or
consumer of the goods sold. Because, however, the NPC has been exempted from both direct and indirect taxation,
the NPC must beheld exempted from absorbing the economic burden of indirect taxation. This means, on the one
hand, that the oil companies which wish to sell to NPC absorb all or part of the economic burden of the taxes
previously paid to BIR, which could they shift to NPC if NPC did not enjoy exemption from indirect taxes. This
means also, on the other hand, that the NPC may refuse to pay the part of the "normal" purchase price of bunker
fuel oil which represents all or part of the taxes previously paid by the oil companies to BIR. If NPC nonetheless
purchases such oil from the oil companies — because to do so may be more convenient and ultimately less costly
for NPC than NPC itself importing and hauling and storing the oil from overseas — NPC is entitled to be reimbursed
by the BIR for that part of the buying price of NPC which verifiably represents the tax already paid by the oil
company-vendor to the BIR.

It should be noted at this point in time that the whole issue of who WILL pay these indirect taxes HAS BEEN
RENDERED moot and academic by E.O. No. 195 issued on June 16, 1987 by virtue of which the ad valorem tax
rate on bunker fuel oil was reduced to ZERO (0%) PER CENTUM. Said E.O. no. 195 reads as follows:

EXECUTIVE ORDER NO. 195

AMENDING PARAGRAPH (b) OF SECTION 128 OF THE NATIONAL INTERNAL REVENUE CODE, AS
AMENDED BY REVISING THE EXCISE TAX RATES OF CERTAIN PETROLEUM PRODUCTS.

xxx xxx xxx

Sec. 1. Paragraph (b) of Section 128 of the National Internal Revenue Code, as amended, is hereby amended to
read as follows:

Par. (b) — For products subject to ad valorem tax only:

PRODUCT AD VALOREM TAX RATE

1. . . .

2. . . . 198

3. . . .

4. Fuel oil, commercially known as bunker oil and on similar fuel oils having more or less the same generating power
0%

xxx xxx xxx

Sec. 3. This Executive Order shall take effect immediately.

Done in the city of Manila, this 17th day of June, in the year of Our Lord, nineteen hundred and eighty-seven.
(Emphasis supplied)

The oil companies can now deliver bunker fuel oil to NPC without having to worry about who is going to bear the
economic burden of the ad valorem taxes. What this Court will now dispose of are petitioner's complaints that some
indirect tax money has been illegally refunded by the Bureau of Internal Revenue to the NPC and that more claims
for refunds by the NPC are being processed for payment by the BIR.

A case in point is the Tax Credit Memo issued by the Bureau of Internal Revenue in favor of the NPC last July 7,
1986 for P58.020.110.79 which were for "erroneously paid specific and ad valorem taxes during the period from
October 31, 1984 to April 27, 1985.   Petitioner asks Us to declare this Tax Credit Memo illegal as the PNC did not
91

have indirect tax exemptions with the enactment of P.D. No. 938. As We have already ruled otherwise, the only
questions left are whether NPC Is entitled to a tax refund for the tax component of the price of the bunker fuel oil
purchased from Caltex (Phils.) Inc. and whether the Bureau of Internal Revenue properly refunded the amount to
NPC.

After P.D. No. 1931 was issued on June 11, 1984 withdrawing the
tax exemptions of all GOCCs — NPC included, it was only on May 8, 1985 when the BIR issues its letter authority to
the NPC authorizing it to withdraw tax-free bunker fuel oil from the oil companies pursuant to FIRB Resolution No.
10-85.   Since the tax exemption restoration was retroactive to June 11, 1984 there was a need. therefore, to
92

recover said amount as Caltex (PhiIs.) Inc. had already paid the BIR the specific and ad valorem taxes on the
bunker oil it sold NPC during the period above indicated and had billed NPC correspondingly.   It should be noted
93

that the NPC, in its letter-claim dated September 11, 1985 to the Commissioner of the Bureau of Internal Revenue
DID NOT CATEGORICALLY AND UNEQUIVOCALLY STATE that itself paid the P58.020,110.79 as part of the
bunker fuel oil price it purchased from Caltex (Phils) Inc. 
94

The law governing recovery of erroneously or illegally, collected taxes is section 230 of the National Internal
Revenue Code of 1977, as amended which reads as follows:

Sec. 230. Recover of tax erroneously or illegally collected. — No suit or proceeding shall be maintained in any court
for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed
or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been
excessive or in any Manner wrongfully collected. until a claim for refund or credit has been duly filed with the
Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been
paid under protest or duress.

In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of
the tax or penalty regardless of any supervening cause that may arise after payment; Provided, however, That the
Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return
upon which payment was made, such payment appears clearly, to have been erroneously paid.

x x x           x x x          x x x

Inasmuch as NPC filled its claim for P58.020,110.79 on September 11, 1985,   the Commissioner correctly issued
95

the Tax Credit Memo in view of NPC's indirect tax exemption.

Petitioner, however, asks Us to restrain the Commissioner from acting favorably on NPC's claim for
P410.580,000.00 which represents specific and ad valorem taxes paid by the oil companies to the BIR from June
11, 1984 to the early part of 1986. 96

A careful examination of petitioner's pleadings and annexes attached thereto does not reveal when the alleged
claim for a P410,580,000.00 tax refund was filed. It is only stated In paragraph No. 2 of the Deed of
Assignment   executed by and between NPC and Caltex (Phils.) Inc., as follows:
97

That the ASSIGNOR(NPC) has a pending tax credit claim with the Bureau of Internal Revenue amounting to
P442,887,716.16. P58.020,110.79 of which is due to Assignor's oil purchases from the Assignee (Caltex [Phils.] 198
Inc.)

Actually, as the Court sees it, this is a clear case of a "Mexican standoff." We cannot restrain the BIR from refunding
said amount because of Our ruling that NPC has both direct and indirect tax exemption privileges. Neither can We
order the BIR to refund said amount to NPC as there is no pending petition for review on certiorari of a suit for its
collection before Us. At any rate, at this point in time, NPC can no longer file any suit to collect said amount EVEN
IF lt has previously filed a claim with the BIR because it is time-barred under Section 230 of the National Internal
Revenue Code of 1977. as amended, which states:

In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of
the tax or penalty REGARDLESS of any supervening cause that may arise after payment. . . . (Emphasis supplied)

The date of the Deed of Assignment is June 6. 1986. Even if We were to assume that payment by NPC for the
amount of P410,580,000.00 had been made on said date. it is clear that more than two (2) years had already
elapsed from said date. At the same time, We should note that there is no legal obstacle to the BIR granting, even
without a suit by NPC, the tax credit or refund claimed by NPC, assuming that NPC's claim had been made
seasonably, and assuming the amounts covered had actually been paid previously by the oil companies to the BIR.

WHEREFORE, in view of all the foregoing, the Motion for Reconsideration of petitioner is hereby DENIED for lack of
merit and the decision of this Court promulgated on May 31, 1991 is hereby AFFIRMED. SO ORDERED.

G.R. No. 102976 October 25, 1995

IRON AND STEEL AUTHORITY, petitioner,

vs.
THE COURT OF APPEALS and MARIA CRISTINA FERTILIZER CORPORATION, respondents.

FELICIANO, J.:

Petitioner Iron and Steel Authority ("ISA") was created by Presidential Decree (P.D.) No. 272 dated 9 August 1973
in order, generally, to develop and promote the iron and steel industry in the Philippines. The objectives of the ISA
are spelled out in the following terms:

Sec. 2. Objectives — The Authority shall have the following objectives:

(a) to strengthen the iron and steel industry of the Philippines and to expand the domestic and export markets for
the products of the industry;

(b) to promote the consolidation, integration and rationalization of the industry in order to increase industry capability
and viability to service the domestic market and to compete in international markets;

(c) to rationalize the marketing and distribution of steel products in order to achieve a balance between demand and
supply of iron and steel products for the country and to ensure that industry prices and profits are at levels that
provide a fair balance between the interests of investors, consumers suppliers, and the public at large;

(d) to promote full utilization of the existing capacity of the industry, to discourage investment in excess capacity,
and in coordination, with appropriate government agencies to encourage capital investment in priority areas of the
industry;

(e) to assist the industry in securing adequate and low-cost supplies of raw materials and to reduce the excessive
dependence of the country on imports of iron and steel.
The list of powers and functions of the ISA included the following:

Sec. 4. Powers and Functions. — The authority shall have the following powers and functions:

xxx xxx xxx

(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent resale and/or lease to the
companies involved if it is shown that such use of the State's power is necessary to implement the construction of
capacity which is needed for the attainment of the objectives of the Authority;
198
xxx xxx xxx

(Emphasis supplied)

P.D. No. 272 initially created petitioner ISA for a term of five (5) years counting from 9 August 1973.  When ISA's
1

original term expired on 10 October 1978, its term was extended for another ten (10) years by Executive Order No.
555 dated 31 August 1979.

The National Steel Corporation ("NSC") then a wholly owned subsidiary of the National Development Corporation
which is itself an entity wholly owned by the National Government, embarked on an expansion program embracing,
among other things, the construction of an integrated steel mill in Iligan City. The construction of such a steel mill
was considered a priority and major industrial project of the Government. Pursuant to the expansion program of the
NSC, Proclamation No. 2239 was issued by the President of the Philippines on 16 November 1982 withdrawing
from sale or settlement a large tract of public land (totalling about 30.25 hectares in area) located in Iligan City, and
reserving that land for the use and immediate occupancy of NSC.

Since certain portions of the public land subject matter Proclamation No. 2239 were occupied by a non-operational
chemical fertilizer plant and related facilities owned by private respondent Maria Cristina Fertilizer Corporation
("MCFC"), Letter of Instruction (LOI), No. 1277, also dated 16 November 1982, was issued directing the NSC to
"negotiate with the owners of MCFC, for and on behalf of the Government, for the compensation of MCFC's present
occupancy rights on the subject land." LOI No. 1277 also directed that should NSC and private respondent MCFC
fail to reach an agreement within a period of sixty (60) days from the date of LOI No. 1277, petitioner ISA was to
exercise its power of eminent domain under P.D. No. 272 and to initiate expropriation proceedings in respect of
occupancy rights of private respondent MCFC relating to the subject public land as well as the plant itself and
related facilities and to cede the same to the NSC. 2

Negotiations between NSC and private respondent MCFC did fail. Accordingly, on 18 August 1983, petitioner ISA
commenced eminent domain proceedings against private respondent MCFC in the Regional Trial Court, Branch 1,
of Iligan City, praying that it (ISA) be places in possession of the property involved upon depositing in court the
amount of P1,760,789.69 representing ten percent (10%) of the declared market values of that property. The
Philippine National Bank, as mortgagee of the plant facilities and improvements involved in the expropriation
proceedings, was also impleaded as party-defendant.

On 17 September 1983, a writ of possession was issued by the trial court in favor of ISA. ISA in turn placed NSC in
possession and control of the land occupied by MCFC's fertilizer plant installation.

The case proceeded to trial. While the trial was ongoing, however, the statutory existence of petitioner ISA expired
on 11 August 1988. MCFC then filed a motion to dismiss, contending that no valid judgment could be rendered
against ISA which had ceased to be a juridical person. Petitioner ISA filed its opposition to this motion.

In an Order dated 9 November 1988, the trial court granted MCFC's motion to dismiss and did dismiss the case.
The dismissal was anchored on the provision of the Rules of Court stating that "only natural or juridical persons or
entities authorized by law may be parties in a civil case."  The trial court also referred to non-compliance by
3

petitioner ISA with the requirements of Section 16, Rule 3 of the Rules of Court. 4

Petitioner ISA moved for reconsideration of the trial court's Order, contending that despite the expiration of its term,
its juridical existence continued until the winding up of its affairs could be completed. In the alternative, petitioner
ISA urged that the Republic of the Philippines, being the real party-in-interest, should be allowed to be substituted
for petitioner ISA. In this connection, ISA referred to a letter from the Office of the President dated 28 September
1988 which especially directed the Solicitor General to continue the expropriation case.

The trial court denied the motion for reconsideration, stating, among other things that:

The property to be expropriated is not for public use or benefit [__] but for the use and benefit [__] of NSC, a
government controlled private corporation engaged in private business and for profit, specially now that the
government, according to newspaper reports, is offering for sale to the public its [shares of stock] in the National
Steel Corporation in line with the pronounced policy of the present administration to disengage the government from
its private business ventures.  (Brackets supplied)
5

Petitioner went on appeal to the Court of Appeals. In a Decision dated 8 October 1991, the Court of Appeals
affirmed the order of dismissal of the trial court. The Court of Appeals held that petitioner ISA, "a government
regulatory agency exercising sovereign functions," did not have the same rights as an ordinary corporation and that
the ISA, unlike corporations organized under the Corporation Code, was not entitled to a period for winding up its
affairs after expiration of its legally mandated term, with the result that upon expiration of its term on 11 August
1987, ISA was "abolished and [had] no more legal authority to perform governmental functions." The Court of
Appeals went on to say that the action for expropriation could not prosper because the basis for the proceedings,
198
the ISA's exercise of its delegated authority to expropriate, had become ineffective as a result of the delegate's
dissolution, and could not be continued in the name of Republic of the Philippines, represented by the Solicitor
General:

It is our considered opinion that under the law, the complaint cannot prosper, and therefore, has to be
dismissed without prejudice to the refiling of a new complaint for expropriation if the Congress sees it fit."
(Emphases supplied)

At the same time, however, the Court of Appeals held that it was premature for the trial court to have ruled that the
expropriation suit was not for a public purpose, considering that the parties had not yet rested their respective
cases.

In this Petition for Review, the Solicitor General argues that since ISA initiated and prosecuted the action for
expropriation in its capacity as agent of the Republic of the Philippines, the Republic, as principal of ISA, is entitled
to be substituted and to be made a party-plaintiff after the agent ISA's term had expired.

Private respondent MCFC, upon the other hand, argues that the failure of Congress to enact a law further extending
the term of ISA after 11 August 1988 evinced a "clear legislative intent to terminate the juridical existence of ISA,"
and that the authorization issued by the Office of the President to the Solicitor General for continued prosecution of
the expropriation suit could not prevail over such negative intent. It is also contended that the exercise of the
eminent domain by ISA or the Republic is improper, since that power would be exercised "not on behalf of the
National Government but for the benefit of NSC."

The principal issue which we must address in this case is whether or not the Republic of the Philippines is entitled to
be substituted for ISA in view of the expiration of ISA's term. As will be made clear below, this is really the only issue
which we must resolve at this time.

Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil action:

Sec. 1. Who May Be Parties. — Only natural or juridical persons or entities authorized by law may be parties in a
civil action.

Under the above quoted provision, it will be seen that those who can be parties to a civil action may be broadly
categorized into two (2) groups:

(a) those who are recognized as persons under the law whether natural, i.e., biological persons, on the one hand,
or juridical person such as corporations, on the other hand; and

(b) entities authorized by law to institute actions.

Examination of the statute which created petitioner ISA shows that ISA falls under category (b) above. P.D. No. 272,
as already noted, contains express authorization to ISA to commence expropriation proceedings like those here
involved:

Sec. 4. Powers and Functions. — The Authority shall have the following powers and functions:

xxx xxx xxx

(j) to initiate expropriation of land required for basic iron and steel facilities for subsequent resale and/or lease to the
companies involved if it is shown that such use of the State's power is necessary to implement the construction of
capacity which is needed for the attainment of the objectives of the Authority;

xxx xxx xxx

(Emphasis supplied)
It should also be noted that the enabling statute of ISA expressly authorized it to enter into certain kinds of
contracts "for and in behalf of the Government" in the following terms:

xxx xxx xxx

(i) to negotiate, and when necessary, to enter into contracts for and in behalf of the government, for the bulk
purchase of materials, supplies or services for any sectors in the industry, and to maintain inventories of such
materials in order to insure a continuous and adequate supply thereof and thereby reduce operating costs of such
sector;
198
xxx xxx xxx

(Emphasis supplied)

Clearly, ISA was vested with some of the powers or attributes normally associated with juridical personality. There
is, however, no provision in P.D. No. 272 recognizing ISA as possessing general or comprehensive juridical
personality separate and distinct from that of the Government. The ISA in fact appears to the Court to be a  non-
incorporated agency or instrumentality of the Republic of the Philippines, or more precisely of the Government of
the Republic of the Philippines. It is common knowledge that other agencies or instrumentalities of the Government
of the Republic are cast in corporate form, that is to say, are incorporated agencies or instrumentalities, sometimes
with and at other times without capital stock, and accordingly vested with a juridical personality distinct from the
personality of the Republic. Among such incorporated agencies or instrumentalities are: National Power
Corporation;  Philippine Ports Authority;  National Housing Authority;  Philippine National Oil Company;  Philippine
6 7 8 9

National Railways;   Public Estates Authority;   Philippine Virginia Tobacco Administration,  and so forth. It is worth
10 11 12

noting that the term "Authority" has been used to designate both incorporated and non-incorporated agencies or
instrumentalities of the Government.

We consider that the ISA is properly regarded as an agent or delegate of the Republic of the Philippines. The
Republic itself is a body corporate and juridical person vested with the full panoply of powers and attributes which
are compendiously described as "legal personality." The relevant definitions are found in the Administrative Code of
1987:

Sec. 2. General Terms Defined. — Unless the specific words of the text, or the context as a whole, or a particular
statute, require a different meaning:

(1) Government of the Republic of the Philippines refers to the corporate governmental entity through which the
functions of government are exercised throughout the Philippines, including, save as the contrary appears from the
context, the various arms through which political authority is made effective in the Philippines, whether pertaining to
the autonomous regions, the provincial, city, municipal or barangay subdivisions or other forms of local government.

xxx xxx xxx

(4) Agency of the Government refers to any of the various units of the Government, including a department,
bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a distinct
unit therein.

xxx xxx xxx

(10) Instrumentality refers to any agency of the National Government, not integrated within the department
framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational autonomy, usually through a charter. This term includes
regulatory agencies, chartered institutions and government-owned or controlled corporations.

xxx xxx xxx

(Emphases supplied)

When the statutory term of a non-incorporated agency expires, the powers, duties and functions as well as the
assets and liabilities of that agency revert back to, and are re-assumed by, the Republic of the Philippines, in the
absence of special provisions of law specifying some other disposition thereof such as, e.g., devolution or
transmission of such powers, duties, functions, etc. to some other identified successor agency or instrumentality of
the Republic of the Philippines. When the expiring agency is an incorporated one, the consequences of such expiry
must be looked for, in the first instance, in the charter of that agency and, by way of supplementation, in the
provisions of the Corporation Code. Since, in the instant case, ISA is a non-incorporated agency or instrumentality
of the Republic, its powers, duties, functions, assets and liabilities are properly regarded as folded back into the
Government of the Republic of the Philippines and hence assumed once again by the Republic, no special statutory
provision having been shown to have mandated succession thereto by some other entity or agency of the Republic.

The procedural implications of the relationship between an agent or delegate of the Republic of the Philippines and
the Republic itself are, at least in part, spelled out in the Rules of Court. The general rule is, of course, that an action
must be prosecuted and defended in the name of the real party in interest. (Rule 3, Section 2) Petitioner ISA was, at
the commencement of the expropriation proceedings, a real party in interest, having been explicitly authorized by its
enabling statute to institute expropriation proceedings. The Rules of Court at the same time expressly recognize the
role of representative parties:
198
Sec. 3. Representative Parties. — A trustee of an expressed trust, a guardian, an executor or administrator, or a
party authorized by statute may sue or be sued without joining the party for whose benefit the action is presented or
defended; but the court may, at any stage of the proceedings, order such beneficiary to be made a party. . . . .
(Emphasis supplied)

In the instant case, ISA instituted the expropriation proceedings in its capacity as an agent or delegate or
representative of the Republic of the Philippines pursuant to its authority under P.D. No. 272. The present
expropriation suit was brought on behalf of and for the benefit of the Republic as the principal of ISA. Paragraph 7 of
the complaint stated:

7. The Government, thru the plaintiff ISA, urgently needs the subject parcels of land for the construction and
installation of iron and steel manufacturing facilities that are indispensable to the integration of the iron and steel
making industry which is vital to the promotion of public interest and welfare. (Emphasis supplied)

The principal or the real party in interest is thus the Republic of the Philippines and not the National Steel
Corporation, even though the latter may be an ultimate user of the properties involved should the condemnation suit
be eventually successful.

From the foregoing premises, it follows that the Republic of the Philippines is entitled to be substituted in the
expropriation proceedings as party-plaintiff in lieu of ISA, the statutory term of ISA having expired. Put a little
differently, the expiration of ISA's statutory term did not by itself require or justify the dismissal of the eminent
domain proceedings.

It is also relevant to note that the non-joinder of the Republic which occurred upon the expiration of ISA's statutory
term, was not a ground for dismissal of such proceedings since a party may be dropped or added by order of the
court, on motion of any party or on the court's own initiative at any stage of the action and on such terms as are
just.   In the instant case, the Republic has precisely moved to take over the proceedings as party-plaintiff.
13

In E.B. Marcha Transport Company, Inc. v. Intermediate Appellate Court,   the Court recognized that the Republic
14

may initiate or participate in actions involving its agents. There the Republic of the Philippines was held to be a
proper party to sue for recovery of possession of property although the "real" or registered owner of the property
was the Philippine Ports Authority, a government agency vested with a separate juridical personality. The Court
said:

It can be said that in suing for the recovery of the rentals, the Republic of the Philippines acted as principal of the
Philippine Ports Authority, directly exercising the commission it had earlier conferred on the latter as its agent . . . .
15
 (Emphasis supplied)

In E.B. Marcha, the Court also stressed that to require the Republic to commence all over again another proceeding,
as the trial court and Court of Appeals had required, was to generate unwarranted delay and create needless
repetition of proceedings:

More importantly, as we see it, dismissing the complaint on the ground that the Republic of the Philippines is not the
proper party would result in needless delay in the settlement of this matter  and also in derogation of the policy
against multiplicity of suits. Such a decision would require the Philippine Ports Authority to refile the very same
complaint already proved by the Republic of the Philippines and bring back as it were to square one.  (Emphasis16

supplied)

As noted earlier, the Court of Appeals declined to permit the substitution of the Republic of the Philippines for the
ISA upon the ground that the action for expropriation could not prosper because the basis for the proceedings, the
ISA's exercise of its delegated authority to expropriate, had become legally ineffective by reason of the expiration of
the statutory term of the agent or delegated i.e., ISA. Since, as we have held above, the powers and functions of
ISA have reverted to the Republic of the Philippines upon the termination of the statutory term of ISA, the question
should be addressed whether fresh legislative authority is necessary before the Republic of the Philippines may
continue the expropriation proceedings initiated by its own delegate or agent.
While the power of eminent domain is, in principle, vested primarily in the legislative department of the government,
we believe and so hold that no new legislative act is necessary should the Republic decide, upon being substituted
for ISA, in fact to continue to prosecute the expropriation proceedings. For the legislative authority, a long time ago,
enacted a continuing or standing delegation of authority to the President of the Philippines to exercise, or cause the
exercise of, the power of eminent domain on behalf of the Government of the Republic of the Philippines. The 1917
Revised Administrative Code, which was in effect at the time of the commencement of the present expropriation
proceedings before the Iligan Regional Trial Court, provided that:

Sec. 64. Particular powers and duties of the President of the Philippines. — In addition to his general supervisory
authority, the President of the Philippines shall have such other specific powers and duties as are expressly
198
conferred or imposed on him by law, and also, in particular, the powers and duties set forth in this Chapter.

Among such special powers and duties shall be:

xxx xxx xxx

(h) To determine when it is necessary or advantageous to exercise the right of eminent domain in behalf of the
Government of the Philippines; and to direct the Secretary of Justice, where such act is deemed advisable, to cause
the condemnation proceedings to be begun in the court having proper jurisdiction. (Emphasis supplied)

The Revised Administrative Code of 1987 currently in force has substantially reproduced the foregoing provision in
the following terms:

Sec. 12. Power of eminent domain. — The President shall determine when it is necessary or advantageous to

exercise the power of eminent domain in behalf of the National Government, and direct the Solicitor General,
whenever he deems the action advisable, to institute expopriation proceedings in the proper court . (Emphasis
supplied)

In the present case, the President, exercising the power duly delegated under both the 1917 and 1987 Revised
Administrative Codes in effect made a determination that it was necessary and advantageous to exercise the power
of eminent domain in behalf of the Government of the Republic and accordingly directed the Solicitor General to
proceed with the suit. 
17

It is argued by private respondent MCFC that, because Congress after becoming once more the depository of
primary legislative power, had not enacted a statute extending the term of ISA, such non-enactment must be
deemed a manifestation of a legislative design to discontinue or abort the present expropriation suit. We find this
argument much too speculative; it rests too much upon simple silence on the part of Congress and casually
disregards the existence of Section 12 of the 1987 Administrative Code already quoted above.

Other contentions are made by private respondent MCFC, such as, that the constitutional requirement of "public
use" or "public purpose" is not present in the instant case, and that the indispensable element of just compensation
is also absent. We agree with the Court of Appeals in this connection that these contentions, which were adopted
and set out by the Regional Trial Court in its order of dismissal, are premature and are appropriately addressed in
the proceedings before the trial court. Those proceedings have yet to produce a decision on the merits, since trial
was still on going at the time the Regional Trial Court precipitously dismissed the expropriation proceedings.
Moreover, as a pragmatic matter, the Republic is, by such substitution as party-plaintiff, accorded an opportunity to
determine whether or not, or to what extent, the proceedings should be continued in view of all the subsequent
developments in the iron and steel sector of the country including, though not limited to, the partial privatization of
the NSC.

WHEREFORE, for all the foregoing, the Decision of the Court of Appeals dated 8 October 1991 to the extent that it
affirmed the trial court's order dismissing the expropriation proceedings, is hereby REVERSED and SET ASIDE and
the case is REMANDED to the court a quo which shall allow the substitution of the Republic of the Philippines for
petitioner Iron and Steel Authority and for further proceedings consistent with this Decision. No pronouncement as to
costs. SO ORDERED.

G.R. No. 109113 January 25, 1995

CONCERNED OFFICIALS OF THE METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM

(MWSS), petitioners,
vs.
HON. OMBUDSMAN CONRADO M. VASQUEZ AND MEMBERS OF THE PHILIPPINE LARGE DIAMETER
PRESSURE PIPE MANUFACTURERS ASSOCIATION (PLDPPMA), respondents.
VITUG, J.:

The Ombudsman, in its 19th October 1992 Order,  directed the Board of Trustees of Metropolitan Waterworks and
1

Sewerage System ("MWSS") (a) to set aside the recommendation of its Pre-qualification, Bids and Awards
Committee for Construction Services and Technical Equipment ("PBAC-CSTE") that Contract No. APM-01 be given
to a contractor offering fiberglass pipes and (b) to instead award the contract to a complying and responsive bidder
pursuant to the provisions of Presidential Decree No. 1594.  The subsequent motion for reconsideration was denied
2

by the Ombudsman in its Order 01 March 1993. 198

These two Orders are now sought to be annulled in this petition for certiorari, with prayer for preliminary injunction or
a restraining order, lodged by the "Concerned Officials of the Metropolitan Waterworks and Sewerage System"  led 3

by its former Administrator Teofilo I. Asuncion. Let us first touch on the factual backdrop.

In order to provide about 1.3 million liters of water daily to about 3.8 million people in the metropolitan area,  MWSS
4

launched the Angat Water Supply optimization ("AWSOP") consisting of several phases. The entire project would
be, in most part, financed by funds loaned by the Overseas Economic Cooperation Fund ("OECF") of Japan to the
national government and allocated to MWSS in the form of equity.  With the completion of the construction of the
5

main aqueduct from Angat Dam all the way down to La Mesa Dam in Novaliches, Quezon City, from where water
mains for the distribution system of the entire Metro Manila begin, MWSS focused its attention to the Distribution
System Phase of the AWSOP. The projects were denominated Projects APM-01 and APM-02 which consist of the
construction of the Distribution System Phase of the AWSOP, that would particularly call for the supply of labor,
materials and equipment, and of the installation of new watermains (43,305 linear meters for APM-01 and 31,491
linear meters for APM-02),  comprising of fittings, valves and pipes of different sizes.  Under Clause IB-34 of the
6 7

contract documents for APM-01 and APM-02 the permitted alternative pipe materials for the projects were to include
the following items:

(millimeters)
Asbestos cement Pipe (ACP) — 100 mm to 600 mm
Cast Iron Pipe (CIP) — 50 and larger
Polyethylene Pipe (PE) — 50 mm to 250 mm
Polyvinyl Chloride Pipe (DIP) — 50 mm and larger
Steel Pipe (SP) — 400 mm and larger
Fiberglass Pressure Pipe — 300 mm and larger 8
(FPP)

On 30 August 1991, MWSS caused the publication in two (2) leading newspapers of an "Invitation for Pre-
qualification and Bids" for Projects were opened for international competitive bidding, copies of the "Invitation for
pre-qualification and Bids" were sent to the respective embassies and trade missions of member countries of the
OECF. The advertisement and invitation to prospective bidders announced that "(g)oods and services to be
supplied under (the) contract must have their origin from countries defined in the Guidelines for Procurement of
Goods under OECF loans" and that "(j)oint ventures between foreign and domestic firms as encouraged." While
there were twenty-five (25) prospective applicants who secured pre-qualification documents, only fourteen (14)
contractors submitted corresponding applications to the PBAC-CSTE.

On 20 November 1991, the PBAC-CSTE, after evaluating the applications for pre-qualification, issued a
report  concluding that only eleven (11)   out of the fourteen (14) contractors were pre-qualified to bid for the 31st
9 10

March 1992 scheduled bidding covering both the APM-01 and APM-02 proposed contracts. The major factors
considered in the evaluation were the applicants' financial condition, technical qualifications and experience to
undertake the project under bid.

Meanwhile, private respondent Philippine Large Diameter pressure Pipes Manufacturers' Association
("PLDPPMA"),   sent seven (7) letters, between 13 January and 23 March 1992, to the MWSS requesting
11

clarification, as well as offering some suggestions, on the technical specifications for APM-01 and APM-02.

The first letter, dated 13 January 1992,   sought clarification on the design criteria of thickness used for fiberglass
12

and ductile iron pipes which varied from the standard thickness given by manufacturers.

The second letter, dated 29 January 1992,   suggested that all alternative pipes for Projects APM-01 and APM-02
13

should have the same design criteria on stiffness class, pressure class, rating, elevated temperature and wall
thickness and should be manufactured in accordance with American water Works Association ("AWWA") standards.
PLDPPMA, in its third letter of 13 February 1992,   sought to be elaborated on the imposition of the testing
14

procedure of stiffness factor on steel pipes used in Fiberglass Reinforced Pipes ("FRP") and suggested that the 5-
year minimum experience by manufacturers be required for alternative pipes.

In its fourth letter, dated 25 February 1992,   PLDPPMA reiterated their request that the deflection allowance of 3%
15

under the AWWA standards on steel pipes be also applied to all alternative pipes and suggested that a comparative
study should be undertaken by the MWSS on the feasibility of using filament wound fiberglass pipes ("FRP") and
centrifugally cast fiberglass pipes ("GRP").

In their fifth letter, dated 05 March 1992,   PLDPPMA appealed to the MWSS to have steel pipes placed in equal
16
198
footing with other alternative pipes, specifically filament wound and centrifugally cast fiberglass pipes, in order to
avoid an unfair requirement on stiffness value.

In their penultimate letter of 16 March 1992,   PLDPPMA informed MWSS of their computation for wall thickness
17

and stiffness values for cement lined/cement coated and epoxy lined/coal tar enamel coated steel pipes based on
AWWA standards.

Finally, in their seventh letter of 23 march 1992,   PLDPPMA reiterated their request for correcting the specifications
18

for steel and fiberglass pipes, particularly on wall thickness and deflections, because of MWSS Addendum #5 where
the wall thickness for steel pipes were noted to be more than the wall thickness computed in the previously agreed
agenda.

Former Administrator Luis Sison issued, between 10 February and 24 March 1992, six (6) addenda to the bidding
documents that embodied the meritorious suggestions of PLDPPMA on various technical specifications. In his 24th
March 1992 letter to the PLDPPMA, in response to the latter's 23rd march 1992 (seventh) letter, Sison explained
that the additional thickness for steel pipes was so required in order to serve as a pipe corrosion allowance to
counter imperfection in the preparation and application of lining and coating, the limit service life of epoxy resin
lining and the corrosive element of the local soil.

The bidding was conducted by PBAC on the previously scheduled date of 31 March 1992. The prequalified bidders
using steel and fiberglass pipes submitted their respective bid proposals. The approved agency cost estimate for
Project APM-01 was Three Hundred Sixty Six Million Six Hundred Fifty Thousand Pesos (P366,650,000,00).    The 19

Three (3) lowest bidders for the said project (APM-01) were the following:

BIDDER BID PRICE

1 DYWIDAG/TITAN/WILPER
PLDPPMA/GREEN JADE (Joint Venture) P267,345,574.00
2 F.F. CRUZ & CO., INC. P268,815,729.00
3 J.V. ANGELES CONST. CORP./JA
DEVT. CORP. P278,205,457.00 20

while the three lowest bidders for Project APM-02 included:

BIDDER BID PRICE

1 ENG'G. EQUIPMENT, INC. (EEI) P219,574,538.00
2 FF CRUZ & CO., INC. P233,533,537.00
3 J.V ANGELES CONST. CORP./JA
DEVT. CORP. P277,304,604.00 21

In APM-01, Joint Venture and F.F. Cruz and Co., Inc. proposed to use fiberglass pipes. In APM-02, Eng'g.
Equipment Inc. and F.F. Cruz likewise preferred to use fiberglass pipes.

After the three lowest bidders for both projects were known, a meeting was held on 27 May 1992 by the PBAC-
CSTE, composed of MWSS Deputy Administrator for Engineering Eduardo M. del Fierro, as Acting Chairman, and
deputy Administrator for Operations Ruben A. Hernandez, Acting Chief of Legal office Precioso E. Remolacio, and
Project Manager Cesar S. Guevarra, as members, to decide on what should be done about Contract APM-01. Three
of the members, namely, Hernandez, Guevarra and Asuncion, recommended for the contract on the following
grounds:

a. Ambiguity of Addendum No. 6 — The Addendum is subject to different interpretations because there was no
illustrations provided. Further, it could also be said that some contractors did not use the FRP because said
Addendum was not clearly explained.
b. There was no provision for maintenance/repair materials for bidders who opted to use FRP which is relatively new
pipe to be used in the country. It was suggested that a 5% to 10% allowance be provided for maintenance
purposes.

c. Further review of pipe design should be made by the Consultant (NJS) in order to accommodate the load to be
carried in the Umiray-Angat Loop.  22

Precioso E. Remolacio abstained; he felt that "technical evaluation (was) more essential in deciding the issues in
(the) Contract." For his part, Acting Chairman Eduardo M. del Fierro recommended that no rebidding should be
undertaken and that an award should be made to either the lowest or the second lowest bidder. 198

On 29 May 1992, PBAC-CSTE met again to discuss and evaluate the bids in APM-02. Here again, three members,
namely, Guevarra, Hernandez and Asuncion, opined that a rebidding should be conducted, while Acting Chairman
del Fierro and Remolacio believed that the contract should be awarded to the lowest bidder.

Finally, on 02 June 1992, the PBAC-CSTE formally submitted its report   on its bid evaluation on APM-01. The
23

PBAC-CSTE held that while Joint Venture's bid might have been the lowest it was, however, invalid due to its failure
to acknowledge Addendum No. 6, a major consideration, that could not be waived. It accordingly recommended that
the contract be instead awarded to the second lowest but complying bidder, F.F. Cruz & Co., Inc., subject to the
latter's manifestation that it would only hire key personnel with experience in the installation of fiberglass pressure
pipes (due to PBAC-CSTE's observation in the report that the company and its key personnel did not have previous
experience in the installation of fiberglass reinforced pipes). Acting Chairman del Fierro, together with members
Guevarra and Asuncion, approved the PBAC-CSTE's findings and recommendation. Hernandez and Remolacio
both disagreed with the findings of the PBAC-CSTE; the former opted for a rebidding while the latter batted for
awarding the contract to Joint Venture.

On the following day, or on 03 June 1992, the MWSS Board Committee on Construction Management and the
Board Committee on Engineering, acting jointly on the recommendation of Administrator Sison, recommended that
Contract No. APM-01 be awarded to F.F. Cruz & Co., Inc., being the lowest complying bidder.  24

Prior thereto, or on 07 April 1992 (seven days after the submission of the bid proposals on 31 March 1992), private
respondent PLDPPMA, through its President Ramon Pastor, filed with the Office of the Ombudsman a letter-
complaint   (docketed Case No. OMB-0-92-0750) protesting the public bidding conducted by the MWSS for Projects
25

APM-01 and APM-02, detailing charges of an "apparent plan" on the part of the MWSS to favor suppliers of
fiberglass pipes, and urging the Ombudsman to conduct an investigation thereon and to hold in abeyance the award
of the contracts. PLDPPMA's letter-complaint, in part, read:

Even before the bidding had started, there appears to be an apparent plan on the part of the MWSS to favor a
particular supplier of pipes for the project considering the following events:

Firstly, the bid documents particularly the specifications for alternative pipes when first released in December 1991
whimsically and arbitrarily set such rigid standards for steel pipes so that MWSS had to issue six addenda to the
bidding documents and had to postpone the bidding several times in a vain attempt to correct the apparent
prejudice against the use of steel pipes for the APM 01 and 02 projects;

Secondly, despite our prior agreement with MWSS Engineering Department that the alternative pipes to be used for
the project should comply with internationally accepted AWWA specifications was written arbitrarily and in complete
disregard of AWWA specifications increased by 1 mm. the thickness required for steel pipes thereby effectively
increasing the cost of steel pipes for the APM 01 project bid by about P30 Million, or more than twice the difference
between the lowest bid and the bid that utilized steel pipes;

Thirdly, despite the fact that it was/is of common knowledge that FRP and GRP (Fiberglass) pipes have had a long
history of failures in the United States such that even MWSS Pre-qualification, Bidding and Awards Committee
resolved in a meeting held in March 1992 not to use FRP and GRP pipes for large projects, bids utilizing such pipes
were still accepted for the FRP and GRP pipes for large projects, bids utilizing such pipes were still accepted for the
APM 01 and 02 projects; and

Lastly, the undue preference for the use of GRP pipes became more apparent when the supposed lowest bidder for
the APM 01 project (who did not participate in the bidding for APM 02 project), and the supposed lowest bidder for
the APM 02 project (who also did not participate in the bidding for APM 01 project), both submitted bids utilizing
GRP pipes.

On 10 June 1992, the Ombudsman referred PLDPPMA's 07th April 1992 letter-complaint to the MWSS Board of
Trustees for comment along with a directive to it to hold in abeyance the awarding of the subject contract.   MWSS
26

asked for an extension of time within which to submit its comment but called, at the same time, the attention of the
Ombudsman to Presidential Decree No. 1818   prohibiting the issuance of restraining orders/injunctions in cases
27

involving government infrastructure projects.

After the submission by the parties of their respective pleadings, the case was referred to the Fact-Finding and
Intelligence Bureau of the Office of the Ombudsman for Investigation and report   was submitted to, and approved
28

by, the Ombudsman which became the basis for the issuance of the now challenged order, dated 19 October
1992,   reading as follows:
29

In view of the findings of this Office on the above-entitled case as contained in the Fact-Finding Report, dated
September 14, 1992, of the Fact Finding Investigation Bureau (copy attached), and pursuant to the Powers, 198
Functions and Duties of the Office of the Ombudsman as mandated under Section 15 of Republic Act 6770
(Ombudsman Act), the MWSS Board of Trustees in hereby directed to:

1) Set aside the recommendation of the MWSS Pre-qualification, Bids and Awards Committee for Construction
Services and Technical Equipment (PBAC-CSTE) to award Contract APM-01 to a contractor offering fiberglass
pipes;

2) Award the subject contract to a complying and responsive bidder pursuant to the provisions of PD 1594,
Prescribing Policies, Guidelines, Rules and Regulations for Government Infrastructure Contracts.

The Board of Trustees is further directed to inform this Office of the action taken thereon.

SO ORDERED.

A motion by herein petitioners for the reconsideration of the order was denied on 01 March 1993. 
30

Petitioners cite to us the following reasons for its petition for certiorari.

RESPONDENT OMBUDSMAN ACTED BEYOND THE COMPETENCE OF HIS OFFICE WHEN HE ASSUMED
JURISDICTION OVER THE COMPLAINT AT BAR NOTWITHSTANDING THAT THE SAME IS CLEARLY AMONG
THE CASES EXCEPTED BY SECTION 20 OF THE OMBUDSMAN ACT OF 1989 (RA NO. 6770) WHICH
ENUMERATED THE ADMINISTRATIVE ACT OR OMISSION THAT MAY NOT BE THE SUBJECT OF
INVESTIGATION BY HIS OFFICE.

II

RESPONDENT OMBUDSMAN, AFTER HAVING TAKEN COGNIZANCE OF THE COMPLAINT, ARBITRARILY

ISSUED A DIRECTIVE IN THE NATURE OF A RESTRAINING ORDER OR WRIT OF PRELIMINARY
INJUNCTION TO PETITIONERS "TO HOLD IN ABEYANCE THE AWARDING OF THE CONTRACT . . . UNTIL
FURTHER ORDER FROM THIS OFFICE," A POWER OR AUTHORITY NOT VESTED IN HIS OFFICE.

III

RESPONDENT OMBUDSMAN ACTED WITHOUT JURISDICTION IN ISSUING THE ORDER OF OCTOBER 1993,
CONSIDERING THAT UNDER THE LAW THE OMBUDSMAN'S JURISDICTION CANNOT AND SHOULD NOT BE
EXPANDED TO INCLUDE THE DECISION MAKING POWER OVER A CIVIL ADJUDICATORY MATTER SUCH
AS THE MWSS BIDDING PROCESS.

IV

RESPONDENT OMBUDSMAN COMMITTED A GRAVE ERROR OF LAW, AND ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION, BY ARBITRARILY AND CAPRICIOUSLY
INTERPRETING WITH THE EXERCISE OF SOUND DISCRETION BY THE MWSS WHICH IS A SPECIALIZED
AGENCY OF GOVERNMENT WITH WHICH EVEN COURTS OF JUSTICE GENERALLY DO NOT INTERFERE
TO ISSUE THE ORDERS.

RESPONDENT OMBUDSMAN COMMITTED A GRAVE ERROR OF LAW, AND ACTED WITH GRAVE ABUSE OF
DISCRETION TANTAMOUNT TO LACK OF JURISDICTION, IN ISSUING THE SUBJECT ORDERS IN GROSS
DISREGARD OF THE CARDINAL PRINCIPLES OF DUE PROCEEDINGS, ASSUMING ARGUENDO THAT HE
HAS JURISDICTION TO ISSUE SAID ORDERS.
VI

RESPONDENT OMBUDSMAN COMMITTED GRAVE ERROR OF LAW, AND ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OF JURISDICTION, IN GROSSLY MISAPPREHENDING THE RECORD BY
FAILING TO TAKE INTO ACCOUNT THE FINDINGS OF EXPERTS THAT THE MWSS SPECIFICATIONS ARE
FAIR, AND BY CONCLUDING BASELESSLY THAT MWSS FORMULATED ITS SPECIFICATIONS TO FAVOR
FIBERGLASS PIPES OVER STEEL PIPES, ASSUMING ARGUENDO THAT HE HAS JURISDICTION TO ISSUE
THE SUBJECT ORDERS.

VII 198

RESPONDENT OMBUDSMAN COMMITTED GRAVE ERROR OF LAW, AND ACTED ARBITRARILY AND
CAPRICIOUSLY, IN IMPLYING BASELESSLY THAT MWSS ACTED UNFAIRLY, OPPRESSIVELY AND WITH
GRAVE ABUSE OF DISCRETION, ASSUMING ARGUENDO THAT HE HAS JURISDICTION TO ISSUE THE
SUBJECT ORDERS.

VIII

IN CONSEQUENCE, THE ORDERS OF OCTOBER 19, 1992 AND MARCH 1, 1993 MUST BE REVERSED,
ANNULLED AND SET ASIDE.  31

After the required pleadings were filed by the parties, this Court, in its resolution of 19 May 1994 gave due course to
the petition and required the parties to submit memoranda. In compliance therewith, the parties filed their respective
memoranda, petitioners (MWSS) on 07 July 1994, the Solicitor-General on 28 June 1994, and PLDPPMA on 19 July
1994. Petitioners opposed Titan's intervention. This Court, ultimately, denied the motion for leave to intervene.

The various alleged errors raised by petitioners can be grouped into two basic issues, i.e., (a) whether or not the
rudiments of due process have been properly observed in the issuance of the assailed 19th October 1992 and 01st
march 1993 orders of the Ombudsman; and, more pivotal that the first, (b) whether or not the Ombudsman has
jurisdiction to take cognizance of PLDPPMA's complaint and to correspondingly issue its challenged orders directing
the Board of Trustees of the MWSS to set aside the recommendation of the PBAC-CSTE.

Relative to the first issue, we are more than convinced, after a scrutiny of the records of this case, that petitioners
have been amply accorded the opportunity to be heard.

Petitioners were asked to comment on the letter-complaint of PLDPPMA. On 25 June 1992, petitioners moved for
an extension of time within which to comment. On July 16, 1992, petitioners filed their letter-comment. Responding
to the reply of PLDPPMA, petitioners later filed a rejoinder. When an adverse order was rendered against them,
petitioners moved for its reconsideration, albeit to no avail.

The absence of due process is an opportunity to be heard.   One may be heard, not solely by verbal presentation
32

but also, and perhaps even many times more creditably and practicable than oral argument, through pleadings.   In 33

administrative proceedings, moreover, technical rules of procedure and evidence are not strictly applied;
administrative due process cannot be fully equated to due process in its strict judicial sense.

On the threshold matter that puts to issue the Ombudsman's directive to the Board of Trustees of MWSS to set
aside the recommendation of the PBAC — CSTE to award Contract No. APM-01 to the lowest complying bid, we
find, this time, the petition to be impressed with merit.

Petitioners maintain that while Republic Act ("R.A.") No. 6770, otherwise known as the Ombudsman Act of 1989,
extends certain well-defined powers and authority to the Office of the Ombudsman to, among other functions,
investigate and prosecute complaints filed therewith, the same law, however, expresses limits to the exercise of
such jurisdictional power and authority. Section 20 of the Act is cited; viz:

Sec. 20. Exceptions. — The Office of the Ombudsman may not conduct the necessary investigation of any
administrative act or omission complained of if it believes that:

(1) The Complainant has an adequate remedy in another judicial or quasi-judicial body;

(2) The complaint pertains to a matter outside the jurisdiction of the Office of the Ombudsman;

(3) The complaint is trivial, frivolous interest in the subject matter of the grievance; or

(4) The complaint is trivial, frivolous, vexations or made in bad in bad faith;
(5) The complaint was filed after one year from the occurrence of the act or omission complained of.

Petitioners contend that PLDPPMA's complaint falls under exceptions (1) to (4) of Sec. 20 of R.A. No. 6770, and
that, therefore, the Ombudsman should not have taken cognizance of the complaint.

Asserting, upon the other hand, that the Ombudsman has jurisdiction over PLDPPMA's complaint, the Solicitor-
General enumerations various constitutional and statutory provisions; to wit:

(a) Section 13, Article XI of the 1987 Constitution providing thusly:

198
Sec. 13. The Office of the Ombudsman shall have the following powers, functions and duties:

(1) Investigate on its own, or on complaint by any person, any act or omission of any public official, employee, office
or agency, when such act or omission appears to be illegal, unjust, improper, or inefficient.

(2) Direct, upon complaint or at its own instance, any public official or employee of the Government, or any
subdivision, agency or instrumentality thereof, as well as of any government-owned or controlled corporation with
original charter, to perform and expedite any act or duty required by law, or to stop, prevent, and correct any abuse
or impropriety in the performance of duties.

(3) Direct, the officer concerned to take appropriate action against a public official or employee at fault, and
recommend his removal, suspension, demotion, fine, censure, or prosecution, and ensure compliance therewith

(4) Direct the officer concerned, in any appropriate case, and subject to such limitations as may be provided by law,
to furnish it with copies of documents relating to contracts or transactions entered into by his office involving the
disbursement or use of public funds or properties, and report any irregularity to the Commission of Audit for
appropriate action.

(5) Request any government agency for assistance and information necessary in the discharge of its
responsibilities, and to examine, if necessary, pertinent records and documents.

(6) Publicize matters covered by its investigation when circumstances so warrant and with due prudence.

(7) determine the causes of inefficiency, red tape, mismanagement, fraud, and corruption in the Government and
make recommendations for their elimination and the observance of high standards of ethics and efficiency.

(8) Promulgate its rule of procure and exercise such other powers or perform such functions or duties as may be
provided by law.

(b) Section 13 of republic Act No. 6770 which reads:

Sec. 13. Mandate. — The Ombudsman and his Deputies, as protectors of the people, shall act promptly on
complaints filed in any form or manner against officers or employees of the Government, or of any subdivision,
agency or instrumentality thereof, including government-owned or controlled corporations, enforce their
administrative, civil and criminal liability in every case where the evidence warrants in order to promote efficient
service by the Government to the to the people.

(c) Section 15, paragraphs (1) to (7), of republic Act No. 6770 which reproduced verbatim the aforequoted
provisions of Section 13 of the 1987 Constitution with some additional salient statutory provisions; hence:

Sec. 15. Powers, Functions and Duties. — The Office of the Ombudsman shall have the following powers, functions
and duties:

xxx xxx xxx

(8) Administer oaths, issue subpoena and subpoena duces tecum, and take testimony in any investigation or
inquiry, including the power to examine and have access to bank accounts and records;

(9) Punish for contempt in accordance with the Rules of Court and under the same penalties provided therein;

(10) delegate to the Deputies, or its investigators or representatives such authority or duty as shall ensure the
effective exercise or performance of the powers, functions and duties herein or hereinafter provided;

(11) Investigate and initiate the proper action for the recovery of ill-gotten and/or unexplained wealth amassed after
February 25, 1986 and the prosecution of the parties involved therein;
The Ombudsman shall give priority to complaints filed against high ranking government officials and/or those
occupying supervisory positions, complaints involving grave offenses as well as complaints involving large sums of
money and/or properties.

(d) And, finally, Section 26 of the Ombudsman Act which expresses, as follows:

Sec. 26. Inquiries. — The Office of the Ombudsman shall inquire into acts or omissions of the public officer,
employee, office or agency which, from the reports or complaints it has received the Ombudsman or his Deputies
consider to be:
198
(a) contrary to law or regulation;

(b) unreasonable, unfair, oppresive, irregular or inconsistent with the general course of the operations and functions
of a public officer, employee, office or agency;

(c) an error in the application or interpretation of law, rules or regulations, or a gross or palpable error in the
appreciation of facts;

(d) based on improper motives or corrupt considerations;

(e) unclear or inadequately explained when reasons should have been revealed; or

(f) inefficiently performed or otherwise objectionable.

2. The Office of the Ombudsman shall receive complaints from any source in whatever form concerning an official
act or omission. It shall act on the complaint immediately and if it finds the same entirely baseless, it shall dismiss
the same and inform the complainant of such dismissal citing the reasons therefor. If it finds a reasonable ground to
investigate further, it shall first furnish the respondent public officer or employee with a summary of the complaint
and require him to submit a written answer within seventy-two hours from receipt thereof. If the answer is found
satisfactory, it shall dismiss the case.

3. When the complaint consists in delay or refusal to perform a duty required by law, or when urgent action is
necessary to protect or preserve the rights of the Ombudsman shall take steps or measures and issue such orders
directing the officer, employee, office or agency concerned to:

(a) expedite the performance of duty;

(b) cease or desist from the performance of a prejudicial act;

(c) correct the omission;

(d) explain fully the administrative act in question; or

(e) take any steps as may be necessary under the circumstances to protect and preserve the rights of the
complainant.

4. Any delay or refusal to comply with the referral or directive of the Ombudsman or any of his Deputies shall
constitute a ground for administrative disciplinary action against the officer or employee to whom it was rendered.

On the basis of all the foregoing provisions of law, the Solicitor-General insists that the authority of the Ombudsman
is sufficiently broad enough to cloth it with sufficient power to look into the alleged irregularities in the bidding
conducted on 31 March 1992 leading to the recommendation made by the PBAC-CSTE on contract APM-01. He
argues that even if no criminal act could be attributed to the former MWSS Administrator and members of the
PBAC-CSTE, the questioned report could still be embraced in the all-encompassing phrase "all kinds of
malfeasance, misfeasance, and non-feasance," and falls within the scope of the constitutional provision calling for
an investigation of "any act or omission of any public official, employee, office or agency, when such act or omission
appears to be illegal, unjust, improper, or inefficient."

Indeed, in Deloso v. Domingo,   this Court had occasion to explain not only the rationale for the creation of an office
35

of the Ombudsman but also the grant to it of broad investigative authority, thus:

The reason for the creation of the Ombudsman in the 1987 Constitution and for the grant to it of broad investigative
authority, is to insulate said office from the long tentacles of officialdom that are able to penetrate judges' and fiscals'
offices, and others involved in the prosecution of erring public officials, and through the exertion of official pressure
and influence, quash, delay, or dismiss investigations into malfeasances and misfeasances committed by public
officers. It was deemed necessary, therefore, to create a special office to investigate all criminal complaints against
public officers regardless of whether or not the acts or omissions complained of are related to or arise from the
performance of the duties of their office. The Ombudsman Act makes perfectly clear that the jurisdiction of the
Ombudsman encompasses "all kinds of malfeasance, misfeasance, and non-feasance that have been committed by
any officer or employee as mentioned in Section 13 hereof, during his tenure of office."

To begin with, the owners, functions and duties of the Ombudsman have generally been categorized into the
following headings: Investigatory Power; Prosecutory Power; Public Assistance Functions; Authority to Inquire and
Obtain Information; and Function to Adopt, Institute and Implement Preventive Measures.
198
Although the Solicitor-General has practically enumerated all the constitutional and statutory provisions describing
the ample authority and responsibilities of the Ombudsman, the particular aspect of his functions that, however,
really finds relevance to the present case relates to his investigatory power and public assistance duties which can
be found in the first and second paragraphs, respectively, of Section 13, Article XI, of the Constitution, along with the
corresponding provisions of the Ombudsman Act. This much can be gleaned from the findings of the Office of the
Ombudsman leading to its questioned orders. We quote:

a. There is an evident on the part of the MWSS under then Administrator Sison to favor suppliers of fiberglass when
it prescribed rigid standards for steel pipes but set lenient requirements for pipes made of fiberglass, for the
following reasons:

1. MWSS management rely on the AWWA standards for fiberglass pipe but neglect the same AWWA standards for
steel pipes. The MWSS management under Administrator Sison disregarded the AWWA specifications by
increasing 1mm thickness for steel pipes.

2. Complainant sent seven letters to the MWSS questioning and making suggestions of the rules of the bidding it set
but only one was answered by Administrator Sison dated and received (by the complainant) after the bidding.

3. The MWSS' original specification for stiffness of fiberglass (36 psi) was [c]hanged to 54 psi (pounds per square
inch) in its Addendum No. 1 as a result of the complaints of the PLDPPMA members. But in its Addendum No. 4, the
MWSS reverted to the original stiffness class of 36 psi. In the letter-comment dated July 26, 1992 of the MWSS, thru
Acting Administrator Teofilo I. Asuncion, the MWSS tried to mislead this office by stating that the stiffness class of
fiberglass pipes was increased from 36 psi to 54 psi when in truth, as appearing in its Addendum No. 4, the MWSS
reverted to the original stiffness class of 36 psi. there is nothing in the subsequent Addenda (Nos. 5 and 6) that will
show that the MWSS finally settled for the stiffness class of 54 psi.

4. The MWSS failed to prescribe specific pipe laying procedure for fiberglass pipes. Contrary to the claim of the
MWSS that pipes is not a complicated procedure as it is similar with other types of pipes, the installation of
fiberglass pipes seems to be a critical factor in the successful implementation of a project as shown in the findings of
experts, attached by the MWSS in its motion, and quoted as follows: . . .

5. The MWSS failed to include in the Specifications a provision for the maintenance/repair materials for bidders who
opted to use fiberglass pipes. The importance of a provision for repair of fiberglass pipes can be inferred in the
findings of experts cited by the MWSS and quoted as follows: . . .

6. The MWSS tried to limit the acceptable joints for fiberglass pipes favorable to a fiberglass manufacturer by
issuing Addendum No. 6 which was undated. The provision of Addendum No. 6 "The only acceptable joints are
gasketted bell and Spigot and Mechanical Type" appears to be vague and ambiguous as it cannot be determined
clearly whether the bidders will be using the Mechanical Type of Joint. As stated in the Report, the cost of the Bell
and Spigot Joint is cheaper than the cost of mechanical Type Joint. Moreover, it was only June 1, 1992 or two (2)
months after the bidding that the MWSS issued clarification to the effect that fiberglass pipes bidders can use either
the Bell and Spigot type or Mechanical type.

7. In connection with Addendum No. 6, this office recently got hold of a copy of a letter dated January 31, 1992
(found on Folder I, records) of Joseph Albanese, Gruppo Sarplast, Milan, Italy (Manufacturer/Supplier of fiberglass
pipes for F.F. Cruz & Co. Inc.), addressed to Felipe Cruz. The letter was officially stamped/received by the Office of
the MWSS Administrator on February 12, 1992. It also has a veriño From: Mr. F.F. Cruz." The pertinent portion of
the letter in the light of Addendum No. 6 is quoted as follows:

8. Conclusion "During the pre-bid meeting our friends should stay: our Spec TS-23 is a general one, but for this
case only the pipes produced with discontinuing filament winding will be accepted and only bell and spigot joint."

The existence of such a letter in such a situation can only mean that F.F. Cruz and Sarplast, Italy had previous
communications with the top officials of the MWSS even before the opening of the bids on march 31, 1992. Clearly,
the issuance of Addendum No. 6 would only fit well for F.F. Cruz Co., Inc. and Sarplast who is proposing the use of
discontinuous filament winding fiberglass pipe with bell and Spigot joint.
b. MWSS has no experience and sufficient knowledge on the use of fiberglass pipes.

c. The Contractors who proposed to use fiberglass pipes have no tract record or experience in the installation of the
same. Thus, they are not qualified to undertake projects pursuant to the provisions of PD 1594 and under the
guidelines of the Overseas Economic Cooperation Fund.

d. The would-be manufacturers of fiberglass pipes has no manufacturing plant at this stage and there is no
guarantee whether such manufacturing plants will be operational.

e. There is no assurance that the manufacturers of fiberglass would be able to produce the kind of pipe desired.  36
198

In sum, the Office of the Ombudsman has considered three issues: (1) whether or not the technical specifications
prescribed by the MWSS in projects APM 01 and 02 have been so designed as to really favor Fiberglass Pipes-
Contractors/Bidders; (2) whether or not the MWSS has the technical knowledge and expertise with fiberglass pipes;
and (3) whether or not the contractors and local manufacturers of fiberglass pipes; and (3) whether or not the
contractors and local manufacturers of fiberglass pipes have the experience and qualification to undertake the APM-
01 and APM-02 projects.

While the broad authority of the Ombudsman to investigate any act or omission which ". . . appears illegal, unjust,
improper, or inefficient" may be yielded, it is difficult to equally concede, however, that the Constitution and the
Ombudsman Act have intended to likewise confer upon it veto or revisory power over an exercise of judgment or
discretion by an agency or officer upon whom that judgment or discretion is lawfully vested. It would seem to us that
the Office of the Ombudsman, in issuing the challenged orders, has not only directly assumed jurisdiction over, but
likewise pre-empted the exercise of discretion by, the Board of Trustees of MWSS. Indeed, the recommendation of
the PBAC-CSTE to award Contract APM-01 appears to be yet pending consideration and action by the MWSS
Board of Trustees.

We can only view the assailed 19th October 1992 Order to be more of an undue interference in the adjudicative
responsibility of the MWSS Board of Trustees rather than a mere directive requiring the proper observance of and
compliance with law. The report submitted by the Fact-Finding and Intelligence Bureau of the Office of the
Ombudsman reveals its predisposition against the use of fiberglass pipes, a technical, rather than a legal, matter.
The fact-finding report has dealt with such matters as (1) the wall thickness of pipes; (2) the joints; (3) the pipe
laying procedure; (4) the technical expertise of the MWSS, on the one hand, and the fiberglass proponements, on
the other; and (5) the supposed negative international feedback on the use of fiberglass pipes.

The question could be asked: Was the 31st March 1992 bidding really that faulty? During the bidding, the people
present were the PBAC members, a COA representative, the bidders and the general public. The eleven (11)
prequalified contractors, according to the prequalification evaluation   of the PBAC, possessed the required
37

experience, technical qualification and financial condition to undertake the project. It should not be amiss to mention
that the PBAC, under the implementing rules and regulations of P.D. No. 1594,   was tasked with the responsibility
38

"for the conduct of prequalification, bidding, evaluation of bids and recommending award of contracts." In evaluating
the bids, PBAC stated in its report that it had examined the three lowest bids. Part of PBAC's review was to verify
whether the proposed pipe materials were in conformity with the permitted alternative materials specified in Clause
IB-34 of the bid document.   In thereafter recommending that the award be made to F.F. Cruz, Inc., instead of Joint
39

venture, PBAC explained:

As presented above, evaluation of the bid results touches on a number of parameters to determine whether the bids
are "substantially responsive to the bidding documents and has offered the lowest evaluated bid, and that the bidder
has the capacity and resources to effectively carry out the Contract Works." The evaluation was conducted as fairly
and accurately as possible to come up with a recommendation that satisfies the interest of the MWSS which in the
final analysis, shall bear the consequences if the contract is not fully performed. Conclusions of the important issues
are hereunder presented.

A. Establishing the validity of the Bid of the Lowest Bidder

The deficiencies with respect to the bidding requirements enumerated in Section 4.2.1, page 4 were discussed to
wit:

a) Authority of the Signing Official

b) Acknowledgment of Addenda received

c) Currency Exchange Rate

After the discussion, the PBAC agreed that the deficiencies on the a) authority of the signing official and the c)
currency exchange rate may be waived as they do not affect the validity of the bid. PBAC believes that the authority
given to Fernando M. Sopot by the Consortium in the Joint Venture Agreement substantially complies with Clause
IB-20-7 of the Contract Documents. On the currency exchange rate, in the absence of BF-14, the MWSS may
provide the exchange rate.

With regard to the acknowledgment of Addendum No. 6, which is a material provision of the documents, it is
ascertained that the Joint Venture has not made allowance for the provision of said Addenda. The Joint Venture
indicated in the bid, as originally submitted, the acknowledgment of Addenda #1 to #5 only. The alteration made
during the bidding acknowledging Addendum #6 was done after the 12 noon deadline of submittal of bids and,
hence, cannot be entertained. Moreover, the person who made the alteration is also not authorized to make such
alteration and affix his signature to the bid.
198

It is therefore, the position of the PBAC that the deficiency in the acknowledgment of Addendum No. 6 is a major
defect and cannot be waived as it affects the validity of the bid of the Consortium. The bid has to be rejected as non-
complying.

The lowest complying becomes the bid submitted by the second lowest Bidder, F.F. CRUZ, & CO., INC. as
discussed above. 40

PBAC was evidently guided by the rule that bids should be evaluated based on the required documents submitted
before, and not after, the opening of bids,   that should further dispel any indiscriminate or whimsical exercise of
41

discretion on its part.

The MWSS, a government-owned and controlled corporation created by law through R.A. No. 6234,   is charged 42

with the construction, maintenance and operation of waterwork system to insure an uninterrupted and adequate
supply and distribution of potable water.   It is the agency that should be in the best position to evaluate the
43

feasibility of the projections of the bidders and to decide which bid is compatible with its development plans. The
exercise of this discretion is a policy decision that necessitates among other things, prior inquiry, investigation,
comparison, evaluation, and deliberation — matters that can best be discharged by it.   MWSS has passed
44

resolution No. 32-93   to likewise show its approval of the technical specifications for fiberglass. All these should
45

deserve weight.

In Razon Inc. v. PPA,   we have said that neither this Court nor Congress, and now perhaps the Ombudsman, could
46

be expected to have the time and technical expertise to look into matters of this nature. While we cannot go so far
as to say that MWSS would have the monopoly of technical know-how in the waterworks system, by the very nature
of its functions, however, it obviously must enjoy an advantage over other agencies on the subject at hand. In Felipe
Ysmael, Jr. & Co. Inc. vs. deputy Executive Secretary,   citing
47
numerous
cases,   this Court has held:
48

Thus, while the administration grapples with the complex and multifarious problems caused by unbridled exploitation
of these resources, the judiciary will stand clear. A long line of cases establish the basic rule that the courts will not
interfere in matters which are addressed to the sound discretion of government agencies entrusted with the
regulation of activities coming under the special technical knowledge and training of such agencies.

It stands to reason for, in Bureau Veritas v. Office of the President,   we have further observed:
49

The discretion to accept or reject a bid and award contracts is vested in the Government agencies entrusted with
that function. The discretion given to the authorities on this matter is of such wide latitude that the Courts will not
interfere therewith, unless it is apparent that it is used as a shield to a fraudulent award.

All considered, it is our view that the issue here involved, dealing, such as they do, on basically technical matters,
dealing, such as they do, on basically technical matters, deserve to be disentangled from undue interference from
courts and so from the Ombudsman as well.

G.R. No. 116025             February 22, 1996

SUNSHINE TRANSPORTATION, INCORPORATED, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and REALUCIO R. SANTOS, respondents.

DECISION

DAVIDE, JR., J.:
This is a special civil action for certiorari under Rules 65 of the Rules of Court to set aside, for having been rendered
with grave abuse of discretion, the 21 April 1994 decision of the National Labor Relations Commission (NLRC) in
1 

NLRC Case No. 005281-93, entitled "Realucio R. Santos vs. Sunshine Transportation, Inc.," which modified the
decision of the Labor Arbiter by allowing the private respondent's money claim in the amount of P158,000.00.
2 

The antecedents are not disputed.

On 24 August 1989, petitioner Sunshine Transportation, Inc. hired private respondent Realucio R. Santos
(hereinafter Santos) as a bus driver on a probationary basis. After six months, the former then extended the latter a
regular appointment as "Bus Driver Class C" on 16 March 1990. 3
198

On 7 January 1992, Santos received a memorandum dated 4 January 1992 from the petitioner directing him to
4 

submit a written explanation within 48 hours as to why he failed to report for his trip scheduled on 28 December
1991. However, Santos claimed that on 2 January 1992, he applied for a leave of absence with the petitioner's
Operations Manager Danilo Alvarado; but Alvarado tore the leave application, verbally terminated his services, and
even forced him off the premises. Santos then opted to mail his application for leave, also on 2 January 1992. 5

Subsequently, Santos received a letter of termination dated 22 January 1992 premised on the grounds that: (1) he
6 

committed insubordination to a lawful order of his superior by failing to submit the required written explanation; and
(2) such failure amounted to an admission of his guilt. Nonetheless, he kept reporting for work, but was not allowed
entry into the company's premises, prompting him to believe that he had been either suspended or dismissed. 7

On 21 December 1992, Santos filed with the Labor Arbiter a complaint for (a) illegal suspension, (b) illegal
dismissal, (c) illegal deduction of Bicol trip allowance, (d) non-payment of salaries, overtime pay, premiums for
holidays, rest day and night shift, allowances, and separation pay. He also prayed for reinstatement with back
8 

wages and moral damages.

On its part, the petitioner emphasized that prior to Santos' misdeed of 28 December 1991, he had committed the
following violations, of company rules:

1. failure to remit and account for cash collections in the amount of P3,716.00 under his custody.

2. refusal to carry a passenger to her destination despite having a ticket and listed in the manifest.

3. remittance of cash collections under his custody only after official demand.

4. attempted illegal exaction of money from two passengers regarding their baggages [sic].

5. stealing dogs.

6. sexually harassing female passengers.

7. arrogant use of company buses for personal use.

8. punching-in of time card of another employee.

9. failure to report for work without prior notice on 17 September 1991. 9

In his decision  of 30 June 1993, Labor Arbiter Eduardo J. Carpio dismissed the complaint upon a finding that
10 

Santos was dismissed for cause with due process and that he was not entitled to his money claims.

Santos appealed to the NLRC and, in its decision  of 21 April 1994, the NLRC upheld the Labor Arbiter's finding,
11 

but granted Santos' money claims in the amount of P158,000.00, as the petitioner "failed to refute the complainant's
claim that he was underpaid.  12

Unsatisfied with the NLRC decision, the petitioner filed the instant special civil action for  certiorari charging the
NLRC with having acted with grave abuse of discretion in rendering the decision. More concretely, it imputes to the
NLRC the commission of the following errors: (1) in not dismissing the patently defective appeal of Santos due to his
failure to comply with the mandatory requirements for perfecting an appeal; (2) in modifying the Labor Arbiter's
decision by granting the private respondent's money claim without any factual nor legal basis; (3) in ruling that the
private respondent's money claims for the year 1989 have not yet prescribed; and (4) in failing to give consideration
to the waiver/quitclaim executed by the private respondent on 20 October 1992 discharging the petitioner from any
obligation arising from his (private respondent's) claim for overtime pay.
In their respective Comments filed in compliance with the resolution of 25 July 1994, the public respondent, through
the Office of the Solicitor General, and the private respondent prayed that we dismiss the petition for lack of merit.

The required Reply to the Comment of public respondent was belatedly filed by counsel for the petitioner after he
was directed to show cause why he should not be held in contempt of court.  13

We gave due course to this petition and required the parties to submit their respective memoranda, which they did,
while the public respondent manifested that it adopted its comment as a memorandum.

We find for the respondents. 198

In the first place, the petitioner has not shown that other than this special civil action under Rule 65, it has no plain,
speedy, and adequate remedy in the ordinary course of law against its perceived grievance.

It is now settled in our jurisdiction that while it is true that the only way by which a labor case may reach this Court is
through a petition for certiorari under Rule 65 of the Rules of Court, it must, however, be shown that the NLRC
acted without or in excess of jurisdiction, or with grave abuse of discretion, and that there is no appeal, nor any
plain, speedy, and adequate remedy in the ordinary course of law. Section 14, Rule VII of the New Rules of
Procedure of the NLRC, which allows an aggrieved party to file a motion for reconsideration of any order, resolution,
or decision of the NLRC, constitutes a plain, speedy, and adequate remedy which the said party may avail of.
Accordingly, and in the light of the doctrine of exhaustion of administrative remedies,   a motion for reconsideration
14 

must first be filed before the special civil action for certiorari may be availed of.  15

In the case at bench, the records do not show and neither does the petitioner make a claim that it filed a motion for
the reconsideration of the challenged decision before it came to us through this action. It has not, as well, suggested
any plausible reason for direct recourse to this Court against the decision in question.

WHEREFORE, the instant special civil action for certiorari is DISMISSED with costs against the petitioner. SO
ORDERED.

G.R. Nos. 112708-09 March 29, 1996

REPUBLIC OF THE PHILIPPINES, represented by PRESIDENTIAL COMMISSION ON GOOD

GOVERNMENT, petitioner,
vs.
SANDIGANBAYAN, SIPALAY TRADING CORPORATION and ALLIED BANKING CORPORATION, respondents.

FRANCISCO, J.:p

Save for slight modification of a specific disquisition made by the SANDIGANBAYAN in its now-assailed judgment dated August 23, 1993, we affirm the same, as
well as its Resolution promulgated on October 7, 1993 denying the Motion For Reconsideration.

The factual background of this case is as follows:

Petitioner PCGG issued separate orders against private respondents Sipalay Trading Corporation and Allied
Banking Corporation (hereinafter referred to as SIPALAY and ALLIED) to effect their sequestration. Two (2)
separate petitions were filed by SIPALAY and ALLIED before this Court assailing the sequestration orders. After the
consolidation of these petitions and the filing of the comments, other pleadings and certain motions by the parties,
this Court referred the cases to public respondent SANDIGANBAYAN for proper disposition,  where SIPALAY's 1

petition was docketed as S.B. 0095, and that of ALLIED as S.B. 0100.

Concerning SIPALAY (S.B. 0095), its 360, 875, 513 shares of stock in Maranaw Hotels and Resort Corporation
which owns the Century Park Sheraton Hotel are, according to the PCGG, part of Lucio C. Tan's ill-gotten wealth.
The PCGG on July 24, 1988 thus sequestered these SIPALAY shares under a "Sequestration Order and
Supervisory Committee" which reads:

24 July 1986

Maranaw Hotels and Resort Corporation

C/O Mr. Lucio C. Tan
Allied Banking Corporation
Allied Bank Center
 Ayala Ave., Makati
Metro Manila

Subject: Sequestration Order and Supervisory Committee

Gentlemen:

By virtue of the powers vested in the Presidential Commission on Good Government by authority of
the President of the Republic of the Philippines, we hereby sequester the shares of stocks in
Maranaw Hotels and Resort Corporation held by and/or in the name of Sipalay Trading Corporation. 198

We direct you not to cause any transfer, conveyance, encumbrance, concealment, or liquidation of
the aforementioned shares of stocks without any written authority from the Commission.

xxx xxx xxx

This sequestration order and formation of the Supervisory Committee shall take effect upon your
receipt of this Order.

For your immediate and strict compliance.

Very truly yours,

FOR THE COMMISSION:

(Sgd.) (Sgd.)

RAMON A. DIAZ QUINTIN S. DOROMAL

Commissioner Commissioner 2

SIPALAY was forced to litigate after the PCGG sought to implement the sequestration without acting on its
motions ". . . To Lift Sequestration Order" and ". . . For Hearing For Specification Of Charges And For
Copies Of Evidence". SIPALAY maintained that the sequestration was without evidentiary substantiation,
violative of due process, and deemed automatically lifted when no judicial proceeding was brought against it
within the period mandated under Article XVIII, Section 26 of the Constitution.

Anent ALLIED (S.B. 0100), its Valenzuela branch on August 13, 1986 was served a "Search and Seizure Order" by
agents of the PCGG, the text of which reads:

The Manager
Allied Banking Corporation
Valenzuela Branch
Valenzuela, Metro Manila

SEARCH AND SEIZURE ORDER

Gentlemen:

By virtue of the powers vested in this Commission by the President of the Republic of the
Philippines, you are hereby directed to submit for search and seizure all bank documents in the
abovementioned premises which our representative may find necessary and relevant to the
investigation being conducted by this Commission.

Atty. Benjamin Alonte is deputized to head the team that will implement this Order.

August 13, 1986, Pasig, Metro Manila.

FOR THE
COMMISSION:

(Sgd.)

RAMON A. DIAZ
 Commissioner

(Sgd.)

MARY CONCEPCION
BAUTISTA

Commissioner 3

ALLIED went to court for the same reason that the PCGG was bent on implementing the order. ALLIED 198
contended that this order is not one for sequestration but is particularly a general search warrant which fails
to meet the constitutional requisites for its valid issuance.

The petitions were jointly heard by the SANDIGANBAYAN. Briefly, the more salient events which transpired therein
are as follows:

At the presentation of their evidence, PCGG Secretary Ramon Hontiveros appeared as the lone witness for
SIPALAY and ALLIED. He produced and identified excerpts of the minutes of the PCGG meetings held on March 13
and 12, 1986  in response to a subpoena duces tecum.
4

For the PCGG's part, its witnesses were Commissioner Dr. Quintin Doromal, former PCGG Commissioner Mary
Concepcion Bautista, now deceased, and Atty. Benjamin Alonte, Director IV, Legal Department of the PCGG who
headed the team that served the search and seizure order on ALLIED. Commissioner Doromal identified
voluminous documents. Former Commissioner Bautista died midway her cross-examination. The PCGG almost
failed to present Atty. Alonte, had the SANDIGANBAYAN not reconsidered  its Order of March 8, 1993  declaring the
5 6

cases submitted for decision after the PCGG was deemed to have waived presentation of its evidence for its
repeated postponements of the hearing. After Atty. Alonte's testimony and upon the PCGG's manifestation that it
was no longer presenting any witness, the SANDIGANBAYAN  gave the PCGG twenty (20) days (from July 1, 1993)
7

within which to submit its formal evidence in writing. SIPALAY and ALLIED were given the same period (20 days)
from receipt of such written formal offer of evidence within which to file their formal comments and/or objections
thereto, and after which, the incident will be deemed submitted for resolution.

What the PCGG filed on July 7, 1993 was not a written formal offer of its evidence as directed by the
SANDIGANBAYAN, but a "Motion To Dismiss" the SIPALAY and ALLIED petitions. Admittedly, this motion to
dismiss came nearly seven (7) years after SIPALAY and ALLIED originally filed their petitions before this Court on
September 16, 1986 and August 26, 1986, respectively. The ground was SIPALAY's and ALLIED's alleged failure to
exhaust administrative remedies. The PCGG argued that SIPALAY and ALLIED should have first appealed the
sequestration orders to the Office of the President before challenging them in court, invoking Sections 5 and 6 of the
PCGG Rules and Regulations. An "Opposition" and a "Reply" were filed in relation to the motion.

At some earlier time (May 21, 1992), the PCGG filed a "Motion For The Consolidation Or Joint Trial" of SIPALAY's
and ALLIED's petitions (S.B. 0095 and S.B. 0100) with Civil Case 0005 — a complaint for "Reversion,
Reconveyance, Restitution, Accounting and Damages" dated July 17, 1987 likewise filed before the
SANDIGANBAYAN by the PCGG against Lucio Tan, Ferdinand and Imelda Marcos, and other defendants.  The 8

SANDIGANBAYAN formally denied this motion in an extended Resolution dated July 6, 1993. The PCGG filed a
"Motion for Reconsideration" thereof. This motion was deemed submitted for resolution when no opposition and
reply were filed. SIPALAY and ALLlED then filed a "Motion To Consider Cases Submitted For Decision", to which an
opposition and reply were filed.

The PCGG lost in these cases below. The SANDIGANBAYAN in its now-assailed August 23, 1993 Decision  voided 9

the orders issued against SIPALAY and ALLIED. The decretal portion reads:

In S.B. No. 0095

WHEREFORE, in the light of the foregoing, the Court has no judicious recourse but to declare, as it
hereby declares, the writ of sequestration issued against petitioner Sipalay Trading Corporation's
shares of stock in Maranaw Hotel and Resorts Corporation as deemed automatically lifted for
respondent PCGG's failure to implead the petitioner within the period mandated under Section 26,
Article XVIII of the 1987 Constitution. The same writ is likewise declared null and void for having
issued without sufficient evidentiary foundation — respondent PCGG having failed to adduce and
proffer that quantum of evidence necessary for its validity — without prejudice to the issue of ill-
gotten wealth being attributed to petitioner Sipalay Trading Corporation and/or defendants Lucio C.
Tan, et al. being threshed out and litigated in Civil Case No. 0005.

In S.B. No. 0100
 WHEREFORE, premises duly considered, the Court hereby declares the subject search and seizure
order issued by respondent PCGG directed against petitioner Allied Banking Corporation's
Valenzuela branch on August 13, 1986 as null and void ab initio for having been issued without due
process and in contravetion of the organic law then in force, the Freedom Constitution, under which
mantle, the Bill of Rights found in the 1973 Constitution was amply protected and enforced.
Consequently, all documents, records and other tangible objections (sic) seized pursuant thereto are
hereby ordered returned to petitioner Allied Banking Corporation through its duly authorized
representative, after proper inventory and accounting shall have been made within thirty (30) days
from receipt hereof.
198
SO ORDERED.

The resolution of PCGG's motions to dismiss and for reconsideration of the denial of its motion for
consolidation or joint trial, as well as SIPALAY's and ALLIED's motion to consider the cases submitted for
decision, was incorporated in the decision. And after its motion for reconsideration of the decision was
denied in a Resolution promulgated on October 7, 1993,  the PCGG brought the instant petition. A
10

comment, reply, and rejoinder were subsequently filed.

The key issues, in query form, are:

(1) Was the SANDIGANBAYAN's denial of the PCGG's motion to dismiss proper?

(2) Should the SANDIGANBAYAN have disposed first such motion to dismiss rather than resolving it as part of the
judgment?

(3) Was the nullification of the sequestration order issued against SIPALAY and of the search and seizure order
issued against ALLIED correct?

(4) Were the sequestration and search and seizure orders deemed automatically lifted for failure to bring an action
in court against SIPALAY and ALLIED within the constitutionally prescribed period?

Hardly can it be disputed that a direct action in court without prior exhaustion of administrative remedies, when
required, is premature, warranting its dismissal on a motion to dismiss grounded on lack of cause of action. The
supporting cases cited by the PCGG in its petition indeed spell this out, to wit: "Pestanas v. Dyogi",  "Aboitiz v. Coll.
11

of Customs",  and "Aquino-Sarmiento v. Morato",  And in the case of "Ocampo v. Buenaventura"  likewise cited by
12 13 14

PCGG, the Court in essence approves of the filing of a motion to dismiss based upon failure to state a cause of
action at any stage of the proceedings.

As a general rule, a motion to dismiss is interposed before the defendant pleads (Section 1, Rule 16,
Rules of Court). However, there is no rule or law prohibiting the defendant from filing a motion to
dismiss after an answer had been filed. On the contrary, Section 2 of Rule 9, expressly authorizes
the filing of such motion at any stage of the proceedings when it is based upon failure to state a
cause of action . . .

These principles, at first impression, appear to favor the PCGG. Sections 5 and 6 of the PCGG Rules and
Regulations indeed provide an administrative mechanism for persons or entities contesting the
sequestration orders issued against them.

Sec. 5. — Who may contest — The person against whom a writ of sequestration or freeze or hold
order is directed may request the lifting thereof in writing, either personally or through counsel within
five (5) days from the receipt of the writ of order . . .

Sec. 6. — Procedure for Review of writ or order — After due hearing or motu propio for good cause
shown, the Commission may lift the writ or order unconditionally or subject to such condition as it
may deem necessary, taking into consideration the evidence and circumstances of the case. The
resolution of the Commission may be appealed by the party concerned to the Office of the President
of the Philippines within fifteen (15) days from receipt thereof.

Neither an initial request before the PCGG for the lifting of the sequestration orders nor an appeal to the
Office of the President was made by SIPALAY and ALLIED before they filed their respective petitions in
court. The PCGG's motion to dismiss was anchored on lack of cause of action, albeit filed beyond the period
to answer.

However, the peculiarities of this case preclude the rightful application of the principles aforestated. The SIPALAY
and ALLIED petitions were both filed on the third quarter of 1986 (September 16 and August 26, respectively), while
the PCGG decided to file its motion to dismiss only in the middle of 1993 (July 7). Nearly seven (7) years came to
pass in between that so much has already transpired in the proceedings during the  interregnum. SIPALAY and
ALLIED had rested their cases, and the PCGG had finished presenting all its witnesses, not to mention other
various motions and incidents already disposed of by the SANDIGANBAYAN, with special attention to the numerous
postponements granted the PCGG for presentation of its evidence which prevented an earlier termination of the
proceedings. The motion to dismiss came only at the penultimate stage of the proceedings where the remaining
task left for the PCGG was to file its written formal offer of evidence as required by the SANDIGANBAYAN. This
Court, in "Soto v. Jareno"  has made it quite clear that:
15

Failure to observe the doctrine of exhaustion of administrative remedies does not affect the
jurisdiction of the Court. We have repeatedly stressed this in a long line of decisions. The only effect
198
of non-compliance with this rule is that it will deprive the complainant of a cause of action, which is a
ground for a motion to dismiss. If not invoked at the proper time, this ground is deemed waived and
the court can take cognizance of the case and try it. (Emphasis supplied).

The length of time the PCGG allowed to drift away and its decision to file its motion to dismiss only at the
homestretch of the trial hardly qualify as "proper time". This factual scenario largely differs from the
"Ocampo" case relied upon by the PCGG. In that case and the case of "Community Investment & Finance
Corp. v. Garcia"  cited therein, the motions to dismiss involved were filed just after the filing of the answer,
16

and not at some belated time nearing the end of the trial. The parties in those cases have not presented any
testimonial or documentary evidence yet, as the trial proper has not commenced, and neither does it appear
that the movants concerned took close to seven (7) years before filing their respective motions to dismiss.
The PCGG therefore cannot seek refuge in the "Ocampo" case to justify the marked delay in filing its motion
to dismiss. Such tarried maneuver made the PCGG guilty of estoppel by laches — the definition and effect
of which this Court, speaking through Mr. Justice Regalado, had the occasion to visit anew in the relatively
recent case of "Olizon v. CA." 7 1

Laches has been defined as the failure or neglect, for an unreasonable and unexplained length of
time, to do that which by exercising due diligence could nor should have been done earlier; it is
negligence or omission to assert a right within a reasonable time, warranting a presumption that the
party entitled to assert it either has abandoned it or declined to assert it.

With its undenied belated action, seven (7) years in the making at that, it is only proper to presume with
conclusiveness that the PCGG has abandoned or declined to assert what it bewailed as the SIPALAY and
ALLIED petitions' lack of cause of action. More accurately, the PCGG should be deemed to have waived
such perceived defect in line with the "Soto" case,  for "proper time" cannot mean nor sanction an
18

unexplained and unreasonable length of time such as seven (7) years. The leniency extended by the Rules
(Rule 9, Section 2, Rules of Court) and by jurisprudence ("Ocampo case") in allowing a motion to dismiss
based on lack of cause of action filed after the answer or at any stage of the proceedings cannot be invoked
to cover-up and validate the onset of
laches — or the failure to do something which should be done or to claim or enforce a right at a proper
time  which, in this case, was one of the PCGG's follies. Indeed, in matters of timeliness, "indecent waste" is
19

just as reprehensible as "indecent haste".

Another equally forceful reason warranting the denial of the PCGG's motion to dismiss is that this case falls under
two recognized exceptions to the general rule of prior exhaustion of administrative remedies, and the
SANDIGANBAYAN's brief but lucid disquisition on one exception merits this Court's approval.

Two. The rule on non-exhaustion of administrative (sic) remedies does not apply to petitioners' case.
This rule, which is based on sound public policy and practical considerations, is not inflexible. It is
subject to many exceptions, to wit: (i) where there is estoppel on the part of the party invoking the
doctrine; (ii) where the challenged administrative act is patently illegal amounting to lack of
jurisdiction; (iii) where there is unreasonable delay or official inaction that will irretrievably prejudice
the complainant; and (iv) where the question involved is purely legal and will ultimately have to be
decided by the courts of justice.20

xxx xxx xxx

. . . there was no absolute necessity of appealing respondent PCGG's resolution to the Office of the
President, as purportedly required by Section 6 of the PCGG Rules and Regulations, inasmuch as
respondent PCGG seemed to have exhibited indifference towards petitioners' pleas for the lifting of
the sequestration and search and seizure orders. Official inaction or unreasonable delay, as
heretofore intimated, is one of the exceptions to the rule on non-exhaustion of administrative
remedies. Hence, under the circumstance, petitioners may not be faulted for seeking relief directly
from the courts. 21

The other exception is the first in the enumeration, i.e., "where there is estoppel on the part of the party
invoking the doctrine", consisting in the PCGG's being guilty of estoppel by laches which has just been
 discussed in great length. In answer therefore to the first key issue, this Court rules in the affirmative. The
denial of the PCGG's motion to dismiss was in order.

In respect of the second key issue, the PCGG faults the SANDIGANBAYAN for incorporating in the judgment the
resolution of its motion to dismiss, arguing that said motion should have been resolved first and separately. That
would have been unnecessary and injudicious in the light of the "peculiarities" of this case where the motion was
filed only at the tail end of the trial and when the PCGG has virtually presented all its evidence. At that stage, there
was in fact nothing left for the parties to do but to await the forthcoming judgment of the SANDIGANBAYAN, save
for the submission of the PCGG's written formal offer of documentary evidence as directed by that court, which the
PCGG failed to do within the 20-day period given it because it filed the motion to dismiss instead. In this connection,
198
the PCGG's contention that the 20-day period for the submission of its written formal offer of evidence was
suspended upon the filing of the motion to dismiss has no merit. The SANDIGANBAYAN's observation on this
matter, as espoused by private respondents SIPALAY and ALLIED, is correct.

The Court agrees with petitioners' (SIPALAY and ALLIED) stance that the only period suspended by
a motion to dismiss is the period to file an answer (Section 4, Rule 16 of the Rules of Court)  and 22

that where a period is to be suspended by the filing of a pleading, the Rules of Court expressly
provides for such suspension (Section 1[b], Rule 12 of the Rules of Court, for instance, provides for
the suspension of the period to file a responsive pleading if a motion for bill of particulars is
filed).  Consequently, respondent's (PCGG) filing of a motion to dismiss, without seeking leave of
23

court to stay or suspend the running of the period for filing its written formal offer of evidence — as
agreed upon and ordered in open court during the hearing on July 1, 1993 — could not have the
effect of suspending the period within which it should submit its formal offer of evidence in writing.
Without express leave of court, respondent (PCGG) could not improvidently assume that it has
liberty to suspend the running of the period agreed upon. Respondent (PCGG) should have been
prudent enough to seek the permission of this Court in respect of such matter to avert possible
controversy arising therefrom. More importantly, respondent (PCGG) should not have made a
unilateral presumption of procedural
norm. 24

xxx xxx xxx

In view of the foregoing, the Court has no judicious recourse but to sustain petitioners' (SIPALAY
and ALLIED) stance and declare, as it hereby declares, that respondent (PCGG) is deemed to have
waived presentation of further evidence and to have its evidence rested on the basis of the evidence
on record. 25

Besides, to insist on a prior and separate resolution of the PCGG's motion to dismiss and the suspension of
the 20-day period for the filing of the written formal offer of its evidence would have needlessly prolonged
further the proceedings below — something that certainly does not, and will not, sit well with a "just, speedy
and inexpensive determination of every action and proceeding" envisioned by Section 2, Rule 1, of the
Rules of Court. The same reasoning likewise justifies dispensing with a prior determination of the PCGG's
"Motion For Reconsideration" of the SANDIGANBAYAN's Resolution denying consolidation or joint trial of
the SIPALAY and ALLIED petitions with Civil Case 0005, and private respondents' (SIPALAY and ALLIED)
"Motion To Consider Cases Submitted For Decision." Thus, the second key issue should be resolved
against the PCGG. The SANDIGANBAYAN was well-justified in incorporating in its decision the resolution of
the PCGG's motion to dismiss, as well as its motion for reconsideration of the denial of the motion for
consolidation or joint trial and private respondents' (SIPALAY and ALLIED) motion to consider the cases
submitted for decision.

Going now to the third key issue, the sequestration order and the search and seizure order issued against SIPALAY
and ALLIED, respectively, were nullified by the SANDIGANBAYAN on the ground of non-compliance with
constitutional requirements. Let us examine the SIPALAY and ALLIED cases separately.

The pertinent constitutional provision in focus in SIPALAY's case is Section 26 of Article XVIII. It reads in full:

Sec. 26. The authority to issue sequestration or freeze orders under Proclamation No. 3 dated
March 25, 1986 in relation to the recovery of ill-gotten wealth shall remain operative for not more
than eighteen months after the ratification of this Constitution. However, in the national interest, as
certified by the President, the Congress may extend said period.

A sequestration or freeze order shall be issued only upon showing of a prima facie case. The order
and the list of the sequestered or frozen properties shall forthwith be registered with the proper court.
For orders issued before the ratification of this Constitution, the corresponding judicial action or
proceeding shall be filed within six months from its ratification. For those issued after such
ratification, the judicial action or proceeding shall be commenced within six months from the
issuance thereof.
 The sequestration or freeze order is deemed automatically lifted if no judicial action or proceeding is
commenced as herein provided.

The SANDIGANBAYAN voided the sequestration order issued against SIPALAY "for lack of sufficient prima
facie factual foundation, . . ."  In so concluding, it only took into account the testimonies of PCGG witnesses
26

Doromal, Bautista and Alonte. It appears further that the SANDIGANBAYAN particularly zeroed in on
Commissioner Doromal's testimony, considering its observations that: 1) "The testimony of former PCGG
Commissioner Mary Concepcion Bautista has no probative value and cannot be admitted in evidence in
view of said witness' untimely demise prior to the completion of her cross-examination by petitioner's
counsel" (citing the cases of "Bachrach Motor Co., Inc. v. CIR, et al." [86 SCRA 27] and "Ortigas, Jr. v.
198
Lufthansa German Airlines" [64 SCRA 610]), 7 and 2) "Neither is Atty. Benjamin Alonte's testimony
2

relevant. His oral declarations, aside from being hearsay, do not go into the substance of the cases." 28

By way of preface, no serious objection can be raised insofar as the SANDIGANBAYAN's exclusive reliance on the
testimonies of the three (3) PCGG witnesses is concerned. The SANDIGANBAYAN had no other choice, for these
testimonies in fact constitute the entire evidence for the PCGG, inasmuch as no documentary evidence which might
have supported the testimonial evidence were offered by the PCGG below. The Rules of Court  and 29

jurisprudence  decree that "The court shall consider no evidence which has not been formally offered." There is no
30

doubt that the testimonies of the PCGG witnesses were formally offered as evidence meriting due appreciation by
the SANDIGANBAYAN, since Section 35, Rule 132 of the Rules requires that the offer of testimonial evidence
"must be made at the time the witness is called to testify." With respect to documents, however, the same Section
35 (second paragraph) provides a different time for their offer, to wit:

Documentary and object evidence shall be offered after the presentation of a party's testimonial
evidence. Such offer shall be done orally unless allowed by the court to be done in writing.

The twenty (20)-day period from July 1, 1993, or until July 20, for the submission of a written formal offer of
evidence given by the SANDIGANBAYAN to the PCGG after the latter's last witness (Atty. Alonte) has
testified, was intended precisely to accommodate any and all documentary evidence — even object
evidence for that matter, the PCGG would have wanted to offer. But, as previously discussed under the
second key issue, the PCGG waived such offer when it opted to file a motion to dismiss sans/in lieu of the
written formal offer of evidence within such given period that expired without interruption. Quite accurately
therefore can it be said that due to its lapse in procedure, the PCGG brought it upon itself if the existence or
non-existence of "prima facie factual foundation" had to be determined by the SANDIGANBAYAN only from
what can be drawn from the PCGG's testimonial evidences — and from no other. And the Court, in
reviewing that court's finding that no prima facie evidence exists to support the sequestration order, likewise
has no other choice but to be similarly confined thereto.

But whose testimony or testimonies? The question becomes significant inasmuch as the SANDIGANBAYAN found
as inadmissible some of the PCGG witnesses' testimonies.

Dr. Doromal's testimony is reviewable as no attack on its admissibility was ever launched by the
SANDIGANBAYAN. With respect to Atty. Alonte's testimony, the SANDIGANBAYAN declared it as hearsay which
finding the PCGG does not contest. The PCGG in fact now appears to do away with his testimony considering that
the PCGG neither quoted in, nor annexed to its petition, such testimony or any portion thereof. Atty. Alonte's
testimony therefore can be dispensed with. However, the Court disagrees with the SANDIGANBAYAN's ruling that
Commissioner Bautista's supervening death in the course of her cross-examination rendered her entire testimony
without probative value and inadmissible. The SANDIGANBAYAN apparently clung to the principle enunciated in the
"Bachrach" and "Ortigas" cases,  to wit:
31

Oral testimony may be taken into account only when it is complete, that is, if the witness has been
wholly cross-examined by the adverse party or the right to cross-examine is lost wholly or in part thru
the fault of such adverse party. But when cross-examination is not and cannot be done or completed
due to causes attributable to the party offering the witness, the uncompleted testimony is thereby
rendered incompetent.

The right of a party to cross-examine the witness of his adversary is invaluable as it is inviolable in
civil cases, no less than the right of the accused in criminal cases. The express recognition of such
right of the accused in the Constitution does not render the right thereto of parties in civil cases less
constitutionally based, for it is an indispensable part of the due process guaranteed by the
fundamental law. . . . Until such cross-examination has been finished, the testimony of the witness
cannot be considered as complete and may not, therefore, be allowed to form part of the evidence to
be considered by the court in deciding the case.

But the "Bachrach" and "Ortigas" cases involved different factual features. In those cases, the witnesses
concerned whose testimonies were rightly stricken off the records either left for abroad or simply failed to
appear at the time they were supposed to be cross-examined by the adverse party. In short, the lack of
 cross-examination by the opposing parties therein was occasioned by sudden or unexplained non-
appearance, unlike in this case where no less than the witness Bautista's death prevented the completion of
her cross-examination. The controlling case here is "Fulgado v. C.A., et al."  where the Court, in allowing the
32

testimony of therein plaintiff Ruperto Fulgado who died before his cross-examination, to remain in the
record, ruled that:

The wholesale exclusion of testimonies was too inflexible a solution to the procedural impasse
because it prejudiced the party whose only fault during the entire proceedings was to die before he
could be cross-examined. The prudent alternative should have been to admit the direct examination
so far as the loss of cross-examination could have been shown to be not in that instance a material
198
loss. And more compellingly so in the instant case where it has become evident that the adverse
party was afforded a reasonable chance for cross-examination but through his own fault failed to
cross-examine the witness.

Where death prevents cross-examination under such circumstances that no responsibility of any sort
can be ascribed to the plaintiff or his witness, it seems a harsh measure to strike out all that has
been obtained in the direct examination. (Emphasis supplied)

If testimony is inexpungible where the witness dies prior to any cross-examination, with more reason should
testimony partially cross-examined at the time of the witness' death (as in Commissioner Bautista's case)
remain intact. Thus, with the exception of Atty. Alonte's testimony, Dr. Doromal's and deceased
Commissioner Bautista's testimonies, together with the evidence of SIPALAY and ALLIED, deserve a
second scrutiny in determining the correctness of the SANDIGANBAYAN's finding of "lack of prima facie
factual foundation."

Here then are the highlights of Dr. Doromal's and deceased Commissioner Bautista's testimonies.

DR. DOROMAL

(DIRECT)

JUSTICE ESCAREAL:

Purpose please?

ATTY. LEYNES:

The testimony of this witness will cover the fact that at the time of sequestration there
were issued (sic), there were more prima facie evidence.

x x x           x x x          x x x

ATTY. LEYNES:

Q Dr. Doromal, do you know the petitioner, Sipalay Trading Corporation?

A Yes, sir.

Q Why do you know Sipalay Trading Corporation?

A It is one of those companies which we had investigated and eventually issued a

Sequestration Order.

Q Do you you (sic) Maranao Hotels and Resorts?

A Yes, sir.

Q Why do you know this Maranao Hotels and Resorts?

A Again it is one of those we had sequestered because of its relation with Sipalay
Trading Corporation?

Q Do you know the petitioner Allied Banking Corporation?

 A Yes, sir.

Q Why do you know it?

A In the same manner that the material of documents we had, we ended up having a
Sequestration Order on Allied Banking Corporation.

x x x           x x x          x x x

ATTY. LEYNES: 198

Q Dr. Doromal at that time that the sequestration order which you have just
recognized was issued and which sequestration order was signed by you and
Commissioner Ramon Diaz, what documents if any did you consider?

A We considered documents which were gotten from Malacañang after the previous
President had left.

We had also document (sic) which were gotten from the U.S. which were given by
the States Department to the PCGG and whatever had been gotten by our operation
people.

Q If I show to you some of these documents will you be able to recognize them?

A Yes, some of them I will be able to recognize.

Q I show to you a set of documents, what relation have these set of documents to
those documents which you have mentioned you and Commissioner Diaz or the
Commission considered when the Sequestration Order dated July 24, 1986 was
issued?

Will you please go over these documents?

COURT INTERPRETER:

Witness is going over the voluminous documents.

WITNESS:

A The documents that I have just slipped into here that would have to do with Sipalay
Trading Corporation, this I remember.

ATTY. LEYNES:

Q The question is, what relation has this document to the document you considered
in issuing the Sequestration Order subject matter of this case?

A This one which I had flipped into this had been considered by the Commission at
the time of the sequestration.

ATTY. LEYNES:

May I request that this document which the witness had identified, these documents
consisted of seventy-six documents and we have earlier inadvertently marked them
as Exhibit A to WWW but if we can have them marked accordingly as Exhibits 1, 2 to
76 accordingly.

xxx xxx xxx

ATTY. LEYNES:

Q Doctor Doromal when you issued, when the Sequestration Order was issued in the
judgment of the Commission, what quantum of evidence do these documents
amount to?
ATTY. MENDOZA:

Objection to the question, Your Honors (sic) please.

First of all the witness did not identify all of those documents as he was going over
the folder of documents. He was picking up particular documents in the folder and it
is a question of law.

ATTY. LEYNES:
198
We are proving that there is more prima facie evidence in the judgment when he
issued the Sequestration Order.

What is the quantum of evidence do these documents represent?

JUSTICE ESCAREAL:

For the purpose of issuance thereof?

ATTY. LEYNES:

Yes, Your Honor.

JUSTICE ESCAREAL:

With that qualification are you willing to accept that qualification?

ATTY. LEYNES:

Yes, Your Honor.

JUSTICE ESCAREAL:

Witness may answer:

WITNESS:

A These documents are more than just prima facie evidence which is the only thing
required of us before issuing the Sequestration Order.

In fact over and above what is needed there are plenty of evidence of these
documents which movant amply justifies our issuing of the Sequestration Order in
the sense that there is just no reason no question that there is a preponderance of
evidence for the sequestration.

ATTY. LEYNES:

That would be all, Your Honor.

JUSTICE ESCAREAL:

How about this 0095?

ATTY. LEYNES:

In both cases, Your Honor.

JUSTICE ESCAREAL:

Does the document include any reference to the Allied Banking Corporation?

ATTY. LEYNES:
Yes, Your Honor; but the Sequestration Order was issued by Commissioner Diaz
and Mary Con Bautista.

JUSTICE ESCAREAL:

With respect to?

ATTY. LEYNES:

Allied Banking Corporation. 198

May I ask additional questions, Your Honor.

JUSTICE ESCAREAL:

Please proceed.

ATTY. LEYNES:

Q Dr. Doromal what if any is your participation in the issuance of the Sequestration
Order or the Search and Seizure Order against Allied Banking Corporation?

A All these Sequestration Orders were brought by the Commission in (sic) banc and

we are present with the documents that had been available.

We listen to them and the action is made by the Commission and in the issuance of
the Sequestration Order.

Then whoever is the Commissioner most involved in that particular company thus
signs or do sign the Sequestration Order.

In this particular case that you mentioned about Allied Banking Corporation, the two
other Commissioners who were there ahead of me were the ones who signed
because they are most familiar with the Allied Banking Corporation.

xxx xxx xxx

ATTY. LEYNES:

Q Specifically what is your participation in the issuance of the sequestration

personally of Allied Banking Corporation?

A I am one of the most who participated in the discussion when I became a member
and that was April in 1986.

xxx xxx xxx

ATTY. LEYNES:

Q When deliberated upon what documents were considered?

xxx xxx xxx

WITNESS:

A First of all when this Search and Seizure Order was issued this was during the time
that I was already a member of the PCGG as Commissioner and when this is
brought before the group before the Commission there are the attached documents
that backed up this Search and Seizure Order and for that matter other items that
have to do with the sequestration or something similar to that so what I am saying
the materials that go with this would indicate the reason for the Search and Seizure
Order similar to the papers that are needed when we issued the Sequestration
Order.
ATTY. LEYNES:

Q I will show you again this Exhibit 1, these Exhibits 1 to 76 will you please go over
the same and state before this Honorable court what relation have these documents
to the documents which you mentioned were considered in the deliberation for the
issuance of Search and Seizure Order against Allied Banking Corporation?

xxx xxx xxx

WITNESS: 198

A I am looking at some of these documents that have to do with the Allied Banking
Corporation and I recognize some of these and the others I do not see because
some of these are materials which were gathered by other groups and their
attachments but the others such as this letter, this I remember.

xxx xxx xxx

ATTY. LEYNES:

Q Dr. Doromal in your recollection what is the reason or the finding of the PCGG why
the Sequestration Order was issued against Sipalay Trading Corporation or Maranao
Hotels and Resorts?

WITNESS:

A The reason was that in the Maranao Corporation which was the company which
was later on acquired by Sipalay Trading Corporation which was the holding
company it was our judgment that there are enough indications there that these were
acquired because of closeness to the president and that this was really in fact one of
those that had been gotten from DBP, Development Bank of the Philippines with the
idea being that it was, it could be gotten through the help of the Office of the
President and the President himself.

xxx xxx xxx

ATTY. LEYNES:

Q What if any is the finding of PCGG regarding the ownership of Sipalay Trading
Corporation?

A Sipalay Trading Corporation was holding company and owner. The people in the
ownership is not only Lucio Tan but looks like relatives of Mr. Tan.

Q In your recollection Doctor Doromal, what is the finding or reason of companies

why it issued the Search and Issue (sic) Order against Allied Banking Corporation?

WITNESS:

A The Commission wanted to find out documents that would indicate or prove the
relationship between President Marcos and Lucio Tan and one way to do that is to
have access to the papers to the documents that were in the Allied Banking
Corporation.

ATTY. LEYNES:

That would be all, Your Honor. 33

MARY CONCEPCION BAUTISTA

(DIRECT)

JUSTICE ESCAREAL:
Purpose, please.

ATTY. LEYNES:

The testimony of the witness is offered for the purpose of proving that when the
Presidential Commission on Good Government issued the search and seizure order
dated August 13, 1988, the Commission considered ample evidence in the issuance
thereof and also to prove that defendant Lucio Tan in concert with defendants
Ferdinand Marcos and Imelda Marcos acquired General Bank and Trust Company in
violation of existing rules and for remedial consideration and that later on Genbank 198
was converted by defendant Lucio Tan and company to Allied Bank of which
defendant Lucio Tan and defendants Ferdinand Marcos owned beneficially.

xxx xxx xxx

ATTY. LEYNES:

Q Madam Witness, what basis or document, if any did the commission consider
when it issued the search and seizure order?

A We had several documents in our possession at that time one of the documents
was a list which have been taken from the office of Imee M. Araneta on EDSA which
contained a listing of the holdings of the late President Marcos in several
corporations and the extent of his participation on this corporation. And the other, in
addition to what have been given by certain informants, another was an affidavit of
Mr. Gapud which he had issued wherein he had mentioned also the participation of
Mr. Marcos in Allied Banking, I think that affidavit is here and also the fact that
deposits were made from Allied Banking in the accounts of Mr. Marcos in the
Security Bank.

xxx xxx xxx

Q Madam Witness, you mentioned certain documents on the basis of which the
PCGG issued the search and seizure order against Allied Banking Corporation, I am
showing to you a folder containing Exhibit 1 to 18, will you please go over this
document and state which of these documents were considered by the Commission
when it issued the search and seizure order.

A These documents marked Exhibits 1 which is a list, which is a letter, unfortunately I

don't see page two of this but this is the document which we have addressed
principally, as far as we know addressed to the late President Marcos and together
with this we have Exhibit 2, another letter dated March 28, 1977 addressed to the
Deputy Governor Mr. Briñas about the intention to purchase General Bank and Trust
Company and subsequently documents Exhibit 3 signed by Carlota Valenzuela,
Special Assistant to the Governor, Exhibit 4 another document marked Confidential
signed by Mr. Barin reporting on the action taken regarding Genbank.

xxx xxx xxx

WITNESS:

And another document which has been marked as Exhibit 4, 5, 6, 7, these

documents refers to the acquisition by Lucio Tan of the Genbank for the amount of
P500,000.00, the commission then considered that plus the fact that the acquisition
and transfer of Genbank to the Lucio Tan group was done in a short time without
proper observance of public bidding which the Commission then considered to be
irregular, so this is one of the documents we look at. Mr. Tan in the acquisition of
Genbank had been given a favored treatment.

xxx xxx xxx

WITNESS:

This document dated May 17, 1989 under letterhead Allied Banking Corporation
addressed to His Excellency President Marcos, President and Prime Minister signed
by Lucio Tan. In addition we have a document which has already been marked as
Exhibit 12 which is the affidavit of Mr. Rolando Gapud dated January 14, this is
series of 1987, in this document Mr. Gapus (sic) has also made an enumeration of
deposits made by certain individuals from certain banks among them Allied Banking
Corporation for the account of Mr. Marcos in the Security Bank.

xxx xxx xxx

WITNESS:

Exhibits 13 and 13-a which is a listings (sic) of deposits made and placements in the 198
bank, in the bank account of Mr. Marcos. In addition, we have the documents marked
up to Exhibits 13-g, h, l, all showing checks or amounts received from Allied Bank
deposited in the Security Bank and Trust Company. Exhibits up to Exhibit 13-k, l, m,
p, t, v, 2, y and x.
34

xxx xxx xxx

ATTY. LEYNES:

Q Chairman Bautista, during the last hearing before it was adjourned we were going
over this folder containing Exhibits 1 to 80 and we are indicating which of these
exhibits were considered by the PCGG when it issued the Search and Seizure Order
against Allied Banking Corporation;

Will you please go over again this folder and indicate to this Exhibit to whether what
was considered by the Presidential Commission on Good Government when it
issued the Search and Seizure Order against Allied Banking Corporation.

A I recall that we had already pointed to the document marked Exhibit 7 in red which
is a letter of Lucio Tan to the Governor Licaros of the Central Bank and the one
marked in red as Exhibit 8 which is the letter to Mr. Gregorio Licaros signed by T.O.
Domingo, the Allied Banking Report which is marked as Exhibit 9.

xxx xxx xxx

Q Apart from these exhibits which you have just mentioned what other evidence if
any did the Commission consider?

A There were for instance the verbal information given to us by individuals as well as
the information given to us by Mr. Rolando Gaffud verbally.

xxx xxx xxx

ATTY. LEYNES:

Q What is the finding based on these Exhibits which you mentioned and the
information given by Rolando Gaffud which he later on formalized in an affidavit.

What finding if any with regards to the Allied Banking Corporation did the
Commission arrive that led to the issuance of the Search and Seixure (sic) Order?

A The Commission after reviewing al (sic) of these exhibits as with all the information
that had come into its possession had come to the conclusion that indeed Mr. Lucio
Tan was a close associate of the late President Marcos and they were involved in
business associates and transactions and that the late President had substantial
holdings in this corporation in which Lucio Tan was also involved and therefore the
commission would have to act in accordance to its powers of the sequestration
granted under Executive Order No. 1.

xxx xxx xxx

ATTY. LEYNES:

Q To what corporation do you refer to when you mentioned Mr. Marcos has equity in
the corporation owned by Lucio Tan?
 A Among them is precisely Allied Banking Corporation, Asia Brewery and Sipalay
Trading Corporation. I mean these are some of the corporations.

Q Chairman Bautista, what is the legal basis or authority by the commission of the
Presidential Commission on Good Government when it issued the Search and
Seizure Order against the Allied Banking Corporation?

A The Commission under Executive Order No. 1, the President has been given
specifically the power to sequester business and property owned by the late
President Marcos, Mrs. Marcos, relatives and closed business associates and to take 198
possession or take over this business and assets in order to prevent dissipation of
these assets or removal of these assets and concealment of these assets and also to
take over such documents as the Commission may consider necessary in order that
these documents may be preserved for the purpose of the filing of the case in order
to prosecute or conduct civil action against President Marcos, Mrs. Marcos, relatives
and other close business associates that is very clearly stated in Executive Order No.
1.

xxx xxx xxx

ATTY. LEYNES:

0100, Your Honor.

Q Chairman Bautista, the Search and Seizure Order issued by PCGG dated August
13, 1986 against Allied Banking Corporation reads in pertinent part and I quote:

"You are hereby directed to submit for Search and Seizure all bank documents in the
above mentioned premises which our representatives may find necessary and
relevant to the investigation conducted by the Commission."

A Well I think we clearly specify there that we are to seize the bank documents.

It is specifically stated that the Search and Seizure Order refers to bank documents
precisely because of the information that had been given to us that these documents
could be found in the particular place.

xxx xxx xxx

ATTY. LEYNES:

Q Now, Chairman Bautista do you know what happened after the Search and
Seizure Order against Allied Banking Corporation?

WITNESS.

A We were not able to seize any document precisely because of the objection raised
and so what happened is that the parties agreed to just seal this place so that neither
of the parties would be able to remove any documents.

ATTY. LEYNES:

That will be all, Your Honor. 35

Dr. Doromal was basically preoccupied with identifying and referring to documents purportedly coming from
Malacañang, the US State Department and other sources. What his testimony essentially yields is the fact that
the prima facie evidence/s supporting the sequestration order issued against SIPALAY is/are buried and
ascertainable in these documents. But, to repeat, any reference thereto is unwarranted since there was no offer
thereof in evidence. And it must be emphasized at this point that mere identification of documents and the marking
thereof as exhibits do not confer any evidentiary weight on documents not formally offered. In "People v. Santito,
Jr."  the Court, speaking through Mr. Justice Regalado once again, thus said that:
36

Even assuming that the same had been identified in court, it would have no evidentiary value .
Identification of documentary evidence must be distinguished from its formal offer as an exhibit. The
first is done in the course of the trial and is accompanied by the marking of the evidence as an
 exhibit. The second is done only when the party rests its case and not before. The mere fact that a
particular document is identified and marked as an exhibit does not mean it will be or has been
offered as part of the evidence of the party. The party may decide to formally offer it if it believes this
will advance its cause, and then again it may decide not to do so at all. (Emphasis supplied.)

Verily then, without the PCGG documents having been formally offered, however decisive and compelling
they may otherwise be, it is as if a prima facie case does not exist at all. That makes Dr. Doromal's
testimony by and in itself worthless. The same can be said of deceased Commissioner Bautista as well who
was similarly immersed in the mechanical process of identification. In fact, her testimony and the documents
she referred to were totally unrelated to the sequestration order issued against SIPALAY, as they chiefly
198
dwelt on the search and seizure order issued against ALLIED. Being immaterial, nothing therefrom can
shore up a prima facie case against SIPALAY. And it may well be clarified at this juncture that it is the
immateriality of deceased Commissioner Bautista's testimony that justified the SANDIGANBAYAN into
paying particular attention to Dr. Doromal's testimony in its search for prima facie evidence — not the
inadmissibility of her testimony arising from her death during cross-examination which we have heretofore
adjudged to be a faulty observation. The SANDIGANBAYAN was therefore correct in saying that:

No direct connection or relationship has been established, at least, as far as the evidence extant on
the records of these cases are concerned, between petitioner Sipalay Trading's acquisition and
ownership of the sequestered shares of stock and Lucio C. Tan's alleged fraudulent business
maneuverings and connivance with the late President Ferdinand E. Marcos. These oral testimonies
are practically dependent on the existence of official records of respondent PCGG which, due to the
latter's own doing, have not been formally offered. Hence, these oral testimonies have no leg to
stand on.   7
3

xxx xxx xxx

Without credible and competent documentary evidence to fortify the witnesses' bare allegations as
aforestated, it is difficult to sustain a finding of prima facie case in the proceedings — especially
taking into account the fact that petitioner Sipalay Trading is presumed by law to possess a separate
and distinct judicial personality from its principal stockholders, i.e., Lucio Tan, et al. . . .
38

The difficulty is easier to grasp when reckoned with the various but uniform definitions of prima
facie case/evidence aside from that given by the SANDIGANBAYAN, to wit:

Prima facie evidence has been defined as evidence which, standing alone unexplained or
uncontroverted, is sufficient to maintain the proposition affirmed. It is such as, in judgment of law, is
sufficient to establish the fact, and if not rebutted, remains sufficient for that purpose.
39

xxx xxx xxx

It is evidence which suffices for the proof of a particular fact until contradicted and overcome by
other evidence. 40

xxx xxx xxx

It is evidence which, standing alone and unexplained, would maintain the proposition and warrant
the conclusion to support which it is introduced. 41

xxx xxx xxx

Prima facie case is such as will suffice until contradicted and overcome by other evidence. 42

xxx xxx xxx

A prima facie case is one which is apparently established by evidence adduced by plaintiff in support
of his case up to the time such evidence stands unexplained and uncontradicted. 43

xxx xxx xxx

A prima facie case is one in which the evidence in favor of a proposition is sufficient to support a
finding in its favor, if all the evidence to the contrary is disregarded.
44

xxx xxx xxx

 A litigating party is said to have a prima facie case when the evidence in his favor is sufficiently
strong for his opponent to be called on to answer it. A prima facie case, is one which is established
by sufficient evidence, and can be overthrown only be rebutting evidence adduced on the other
side.
45

From whatever definition we look at it, Dr. Doromal's and deceased Commissioner Bautista's testimonies are by no
means sufficiently strong evidence to make up a prima facie case for the PCGG. What gave them colorable weight
were the unoffered documents. But as things stand in the absence of such documentary evidence, they are empty
and crumble on their own even without counter-explanation or contradiction, as anything that may tend to prove the
proposition that the SIPALAY shares in Maranaw Hotels and Resort Corporation were/are ill-gotten is just nowhere
198
extractable from these testimonies by and in themselves. These declarations unfortunately fail to hurdle judicial
inspection, proceeding from the principle that a party's evidence is "of necessity subject to a rigid scrutiny" when he
possesses, but does not produce, documentary evidence which would be far more satisfactory.  We are thus vividly
46

and fittingly reminded of the proverbial words of Mr. Justice Story that:

Naked statements must be entitled to little weight when the parties hold better evidence behind the
scenes  7 and
4

A party's nonproduction of a document which courts almost invariably expect will be produced
unavoidably throws a suspicion over the cause. 48

Corollary to this is that the presumption is always and inevitably against a litigant who fails to furnish
evidence within his reach, and it is the stronger when the documents, writings, etc., would be conclusive in
establishing his
case.   This is indeed an occasion to emphasize once again that the superiority of written evidence,
49

compared with oral, is so pronounced, obvious and well known, that in most cases the deliberate and
inexcusable withholding of the written evidence, and effort to secure favorable consideration of oral
testimony in the place of it , is an affront to the intelligence of the court. 50

At best, the bare testimonies of Dr. Doromal and deceased Commissioner Bautista, in the eyes of the Court, yield
nothing but mere uncorroborated speculations or suspicions insofar as the PCGG attempted to establish the  "prima
facie factual foundation" that would hold up the sequestration order against SIPALAY. But a fact cannot be found by
mere surmise or conjecture.  Suspicion cannot give probative force to testimony which in itself is insufficient to
51

establish or to justify an inference of a particular fact,  for "the sea of suspicion has no shore, and the court that
52

embarks upon it is without rudder or compass".  And as it is not the habit of any courts of justice to yield themselves
53

up in matters of right to mere conjectures and possibilities,   courts are not permitted to render verdicts or judgments
54

upon guesses or surmises. 55

Turning now to the evidence for SIPALAY and ALLIED, it unveiled no "prima facie factual foundation" either. Former
PCGG secretary and lone witness Atty. Hontiveros, in response to two (2) subpoenas  duces tecum  requested by 56

counsel for both corporations 7 which required him to bring to the court "all records, including minutes of meeting of
5

the PCGG, its resolutions, together with all supporting evidence or documents of whatever nature" in connection
with the issuance of the sequestration order against SIPALAY and the search and seizure order against ALLIED,
could only produce the following excerpts of minutes of two (2) PCGG meetings held on March 13 and March 12,
1986:

6. Commissioner Daza also informed the Commissioner that upon the instructions of Minister
Salonga, any Commissioner can file or issue a sequestral order provided the order has the
conformity verbal or written of another Commissioner. These could include any other order or
seizure. 58

xxx xxx xxx

6. Commissioner Pedro L. Yap before his departure on a mission, reported the work he had
accomplished during the past days. These included numerous "freeze" and "sequestration" orders.
He asked that the list of orders should not be particularized in the minutes. 59

after admittedly spending no less than two (2) months tracing documents to bring to court:

ATTY. MENDOZA:

xxx xxx xxx

Q I am asking you how many months did it take looking for records?

A I think more than two months, sir.

 Q And these were the records you found, marked Exhibits A and B?

A Yes, sir, during the time I devoted to them. 60

xxx xxx xxx

ATTY. MENDOZA:

xxx xxx xxx

198
Q But nonetheless, for two months you tried looking for records corresponding to the
subpoena?

A Yes, sir. 61

Other than being informative of PCGG internal procedure on how and by whom sequestration orders in
general are issued and of the "accomplishments" of one of its then commissioners, the excerpts are
absolutely unreflective of any deliberation by PCGG commissioners particularly concerning the
sequestration order against SIPALAY, much less the factual basis for its issuance. They do not even make
the slightest allusion to SIPALAY, or ALLIED. That Atty. Hontiveros devoted two (2) months for document-
searching only to come up with minutes that are as barren as the testimonial evidences of the PCGG
validates indeed the claim of respondent corporations which may well sum-up the PCGG's case specifically
against SIPALAY, that:

The only logical conclusion that may be reached by Atty. Hontiveros' inability to produce PCGG
records in regard respondent Sipalay is that there was no evidence before the PCGG or any of its
Commissioners which would tend to establish that the shares of stock in Maranaw registered in the
name of private respondent Sipalay are ill-gotten.62

There being no evidence, not even a prima facie one, there was therefore no valid sequestration of the
SIPALAY shares in the Maranaw Hotels and Resort Corporation. We hereby re-emphasize the
indispensability of prima facie evidence by adverting to the Court's pronouncement in "Republic v.
Sandiganbayan,"  to wit:
63

IV. The issue on the existence of prima facie evidence in support of the issuance of a sequestration
order has likewise been laid to rest in the BASECO case, in this wise:

8. Requisites for Validity

What is indispensable is that, again as in the case of attachment and receivership,

there exist a prima facie factual foundation, at least, for the sequestration, freeze or
takeover order, and adequate and fair opportunity to contest it and endeavor to
cause its negation or nullification.

Both were assured under the executive orders in question and the rules and
regulations promulgated by the PCGG.

a. Prima Facie Evidence as Basis for Orders

Executive Order No. 14 enjoins that there be "due regard to the requirements of
fairness and due process." Executive Order No. 2 declares that with respect to
claims on allegedly "ill-gotten" assets and properties, "it is the position of the new
democratic government that President Marcos . . . (and other parties affected) be
afforded fair opportunity to contest these claims before appropriate Philippine
authorities." Section 7 of the Commission's Rules and Regulations provides that
sequestration or freeze (and takeover) orders issue upon the authority of at least two
commissioners, based on the affirmation or complaint of an interested party, or motu
propio when the Commission has reasonable grounds to believe that the issuance
thereof is warranted. A similar requirement is now found in Section 26, Art. XVIII of
the 1987 Constitution, which requires that a "sequestion or freeze order shall be
issued only upon showing of a prima facie case." (Emphasis in the original text)

Notably the PCGG, in what apparently appears to be a desperate attempt to slither its way out of its failure
to show a prima facie case, would now argue that:
 . . . it is worth-mentioning the fact that the FREEDOM CONSTITUTION under which Executive Order
Nos. 1, 2, 14 and 14-A had been issued, categorically authorized the issuance of writs of
sequestration without requiring any finding of prima facie evidence to support such issuance.
Nevertheless, the PCGG saw to it that before any writ of sequestration was issued, the
Commissioners carefully examined and weighed the evidence on hand that would justify such
issuance of sequestration order. The FREEDOM CONSTITUTION provides under Article II, Section
1, the following:

Sec. 1. Until a legislature is elected and convened under a New Constitution, the
President shall continue to exercise legislative power.
198

The President shall give priority to measures to achieve the mandate of the people
to:

a) . . .

b) . . .

c) . . . and

d) Recover ill-gotten properties amassed by the leaders and supporters of the

previous regime and protect the interest of the people through orders of
sequestration or freezing of assets or accounts.

It is only in the 1987 Constitution that the existence or finding of prima facie case was required
before a sequestration order could be issued. The writ of sequestration in question was issued long
before the ratification of the 1987 Constitution; hence, it was covered by the Freedom Constitution
which did not require, the prior finding of prima facie evidence.64

This argument is clearly without merit in the face of this Court's pronouncement in the "Baseco" case,  that:
65

Parenthetically, even if the requirement for a prima facie showing of ill-gotten wealth were not
expressly imposed by some rule or regulation as a condition to warrant the sequestration or freezing
of property contemplated in the executive orders in question, it would nevertheless be exigible in this
jurisdiction in which the Rule of Law prevails and official acts which are devoid of rational basis in
fact or law, or are whimsical and capricious, are condemned and struck down.

Going now to the case of ALLIED, the principal objection raised regarding the order issued against it is that the
PCGG made use of an unauthorized and constitutionally defective search warrant to effect the sequestration. The
SANDIGANBAYAN saw and declared it as such. We agree.

There can be no doubt that the order which the PCGG issued against ALLIED typifies a search warrant (full text of
which appears in the early part of this decision). Not only is the order captioned as SEARCH AND SEIZURE
ORDER, the body thereof clearly enjoined the branch manager to make available to the PCGG team all bank
documents precisely for that purpose. It is unauthorized because nowhere in the same Executive Order No.
1  (particularly Section 3) invoked by the PCGG to justify the search and seizure order was the PCGG expressly
66

empowered to issue such specie of a process in pursuit of its mandated purpose of recovering ill-gotten/unexplained
wealth. Section 3 of E.O. No. 1 enumerates the following powers of the PCGG:

Sec. 3. — The Commission shall have the power and authority:

(a) To conduct investigation as may be necessary in order to accomplish and carry out the purposes
of this order.

(b) To sequester or place or cause to be placed under its control or possession any building or office
wherein any ill-gotten wealth or properties may be found, and any records pertaining thereto, in
order to prevent their destruction, concealment or disappearance which would frustrate or hamper
the investigation or otherwise prevent the Commission from accomplishing its task.

(c) To provisionally take over in the public interest or to prevent its disposal or dissipation, business
enterprises and properties taken over by the government of the Marcos administration or by entities
or persons close to former President Marcos, until the transactions leading to such acquisition by the
latter can be disposed of by the appropriate authorities.
 (d) To enjoin or restrain any actual or threatened commission of acts by any person or entity that
may render moot and academic, or frustrate, or otherwise make ineffectual the efforts of the
Commission to carry out its tasks under this order.

(e) To administer oaths, and issue subpoenas requiring the attendance and testimony of witnesses
and/or the production of such books, papers, contracts, records, statement of accounts and other
documents as may be material to the investigation conducted by the Commission.

(f) To hold any person in direct or indirect contempt and impose the appropriate penalties, following
the same procedures and penalties provided in the Rules of Court. 198

(g) To seek and secure the assistance of any office, agency or instrumentality of the government.

(h) To promulgate such rules and regulations as may be necessary to carry out the purposes of this
order.

The Court in "Cojuangco, Jr. v. PCGG" 7 simplified these powers in this wise:
6

From the foregoing provisions of law, it is clear that the PCGG has the following powers and
authority:

1. To conduct an investigation including the preliminary investigation and prosecution of the ill-gotten
wealth cases of former President Marcos, relatives and associates, and graft and corruption cases
assigned by the President to it;

2. Issue sequestration orders in relation to property claimed to be ill-gotten;

3. Issue "freeze orders" prohibiting persons in possession of property alleged to be ill-gotten from
transferring or otherwise disposing of the same;

4. Issue provisional takeover orders of the said property;

5. Administer oaths and issue subpoenas in the conduct of investigation;

6. Hold any person in direct or indirect contempt and impose the appropriate penalties as provided
by the rules.

Neither can it be validly argued by the PCGG that its authority to issue a search and seizure order
possessing the essential features of a search warrant is derivable from subparagraphs (b) and (c) of Section
3 of E.O. No. 1 or from No. 4 of the simplified enumeration in the "Cojuangco" case, by implication. "Baseco"
has clarified once and for all the essential nature of the provisional measures of sequestration, freeze orders
and provisional takeover that the PCGG is explicitly equipped with:

As thus described, sequestration, freezing and provisional takeover are akin to the provisional
remedy of preliminary attachment, or receivership. By attachment, a sheriff seizes property of a
defendant in a civil suit so that it may stand as security for the satisfaction of any judgment that may
be obtained, and not disposed of, or dissipated, or lost intentionally or otherwise, pending the action.
By receivership, property, real or personal, which is subject of litigation, is placed in the possession
and control of a receiver appointed by the Court, who shall conserve it pending final determination of
the title or right or possession over it. All these remedies — sequestration, freezing, provisional
takeover, attachment and receivership — are provisional, temporary, designed for particular
exigencies, attended by no character or permanency or finality, and always subject to the control of
the issuing court or agency.

Attachment and receivership are legal processes purely conservatory in character, not involving an active
and drastic intrusion into and confiscation of properties as what a search warrant (or search and seizure
order) necessarily entails. All processes that the PCGG is allowed to issue in discharging the duty for which
it was created, therefore, ought to be viewed strictly in this context. And this finds further support in
"Philippine Coconut Producers Federation, Inc. [COCOFED] v. PCGG"  where the Court stressed anew that:
68

The question of the validity of PCGG sequestration and freeze orders as provisional measures to
collect and conserve the assets believed to be ill-gotten wealth has been laid to rest in BASECO
vs. PCGG (150 SCRA 181) where this Court held that such orders are not confiscatory but only
preservative in character, not designed to effect a confiscation of, but only to conserve
properties believed to be ill-gotten wealth of the ex-president, his family and associates, and to
 prevent their concealment, dissipation, or transfer, pending the determination of their true ownership.
(Emphasis supplied)

Being in fact a search warrant, the SEARCH AND SEIZURE ORDER cannot escape, and must pass, the acid test
for validity as provided by the prevailing constitution under which it was issued — the FREEDOM CONSTITUTION
which adopted verbatim the provision of the 1973 Constitution (Section 3, Article IV) relating to search warrants, to
wit:

The right of the people to be secure in their persons, houses, papers, and effects against
unreasonable searches and seizures of whatever nature and for any purpose shall not be violated, 198
and no search warrant or warrant of arrest shall issue except upon probable cause to be determined
by the judge, or such other responsible officer as may be authorized by law, after examination under
oath or affirmation of the complainant and the witnesses he may produce, and particularly describing
the place to be searched, and the person or things to be seized.

Supporting jurisprudence thus outlined the following requisites for a search warrant's validity, the absence of
even one will cause its downright nullification:

(1) it must be issued upon probable cause;

(2) the probable cause must be determined by the judge himself and not by the applicant or any other person;

(3) in the determination of probable cause, the judge must examine, under oath or affirmation, the complainant and
such witnesses as the latter may produce; and

(4) the warrant issued must particularly describe the place to be searched and persons or things to be seized. 69

In addition to its unauthorized issuance (as just discussed), the SEARCH AND SEIZURE ORDER is so
constitutionally defective.

Firstly, as it suffered from the same inherent weakness or emptiness as that which marred Dr. Doromal's testimony
(as earlier discussed extensively), deceased Commissioner Bautista's in-court declarations did not in any way
establish probable cause which has been consistently defined as:

. . . such facts and circumstances which would lead a reasonably discreet and prudent man to
believe that an offense has been committed, and that objects sought in connection with the offense
are in the place sought to be searched. This probable cause must be shown to be within the
personal knowledge of the complainant or the witnesses he may produce and not based on mere
hearsay.70

This is so because, as what her testimony irresistibly suggested, the purported facts and circumstances
supporting the order are exclusively traceable from documents she identified but which were never formally
offered in evidence in the SANDIGANBAYAN. She never testified to any fact of her own personal knowledge
to bolster the PCGG's claim that ALLIED was in possession and control of illegally-amassed wealth by Lucio
Tan. Her testimony, therefore, is plain hearsay, self-serving, or uncorroborated suspicion. And the rule is
that search warrants are not issued on loose, vague or doubtful basis of fact, nor on mere suspicion or
belief.
71

Secondly, the PCGG has no authority to issue the order in the first place. Only a  "judge" and "such other
responsible officer as may be authorized by law" were empowered by the FREEDOM CONSTITUTION to do so,
and the PCGG is neither. It is not a judge, as clarified by the Court in "Baseco", to wit:

It should also by now be reasonably evident from what has thus far been said that the  PCGG is not,
and was never intended to act as, judge. Its general function is to conduct investigations in order
to collect evidence establishing instances of "ill-gotten wealth"; issue sequestration, and such
orders as may be warranted by the evidence thus collected and as may be necessary to preserve
and conserve the assets of which it takes custody and contral and prevent their disappearance, loss
or dissipation; and eventually file and prosecute in the proper court of competent jurisdiction all
cases investigated by it as may be warranted by its findings. It does not try and decide, or hear and
determine, or adjudicate with any character of finality or compulsion, cases involving the essential
issue of whether or not property should be forfeited and transferred to the State because "ill-gotten"
within the meaning of the Constitution and the executive orders. This function is reserved to the
designated court, in this case, the Sandiganbayan. There can therefore be no serious regard
accorded to the accusation, leveled by BASECO, that the PCGG plays the perfidious role of
prosecutor and judge at the same time. (Emphasis supplied.)
 And the PCGG cannot be considered as "such other responsible officer as may be authorized by law"
because Executive Order No. 1, to reiterate, did not expressly nor impliedly grant the PCGG the power to
issue search warrants orders.

Thirdly, the order does not provide a specification of the documents sought to be searched/seized from ALLIED. The
body thereof, to quote again, reads:

By virtue of the powers vested in the Commission by the President of the Republic of the Philippines,
you are hereby directed to submit for search and seizure all bank documents in the aforementioned
premises which our representative may find necessary and relevant to the investigation being 198
conducted by this Commission.

x x x           x x x          x x x

It expressly refers to "all bank documents" which is too all-embracing, the obvious intent of which is to
subject virtually all records pertaining to all business transactions of ALLIED of whatever nature, to search
and seizure. Such tenor of a seizure warrant is not a particular description,  thus contravening the explicit
72

command of the Constitution that there be a particular description of things to be seized.  Being a general
73

warrant, the SEARCH AND SEIZURE ORDER is constitutionally objectionable  and to be more precise, void
74

for lack of particularity.  We end our discussion on this matter with the Court's admonition in "People v.
75

Veloso": 76

A search warrant must conform strictly to the requirements of the constitutional and statutory
provisions under which it was issued. Otherwise, it is void. The proceedings upon search warrants, it
has rightly been held, must be absolutely legal, "for there is not a description of process known to
the law, the execution of which is more distressing to the citizen. Perhaps there is none which
excites such intense feeling in consequence of its humiliating and degrading effect." The warrant will
always be construed strictly without, however, going the full length of requiring technical accuracy.
No presumptions of regularity are to be invoked in aid of the process when an officer undertakes to
justify under it.

The third key issue should therefore be answered in the affirmative, i.e., the nullification of the sequestration
and search and seizure orders was in order.

The last key issue involves another constitutional imperative — i.e., that the corresponding suit or suits against a
sequestered entity or entities should be brought in the proper court, the Sandiganbayan to be precise, 7 within the
7

prescribed period — failure of which automatically lifts the sequestration order or orders issued. Up for
determination is whether under the factual features of the case, there was compliance with this rule as professed by
the PCGG, or non-observance thereof, as argued and declared by respondent corporations and the
SANDIGANBAYAN, respectively. Stress should be given to the fact that the Court's resolution of this crucial issue
would particularly apply to SIPALAY inasmuch as it involves a sequestration order — not to ALLIED against whom
was issued a search and seizure order that we have just heretofore declared as void. Nonetheless, for simplicity's
sake, such resolution can be made to cover ALLIED's case as well. We thus forego with the distinction in this
instance and assume that ALLIED was sequestered via sequestration order similar to that issued against SIPALAY.

At the fore once again is Section 26, Article XVIII of the 1987 Constitution, specifically the second and third
paragraphs:

Sec. 26.

xxx xxx xxx

A sequestration or freeze order shall be issued only upon showing of a prima facie case. The order
and the list of the sequestered or frozen properties shall forthwith be registered with the proper court.
For orders issued before the ratification of this Constitution, the corresponding judicial action or
proceeding shall be filed within six months from its ratification. For those issued after such
ratification, the judicial action or proceeding shall be commenced within six months from the
issuance thereof.

The sequestration or freeze order is deemed automatically lifted if no judicial action or proceeding is
commenced as herein provided.

And here are the relevant and undisputable facts: The 1987 Constitution was ratified on February 2, 1987.
Counting six (6) months therefrom, August 2, 1987 was the constitutional deadline for the PCGG to file the
corresponding judicial action/proceeding against entity or entities it sequestered prior to February 2, 1987.
Among such entity or entities were SIPALAY and ALLIED, the dates of their sequestration as appearing
 from the corresponding orders issued against them are July 14, 1986 and August 13, 1986, respectively.
The PCGG admittedly did not file any direct complaint either against SIPALAY or ALLIED before the
SANDIGANBAYAN between February 2 and August 2 of 1987. But within such period, specifically on July
17, 1987, the PCGG filed before the SANDIGANBAYAN a civil case against Lucio Tan and others, for
"Reversion, Reconveyance, Restitution, Accounting and Damages", docketed as CC No. 0005.  The original
78

complaint in CC No. 0005 did not name SIPALAY and ALLIED as defendants, as it enumerated only natural
persons, except for one,  as such. SIPALAY and ALLIED were impleaded as defendants in CC No. 0005 for
79

the first time only after the lapse of more than four (4) years from the filing of the original complaint in July of
1987, under an amended complaint filed by the PCGG in September of 1991.
198
Given this factual backdrop, two propositions are being bruited by the PCGG:

1) that the July 17, 1987 original complaint against Lucio C. Tan, et al. (CC No. 0005) is the judicial action required
by the 1987 Constitution to justify the continued sequestration of SIPALAY (and ALLIED), and

2) even assuming arguendo that such original complaint was defective for not naming therein SIPALAY and ALLIED
as defendants, still there was faithful compliance with the constitutional mandate, since the September, 1991
amended complaint impleading SIPALAY and ALLIED as defendants — even when filed beyond the August 2, 1987
deadline — retroacted to July 17, 1987 which, thus, cured the defect.

Both propositions have to be rejected.

As to the first, the SANDIGANBAYAN correctly struck it down by following the doctrine laid down in "PCGG v.
International Copra Export Corporation, Interco Manufacturing Corporation and Sandiganbayan"  ("INTERCO" case,
80

for short). We thus quote with approval the pertinent disquisitions, to wit:

. . . On not a few occasions, the Court has sustained the merit and logic of motions seeking the lifting
of writs of sequestration for respondent PCGG's failure to institute the corresponding judicial action
or proceeding against corporations which, either through sheer oversight or gross neglect, have not
been expressly impleaded in the various civil complaints filed before this Court. The case of "PCGG
v. International Copra Export Corporation, et al." (INTERCO case) is illuminating on this point.
Therein, the Supreme Court made a distinction between the juridical personalities of a corporation
and its stockholders, ruling that if a corporation is not impleaded, it cannot be deemed to have been
sued in an action against its stockholders.

A perusal of the original complaint in Civil Case No. 0005, which was concededly filed within the six-
month period provided for under the organic law, reveals that petitioner Sipalay Trading was not
specifically impleaded therein as party-defendant, either in a nominal or principal capacity. If at all,
the latter has been included therein as part of principal defendant's ill-gotten assets. Under Rule 3,
Section 7 of the Rules of Court, "(P)arties in interest without whom no final determination can be had
of an action shall be joined either as plaintiffs or defendants."

It bears emphasis along this vein that, as implied from INTERCO, petitioner Sipalay Trading has a
juridical personality separate and distinct from its stockholders. As such, any civil charge filed
against principal defendant Lucio C. Tan and/or his dummies or agents is not deemed a suit against
the former. Neither does mere inclusion in the list of ill-gotten assets as part of principal defendant's
ill-gotten wealth suffice to comply with the constitutional injunction. Impleading a party means
bringing the suit against it. Listing or annexing it to the complaint, on the other hand, implies being
the object of the action.

xxx xxx xxx

It must be stated with equal respect that the phrase "judicial action or proceeding," within the
meaning of the organic law, is subject to the ordinary rules of procedure and is subordinate to the
requirements of due process. Failure to implead petitioner corporation in the action within the
constitutional period is, therefore, patently transgressive of the constitutional mandate against
deprivation of life, liberty and property without due process of law. 81

To fortify this ruling, we need only to point out the similarity in factual antecedents obtaining in "INTERCO"
and the instant case. In "INTERCO", no judicial action or proceeding was instituted by the PCGG directly
against respondent corporations therein (International Copra Export and International Manufacturing) which
it sequestered on June 10, 1987 purportedly upon a prima facie finding that certain shares of stocks in those
corporations are beneficially owned but were acquired with ill-gotten wealth by Eduardo Cojuangco, Jr.,
within six (6) months from the date of their sequestration — i.e., between June 10, 1987 and December 10,
1987. And the PCGG in "INTERCO" likewise filed a complaint before the SANDIGANBAYAN on July 31,
1987 against Eduardo Cojuangco, Jr., among others (Civil Case No. 0033) without, however, impleading
 respondent corporations as parties-defendants. The Court in "INTERCO" rejected the PCGG's contention
that the July 31, 1987 complaint against Cojuangco, Jr., et al. was substantial compliance with the
requirement under Section 26, Article XVIII of the 1987 Constitution, by upholding very fundamental
principles in corporation law:

In this jurisdiction, a corporation has a legal personality distinct and separate from its stockholders.
Thus, a suit against any of the stockholders is not ipso facto a suit against the corporation.

xxx xxx xxx

198
There is likewise no merit to petitioner's argument that the doctrine which justifies the "piercing of the
veil of corporate fiction" is applicable to the case at bar. The Sandiganbayan correctly found the
record bereft of sufficient basis from which to conclude that private respondents' respective
corporate identities have been used to defeat public convenience, protect fraudulent schemes, or
evade obligations and liabilities under statutes. Whether or not Enrique Luy, a major stockholder of
private respondents, acted as a dummy of Eduardo Cojuangco, Jr., and whether or not the
shareholders of Enrique Luy are beneficially owned by Eduardo Cojuangco, Jr., are matters still to
be established in Civil Case No. 0033. But as far as private respondents are concerned, inclusion of
their major stockholder in Civil Case No. 0033 does not detract from, nor excuse, petitioner's failure
to file the proper judicial action against them in compliance with the constitutional requirement under
Section 26 of Article XVIII.

And following the rule, elsewise stated, that cases circumstanced identically should be resolved consistently,
adherence to the ruling of the Court in "INTERCO" is necessary and inescapable.

Regarding its second proposition, the PCGG erroneously relies on "Pangasinan Transportation Co. v. Philippine
Farming Co., Ltd."  where it was ruled to the effect that:
82

Where the original complaint states a cause of action, but does it imperfectly, and afterward an
amended complaint is filed, correcting the defect, the plea of statute of limitations will relate to the
time of filing the original complaint.

The "Pangasinan" case dealt solely with a defect in the cause of action stated in the original complaint filed
by therein petitioner Pangasinan Transport against its competitor, respondent Philippine Farming before the
Public Service Commission; for illegal reduction of rates — i.e., non-specification of the acts constituting the
offense. It did not in any way involve a failure to implead a party-defendant which is an entirely different thing
from a defective cause of action. The scope of the retroactive and curative effect of an amended complaint
as declared in "Pangasinan" therefore ought not be broadened so as to cover infirmities in the original
complaint other than amendable imperfections in a cause of action. In fact, insofar as the failure to implead a
party or parties in the original complaint is specifically concerned, the Court on at least two occasions said
that the rule in "Pangasinan" would not apply to the party impleaded for the first time in the amended
complaint. These are the cases of "Aetna Insurance Co. v. Luzon Stevedoring Corporation"  and "Seno, et
83

al., v. Mangubat, et al."  cited by herein SIPALAY and ALLIED in their "Comment." In "Aetna", the amended
84

complaint filed by therein appellant Aetna Insurance Co. as plaintiff before the then CFI of Manila impleading
Barber Line Far East Service as defendant for the first time, was filed beyond the one-year period fixed in
the Carriage of Goods by Sea Act. In "Seno", one Andres Evangelista and Bienvenido Mangubat were
likewise impleaded as defendants for the first time under an amended complaint filed beyond the ten-year
period required under Article 1144 of the New Civil Code within which to bring an action upon a written
contract. And in both cases, the Court affirmed the dismissal of the complaints against these newly
impleaded defendants by refusing the application of the "Pangasinan" ruling and decreeing that the
amended complaints did not stall the running of the prescription periods provided under the applicable laws.
Bearing once again similar factual features as the "Aetna" and "Seno" cases, this particular sub-issue
should, perforce, be resolved in accordance therewith.

This Court is, of course, fully aware of that very recent case of "Republic v. Sandiganbayan, et al.", 240 SCRA 376
[January 23, 1995], where its "Final Dispositions" relating to the judicial action/proceeding in sequestration cases
appear to clash with "INTERCO". In resolving what appeared to be the "crucial question" involved in that 1995
"Republic v. Sandiganbayan" case, to wit:

DOES INCLUSION IN THE COMPLAINTS FILED BY THE PCGG BEFORE THE

SANDIGANBAYAN OF SPECIFIC ALLEGATIONS OF CORPORATIONS BEING "DUMMIES" OR
UNDER THE CONTROL OF ONE OR ANOTHER OF THE DEFENDANTS NAMED THEREIN AND
USED AS INSTRUMENTS FOR ACQUISITION, OR AS BEING DEPOSITARIES OR PRODUCTS,
OF ILL-GOTTEN WEALTH; OR THE ANNEXING TO SAID COMPLAINTS OF A LIST OF SAID
FIRMS, BUT WITHOUT ACTUALLY IMPLEADING THEM AS DEFENDANTS, SATISFY THE
CONSTITUTIONAL REQUIREMENT THAT IN ORDER TO MAINTAIN A SEIZURE EFFECTED IN
ACCORDANCE WITH EXECUTIVE ORDER NO. 1, s. 1986, THE CORRESPONDING "JUDICIAL
 ACTION OR PROCEEDING" SHOULD BE FILED WITHIN THE SIX-MONTH PERIOD
PRESCRIBED IN SECTION 26, ARTICLE XVIII, OF THE (1987) CONSTITUTION?

the Court made these conclusions:

It is thus both needful and timely to pronounce that:

1) Section 26, Article XVIII of the Constitution does not, by its terms or any fair interpretation thereof,
require that corporations or business enterprises alleged to be repositories of "ill-gotten wealth", as
the term is used in said provision, be actually and formally impleaded in the actions for the recovery 198
thereof, in order to maintain in effect existing sequestrations thereof;

2) complaints for the recovery of ill-gotten wealth which merely identify and/or allege said
corporations or enterprises to be the instruments, repositories or the fruits of ill-gotten wealth,
without more, come within the meaning of the phrase "corresponding judicial action or proceeding"
contemplated by the constitutional provision referred to; the more so, that normally, said
corporations, as distinguished from their stockholders or members, are not generally suable for the
latter's illegal or criminal actuations in the acquisition of the assets invested by them in the former;

3) even assuming the impleading of said corporations to be necessary and proper so that judgment
may comprehensively and effectively be rendered in the actions, amendment of the complaints to
implead them as defendants may, under existing rules of procedure, be done at any time during the
pendency of the actions thereby initiated, and even during the pendency of an appeal to the
Supreme Court — a procedure that, in any case, is not inconsistent with or proscribed by the
constitutional time limits to the filing of the corresponding complaints "for" — i.e., with regard or in
relation to, in respect of, or in connection with, or concerning — orders of sequestration, freezing, or
provisional takeover.

These fresh pronouncements, however, did not reverse, abandon or supplant "INTERCO". What the Court did was
to explain the two apparently colliding dispositions by making this "hairline", but critical, distinction:

XVI. The "Interco" and "PJI" Rulings

This Court is not unmindful of the fact that its Resolution of July 26, 1991 on the petitioner's motion
for reconsideration in G.R. No. 92755 (PCGG vs. Interco) appears to sustain the proposition that
actual impleading in the recovery action of a corporation under sequestration for being a repository
of illegally-acquired wealth, is necessary and requisite for such proposed or pending seizure to come
under the protective umbrella of the Constitution. But Interco is to be differentiated from the cases
now under review in that in the former, as already elsewhere herein made clear, there was a lack of
proof, even of the prima facie kind, that Eduardo Cojuangco, Jr. owned any stock in Interco, the
evidence on record being in fact that said corporation had been organized as a family corporation of
the Luys.

So, too, this Court's judgment in the so-called "PJI Case" (Republic of the Philippines [PCGG] v.
Sandiganbayan and Rosario Olivares) may not be regarded as on all fours with the cases under
consideration. The PJI Case involved the shares of stock in the name of eight (8) natural persons
which had never been sequestered at all. What happened was that the PCGG simply arrogated unto
itself the right to vote those unsequestered shares on the bare claim that the eight (8) registered
owners thereof were "dummies" of Benjamin Romualdez, the real owner of the shares; and all that
the PCGG had done as predicate for that act of appropriation of the stock, was to include all the
shares of PJI in a list (Annex A) appended to its complaint in Sandiganbayan Case No. 0035,
describing them as among the properties illegally acquired by Romualdez. Unfortunately, as
in Interco, the PCGG failed to substantiate by competent evidence its theory of clandestine
ownership of Romualdez; and since moreover, there had been no sequestration of the alleged
dummies' shares of stock, it was undoubtedly correct for the Sandiganbayan to grant the latter's
motion for them to be recognized and declared as the true owners of the stock in question, which
judgment this Court subsequently pronounced to be free from grave abuse of discretion. 85

We need only to recall at this juncture that, as in "INTERCO", evidence of the PCGG is nil to even come up
with a prima facie case against SIPALAY (and ALLIED). This similitude is the one decisive factor that draws
the instant case away from the "Final Dispositions" made by the Court in the 1995 "Republic v.
Sandiganbayan" case — thus making "INTERCO", as supported by the "Aetna" and "Seno" cases, the
controlling precedent. The principle of Stare Decisis, indeed, is most compelling, for "when the court has
once laid down a principle of law as applicable to a certain state of facts, it will adhere to that principle and
apply it to all future cases where the facts are substantially the same."  And it is in this light that Mr. Justice
86
 Padilla's lone "Dissent" in the 1995 "Republic v. Sandiganbayan" case becomes meaningfully relevant, to
wit:

. . . failure to implead these corporations as defendants and merely annexing a list of such
corporations to the complaints is a violation of their right to due process for it would in effect be
disregarding their distinct and separate personality without a hearing.

In cases where stocks of a corporation were allegedly the fruits of ill-gotten wealth, it should be
remembered that in most of these cases the stocks involved constitute a substantial if not controlling
interest in the corporations. The basic tenets of fair play demand that these corporations be 198
impleaded as defendants since a judgment in favor of the government will undoubtedly substantially
and decisively affect the corporations as distinct entities. The judgment could strip them of
everything without being previously heard as they are not parties to the action in which the judgment
is rendered.

. . . Holding that the "corresponding judicial action or proceeding" contemplated by the Constitution is
any action concerning or involving the corporation under sequestration is oversimplifying the
solution, the result of which is antagonistic to the principles of justice and fair play.

. . . the actions contemplated by the Constitution should be those which include the corporation not
as a mere annex to the complaint but as defendant. This is the minimum requirement of the due
process guarantee. Short of being impleaded, the corporation has no standing in the judicial action.
It cannot adequately defend itself. It may not even be heard.

On the . . . opinion that alternatively the corporations can be impleaded as defendants by

amendment of the complaint, Section 26, Article XVIII of the Constitution would appear to preclude
this procedure, for allowing amendment of the complaint to implead theretofore unimpleaded
corporations would in effect allow complaints against the corporations to be filed beyond the periods
fixed by said Section 26.

Justice Amuerfina Melencio-Herrera in her separate opinion in Bataan Shipyard and Engineering
Corporation, Inc. v. PCGG (150 SCRA 181, 253) correctly stated what should be the rule, thus:

Sequestration is an extraordinary, harsh and severe remedy. It should be confined to

its lawful parameters and exercised, with due regard, in the words of its enabling
laws, to the requirements of fairness, due process, and Justice. (Emphasis supplied)

While government efforts to recover illegally amassed wealth should have support from all its
branches, eagerness and zeal should not be allowed to run berserk, overriding in the process the
very principles that it is sworn to uphold. In our legal system, the ends do not always justify the
means. Wrongs are never corrected by committing other wrongs, and as above-discussed the
recovery of ill-gotten wealth does not and should never justify unreasonable intrusions into
constitutionally forbidden grounds. . . .

In answer therefore to the last key issue, we hold that the sequestration and the search and seizure orders
issued were indeed automatically lifted.

Finally, the PCGG in its "Reply" raises as "additional issue" the bias and partiality of the now-assailed
decision's ponente and Chairman of the SANDIGANBAYAN's SECOND DIVISION, Justice Romeo Escareal. To
bolster this charge, the PCGG harps on alleged prejudicial acts committed by Justice Escareal affecting CC No.
0005 — the case filed against Lucio C. Tan, and the instant case (S.B. Nos. 0095 against SIPALAY and 0100
against ALLIED).

This issue deserves no merit at all. Firstly, the PCGG's complaints against Justice Escareal's purported bias and
partiality in CC No. 0005 have no bearing whatsoever to the instant case. That should be ventilated and passed
upon there, not here. And secondly, SIPALAY and ALLIED in their "Rejoinder" meritoriously parried the PCGG's
accusation by arguing that:

1.02. Petitioner apparently overlooks that the Sandiganbayan is a collegiate court which sits in
divisions composed of three (3) members each. The unanimous vote of all the three (3) members of
a division is required for the rendition of a judgment (See Section 1(b), Rule XVIII, Revised Rules of
the Sandiganbayan). The Decision and Resolution subject of the present appeal, though penned by
Justice Romeo Escareal, the Chairman of the Second Division of the Sandiganbayan, were
concurred in by the two (2) other members of the Sandiganbayan's Second Division. Such being the
case, petitioner's fears of bias or partiality on the part of Justice Romeo Escareal cannot affect the
questioned Decision and Resolution rendered by the Sandiganbayan (Second Division). As held by
 this Honorable Court in Miriam Defensor-Santiago vs. Hon. Justice Francis Garchitorena, et al. (G.R.
No. 109226, December 2, 1993):

Notwithstanding petitioner's misgiving, it should be taken into consideration that the

Sandiganbayan sits in three divisions with three justices in each division. Unanimity
among the three members is mandatory for arriving at any decision of a division.
(P.D. 1606, Sec. 5). The collegiate character of the Sandiganbayan thus renders
baseless petitioner's fear of prejudice and bias on the part of Presiding Justice
Garchitorena (Paredes vs. Gopenco, 29 SCRA 688 [1969]).
198
WHEREFORE, the petition is hereby DISMISSED. SO ORDERED.

G.R. No. 117618 March 29, 1996

VIRGINIA MALINAO, petitioner,
vs.
HON. LUISITO REYES, in his capacity as Governor of the Province of Marinduque, SANGGUNIANG
PANLALAWIGAN OF MARINDUQUE and WILFREDO RED, in his capacity as Mayor of Sta. Cruz,
Marinduque, respondents.

MENDOZA, J.:p

This is a petition for certiorari and mandamus to annul the decision dated October 21, 1994 of the Sangguniang Panlalawigan of Marinduque, dismissing the
administrative case filed by petitioner against respondent Mayor Wilfredo Red of Sta. Cruz, Marinduque. The ground for the present petition is that the same body
already found respondent Mayor guilty of abuse of authority in removing petitioner from her post as Human Resource Manager without due process in another
decision which is now final and executory.

The facts are as follows:

Petitioner Virginia Malinao is Human Resource Manager III of Sta. Cruz, Marinduque. Respondent Mayor filed a
case against her in the Office of the Ombudsman for gross neglect of duty, inefficiency and incompetence. While the
case was pending, he appointed a replacement for petitioner.

On February 24, 1994 petitioner filed an administrative case, docketed as Administrative Case No, 93-03, against
respondent Mayor in the Sangguniang Panlalawigan of Marinduque, charging him with abuse of authority and denial
of due process.

On August 12, 1994, the case was taken up in executive session of the Sanggunian. The transcript of stenographic
notes of the session  shows that the Sanggunian, by the vote of 5 to 3 of its members, found respondent Mayor
1

guilty of the charge and imposed on him the penalty of one-month suspension.

The result of the voting was subsequently embodied in a "Decision" dated September 5, 1994,  signed by only one 2

member of the Sanggunian, Rodrigo V. Sotto, who did so as "Presiding Chairman, Blue Ribbon Committee,
Sangguniang Panlalawigan." Copies of the "Decision" were served on respondent Mayor Red as well as on
respondent Governor Luisito Reyes On September 12, 1994.

On September 14, 1994, respondent Mayor filed a manifestation  before the Sanggunian, questioning the "Decision"
3

on the ground that it was signed by Sotto alone, "apparently acting in his capacity and designated as "Presiding
Chairman, Blue Ribbon Committee, Sangguniang Panlalawigan." He contended that because of this the decision
could only be considered as a recommendation of the Blue Ribbon Committee and he was not bound thereby.

On September 13, 1994, respondent Mayor sought the opinion of the Secretary of the Department of the Interior
and Local Government regarding the validity of the "Decision."

In his letter dated September 14, 1994,  DILG Secretary Rafael M. Alunan III opined that the " 'decision' alluded to
4

does not appear to be in accordance with Section 66 of the Local Government Code of 1991 and settled
jurisprudence" since

in the instant case, the purported decision of the Blue Ribbon Committee should have been
submitted to, approved and/or adopted by the Sangguniang Panlalawigan as a collegial body
inasmuch as the Sangguniang Panlalawigan has the administrative jurisdiction to take cognizance
thereof in conformity with Section 61 and Section 66 of the Code. It is not for the said committee to
 decide on the merits thereof, more so to impose the suspension, as its duty and function is purely
recommendatory. If it were at all the intention of the Sangguniang Panlalawigan to adopt entirely the
recommendation of the Blue Ribbon Committee, it should have so stated and the members of the
Sangguniang Panlalawigan, who may have affirmatively voted thereon or participated in its
deliberations, should have affixed their respective signatures on whatever decision that could have
been arrived at. . . .

On the other hand petitioner sent a letter  on October 14, 1994 to respondent Governor Reyes, demanding that the
5

"Decision" suspending respondent Mayor from office be implemented without further delay.
198
In his letter dated October 20, 1994,  respondent Governor informed the Sanggunian that he agreed with the opinion
6

of the DILG for which reason he could not implement the "Decision" in question.

On October 21, 1994,  the Sanggunian, voting 7 to 2, acquitted respondent Mayor of the charges against him. The
7

vote was embodied in a Decision of the same date, which was signed by all members who had thus voted. 8

Hence this petition.

I. Petitioner's basic contention is that inasmuch as the "Decision" of September 5, 1994 had become final and
executory, for failure of respondent Mayor to appeal, it was beyond the power of the Sanggunian to render another
decision on October 21, 1994 which in effect reversed the first decision.

These contentions are without merit. What petitioner claims to be the September 5, 1994 "Decision" of the
Sangguniang Panlalawigan bore the signature of only one member (Rodrigo V. Sotto) who signed the "Decision" as
"Presiding Chairman, Blue Ribbon Committee, Sangguniang Panlalawigan." Petitioner claims that at its session on
August 12, 1994, the Sanggunian by the vote of five members against three found respondent Mayor guilty of
having removed petitioner as Human Resources Officer III without due process and that this fact is shown in the
minutes of the session of the Sanggunian. The minutes referred to read in pertinent part as follows:

KGD. SOTTO –– No if he [respondent Mayor] is acquitted, then let's acquit it. Whatever is the
decision everybody goes to the majority.

(There was nominal voting from the Sangguniang Panlalawigan member. For NOT GUILTY OR
GUILTY)

KGD. ZOLETA –– I vote not guilty.

KGD. MUHI –– Guilty.

KGD. LIM –– Not guilty.

KGD. RAZA –– First I would like to say that I will decide on the merit of the case. The fact that the
Civil Service ordered the reinstatement wherein Virginia Malinao is included, only means that the
Supreme Court duly constituted has found the merit of the decision of the Civil Service.

I vote that the Mayor is guilty.

KGD. PINAROC –– Guilty.

KGD. DE LUNA –– Guilty, there is no due process and to protect the integrity of the Sangguniang
Panlalawigan.

KGD. LAGRAN –– Guilty.

KGD. ZOLETA –– My reason for voting "not guilty" is that the mayor acted in good faith, he just
followed the order of the reorganization recommended by the Placement Committee.

KGD. REJANO –– The order of the reorganization was given by the Civil Service Commission and
based on the contention made by Kgd. Palamos that since there should be reorganization to be
conducted by the Civil Service Commission the mayor was supposed to go on with that
reorganization and based on the reorganization there should be a screening committee to check
whether the employees are really working efficiently. Based on the case that has been given to Mrs.
Malinao, based on the witnesses, Ligeralde, Monterozo and Pastrana and then decided that Mayor
Red has done in good faith.
So I vote Not Guilty.

Five (5) voted GUILTY:

Kgd. Muhi

Kgd. Raza

Kgd. Pinaroc
198
Kgd. Lagran

Kgd. De Luna

Three (3) voted NOT GUILTY:

Kgd. Rejano

Kgd. Zoleta

Kgd. Lim

KGD. SOTTO –– Punishment . . .

Censure? Reprimand? Suspension?.

KGD. LAGRAN –– I suggest that only those who voted "guilty" should vote as to what punishment
should be given.

KGD. LIM –– All the members should be given the right to vote.

(THE VOTING PROCEEDED.)

Kgd. Muhi –– Suspension

Kgd. Raza –– Suspension

Kgd. Pinaroc –– Suspension

Kgd. Lagran –– Suspension

Kgd. de Luna –– Suspension

KGD. ZOLETA –– Since we voted "not guilty" therefore "no punishment."

KGD. REJANO –– "No punishment"

KGD. LIM –– "No punishment"

KGD. SOTTO –– How many months?

KGD. MUHI –– One month.

KGD. RAZA –– One month.

KGD. PINAROC –– One month.

KGD. LAGRAN –– One month.

KGD. DE LUNA –– One month.

KGD SOTTO –– Be it on record that on August 12, 1994 during the Executive Session of the
Sangguniang Panlalawigan en banc the respondent is hereby found "guilty."
 Effective upon receipt of the Decision, copy furnished: the counsel for Respondent, the Counsel for
Complainant, the Municipal Treasurer, Sta. Cruz, Marinduque, the Provincial Auditor, the Civil
Service Commission, Boac, Marinduque, the DILG, Boac, Marinduque, the Provincial Governor.

Contrary to petitioner's claim, what the minutes only show is that on August 12, 1994 the Sanggunian took a vote on
the administrative case of respondent Mayor and not that it then rendered a decision as required by §66 (a) of the
Local Government Code (R.A. No. 7160) which provides as follows:

§66. Form and Notice of Decision. –– (a) The investigation of the case shall be terminated within
ninety (90) days from the start thereof. Within thirty (30) days after the end of the investigation, the 198
Office of the President or the sanggunian concerned shall render a decision in writing stating clearly
and distinctly the facts and the reasons for such decision. Copies of said decision shall immediately
be furnished the respondent and all interested parties.

In order to render a decision in administrative cases involving elective local officials, the decision of the
Sanggunian must thus be "in writing stating clearly and distinctly the facts and the reasons for such
decision." What the Sanggunian, therefore, did on August 12, 1994 was not to render a decision.

Neither may the so-called "Decision" prepared by Sanggunian Member Rodrigo V. Sotto on September 5, 1994 be
regarded as the decision of the Sanggunian for lack of the signatures of the requisite majority. Like the procedure in
the Supreme Court, the voting following the deliberation of the members of the Sanggunian did not necessarily
constitute their decision unless this was embodied in an opinion prepared by one of them and concurred in by the
others, in the same way that the voting following the deliberation on a case in the Supreme Court becomes its
decision only after the opinion prepared by a Justice is concurred in by others composing the majority. Until they
have signed the opinion and the decision is promulgated, the Justices are free to change their votes. 9

Indeed, in his comment   in this case, Member Sotto admits that the draft decision he prepared had only his
10

signature "due to the reluctance of some Kagawads to affix their signatures." Consequently the draft never became
a decision. It is noteworthy that the draft was signed by Member Sotto in his capacity as "Presiding Chairman of the
Blue Ribbon Committee of the Sangguniang Panlalawigan" and that it did not provide spaces for the signatures of
other members of the Sanggunian had it been intended that it be signed by them. This fact led the DILG to conclude
that the draft was simply the report and recommendation of the Blue Ribbon Committee to the Sanggunian.

Now, as already stated, the Sanggunian, at its session on October 21, 1994, took another vote and, 7 to 2, decided
to dismiss the case against respondent Mayor. This time its decision was made in writing, stating the facts and the
law on which it was based, and it was signed by the members taking part in the decision. This, and not the so-called
decision of September 5, 1994, is the decision of the Sanggunian.

Petitioner complains that no notice of the session by the Sanggunian on October 21, 1994 was given to her. None
was really required to be given to her. The deliberation of the Sanggunian was an internal matter.

II. Petitioner brought this case by way of petition for certiorari and mandamus. A prime specification of the writ
of certiorari, however, is that there is no appeal nor any plain, speedy and adequate remedy in the ordinary course
of law available to petitioner. But, in the case at bar, petitioner could have appealed the decision of the Sanggunian
to the Office of the President as provided in §67(b) of the Local Government Code.

III. At all events, this case is now moot and academic as a result of the expiration of respondent's term during which
the act complained of was allegedly committed, and further proceedings against respondent Mayor are barred by
his reelection on May 8, 1995.

Pursuant to §66(b) of the Code, the penalty of suspension cannot exceed the unexpired term of the respondent or a
period of six (6) months for every administrative offense. On the other hand, any administrative disciplinary
proceeding against respondent is abated if in the meantime he is reelected, because his reelection results in a
condonation of whatever misconduct he might have committed during his previous term. 11

WHEREFORE, the petition is DISMISSED for lack of merit. SO ORDERED.

G.R. No. 120082 September 11, 1996

MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY, petitioner,

vs.
HON. FERDINAND J. MARCOS, in his capacity as the Presiding Judge of the Regional Trial Court, Branch
20, Cebu City, THE CITY OF CEBU, represented by its Mayor HON. TOMAS R. OSMEÑA, and EUSTAQUIO B.
CESA, respondents.
 

DAVIDE, JR., J.:

For review under Rule 45 of the Rules of Court on a pure question of law are the decision of 22 March
1995  of the Regional Trial Court (RTC) of Cebu City, Branch 20, dismissing the petition for declaratory relief
1

in Civil Case No. CEB-16900 entitled "Mactan Cebu International Airport Authority vs. City of Cebu", and its
order of 4, May 1995  denying the motion to reconsider the decision.
2

We resolved to give due course to this petition for its raises issues dwelling on the scope of the taxing power 198
of local government-owned and controlled corporations.

The uncontradicted factual antecedents are summarized in the instant petition as follows:

Petitioner Mactan Cebu International Airport Authority (MCIAA) was created by virtue of Republic Act
No. 6958, mandated to "principally undertake the economical, efficient and effective control,
management and supervision of the Mactan International Airport in the Province of Cebu and the
Lahug Airport in Cebu City, . . . and such other Airports as may be established in the Province of
Cebu . . . (Sec. 3, RA 6958). It is also mandated to:

a) encourage, promote and develop international and domestic air

traffic in the Central Visayas and Mindanao regions as a means of
making the regions centers of international trade and tourism, and
accelerating the development of the means of transportation and
communication in the country; and

b) upgrade the services and facilities of the airports and to formulate

internationally acceptable standards of airport accommodation and
service.

Since the time of its creation, petitioner MCIAA enjoyed the privilege of exemption from payment of
realty taxes in accordance with Section 14 of its Charter.

Sec. 14. Tax Exemptions. — The authority shall be exempt from realty taxes
imposed by the National Government or any of its political subdivisions, agencies
and instrumentalities . . .

On October 11, 1994, however, Mr. Eustaquio B. Cesa, Officer-in-Charge, Office of the Treasurer of
the City of Cebu, demanded payment for realty taxes on several parcels of land belonging to the
petitioner (Lot Nos. 913-G, 743, 88 SWO, 948-A, 989-A, 474, 109(931), I-M, 918, 919, 913-F, 941,
942, 947, 77 Psd., 746 and 991-A), located at Barrio Apas and Barrio Kasambagan, Lahug, Cebu
City, in the total amount of P2,229,078.79.

Petitioner objected to such demand for payment as baseless and unjustified, claiming in its favor the
aforecited Section 14 of RA 6958 which exempt it from payment of realty taxes. It was also asserted
that it is an instrumentality of the government performing governmental functions, citing section 133
of the Local Government Code of 1991 which puts limitations on the taxing powers of local
government units:

Sec. 133. Common Limitations on the Taxing Powers of Local Government Units. —

Unless otherwise provided herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangay shall not extend to the levy of the following:

a) . . .

x x x           x x x          x x x

o) Taxes, fees or charges of any kind on the National

Government, its agencies and instrumentalities, and local
government units. (Emphasis supplied)

Respondent City refused to cancel and set aside petitioner's realty tax account, insisting that the
MCIAA is a government-controlled corporation whose tax exemption privilege has been withdrawn
by virtue of Sections 193 and 234 of the Local Governmental Code that took effect on January 1,
1992:
 Sec. 193. Withdrawal of Tax Exemption Privilege. — Unless otherwise provided in this Code, tax
exemptions or incentives granted to, or presently enjoyed by all persons whether natural or
juridical, including government-owned or controlled corporations, except local water districts,
cooperatives duly registered under RA No. 6938, non-stock, and non-profit hospitals and educational
institutions, are hereby withdrawn upon the effectivity of this Code. (Emphasis supplied)

xxx xxx xxx

Sec. 234. Exemptions from Real Property taxes. — . . .

198
(a) . . .

x x x           x x x          x x x

(c) . . .

Except as provided herein, any exemption from payment of real property tax
previously granted to, or presently enjoyed by all persons, whether natural or
juridical, including government-owned or controlled corporations are hereby
withdrawn upon the effectivity of this Code.

As the City of Cebu was about to issue a warrant of levy against the properties of petitioner, the
latter was compelled to pay its tax account "under protest" and thereafter filed a Petition for
Declaratory Relief with the Regional Trial Court of Cebu, Branch 20, on December 29, 1994. MCIAA
basically contended that the taxing powers of local government units do not extend to the levy of
taxes or fees of any kind on an instrumentality of the national government. Petitioner insisted that
while it is indeed a government-owned corporation, it nonetheless stands on the same footing as an
agency or instrumentality of the national government. Petitioner insisted that while it is indeed a
government-owned corporation, it nonetheless stands on the same footing as an agency or
instrumentality of the national government by the very nature of its powers and functions.

Respondent City, however, asserted that MACIAA is not an instrumentality of the government but
merely a government-owned corporation performing proprietary functions As such, all exemptions
previously granted to it were deemed withdrawn by operation of law, as provided under Sections 193
and 234 of the Local Government Code when it took effect on January 1, 1992. 3

The petition for declaratory relief was docketed as Civil Case No. CEB-16900.

In its decision of 22 March 1995,  the trial court dismissed the petition in light of its findings, to wit:
4

A close reading of the New Local Government Code of 1991 or RA 7160 provides the express
cancellation and withdrawal of exemption of taxes by government owned and controlled corporation
per Sections after the effectivity of said Code on January 1, 1992, to wit: [proceeds to quote Sections
193 and 234]

Petitioners claimed that its real properties assessed by respondent City Government of Cebu are
exempted from paying realty taxes in view of the exemption granted under RA 6958 to pay the same
(citing Section 14 of RA 6958).

However, RA 7160 expressly provides that "All general and special laws, acts, city charters, decress
[sic], executive orders, proclamations and administrative regulations, or part or parts thereof which
are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly."
([f], Section 534, RA 7160).

With that repealing clause in RA 7160, it is safe to infer and state that the tax exemption provided for
in RA 6958 creating petitioner had been expressly repealed by the provisions of the New Local
Government Code of 1991.

So that petitioner in this case has to pay the assessed realty tax of its properties effective after
January 1, 1992 until the present.

This Court's ruling finds expression to give impetus and meaning to the overall objectives of the New
Local Government Code of 1991, RA 7160. "It is hereby declared the policy of the State that the
territorial and political subdivisions of the State shall enjoy genuine and meaningful local autonomy
to enable them to attain their fullest development as self-reliant communities and make them more
 effective partners in the attainment of national goals. Towards this end, the State shall provide for a
more responsive and accountable local government structure instituted through a system of
decentralization whereby local government units shall be given more powers, authority,
responsibilities, and resources. The process of decentralization shall proceed from the national
government to the local government units. . . . 5

Its motion for reconsideration having been denied by the trial court in its 4 May 1995 order, the petitioner
filed the instant petition based on the following assignment of errors:

I RESPONDENT JUDGE ERRED IN FAILING TO RULE THAT THE PETITIONER IS 198

VESTED WITH GOVERNMENT POWERS AND FUNCTIONS WHICH PLACE IT IN
THE SAME CATEGORY AS AN INSTRUMENTALITY OR AGENCY OF THE
GOVERNMENT.

II RESPONDENT JUDGE ERRED IN RULING THAT PETITIONER IS LIABLE TO

PAY REAL PROPERTY TAXES TO THE CITY OF CEBU.

Anent the first assigned error, the petitioner asserts that although it is a government-owned or controlled
corporation it is mandated to perform functions in the same category as an instrumentality of Government.
An instrumentality of Government is one created to perform governmental functions primarily to promote
certain aspects of the economic life of the people.  Considering its task "not merely to efficiently operate and
6

manage the Mactan-Cebu International Airport, but more importantly, to carry out the Government policies of
promoting and developing the Central Visayas and Mindanao regions as centers of international trade and
tourism, and accelerating the development of the means of transportation and communication in the
country,"  and that it is an attached agency of the Department of Transportation and Communication
7

(DOTC),  the petitioner "may stand in [sic] the same footing as an agency or instrumentality of the national
8

government." Hence, its tax exemption privilege under Section 14 of its Charter "cannot be considered
withdrawn with the passage of the Local Government Code of 1991 (hereinafter LGC) because Section 133
thereof specifically states that the taxing powers of local government units shall not extend to the levy of
taxes of fees or charges of any kind on the national government its agencies and instrumentalities."

As to the second assigned error, the petitioner contends that being an instrumentality of the National
Government, respondent City of Cebu has no power nor authority to impose realty taxes upon it in
accordance with the aforesaid Section 133 of the LGC, as explained in Basco vs. Philippine Amusement
and Gaming Corporation; 9

Local governments have no power to tax instrumentalities of the National Government. PAGCOR is
a government owned or controlled corporation with an original character, PD 1869. All its shares of
stock are owned by the National Government. . . .

PAGCOR has a dual role, to operate and regulate gambling casinos. The latter joke is
governmental, which places it in the category of an agency or instrumentality of the
Government. Being an instrumentality of the Government, PAGCOR should be and actually is
exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to
control by a mere Local government.

The states have no power by taxation or otherwise, to retard, impede, burden or in any manner
control the operation of constitutional laws enacted by Congress to carry into execution the powers
vested in the federal government. (McCulloch v. Maryland, 4 Wheat 316, 4 L Ed. 579).

This doctrine emanates from the "supremacy" of the National Government over local government.

Justice Holmes, speaking for the Supreme Court, make references to the entire absence of power
on the part of the States to touch, in that way (taxation) at least, the instrumentalities of the United
States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political subdivision
can regulate a federal instrumentality in such a way as to prevent it from consummating its federal
responsibilities, or even to seriously burden it in the accomplishment of them. (Antieau Modern
Constitutional Law, Vol. 2, p. 140)

Otherwise mere creature of the State can defeat National policies thru extermination of what local
authorities may perceive to be undesirable activities or enterprise using the power to tax as "a toll for
regulation" (U.S. v. Sanchez, 340 US 42). The power to tax which was called by Justice Marshall as
the "power to destroy" (McCulloch v. Maryland, supra) cannot be allowed to defeat an instrumentality
or creation of the very entity which has the inherent power to wield it. (Emphasis supplied)
It then concludes that the respondent Judge "cannot therefore correctly say that the questioned provisions of
the Code do not contain any distinction between a governmental function as against one performing merely
proprietary ones such that the exemption privilege withdrawn under the said Code would apply
to all government corporations." For it is clear from Section 133, in relation to Section 234, of the LGC that
the legislature meant to exclude instrumentalities of the national government from the taxing power of the
local government units.

In its comment respondent City of Cebu alleges that as local a government unit and a political subdivision, it
has the power to impose, levy, assess, and collect taxes within its jurisdiction. Such power is guaranteed by
the Constitution  and enhanced further by the LGC. While it may be true that under its Charter the petitioner
10

198
was exempt from the payment of realty taxes,  this exemption was withdrawn by Section 234 of the LGC. In
11

response to the petitioner's claim that such exemption was not repealed because being an instrumentality of
the National Government, Section 133 of the LGC prohibits local government units from imposing taxes,
fees, or charges of any kind on it, respondent City of Cebu points out that the petitioner is likewise a
government-owned corporation, and Section 234 thereof does not distinguish between government-owned
corporation, and Section 234 thereof does not distinguish between government-owned corporation, and
Section 234 thereof does not distinguish between government-owned or controlled corporations performing
governmental and purely proprietary functions. Respondent city of Cebu urges this the Manila International
Airport Authority is a governmental-owned corporation,   and to reject the application of Basco because it
12

was "promulgated . . . before the enactment and the singing into law of R.A. No. 7160," and was not,
therefore, decided "in the light of the spirit and intention of the framers of the said law.

As a general rule, the power to tax is an incident of sovereignty and is unlimited in its range, acknowledging
in its very nature no limits, so that security against its abuse is to be found only in the responsibility of the
legislature which imposes the tax on the constituency who are to pay it. Nevertheless, effective limitations
thereon may be imposed by the people through their Constitutions.  Our Constitution, for instance, provides
13

that the rule of taxation shall be uniform and equitable and Congress shall evolve a progressive system of
taxation.  So potent indeed is the power that it was once opined that "the power to tax involves the power to
14

destroy."  Verily, taxation is a destructive power which interferes with the personal and property for the
15

support of the government. Accordingly, tax statutes must be construed strictly against the government and
liberally in favor of the taxpayer.  But since taxes are what we pay for civilized society,  or are the lifeblood
16 17

of the nation, the law frowns against exemptions from taxation and statutes granting tax exemptions are thus
construed strictissimi juris against the taxpayers and liberally in favor of the taxing authority.  A claim of
18

exemption from tax payment must be clearly shown and based on language in the law too plain to be
mistaken.  Elsewise stated, taxation is the rule, exemption therefrom is the exception.  However, if the
19 20

grantee of the exemption is a political subdivision or instrumentality, the rigid rule of construction does not
apply because the practical effect of the exemption is merely to reduce the amount of money that has to be
handled by the government in the course of its operations. 21

The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be exercised by
local legislative bodies, no longer merely by virtue of a valid delegation as before, but pursuant to direct
authority conferred by Section 5, Article X of the Constitution.  Under the latter, the exercise of the power
22

may be subject to such guidelines and limitations as the Congress may provide which, however, must be
consistent with the basic policy of local autonomy.

There can be no question that under Section 14 of R.A. No. 6958 the petitioner is exempt from the payment
of realty taxes imposed by the National Government or any of its political subdivisions, agencies, and
instrumentalities. Nevertheless, since taxation is the rule and exemption therefrom the exception, the
exemption may thus be withdrawn at the pleasure of the taxing authority. The only exception to this rule is
where the exemption was granted to private parties based on material consideration of a mutual nature,
which then becomes contractual and is thus covered by the non-impairment clause of the Constitution. 23

The LGC, enacted pursuant to Section 3, Article X of the constitution provides for the exercise by local
government units of their power to tax, the scope thereof or its limitations, and the exemption from taxation.

Section 133 of the LGC prescribes the common limitations on the taxing powers of local government units
as follows:

Sec. 133. Common Limitations on the Taxing Power of Local Government Units. — Unless
otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the following:

(a) Income tax, except when levied on banks and other financial institutions;

(b) Documentary stamp tax;

 (c) Taxes on estates, "inheritance, gifts, legacies and other acquisitions mortis
causa, except as otherwise provided herein

(d) Customs duties, registration fees of vessels and wharfage on wharves, tonnage
dues, and all other kinds of customs fees charges and dues except wharfage on
wharves constructed and maintained by the local government unit concerned:

(e) Taxes, fees and charges and other imposition upon goods carried into or out of,
or passing through, the territorial jurisdictions of local government units in the guise
or charges for wharfages, tolls for bridges or otherwise, or other taxes, fees or 198
charges in any form whatsoever upon such goods or merchandise;

(f) Taxes fees or charges on agricultural and aquatic products when sold by marginal
farmers or fishermen;

(g) Taxes on business enterprise certified to be the Board of Investment as pioneer

or non-pioneer for a period of six (6) and four (4) years, respectively from the date of
registration;

(h) Excise taxes on articles enumerated under the National Internal Revenue Code,
as amended, and taxes, fees or charges on petroleum products;

(i) Percentage or value added tax (VAT) on sales, barters or exchanges or similar
transactions on goods or services except as otherwise provided herein;

(j) Taxes on the gross receipts of transportation contractor and person engage in the
transportation of passengers of freight by hire and common carriers by air, land, or
water, except as provided in this code;

(k) Taxes on premiums paid by ways reinsurance or retrocession;

(l) Taxes, fees, or charges for the registration of motor vehicles and for the issuance
of all kinds of licenses or permits for the driving of thereof, except, tricycles;

(m) Taxes, fees, or other charges on Philippine product actually exported, except as
otherwise provided herein;

(n) Taxes, fees, or charges, on Countryside and Barangay Business Enterprise and
Cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered Sixty
nine hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperative Code
of the Philippines; and

(o) TAXES, FEES, OR CHARGES OF ANY KIND ON THE NATIONAL

GOVERNMENT, ITS AGENCIES AND INSTRUMENTALITIES, AND LOCAL
GOVERNMENT UNITS. (emphasis supplied)

Needless to say the last item (item o) is pertinent in this case. The "taxes, fees or charges" referred to are
"of any kind", hence they include all of these, unless otherwise provided by the LGC. The term "taxes" is well
understood so as to need no further elaboration, especially in the light of the above enumeration. The term
"fees" means charges fixed by law or Ordinance for the regulation or inspection of business activity,  while
24

"charges" are pecuniary liabilities such as rents or fees against person or property.
25

Among the "taxes" enumerated in the LGC is real property tax, which is governed by Section 232. It reads
as follows:

Sec. 232. Power to Levy Real Property Tax. — A province or city or a municipality within the
Metropolitan Manila Area may levy on an annual ad valorem tax on real property such as land,
building, machinery and other improvements not hereafter specifically exempted.

Section 234 of LGC provides for the exemptions from payment of real property taxes and withdraws
previous exemptions therefrom granted to natural and juridical persons, including government owned and
controlled corporations, except as provided therein. It provides:

Sec. 234. Exemptions from Real Property Tax. — The following are exempted from payment of the
real property tax:
 (a) Real property owned by the Republic of the Philippines or any of its political
subdivisions except when the beneficial use thereof had been granted, for
reconsideration or otherwise, to a taxable person;

(b) Charitable institutions, churches, parsonages or convents appurtenants thereto,

mosques nonprofits or religious cemeteries and all lands, building and improvements
actually, directly, and exclusively used for religious charitable or educational
purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by 198
local water districts and government-owned or controlled corporations engaged in the
supply and distribution of water and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided for under
R.A. No. 6938; and;

(e) Machinery and equipment used for pollution control and environmental protection.

Except as provided herein, any exemptions from payment of real property tax
previously granted to or presently enjoyed by, all persons whether natural or juridical,
including all government owned or controlled corporations are hereby withdrawn
upon the effectivity of his Code.

These exemptions are based on the ownership, character, and use of the property. Thus;

(a) Ownership Exemptions. Exemptions from real property taxes on the basis of

ownership are real properties owned by: (i) the Republic, (ii) a province, (iii) a city,
(iv) a municipality, (v) a barangay, and (vi) registered cooperatives.

(b) Character Exemptions. Exempted from real property taxes on the basis of their
character are: (i) charitable institutions, (ii) houses and temples of prayer like
churches, parsonages or convents appurtenant thereto, mosques, and (iii) non profit
or religious cemeteries.

(c) Usage exemptions. Exempted from real property taxes on the basis of the actual,
direct and exclusive use to which they are devoted are: (i) all lands buildings and
improvements which are actually, directed and exclusively used for religious,
charitable or educational purpose; (ii) all machineries and equipment actually, directly
and exclusively used or by local water districts or by government-owned or controlled
corporations engaged in the supply and distribution of water and/or generation and
transmission of electric power; and (iii) all machinery and equipment used for
pollution control and environmental protection.

To help provide a healthy environment in the midst of the modernization of the country, all machinery
and equipment for pollution control and environmental protection may not be taxed by local
governments.

2. Other Exemptions Withdrawn. All other exemptions previously granted to natural

or juridical persons including government-owned or controlled corporations are
withdrawn upon the effectivity of the Code. 26

Section 193 of the LGC is the general provision on withdrawal of tax exemption privileges. It provides:

Sec. 193. Withdrawal of Tax Exemption Privileges. — Unless otherwise provided in this code, tax
exemptions or incentives granted to or presently enjoyed by all persons, whether natural or juridical,
including government-owned, or controlled corporations, except local water districts, cooperatives
duly registered under R.A. 6938, non stock and non profit hospitals and educational constitutions,
are hereby withdrawn upon the effectivity of this Code.

On the other hand, the LGC authorizes local government units to grant tax exemption privileges. Thus,
Section 192 thereof provides:

Sec. 192. Authority to Grant Tax Exemption Privileges. — Local government units may, through
ordinances duly approved, grant tax exemptions, incentives or reliefs under such terms and
conditions as they may deem necessary.
The foregoing sections of the LGC speaks of: (a) the limitations on the taxing powers of local government
units and the exceptions to such limitations; and (b) the rule on tax exemptions and the exceptions thereto.
The use of exceptions of provisos in these section, as shown by the following clauses:

(1) "unless otherwise provided herein" in the opening paragraph of Section 133;

(2) "Unless otherwise provided in this Code" in section 193;

(3) "not hereafter specifically exempted" in Section 232; and

198
(4) "Except as provided herein" in the last paragraph of Section 234

initially hampers a ready understanding of the sections. Note, too, that the aforementioned clause in section
133 seems to be inaccurately worded. Instead of the clause "unless otherwise provided herein," with the
"herein" to mean, of course, the section, it should have used the clause "unless otherwise provided in this
Code." The former results in absurdity since the section itself enumerates what are beyond the taxing
powers of local government units and, where exceptions were intended, the exceptions were explicitly
indicated in the text. For instance, in item (a) which excepts the income taxes "when livied on banks and
other financial institutions", item (d) which excepts "wharfage on wharves constructed and maintained by the
local government until concerned"; and item (1) which excepts taxes, fees, and charges for the registration
and issuance of license or permits for the driving of "tricycles". It may also be observed that within the body
itself of the section, there are exceptions which can be found only in other parts of the LGC, but the section
interchangeably uses therein the clause "except as otherwise provided herein" as in items (c) and (i), or the
clause "except as otherwise provided herein" as in items (c) and (i), or the clause "excepts as provided in
this Code" in item (j). These clauses would be obviously unnecessary or mere surplus-ages if the opening
clause of the section were" "Unless otherwise provided in this Code" instead of "Unless otherwise provided
herein". In any event, even if the latter is used, since under Section 232 local government units have the
power to levy real property tax, except those exempted therefrom under Section 234, then Section 232 must
be deemed to qualify Section 133.

Thus, reading together Section 133, 232 and 234 of the LGC, we conclude that as a general rule, as laid
down in Section 133 the taxing powers of local government units cannot extend to the levy of  inter alia,
"taxes, fees, and charges of any kind of the National Government, its agencies and instrumentalties, and
local government units"; however, pursuant to Section 232, provinces, cities, municipalities in the
Metropolitan Manila Area may impose the real property tax except on, inter alia, "real property owned by the
Republic of the Philippines or any of its political subdivisions except when the beneficial used thereof has
been granted, for consideration or otherwise, to a taxable person", as provided in item (a) of the first
paragraph of Section 234.

As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical persons, including
government-owned and controlled corporations, Section 193 of the LGC prescribes the general rule,  viz.,
they are withdrawn upon the effectivity of the LGC, except upon the effectivity of the LGC, except those
granted to local water districts, cooperatives duly registered under R.A. No. 6938, non stock and non-profit
hospitals and educational institutions, and unless otherwise provided in the LGC. The latter proviso could
refer to Section 234, which enumerates the properties exempt from real property tax. But the last paragraph
of Section 234 further qualifies the retention of the exemption in so far as the real property taxes are
concerned by limiting the retention only to those enumerated there-in; all others not included in the
enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as the real property is owned
by the Republic of the Philippines, or any of its political subdivisions covered by item (a) of the first
paragraph of Section 234, the exemption is withdrawn if the beneficial use of such property has been
granted to taxable person for consideration or otherwise.

Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions
from real property taxes granted to natural or juridical persons, including government-owned or controlled
corporations, except as provided in the said section, and the petitioner is, undoubtedly, a government-owned
corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its charter, R.A.
No. 6958, has been withdrawn. Any claim to the contrary can only be justified if the petitioner can seek
refuge under any of the exceptions provided in Section 234, but not under Section 133, as it now asserts,
since, as shown above, the said section is qualified by Section 232 and 234.

In short, the petitioner can no longer invoke the general rule in Section 133 that the taxing powers of the
local government units cannot extend to the levy of:

(o) taxes, fees, or charges of any kind on the National Government, its agencies, or
instrumentalities, and local government units.
I must show that the parcels of land in question, which are real property, are any one of those enumerated in
Section 234, either by virtue of ownership, character, or use of the property. Most likely, it could only be the
first, but not under any explicit provision of the said section, for one exists. In light of the petitioner's theory
that it is an "instrumentality of the Government", it could only be within be first item of the first paragraph of
the section by expanding the scope of the terms Republic of the Philippines" to
embrace . . . . . . "instrumentalities" and "agencies" or expediency we quote:

(a) real property owned by the Republic of the Philippines, or any of the Philippines,
or any of its political subdivisions except when the beneficial use thereof has been
granted, for consideration or otherwise, to a taxable person.
198

This view does not persuade us. In the first place, the petitioner's claim that it is an instrumentality of the
Government is based on Section 133(o), which expressly mentions the word "instrumentalities"; and in the
second place it fails to consider the fact that the legislature used the phrase "National Government, its
agencies and instrumentalities" "in Section 133(o),but only the phrase "Republic of the Philippines or any of
its political subdivision "in Section 234(a).

The terms "Republic of the Philippines" and "National Government" are not interchangeable. The former is
boarder and synonymous with "Government of the Republic of the Philippines" which the Administrative
Code of the 1987 defines as the "corporate governmental entity though which the functions of the
government are exercised through at the Philippines, including, saves as the contrary appears from the
context, the various arms through which political authority is made effective in the Philippines, whether
pertaining to the autonomous reason, the provincial, city, municipal or barangay subdivision or other forms
of local government."  These autonomous regions, provincial, city, municipal or barangay subdivisions" are
27

the political subdivision. 28

On the other hand, "National Government" refers "to the entire machinery of the central government, as
distinguished from the different forms of local Governments."  The National Government then is composed
29

of the three great departments the executive, the legislative and the judicial. 30

An "agency" of the Government refers to "any of the various units of the Government, including a
department, bureau, office instrumentality, or government-owned or controlled corporation, or a local
government or a distinct unit therein;"  while an "instrumentality" refers to "any agency of the National
31

Government, not integrated within the department framework, vested with special functions or jurisdiction by
law, endowed with some if not all corporate powers, administering special funds, and enjoying operational
autonomy; usually through a charter. This term includes regulatory agencies, chartered institutions and
government-owned and controlled corporations". 32

If Section 234(a) intended to extend the exception therein to the withdrawal of the exemption from payment
of real property taxes under the last sentence of the said section to the agencies and instrumentalities of the
National Government mentioned in Section 133(o), then it should have restated the wording of the latter.
Yet, it did not Moreover, that Congress did not wish to expand the scope of the exemption in Section 234(a)
to include real property owned by other instrumentalities or agencies of the government including
government-owned and controlled corporations is further borne out by the fact that the source of this
exemption is Section 40(a) of P.D. No. 646, otherwise known as the Real Property Tax Code, which reads:

Sec 40. Exemption from Real Property Tax. — The exemption shall be as follows:

(a) Real property owned by the Republic of the Philippines or any of

its political subdivisions and any government-owned or controlled
corporations so exempt by is charter: Provided, however, that this
exemption shall not apply to real property of the above mentioned
entities the beneficial use of which has been granted, for
consideration or otherwise, to a taxable person.

Note that as a reproduced in Section 234(a), the phrase "and any government-owned or controlled
corporation so exempt by its charter" was excluded. The justification for this restricted exemption in Section
234(a) seems obvious: to limit further tax exemption privileges, specially in light of the general provision on
withdrawal of exemption from payment of real property taxes in the last paragraph of property taxes in the
last paragraph of Section 234. These policy considerations are consistent with the State policy to ensure
autonomy to local governments  and the objective of the LGC that they enjoy genuine and meaningful local
33

autonomy to enable them to attain their fullest development as self-reliant communities and make them
effective partners in the attainment of national goals.  The power to tax is the most effective instrument to
34

raise needed revenues to finance and support myriad activities of local government units for the delivery of
basic services essential to the promotion of the general welfare and the enhancement of peace, progress,
and prosperity of the people. It may also be relevant to recall that the original reasons for the withdrawal of
tax exemption privileges granted to government-owned and controlled corporations and all other units of
 government were that such privilege resulted in serious tax base erosion and distortions in the tax treatment
of similarly situated enterprises, and there was a need for this entities to share in the requirements of the
development, fiscal or otherwise, by paying the taxes and other charges due from them. 35

The crucial issues then to be addressed are: (a) whether the parcels of land in question belong to the
Republic of the Philippines whose beneficial use has been granted to the petitioner, and (b) whether the
petitioner is a "taxable person".

Section 15 of the petitioner's Charter provides:

198
Sec. 15. Transfer of Existing Facilities and Intangible Assets. — All existing public airport facilities,
runways, lands, buildings and other properties, movable or immovable, belonging to or presently
administered by the airports, and all assets, powers, rights, interests and privileges relating on
airport works, or air operations, including all equipment which are necessary for the operations of air
navigation, acrodrome control towers, crash, fire, and rescue facilities are hereby transferred to the
Authority: Provided however, that the operations control of all equipment necessary for the operation
of radio aids to air navigation, airways communication, the approach control office, and the area
control center shall be retained by the Air Transportation Office. No equipment, however, shall be
removed by the Air Transportation Office from Mactan without the concurrence of the authority. The
authority may assist in the maintenance of the Air Transportation Office equipment.

The "airports" referred to are the "Lahug Air Port" in Cebu City and the "Mactan International AirPort in the
Province of Cebu",  which belonged to the Republic of the Philippines, then under the Air Transportation
36

Office (ATO). 37

It may be reasonable to assume that the term "lands" refer to "lands" in Cebu City then administered by the
Lahug Air Port and includes the parcels of land the respondent City of Cebu seeks to levy on for real
property taxes. This section involves a "transfer" of the "lands" among other things, to the petitioner and not
just the transfer of the beneficial use thereof, with the ownership being retained by the Republic of the
Philippines.

This "transfer" is actually an absolute conveyance of the ownership thereof because the petitioner's
authorized capital stock consists of, inter alia "the value of such real estate owned and/or administered by
the airports."  Hence, the petitioner is now the owner of the land in question and the exception in Section
38

234(c) of the LGC is inapplicable.

Moreover, the petitioner cannot claim that it was never a "taxable person" under its Charter. It was  only
exempted from the payment of real property taxes. The grant of the privilege only in respect of this tax is
conclusive proof of the legislative intent to make it a taxable person subject to all taxes, except real property
tax.

Finally, even if the petitioner was originally not a taxable person for purposes of real property tax, in light of
the forgoing disquisitions, it had already become even if it be conceded to be an "agency" or
"instrumentality" of the Government, a taxable person for such purpose in view of the withdrawal in the last
paragraph of Section 234 of exemptions from the payment of real property taxes, which, as earlier adverted
to, applies to the petitioner.

Accordingly, the position taken by the petitioner is untenable. Reliance on Basco vs. Philippine Amusement
and Gaming Corporation  is unavailing since it was decided before the effectivity of the LGC. Besides,
39

nothing can prevent Congress from decreeing that even instrumentalities or agencies of the government
performing governmental functions may be subject to tax. Where it is done precisely to fulfill a constitutional
mandate and national policy, no one can doubt its wisdom.

WHEREFORE, the instant petition is DENIED. The challenged decision and order of the Regional Trial
Court of Cebu, Branch 20, in Civil Case No. CEB-16900 are AFFIRMED.

No pronouncement as to costs. SO ORDERED.

G.R. No. 98310 October 24, 1996

MATUGUINA INTEGRATED WOOD PRODUCTS, INC., petitioner,

vs.
The HON. COURT OF APPEALS, DAVAO ENTERPRISES CORPORATION, The HON. MINISTER, (NOW
SECRETARY) of NATURAL RESOURCES AND PHILLIP CO, respondents.
TORRES, JR., J.:p

Matuguina Integrated Wood Products Inc. (MIWPI, for brevity) filed this action for Prohibition, Damages and Injunction, in order to prevent the respondent Minister
(now Secretary) of Natural Resources from enforcing its Order of Execution against it, for liability arising from an alleged encroachment of the petitioner over the
timber concession of respondent DAVENCOR located in Mati, Davao Oriental.

The Regional Trial Court, Branch 17, Davao City, ruled in favor of the petitioner, but on appeal, was reversed by the
respondent Court of Appeals in its decision dated February 25, 1991, which found MIWPI, as an alter ego of
Milagros Matuguina and/or Matuguina Logging Enterprises (MLE), to be liable to DAVENCOR for the illegal 198
encroachment.

The following are the antecedent facts:

On June 28, 1973, the Acting Director of the Bureau of Forest Development issued Provisional Timber License
(PTL) No. 30, covering an area of 5,400 hectares to Ms. Milagros Matuguina who was then doing business under
the name of MLE, a sole proprietorship venture. A portion, covering 1,900 hectares, of the said area was located
within the territorial boundary of Gov. Generoso in Mati, Davao Oriental, and adjoined the timber concession of
Davao Enterprises Corporation (DAVENCOR), the private respondent in this case.

On July 10, 1974, petitioner Matuguina Integrated Wood Products, Inc. (MIWPI), was incorporated, having an
authorized capital stock of Ten Million Pesos (P10,000,000.00).   The incorporators/stockholders of MIWPI, and their
1

stock subscriptions were as follows:

Name No. Of Shares Amount of Capital

Subscribed Stock Subscribed

1. Henry Wee 1,160,000 1,160,000.00

2. Ma. Milagros Matuguina 400,000 400,000.00
3. Alejandro Chua Chun 200,000 200,000.00
4. Bernadita Chua 120,000 120,000.00
5. Domingo Herrera 40,000 40,000.00
6. Manuel Hernaez 40,000 40,000.00
7. Luis Valderama 40,000 40,000.00
————— —————
2,000,000 2,000,000.00
======== =========

Milagros Matuguina became the majority stockholder of MIWPI on September 24, 1974, when the latter's Board of
Directors approved by Resolution the transfer of 1,000,000 shares from Henry Wee to Milagros Matuguina, thus
giving her seventy percent (70%) stock ownership of MIWPI.

In an undated letter   to the Director of Forest Development (BFD) on November 26, 1974, Milagros Matuguina
2

requested the Director for a change of name and transfer of management of PTL No. 30 from a single proprietorship
under her name, to that of MIWPI.

This request was favorably endorsed on December 2, 1974   by the BFD's Acting Director, Jose Viado to
3

respondent Secretary of Natural Resources, who approved the same on September 5, 1975.  4

On July 17, 1975, Milagros Matuguina and petitioner MIWPI executed a Deed of Transfer    transferring all of the 5

former's rights, interests, ownership and participation in Provincial Timber License No. 30 to the latter for and in
consideration of 148,000 shares of stocks in MIWPI.

A copy of said deed was submitted to the Director of Forest Development and petitioner MIWPI had since been
acting as holder and licensee of PTL No. 30

On July 28, 1975, pending approval of the request to transfer the PTL to MIWPI, DAVENCOR, through its Assistant
General Manager, complained to the District Forester at Mati, Davao Oriental that Milagros Matuguina/MLE had
encroached into and was conducting logging operations in DAVENCOR's timber concession.

After investigation of DAVENCOR's complaint, the Investigating Committee which looked into DAVENCOR's
complaint submitted its report to the Director, finding that MLE had encroached on the concession area of
DAVENCOR. In line with this, the Director of Forest Development issued an Order   on July 15, 1981, finding and 6

declaring MLE to have encroached upon, and conducted illegal logging operations within the licensed or concession
area of DAVENCOR.
MLE appealed the Order to the Ministry of Natural Resources, which appeal was docketed as MNR CASE No. 6540.
During the pendency of the appealed case with the Minister of Natural Resources, Ma. Milagros Matuguina
disposed of her shares in petitioner MIWPI, thereby ceasing to be a stockholder of the petitioner as of March 16,
1986. 7

On October 1, 1986, The Minister of Natural Resources, Hon. Ernesto M. Maceda rendered his Decision,    affirming
8

the aforesaid order of the Director of Foreign Development, stating thus:

DECISION
198
For our Resolution is the appeal by MATUGUINA LOGGING ENTERPRISES (MLR, for short) of the
Order dated 15 July 1991 of the Director of Forest Development finding and declaring MLE to have
encroached upon, and conducted illegal logging operations within the license or concession area of
DAVAO ENTERPRISES CORPORATION. The aforesaid Order dispositively states:

Wherefore, there being a clear and convincing proof that Matuguina Conducted
illegal operation within the license area of DAVENCOR, above named respondent is
hereby ordered to pay to the complainant the equivalent value in pesos of 2,352.04
cubic meters of timber based on the market price obtaining, at the logpond of the
respondent at the time of cutting, minus the cost of production, or to restitute to the
complainant equal volume of 2,352.04 cubic meters of logs owned by respondent to
be taken at respondent's logpond. The respondent is hereby directed to comply with
this Order within a period of ninety (90) days from receipt of this Order and after the
lapse of the said period, no compliance has been made by the respondent, its
logging operations shall ipso facto become automatically suspended until respondent
shall have complied as directed.

The Regional Director of Region II, Davao City is hereby instructed to implement this
Order and to submit his compliance report within ten (10) days after the lapse of the
ninety (90) days period within which the respondent is directed to comply with this
Order.

And that the dispositive portion of the said decision states:

WHEREFORE, the Order dated 15 July 1981 of the Director of Forest Development is hereby
AFFIRMED.

When the Decision of the Minister of Natural Resources became final and executory, Philip Co and DAVENCOR
requested the respondent Minister on October 30, 1986 to issue immediately a writ of execution against MLE and/or
MIWPI.   The Order of Execution   was issued on January 6, 1987 by the Minister through the latter's Assistant on
9 10

Legal Affairs. The said Order directed the issuance of a writ of execution, not only against MLE, but likewise against
MIWPI. The dispositive portion of the order provides:

WHEREFORE, let a Writ of Execution be issued against Matuguina Logging Enterprises and/or
Matuguina Integrated Wood Products, Inc. For the satisfaction of the Decision of the Bureau of
Forest Development dated 15 July 1981, and the Order of this office dated 1 October 1986.

SO ORDERED.

Subsequently, a writ of execution   dated January 8, 1987 was issued in favor of the respondent DAVENCOR,
11

which states:

The City/Provincial Sheriff

Davao City

GREETINGS:

You are hereby directed to enforce, implement and execute the Order of Execution dated 06 June
1987 of this Office in the above-entitled case against Matuguina Logging Enterprises and/or
Matuguina Integrated Wood Products, Inc. Its officers or any person or corporation in its behalf and
conformably with the Order dated 15 July 1981 of the Director of Forest Development, stating
dispositively.

xxx xxx xxx

 You are hereby requested to submit your return to this Office within the period of sixty (60) days from
your receipt hereof as to action taken hereon.

SO ORDERED.

On February 11, 1987, MIWPI filed the instant complaint   for prohibition, damages and injunction, with prayer for
12

restraining order, which case was docketed as Civil Case No. 18,457-87 in the Regional Trial Court — Davao City,
Branch 17. MIWPI stated its primary cause of action, the relevant portion of which reads, viz.:

5. That plaintiff which has a distinct and separate personality of its own under the law, and was 198
never a party to the case between DAVENCOR and MLE, suddenly became a party to the case after
the decision became final and executory with the issuance of Annex "B" hereof for reasons known to
the defendants alone:

6. That the issuance of Annex "B" hereof (the order of execution) by the defendant Minister has been
made not only without or in excess of his authority but that the same was issued patently without any
factual or legal basis, hence, a gross violation of plaintiff's constitutional rights under the due process
clause;

7. That plaintiff, in the face of the order (Annex "B") complained of, there being no appeal or any
plain, speedy, and adequate remedy in the ordinary course of law, does not have any alternative but
to ventilate the present recourse;

8. That defendant Minister is doing, threatens or is about to do, or is procuring or suffering to be

done, some act which definitely is in violation of the plaintiff's rights respecting the subject matter of
the action, and unless said act or acts are restrained or prohibited at least during the pendency of
this case, said act or acts would probably work not only injustice to plaintiff but would tend to render
the judgment of this Honorable Court ineffectual;

9. That the commission or continuance of the acts complained of during the present litigation would
not only cause great and irreparable injury, but will also work injustice to the plaintiff, and would
complicate, aggravate and multiply the issues in this case;

10. That the plaintiff is entitled to the relief demanded, and the whole or part of such relief consists in
restraining the commission or continuance of the acts complained of, or in the performance of acts,
either for a limited period or perpetually;

11. That great and irreparable injury would inevitably result to the plaintiff before the matter can be
heard on notice, hence, immediate issuance of a restraining order is necessary and proper;

12. That the plaintiff is willing and able to file the necessary bond executed to the defendants, in an
amount to be fixed by the court, to the effect that the plaintiff will pay to the defendants all damages
which they may sustain by reason of the injunction if the court should finally decide that the plaintiff
was not entitled thereto.

MIWPI, likewise, alleges that in wantonly and imprudently procuring the Writ of Execution against it, which
DAVENCOR and Philip Co seek to enforce a 2.5 Million Peso liability of plaintiff, the latter has been constrained to
bring the present action, thereby incurring damages in the sum of P500,000.00 in concept of actual and
compensatory damages, and P250,000.00 in attorney's fees, which amount petitioner now seeks to recover.

The trial court issued a temporary restraining order the next day, February 12, 1987, restraining and/or enjoining the
private respondents and the Hon. Secretary of Natural Resources from enforcing, implementing and/or carrying into
effect, the decision of the respondent Secretary dated October 1, 1986, as well as the order of execution dated
January 6, 1987.

On February 17, 1987, private respondents filed a Motion to Dismiss   alleging that the trial court had no jurisdiction
13

over the case under Presidential Decree No. 705, to which Motion to Dismiss, petitioner filed an Opposition   dated
14

February 1987. On March 9, 1987, the trial court issued an order   denying private respondent's Motion to Dismiss.
15

Hence, private respondents filed their Answer   dated March 13, 1987 and an Amended Answer  7 dated July 16,
16 1

1987.

In the latter pleading, private respondents raised the following special and affirmative defenses:

7. That neither Milagros Matuguina nor Matuguina Integrated Wood Products, Inc. advised
defendant Davencor of the change of name, and transfer of management of PTL No. 30 from
Milagros Matuguina to Matuguina Integrated Wood Products, Inc., during the pendency of MNR
 Case No. 6540 before the Bureau of Forest Development and the Ministry of Natural Resources,
notwithstanding that the lawyer of Matuguina Integrated Wood Products, Inc., who was also a
stockholder thereof, had appeared for Milagros Matuguina in said administrative case.

8. That plaintiff has acted in bad faith and is now in estoppel from questioning the Writ of Execution
issued against Milagros Matuguina (now Matuguina Integrated Wood Products, Inc.) to satisfy the
judgment in MNR Case No. 6540.

9. This Honorable Court has no jurisdiction over the nature and subject matter of this action,
especially because: 198

(a) The plaintiff has not exhausted administrative remedies available to it before initiating this action;

(b) In the guise of entertaining an action for damages, this Court is being misled by the plaintiff into
deciding questions properly for the Department of Natural Resources to decide exclusively in the
lawful exercise of its regulatory jurisdiction;

(c) The plaintiff is now precluded and estopped from filing this action.

10. The plaintiff has no cause of action against the defendants and has not stated any in its
complaint, especially because:

(a) Having failed to exhaust administrative remedies, plaintiff is without a ripe cause of action that
can be pleaded before this Honorable Court;

(b) In substance, there is no justiciable question raised under the facts and circumstances of this
case.

Meanwhile, on June 2, 1987, the trial court issued on order   granting the petitioner's prayer for the issuance of a
18

writ of preliminary injunction against the private respondents and the Secretary of Natural Resources, ordering them
to desist, refrain and prevent from enforcing respondent Secretary's Decision dated October 1, 1986 as well as the
writ of execution dated January 8, 1987.

On May 10, 1989, the trial court rendered its Decision   in favor of the petitioner, disposing of the action as follows:
19

WHEREFORE, in view of the foregoing, finding the evidence of plaintiff, Matuguina Integrated Wood
Products, Inc. sufficient to sustain a preponderance of evidence, showing that the order of execution
dated January 6, 1987, issued by the Minister of Natural Resources, through Alexander C. Castro,
Assistant Minister for Legal Affairs, included therein, plaintiff Matuguina Integrated Wood Products,
Inc., despite non-inclusion of plaintiff in the decision of the then Minister of Natural Resources, dated
October 1, 1986, already final and executory before the issuance of the order and execution, said
order or execution is hereby declared null and void and without any legal effect.

As a consequence thereof, the writ of preliminary injunction issued by this court, dated June 2, 1987
is hereby made permanent.

Moreover, as a result of the filing of this case, defendant Philip Co and Davencor Corporation, are
ordered to jointly and severally pay the amount of P100,000.00 as actual and compensatory
damages, along with another amount of P20,000.00 as attorney's fees and costs of this action, in
favor of plaintiff Matuguina Integrated Wood Products, Inc.

SO ORDERED.

Private respondents appealed the trial court's decision on May 19, 1989. Their notice of appeal was approved by the
trial court. The appealed case was docketed with respondent Honorable Court of Appeals as CA-G.R. SP No.
19887.

On February 25, 1991, the respondent Court rendered its Decision,   reversing the lower court's pronouncement.
20

The dispositive portion of the Decision reads:

WHEREFORE, premises considered, the decision appealed from is reversed and set aside and the
Order of Execution issued by the Minister of Natural Resources dated January 6, 1987 is affirmed.
Without pronouncement as to costs.

SO ORDERED.
In due time, petitioner filed a motion for reconsideration.   Private respondents filed their opposition   to the same on
21 22

April 2, 1991. In a Resolution   dated April 12, 1991, the motion was denied by the respondent Court.
23

Not content with the court's pronouncement, petitioner is now before us on a Petition for Review
on Certiorari,   alleging that the respondent court acted with grave abuse of discretion in rendering the questioned
24

decision and its companion resolution, denying the motion for reconsideration.

The reasons relied upon by the Petitioner in filing its petition are hereby restated:

I 198

PETITIONER WAS DENIED DUE PROCESS OF LAW WHEN IT WAS MADE LIABLE BY
RESPONDENT SECRETARY OF NATURAL RESOURCES IN HIS ORDER OF EXECUTION
DATED 06 JANUARY 1987 (EXHIBIT "B" OF ATTACHMENT "O") ISSUED IN MNR CASE NO.
6540 DESPITE THE FACT THAT PETITIONER WAS NEVER A PARTY NOR A PARTICIPANT IN
THE SAID CASE: IN FACT, PETITIONER NEVER HAD NOTICE OF THE PROCEEDINGS IN MNR
CASE NO. 6540.

II

THE FAILURE TO AFFORD PETITIONER THE OPPORTUNITY TO BE HEARD IN THE

ADMINISTRATIVE LEVEL (MNR CASE NO. 6540) COULD NOT HAVE BEEN CURED BY THE
INSTITUTION OF THE ACTION FOR PROHIBITION IN THE TRIAL COURT BECAUSE SAID
COURT HAD NO JURISDICTION TO DETERMINE WHETHER PETITIONER WAS GUILTY OF
ENCROACHMENT ON PRIVATE RESPONDENT DAVENCOR'S TIMBER CONCESSION;
FURTHERMORE, THE QUESTION ON WHETHER PETITIONER WAS GUILTY OF
ENCROACHMENT WAS NEVER PUT IN ISSUE IN THE CASE BEFORE THE TRIAL COURT.

III

THE LIABILITY OF MILAGROS/MLE AS FOUND BY RESPONDENT SECRETARY IN ITS

DECISION DATED 01 OCTOBER 1986 (EXHIBIT "A" OF THE ATTACHMENT "0") CANNOT BE
IMPUTED AGAINST PETITIONER SINCE THE LATTER IS A CORPORATION HAVING A
PERSONALITY SEPARATE AND DISTINCT FROM MILAGROS/MLE.

IV

PETITIONER CANNOT BE MADE LIABLE TO PRIVATE RESPONDENTS UNDER THE DEED OF

TRANSFER DATED 18 JULY 1975 (EXHIBIT "3" OF ATTACHMENT "P") AND SECTION 61 OF
THE REVISED FORESTRY CODE OF THE PHILIPPINES (P.D. 705, AS AMENDED):

A. THE ALLEGED TRANSFER OF PTL NO. 30 FROM MILAGROS/MLE TO PETITIONER NEVER

BECAME BINDING AND EFFECTIVE SINCE PTL NO. 30 REMAINED IN THE NAME OF
MILAGROS/MLE UNTIL ITS EXPIRATION ON 30 JUNE 1977: THIS IS DUE TO THE FACT THAT
SAID TRANSFER WAS NEVER APPROVED BY THE SECRETARY OF NATURAL RESOURCES.

B. GRANTING ARGUENDO THAT THERE WAS AN EFFECTIVE TRANSFER OF PTL NO. 30

FROM MILAGROS/MLE TO PETITIONER, THE TRANSFER COULD NOT MAKE PETITIONER
LIABLE FOR THE ALLEGED ENCROACHMENT OF PRIVATE RESPONDENT DAVENCOR'S
TIMBER CONCESSION, SINCE:

1. SAID TRANSFER WAS EXECUTED PRIOR TO THE COMMISSION OF THE

ALLEGED ENCROACHMENT AND THE FILING THE ADMINISTRATIVE
COMPLAINT FOR ENCROACHMENT DATED 28 JULY 1975; THUS, PETITIONER
CANNOT BE MADE LIABLE FOR OBLIGATIONS OF MILAGROS/MLE WHICH
WERE INCURRED AFTER THE DATE OF THE SAID TRANSFER.

2. SAID TRANSFER COVERED ONLY FORESTRY CHARGES AND OTHER

GOVERNMENT FEES, AND DID NOT INCLUDE THE PERSONAL LIABILITY OF
MILAGROS/MLE THAT AROSE FROM THE ENCROACHMENT OF THE TIMBER
CONCESSION OF RESPONDENT DAVENCOR.  25

Private Respondents DAVENCOR and the public respondent Hon. Minister (now Secretary) of Natural Resources
filed separate Comments   on September 5, 1991 and June 8, 1992 respectively.
26
The essential issues of the present controversy boil down to the following:

Was the Petitioner denied due process when it was adjudged liable with MLE for encroaching upon the timber
concession of DAVENCOR in the respondent Minister's Order of Execution?

Is the petitioner a transferee of MLE's interest, as to make it liable for the latter's illegal logging operations in
DAVENCOR's timber concession, or more specially, is it possible to pierce the veil of MIWPI's corporate existence,
making it a mere conduit or successor of MLE?

Generally accepted is the principle that no man shall be affected by any proceeding to which he is a stranger, and 198
strangers to a case not bound by judgment rendered by the court. In the same manner an execution can be issued
only against a party and not against one who did not have his day in court. In Lorenzo vs. Cayetano, 78 SCRA 485
[1987], this Court held that only real parties in interest in an action are bound by judgment therein and by writs of
execution and demolition issued pursuant thereto.  7 2

Indeed a judgment cannot bind persons who are not parties to the
action.   It is elementary that strangers to a case are not bound by the judgment rendered by the court and such
28

judgment is not available as an adjudication either against or in favor of such other person. A decision of a court will
not operate to divest the rights of a person who has not and has never been a party to a litigation, either as plaintiff
or as defendant. Execution of a judgment can only be issued against one who is a party to the action, and not
against one who, not being a party in the action has not yet had his day in court. 29

The writ of execution must conform to the judgment which is to be executed, as it may not vary the terms of the
judgment it seeks to enforce.   Nor may it go beyond the terms of the judgment sought to be executed. Where the
30

execution is not in harmony with the judgment which gives it life and exceeds it, it has pro tanto no validity. To
maintain otherwise would be to ignore the constitutional provision against depriving a person of his property without
due process of law.  31

The writ of execution issued by the Secretary of Natural Resources on January 8, 1987 clearly varies the term of his
Decision of October 1, 1986, inasmuch as the Writ includes the MIWPI as party liable whereas the Decision only
mentions Milagros Matuguina/MLE.

There is no basis for the issuance of the Order of Execution against the petitioner. The same was issued without
giving the petitioner an opportunity to defend itself and oppose the request of DAVENCOR for the issuance of a writ
of execution against it. In fact, it does not appear that petitioner was at all furnished with a copy of DAVENCOR's
letter requesting for the Execution of the Honorable Secretary's decision against it. Petitioner was suddenly made
liable upon the order of execution by the respondent Secretary's expedient conclusions that MLE and MIWPI are
one and the same, apparently on the basis merely of DAVENCOR's letter requesting for the Order, and without
hearing or impleading MIWPI. Until the issuance of the Order of execution, petitioner was not included or mentioned
in the proceedings as having any participation in the encroachment in DAVENCOR's timber concession. This action
of the respondent Secretary disregards the most basis tenets of due process and elementary fairness.

The liberal atmosphere which pervades the procedure in administrative proceedings does not empower the
presiding officer to make conclusions of fact before hearing all the parties concerned.   In Police Commission
32

vs. Hon. Judge Lood,   we held that the formalities usually attendant in court hearings need not be present in an
33

administrative investigation, provided that the parties are heard given the opportunity to adduce their evidence. The
right to notice and hearing is essential to due process and its non-observance will, as a rule, invalidate the
administrative proceedings.

As observed by the appellate court, to writ:

the appellant should have filed a Motion with the Minister with Notice to the appellee to include the
latter as party liable for the judgment in order to afford the appellee an opportunity to be heard on its
liability for the judgment rendered against Ma. Milagros Matuguina doing business under the name
Matuguina Logging Enterprises.  34

Continuing, the said court stated further that:

Nevertheless, the failure to comply with the procedure in order to satisfy the requirements of due
process was cured by the present action for prohibition where the liability of appellee has been
ventilated.

We do not agree. Essential, Prohibition is a remedy to prevent inferior courts, corporations, boards or persons from
usurping or exercising a jurisdiction or power with which they have not been vested by law   As we have held
35

in Mafinco Trading Corporation vs. Ople, et al,   in a certiorari or prohibition case, only issues affecting the
36

jurisdiction of the tribunal, board and offices involved may be resolved on the basis of undisputed facts.
The issue of whether or not petitioner is an alter ego of Milagros Matuguina/MLE, is one of fact, and which should
have been threshed out in the administrative proceedings, and not in the prohibition proceedings in the trial court,
where it is precisely the failure of the respondent Minister of Natural Resources to proceed as mandated by law in
the execution of its order which is under scrutiny.

Assuming, arguendo, that prohibition is the proper remedy for determining the propriety of piercing the separate
personality of petitioner with its stockholders, the evidence presented at said trial does not warrant such action.

It is settled that a corporation is clothed with personality separate and distinct from that of the persons composing it.
It may not generally be held liable for that of the persons composing it. It may not be held liable for the personal 198
indebtedness of its stockholders or those of the entities connected with it. Conversely, a stockholder cannot be
made to answer for any of its financial obligations even if he should be its president.   7 But when the juridical
3

personality of the corporation is used to defeat public convenience, justify wrong, protect fraud or defend crime, the
corporation shall be considered as a mere association of persons (Koppel, Inc. vs. Yatco, 77 Phil 496, Palay, Inc.
vs. Clave, G.R. No. 56076, September 21, 1983, 124 SCRA 638), and its responsible officers and/or stockholders
shall be individually liable (Namarco vs. Associated Finance Co., Inc., G.R. No. L-20886, April 27, 1967, 19 SCRA
962). For the same reasons, a corporation shall be liable for the obligations of a stockholder (Palacio vs. Fely
Transportation Co., G.R No. L-15121, August 31, 1963, 5 SCRA 1011), or a corporation and its successor-in-
interest shall be considered as one and the liability of the former shall attach to the latter. 
38

But for the separate juridical personality of a corporation to be disregarded, the wrongdoing must be clearly and
convincingly established. It cannot be presumed.  39

In the case at bar, there is, insufficient basis for the appellate court's ruling that MIWPI is the same as Matuguina.
The trial court's observation is enlightening.

Despite apparently opposing evidence of both parties, the Court gathered and finds, that defendant's
attempt to pierce the veil of corporate personality of plaintiff corporation, as to consider plaintiff
corporations merely an adjunct or alter ego of Maria Milagros Matuguina Logging Enterprises, to
justify defendant's claim against plaintiff corporation, suffers heavily from insufficiency of evidence.

It is the vehement contention of defendants, to bolster its claim, that plaintiff corporation is the alter
ego of Maria Milagros Matuguina Logging Enterprises, because when Milagros Matuguina became
the Chairman of the Board of Directors of plaintiff corporation, she requested for the change of name
and transfer of management of PTL No. 30, from her single proprietorship, to plaintiff corporation.

Secondly, when Milagros Matuguina executed the deed of transfer, transferring her forest
concession under PTL No. 30, together with all the structures and improvements therein, to plaintiff
corporation, for a consideration of P14,800.00 representing 148,000 shares of stocks of plaintiff
corporation actually all existing shares of stocks of Milagros Matuguina, in plaintiff corporation
represents 77.4% therein; suffice to say that plaintiff corporation practically became an alter ego of
Milagros Matuguina.

Defendant's arguments on this peripheral aspect of corporate existence, do not at all indicate that
such a legal fiction, was granted.

In the first place, the alleged control of plaintiff corporation was not evident in any particular
corporate acts of plaintiff corporation, wherein Maria Milagros Matuguina Logging Enterprises using
plaintiff corporation, executed acts or powers directly involving plaintiff corporation.

Neither was there any evidence of defendants, that Maria Milagros Matuguina Logging Enterprises,
using the facilities and resources of plaintiff corporation, involved itself in transaction using both
single proprietorship and plaintiff corporation in such particular line of business undertakings.

As stated by this court in resolving plaintiff's prayer for issuance of a writ or preliminary injunction,
said:

There is actually, no evidence presented by defendant, showing that sometime on

March 15, 1986, to January 1987, during which period, the subject decision of Hon.
Secretary of Natural Resources and corresponding writ of execution, Maria Milagros
Matuguina was a stockholder of plaintiff corporation in such amount or was she an
officer of plaintiff corporation in whatever capacity.

The above circumstances is relevant and significant to assume any such justification of including
plaintiff corporation in the subject writ of execution, otherwise, as maintained by defendants, what
matters most was the control of Milagros Matuguina Logging Enterprises of plaintiff corporation in
 1974 and 1975, when the administrative case was pending, this circumstance alone without formally
including plaintiff corporation in said case, will not create any valid and sufficient justification for
plaintiff corporation, to have been supposedly included in the suit against defendants and Maria
Milagros Matuguina Logging Enterprises, in the administrative case.

Yet, granting as claimed by defendants, that in 1974 or in 1975, Maria Milagros Matuguina became
the controlling stockholder of plaintiff corporation, on account of the change of name and transfer of
management of PTL No. 30, this circumstance, we repeat, does not of itself prove that plaintiff
corporation was the alter ego of Maria Milagros Matuguina Logging Enterprises, as enunciated in
various decisions of this Court, to writ:
198

It is important to bear in mind that mere ownership by a single stockholder or by

another corporation of all or nearly all of the capital stocks of the corporation, is not
itself a sufficient warrant for disregarding the fiction of separate personality (Liddel
and Co. vs. Collector of Internal Revenue, G.R. No. 9687, June 30, 1961).

It is recognized as lawful to obtain a corporation charter, even with a single substantial stockholder,
to engage in specific activity and such activity may co-exist with other private activities of the
stockholder.

If the corporation is substantial one, conducted lawfully; without fraud on another, its separate
identity is to be respected. 40

In this jurisdiction, it is a settled rule that conclusions and findings of fact by the trial court are entitled to great weight
on appeal and should not be disturbed unless for strong and cogent reasons because the trial court is in a better
position to examine real evidence, as well as to observe the demeanor of the witnesses while testifying in the
case. 41

It is likewise improper to state that the MIWPI is the privy or the successor-in-interest of MLE, as the liability for the
encroachment over DAVENCOR's timber concession is concerned, by reason of the transfer of interest in PTL No.
30 from MLE to MIWPI.

First of all, it does not appear indubitable that the said transfer ever became effective, since PTL No. 30 remained in
the name of Milagros Matuguina/MLE until it expired on June 30, 1977.  42

More importantly, even if it is deemed that there was a valid change of name and transfer of interest in the PTL No.
30, this only signifies a transfer of authority, from MLE to MIWPI, to conduct logging operations in the area covered
by PTL No. 30. It does not show indubitable proof that MIWPI was a mere conduit or successor of Milagros
Matuguina/MLE, as far the latter's liability for the encroachment upon DAVENCOR's concession is concerned. This
is the only conclusion which we can discern from the language of Section 61 of P.D. 750,   and the letters of the
43

Acting Minister of Natural Resources to Milagros Matuguina/MLE and to MIWPI, on September 16,
1975.   In Soriano vs. Court of Appeals, this Court stated in clear language, that —
44

It is the general rule that the protective mantle of a corporation's separate and distinct personality
could only be pierced and liability attached directly to its officers and/or members — stockholders,
when the same is used for fraudulent, unfair, or illegal purpose. In the case at bar, there is no
showing that the Association entered into the transaction with the private respondent for the purpose
of defrauding the latter of his goods or the payment thereof. . . . Therefore, the general rule on
corporate liability, not the exception, should be applied in resolving this case. (G.R. No. 49834, June
22, 1989)

The respondents cite Section 61 of P.D. 705 to establish MIWPI's succession to the liability of Milagros
Matuguina/MLE:

Sec. 61. Transfers. — Unless authorized by the Department Head, no licensee, lessee, or permittee
may transfer, exchange, sell, or convey his license agreement, license, lease or permit, or any of his
rights or interests therein, or any of his assets used in connection therewith.

The licensee, lessee, or permittee shall be allowed to transfer or convey his license agreement,
license, lease, or permit only if he has not violated any forestry law, rule or regulation; has been
faithfully complying with the terms and conditions of the license agreement, license, lease or permit;
the transferee has all the qualifications and none of the disqualifications to hold a license agreement,
license, lease or permit; there is no evidence that such transfer or conveyance is being made for
purposes of speculation; and the transferee shall assume all the obligations of the transferor.
 The transferor shall forever be barred from acquiring another license agreement, license, lease or
permit.

Even if it is mandated in the abovestated provision that "the transferee shall assume all the obligations of the
transferor" this does not mean that all obligations are assumed, indiscriminately.

Invariably, it is not the letter, but the spirit of the law and intent of the legislature that is important. When the
interpretation of a statute according to the exact and literal import of its words would lead to absurdity, it should be
construed according to the spirit and reason, disregarding if necessary the letter of the law. 
45

198
In construing statutes, the terms used therein are generally to be given their ordinary meaning, that is, such
meaning which is ascribed to them when they are commonly used, to the end that absurdity in the law must be
avoided.   The term "obligations" as used in the final clause of the second paragraph of Section 61 of P.D. 705 is
46

construed to mean those obligations incurred by the transferor in the ordinary course of business. It cannot be
construed to mean those obligations or liabilities incurred by the transferor as a result of transgressions of the law,
as these are personal obligations of the transferor, and could not have been included in the term "obligations"
absent any modifying provision to that effect.

In the September 16, 1975 letters of Acting Director of the Bureau of Forest Development of Milagros Matuguina
and MIWPI informing them of the approval of Matuguina's request for the change of name and transfer of
management of PTL No. 30, the following statements were made by the Acting Director:

In view hereof, (Matuguina Integrated Wood Products, Inc.) shall assume the responsibility of paying
whatever pending liabilities and/or accounts remaining unsettled, if any, by the former licensee,
Milagros Matuguina, with the government. (Emphasis ours)   7 4

Accordingly, the letter's language implies that the obligations which MIWPI are to assume as transferee of Milagros
Matuguina/MLE are those obligations in favor of the government only, and not to any other entity. Thus this would
include Forestry Charges, Taxes, Fees, and similar accountabilities.

In sum, the Court makes the following pronouncements:

(a) The respondent Honorable Minister of Natural Resources gravely abused its discretion when it issued its Order
of Execution on January 6, 1987, including therein as one of the parties liable the petitioner Matuguina Integrated
Wood Products, Inc., which was never a party to the assailed proceeding resulting in the issuance of such Order
and, without affording the same an opportunity to be heard before it was adjudged liable.

(b) The petitioner is a corporate entity separate and distinct from Milagros Matuguina/Matuguina Logging
Enterprises, there being no clear basis for considering it as a mere conduit or alter ego of Matuguina/MLE, and
therefore, cannot be made liable for the obligations of the same for encroachment over the timber concession of
private respondent DAVENCOR.

IN VIEW OF THE FOREGOING, the Petition is hereby GRANTED, and the Decision dated February 25, 1991, is
SET ASIDE. The decision of the Regional Trial Court is hereby REINSTATED, and correspondingly, Order of
Execution of the respondent Secretary of Natural Resources is declared NULL and VOID and without effect.

No pronouncement as to costs. SO ORDERED.

G.R. No. 111107 January 10, 1997

LOEONARDO A. PAAT, in his capacity as Officer-in-Charge (OIC), Regional Executive Director (RED),
Region 2 and JOVITO LAYUGAN, JR., in his capacity as Community Environment and Natural Resources
Officer (CENRO), both of the Department of Environment and Natural Resources (DENR), petitioners,
vs.
COURT OF APPEALS, HON. RICARDO A. BACULI in his capacity as Presiding Judge of Branch 2, Regional
Trial Court at Tuguegarao, Cagayan, and SPOUSES BIENVENIDO and VICTORIA DE GUZMAN, respondents.

TORRES, JR., J.:

Without violating the principle of exhaustion of administrative remedies, may an action for replevin prosper to
recover a movable property which is the subject matter of an administrative forfeiture proceeding in the Department
of Environment and Natural Resources pursuant to Section 68-A of P.D. 705, as amended, entitled The Revised
Forestry Code of the Philippines?

Are the Secretary of DENR and his representatives empowered to confiscate and forfeit conveyances used in
transporting illegal forest products in favor of the government?

These are two fundamental questions presented before us for our resolution.

The controversy on hand had its incipiency on May 19, 1989 when the truck of private respondent Victoria de
Guzman while on its way to Bulacan from San Jose, Baggao, Cagayan, was seized by the Department of 198
Environment and Natural Resources (DENR, for brevity) personnel in Aritao, Nueva Vizcaya because the driver
could not produce the required documents for the forest products found concealed in the truck. Petitioner Jovito
Layugan, the Community Environment and Natural Resources Officer (CENRO) in Aritao, Cagayan, issued on May
23, 1989 an order of confiscation of the truck and gave the owner thereof fifteen (15) days within which to submit an
explanation why the truck should not be forfeited. Private respondents, however, failed to submit the required
explanation. On June 22, 1989,  Regional Executive Director Rogelio Baggayan of DENR sustained petitioner
1

Layugan's action of confiscation and ordered the forfeiture of the truck invoking Section 68-A of Presidential Decree
No. 705 as amended by Executive Order No. 277. Private respondents filed a letter of reconsideration dated June
28, 1989 of the June 22, 1989 order of Executive Director Baggayan, which was, however, denied in a subsequent
order of July 12, 1989.  Subsequently, the case was brought by the petitioners to the Secretary of DENR pursuant to
2

private respondents' statement in their letter dated June 28, 1989 that in case their letter for reconsideration would
be denied then "this letter should be considered as an appeal to the Secretary."  Pending resolution however of the
3

appeal, a suit for replevin, docketed as Civil Case 4031, was filed by the private respondents against petitioner
Layugan and Executive Director Baggayan  with the Regional Trial Court, Branch 2 of Cagayan,  which issued a writ
4 5

ordering the return of the truck to private respondents.  Petitioner Layugan and Executive Director Baggayan filed a
6

motion to dismiss with the trial court contending, inter alia, that private respondents had no cause of action for their
failure to exhaust administrative remedies. The trial court denied the motion to dismiss in an order dated December
28, 1989.  Their motion for reconsideration having been likewise denied, a petition for certiorari was filed by the
7

petitioners with the respondent Court of Appeals which sustained the trial court's order ruling that the question
involved is purely a legal question.  Hence, this present petition,  with prayer for temporary restraining order and/or
8 9

preliminary injunction, seeking to reverse the decision of the respondent Court of Appeals was filed by the
petitioners on September 9, 1993. By virtue of the Resolution dated September 27, 1993,  the prayer for the
10

issuance of temporary restraining order of petitioners was granted by this Court.

Invoking the doctrine of exhaustion of administrative remedies, petitioners aver that the trial court could not legally
entertain the suit for replevin because the truck was under administrative seizure proceedings pursuant to Section
68-A of P.D. 705, as amended by E.O. 277. Private respondents, on the other hand, would seek to avoid the
operation of this principle asserting that the instant case falls within the exception of the doctrine upon the
justification that (1) due process was violated because they were not given the chance to be heard, and (2) the
seizure and forfeiture was unlawful on the grounds: (a) that the Secretary of DENR and his representatives have no
authority to confiscate and forfeit conveyances utilized in transporting illegal forest products, and (b) that the truck as
admitted by petitioners was not used in the commission of the crime.

Upon a thorough and delicate scrutiny of the records and relevant jurisprudence on the matter, we are of the opinion
that the plea of petitioners for reversal is in order.

This Court in a long line of cases has consistently held that before a party is allowed to seek the intervention of the
court, it is a pre-condition that he should have availed of all the means of administrative processes afforded him.
Hence, if a remedy within the administrative machinery can still be resorted to by giving the administrative officer
concerned every opportunity to decide on a matter that comes within his jurisdiction then such remedy should be
exhausted first before court's judicial power can be sought, The premature invocation of court's intervention is fatal
to one's cause of action.  Accordingly, absent any finding of waiver or estoppel the case is susceptible of dismissal
11

for lack of cause of

action.  This doctrine of exhaustion of administrative remedies was not without its practical and legal reasons, for
12

one thing, availment of administrative remedy entails lesser expenses and provides for a speedier disposition of
controversies. It is no less true to state that the courts of justice for reasons of comity and convenience will shy away
from a dispute until the system of administrative redress has been completed and complied with so as to give the
administrative agency concerned every opportunity to correct its error and to dispose of the case. 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
13 14

illegal amounting to lack or excess of jurisdiction,  (4) when there is estoppel on the part of the administrative
15

agency concerned,  (5) when there is irreparable injury,  (6) when the respondent is a department secretary whose
16 17

acts as an alter ego of the President bears the implied and assumed approval of the latter,  (7) when to require
18

exhaustion of administrative remedies would be unreasonable,  (8) when it would amount to a nullification of a
19

claim,  (9) when the subject matter is a private land in land case proceedings,  (10) when the rule does not provide
20 21
a plain, speedy and adequate remedy, and (11) when there are circumstances indicating the urgency of judicial
intervention.
22

In the case at bar, there is no question that the controversy was pending before the Secretary of DENR when it was
forwarded to him following the denial by the petitioners of the motion for reconsideration of private respondents
through the order of July 12, 1989. In their letter of reconsideration dated June 28, 1989,  private respondents
23

clearly recognize the presence of an administrative forum to which they seek to avail, as they did avail, in the
resolution of their case. The letter, reads, thus:

xxx xxx xxx 198

If this motion for reconsideration does not merit your favorable action, then this letter should be
considered as an appeal to the
Secretary. 24

It was easy to perceive then that the private respondents looked up to the Secretary for the review and disposition of
their case. By appealing to him, they acknowledged the existence of an adequate and plain remedy still available
and open to them in the ordinary course of the law. Thus, they cannot now, without violating the principle of
exhaustion of administrative remedies, seek court's intervention by filing an action for replevin for the grant of their
relief during the pendency of an administrative proceedings.

Moreover, it is important to point out that the enforcement of forestry laws, rules and regulations and the protection,
development and management of forest lands fall within the primary and special responsibilities of the Department
of Environment and Natural Resources. By the very nature of its function, the DENR should be given a free hand
unperturbed by judicial intrusion to determine a controversy which is well within its jurisdiction. The assumption by
the trial court, therefore, of the replevin suit filed by private respondents constitutes an unjustified encroachment into
the domain of the administrative agency's prerogative. The doctrine of primary jurisdiction does not warrant a court
to arrogate unto itself the authority to resolve a controversy the jurisdiction over which is initially lodged with an
administrative body of special competence.  In Felipe Ismael, Jr. and Co. vs. Deputy Executive Secretary,  which
25 26

was reiterated in the recent case of Concerned Officials of MWSS vs. Vasquez,  this Court held:
27

Thus, while the administration grapples with the complex and multifarious problems caused by
unbriddled exploitation of these resources, the judiciary will stand clear. A long line of cases
establish the basic rule that the courts will not interfere in matters which are addressed to the sound
discretion of government agencies entrusted with the regulation of activities coming under the
special technical knowledge and training of such agencies.

To sustain the claim of private respondents would in effect bring the instant controversy beyond the pale of the
principle of exhaustion of administrative remedies and fall within the ambit of excepted cases heretofore stated.
However, considering the circumstances prevailing in this case, we can not but rule out these assertions of private
respondents to be without merit. First, they argued that there was violation of due process because they did not
receive the May 23, 1989 order of confiscation of petitioner Layugan. This contention has no leg to stand on. Due
process does not necessarily mean or require a hearing, but simply an opportunity or right to be heard.  One may
28

be heard, not solely by verbal presentation but also, and perhaps many times more creditably and practicable than
oral argument, through pleadings.  In administrative proceedings moreover, technical rules of procedure and
29

evidence are not strictly applied; administrative process cannot be fully equated with due process in its strict judicial
sense.  Indeed, deprivation of due process cannot be successfully invoked where a party was given the chance to
30

be heard on his motion for reconsideration,  as in the instant case, when private respondents were undisputedly
31

given the opportunity to present their side when they filed a letter of reconsideration dated June 28, 1989 which
was, however, denied in an order of July 12, 1989 of Executive Director Baggayan, In Navarro III vs. Damasco,  we 32

ruled that :

The essence of due process is simply an opportunity to be heard, or as applied to administrative

proceedings, an opportunity to explain one's side or an opportunity to seek a reconsideration of the
action or ruling complained of. A formal or trial type hearing is not at all times and in all instances
essential. The requirements are satisfied when the parties are afforded fair and reasonable
opportunity to explain their side of the controversy at hand. What is frowned upon is the absolute
lack of notice or hearing.

Second, private respondents imputed the patent illegality of seizure and forfeiture of the truck because the
administrative officers of the DENR allegedly have no power to perform these acts under the law. They insisted that
only the court is authorized to confiscate and forfeit conveyances used in transporting illegal forest products as can
be gleaned from the second paragraph of Section 68 of P.D. 705, as amended by E.O. 277. The pertinent provision
reads as follows:

Sec. 68. . . .
 xxx xxx xxx

The court shall further order the confiscation in favor of the government of the timber or any forest
products cut, gathered, collected, removed, or possessed, as well as
the machinery, equipments, implements and tools illegaly [sic] used in the area where the timber or
forest products are found. (Emphasis ours)

A reading, however, of the law persuades us not to go along with private respondents' thinking not only because the
aforequoted provision apparently does not mention nor include "conveyances" that can be the subject of
confiscation by the courts, but to a large extent, due to the fact that private respondents' interpretation of the subject 198
provision unduly restricts the clear intention of the law and inevitably reduces the other provision of Section 68-A,
which is quoted herein below:

Sec. 68-A. Administrative Authority of the Department or His Duly Authorized Representative To
Order Confiscation. In all cases of violation of this Code or other forest laws, rules and regulations,
the Department Head or his duly authorized representative, may order the confiscation of any forest
products illegally cut, gathered, removed, or possessed or abandoned, and all conveyances used
either by land, water or air in the commission of the offense and to dispose of the same in
accordance with pertinent laws, regulations and policies on the matter. (Emphasis ours)

It is, thus, clear from the foregoing provision that the Secretary and his duly authorized representatives are given the
authority to confiscate and forfeit any conveyances utilized in violating the Code or other forest laws, rules and
regulations. The phrase "to dispose of the same" is broad enough to cover the act of forfeiting conveyances in favor
of the government. The only limitation is that it should be made "in accordance with pertinent laws, regulations or
policies on the matter." In the construction of statutes, it must be read in such a way as to give effect to the purpose
projected in the statute.  Statutes should be construed in the light of the object to be achieved and the evil or
33

mischief to be suppressed, and they should be given such construction as will advance the object, suppress the
mischief, and secure the benefits intended.  In this wise, the observation of the Solicitor General is significant, thus:
34

But precisely because of the need to make forestry laws "more responsive to present situations and
realities" and in view of the "urgency to conserve the remaining resources of the country," that the
government opted to add Section 68-A. This amendatory provision is an administrative
remedy totally separate and distinct from criminal proceedings. More than anything else, it is
intended to supplant the inadequacies that characterize enforcement of forestry laws through
criminal actions. The preamble of EO 277-the law that added Section 68-A to PD 705-is most
revealing:

"WHEREAS, there is an urgency to conserve the remaining forest resources of the

country for the benefit and welfare of the present and future generations of Filipinos;

WHEREAS, our forest resources may be effectively conserved and protected

through the vigilant enforcement and implementation of our forestry laws, rules and
regulations;

WHEREAS, the implementation of our forestry laws suffers from technical difficulties,

due to certain inadequacies in the penal provisions of the Revised Forestry Code of
the Philippines; and

WHEREAS, to overcome this difficulties, there is a need to penalize certain acts

more responsive to present situations and realities;"

It is interesting to note that Section 68-A is a new provision authorizing the DENR to confiscate, not
only "conveyances," but forest products as well. On the other hand, confiscation of forest products
by the "court" in a criminal action has long been provided for in Section 68. If as private respondents
insist, the power on confiscation cannot be exercised except only through the court under Section
68, then Section 68-A would have no Purpose at all. Simply put, Section 68-A would not have
provided any solution to the problem perceived in EO 277, supra. 35

Private respondents, likewise, contend that the seizure was illegal because the petitioners themselves admitted in
the Order dated July 12, 1989 of Executive Director Baggayan that the truck of private respondents was not used in
the commission of the crime. This order, a copy of which was given to and received by the counsel of private
respondents, reads in part, viz.:

. . . while it is true that the truck of your client was not used by her in the commission of the crime,
we uphold your claim that the truck owner is not liable for the crime and in no case could a criminal
case be filed against her as provided under Article 309 and 310 of the Revised Penal Code. . . 36
We observed that private respondents misread the content of the aforestated order and obviously misinterpreted the
intention of petitioners. What is contemplated by the petitioners when they stated that the truck "was not used in the
commission of the crime" is that it was not used in the commission of the crime of theft, hence, in no case can a
criminal action be filed against the owner thereof for violation of Article 309 and 310 of the Revised Penal Code.
Petitioners did not eliminate the possibility that the truck was being used in the commission of another crime, that is,
the breach of Section 68 of P.D. 705 as amended by E.O. 277. In the same order of July 12, 1989, petitioners
pointed out:

. . . However, under Section 68 of P.D. 705 as amended and further amended by Executive Order
No. 277 specifically provides for the confiscation of the conveyance used in the transport of forest
198
products not covered by the required legal documents. She may not have been involved in the
cutting and gathering of the product in question but the fact that she accepted the goods for a fee or
fare the same is therefor liable. . .
37

Private respondents, however, contended that there is no crime defined and punishable under Section 68 other than
qualified theft, so that, when petitioners admitted in the July 12, 1989 order that private respondents could not be
charged for theft as provided for under Articles 309 and 310 of the Revised Penal Code, then necessarily private
respondents could not have committed an act constituting a crime under Section 68. We disagree. For clarity, the
provision of Section 68 of P.D. 705 before its amendment by E.O. 277 and the provision of Section 1 of E.O. No.
277 amending the aforementioned Section 68 are reproduced herein, thus:

Sec. 68. Cutting, gathering and/or collecting timber or other products without license. — Any person
who shall cut, gather, collect, or remove timber or other forest products from any forest land, or
timber from alienable and disposable public lands, or from private lands, without any authority under
a license agreement, lease, license or permit, shall be guilty of qualified theft as defined and
punished under Articles 309 and 310 of the Revised Penal Code . . . (Emphasis ours; Section 68,
P.D. 705 before its amendment by E.O. 277)

Sec. 1. Section 68 of Presidential Decree No. 705, as amended, is hereby amended to read as
follows:

Sec. 68. Cutting, gathering and/or collecting timber or other forest products without
license. — Any person who shall cut, gather, collect, remove timber or other forest
products from any forest land, or timber from alienable or disposable public land, or
from private land, without any authority, or possess timber or other forest products
without the legal documents as required under existing forest laws and regulations,
shall be punished with the penalties imposed under Articles 309 and 310 of the
Revised Penal Code . . . (Emphasis ours; Section 1, E.O. No. 277 amending Section
68, P.D. 705 as amended)

With the introduction of Executive Order No. 277 amending Section 68 of P.D. 705, the act of cutting, gathering,
collecting, removing, or possessing forest products without authority constitutes a distinct offense independent now
from the crime of theft under Articles 309 and 310 of the Revised Penal Code, but the penalty to be imposed is that
provided for under Article 309 and 310 of the Revised Penal Code. This is clear from the language of Executive
Order No. 277 when it eliminated the phrase "shall be guilty of qualified theft as defined and punished under Articles
309 and 310 of the Revised Penal Code" and inserted the words "shall be punished with the penalties imposed
under Article 309 and 310 of the Revised Penal Code". When the statute is clear and explicit, there is hardly room
for any extended court ratiocination or rationalization of the law.
38

From the foregoing disquisition, it is clear that a suit for replevin can not be sustained against the petitioners for the
subject truck taken and retained by them for administrative forfeiture proceedings in pursuant to Section 68-A of the
P.D. 705, as amended. Dismissal of the replevin suit for lack of cause of action in view of the private respondents'
failure to exhaust administrative remedies should have been the proper course of action by the lower court instead
of assuming jurisdiction over the case and consequently issuing the writ ordering the return of the truck. Exhaustion
of the remedies in the administrative forum, being a condition precedent prior to one's recourse to the courts and
more importantly, being an element of private respondents' right of action, is too significant to be waylaid by the
lower court.

It is worth stressing at this point, that a suit for replevin is founded solely on the claim that the defendant wrongfully
withholds the property sought to be recovered. It lies to recover possession of personal chattels that are unlawfully
detained.  "To detain" is defined as to mean "to hold or keep in custody,"  and it has been held that there is tortious
39 40

taking whenever there is an unlawful meddling with the property, or an exercise or claim of dominion over it, without
any pretense of authority or right; this, without manual seizing of the property is sufficient.  Under the Rules of
41

Court, it is indispensable in replevin proceeding that the plaintiff must show by his own affidavit that he is entitled to
the possession of property, that the property is wrongfully detained by the defendant, alleging the cause of
detention, that the same has not been taken for tax assessment, or seized under execution, or attachment, or if so
seized, that it is exempt from such seizure, and the actual value of the property.  Private respondents miserably
42
failed to convince this Court that a wrongful detention of the subject truck obtains in the instant case. It should be
noted that the truck was seized by the petitioners because it was transporting forest products without the required
permit of the DENR in manifest contravention of Section 68 of P.D. 705 as amended by E.O 277. Section 68-A of
P.D. 705, as amended, unquestionably warrants the confiscation as well as the disposition by the Secretary of
DENR or his duly authorized representatives of the conveyances used in violating the provision of forestry laws.
Evidently, the continued possession or detention of the truck by the petitioners for administrative forfeiture
proceeding is legally permissible, hence, no wrongful detention exists in the case at bar.

Moreover, the suit for replevin is never intended as a procedural tool to question the orders of confiscation and
forfeiture issued by the DENR in pursuance to the authority given under P.D. 705, as amended. Section 8 of the
198
said law is explicit that actions taken by the Director of the Bureau of Forest Development concerning the
enforcement of the provisions of the said law are subject to review by the Secretary of DENR and that courts may
not review the decisions of the Secretary except through a special civil action for certiorari or prohibition. It reads:

Sec. 8. REVIEW — All actions and decisions of the Director are subject to review, motu propio or
upon appeal of any person aggrieved thereby, by the Department Head whose decision shall be final
and executory after the lapse of thirty (30) days from the receipt of the aggrieved party of said
decision, unless appealed to the President in accordance with Executive Order No. 19, Series of
1966. The Decision of the Department Head may not be reviewed by the courts except through a
special civil action for certiorari or prohibition.

WHEREFORE, the Petition is GRANTED; the Decision of the respondent Court of Appeals dated October 16, 1991
and its Resolution dated July 14, 1992 are hereby SET ASIDE AND REVERSED; the Restraining Order
promulgated on September 27, 1993 is hereby made permanent; and the Secretary of DENR is directed to resolve
the controversy with utmost dispatch. SO ORDERED.

G.R. No. 127066 March 11, 1997

REYNALDO O. MALONZO, petitioner,
vs.
THE HONORABLE COMMISSION ON ELECTIONS and THE LIGA NG MGA BARANGAY (Caloocan Chapter)
and ALEX L. DAVID, CONRADO G. CRUZ, TRINIDAD REPUNO, GLORIA M. CRUZ, MIRALI M. DURR, FERMIN
JIMENEZ, AURELIO BILUAN, ROGELIO SARAZA, HELENE VALBUENA, and HIGINO RULLEPA, respondents.

TORRES, JR., J.:

The Court is called upon to strike down Resolution 96-026,  dated November 18, 1996, of the respondent
1

Commission on Elections (COMELEC) calling for an Election for the Recall of the Petitioner Reynaldo O. Malonzo,
the incumbent Mayor of Caloocan City.

Petitioner was duly elected as Mayor in the elections held on May 8, 1995, winning over former Mayor Macario
Asistio, Jr. Barely one year into his term, petitioner's office as Mayor was put to serious question when on July 7,
1996, 1,057 Punong Barangays and Sangguniang Barangay members and Sangguniang Kabataan chairmen,
constituting a majority of the members of the Preparatory Recall Assembly of the City of Caloocan, met, and upon
deliberation and election, voted for the approval of Preparatory Recall Assembly Resolution No. 01-96, expressing
loss of confidence in Mayor Malonzo, and calling for the initiation of recall proceedings against him.

Together with relevant documents, PRA Resolution No. 01-96 was filed with the COMELEC for appropriate action.
In response, Mayor Malonzo filed a Petition with the respondent Commission alleging, principally, that the recall
process was deficient in form and substance, and therefore, illegally initiated. The COMELEC found the petition
devoid of merit and declared the recall proceedings to be in order. The COMELEC's Resolution on the petition
states pertinently:

WHEREFORE, in view of the foregoing, the Commission En Banc hereby RESOLVES to DISMISS

the Petition. We approve and give DUE COURSE to PRA Resolution No. 01-96 entitled
RESOLUTION TO INITIATE RECALL OF REYNALDO O. MALONZO AS MAYOR OF KALOOCAN
CITY FOR LOSS OF CONFIDENCE. Accordingly and conformably with Section 71 R.A. 7160, the
Commission SETS the date of the Election on Recall on December 14, 1996. We shall, by separate
resolution, issue a calendar of activities involved in said exercise.

SO ORDERED. 2
On November 28, 1996, Mayor Malonzo came to us on a "Petition for Certiorari With Prayer For Temporary
Restraining Order and Application for Writ of Preliminary Injunction", assailing the COMELEC's resolution as having
been issued with grave abuse of discretion. The Petition, in the main, raises the issue of the validity of the institution
and proceedings of the recall, putting to fore the propriety of the service of notices to the members of the
Preparatory Recall Assembly, and the proceedings held, resulting in the issuance of the questioned Resolution.

Due to the importance of the matters in issue, and the proximity of the Recall Election date declared by the
COMELEC, the Court, on November 29, 1996, issued a Resolution  ordering the respondent COMELEC to cease
3

and desist from proceeding with the recall election projected on December 14, 1996, and directing the respondents
to file their respective Comments.
198

Private respondents Liga ng mga Barangay (Caloocan Chapter), Alex L. David, Conrado G. Cruz, Trinidad Repuno,
Gloria M. Cruz, Mirali M. Durr, Fermin Jimenez, Aurelio Biluan, Rogelio Saraza, Helene Valbuena and Higino
Rullepa, filed their Comment  on December 6, 1996, alleging that all the requirements for the holding of a recall
4

election were duly complied with and that the petition is therefore without basis. On the other hand, the Office of the
Solicitor General filed a Manifestation in lieu of Comment  on February 7, 1997, with the surprising submission that
5

the COMELEC was amiss in its duties as enforcer of election laws.

According to the Solicitor General, the veracity of notices sent to 42 members of the Preparatory Recall Assembly
were not directly passed upon by the COMELEC before it issued the questioned Resolution. It thus submits that the
propriety of notices sent to said PRA members must first be determined by the COMELEC, after giving private
respondents the chance to prove the same, otherwise, a discussion of the other issues in the present petition would
be premature.

At this juncture, the Court finds that there is no need to refer the matter of the veracity of the questioned notices sent
to certain members of the Preparatory Recall Assembly back to the COMELEC, for the reason that the COMELEC
has already conducted an investigation into the same, and has found the proceedings instituting the recall to be in
accord with law.

The Solicitor General's observation that the issue of veracity of the notices was not directly passed upon by the
COMELEC is incorrect. On the contrary, the matter of validity of notices to the members of the Preparatory Recall
Assembly was sufficiently considered by the respondent Commission, as in response to petitioner's request for a
technical examination of the recall documents, the COMELEC directed its Election Records and Statistics
Department (ERSD) to resolve the matter of notices sent to the Preparatory Recall Assembly members. The ERSD
in turn performed its task and reported its findings to the COMELEC. The following excerpts from Resolution UND
96-026 of the COMELEC reflect the results of the ERSD's investigation, and the resulting action of the COMELEC:

The ERSD Report gave the following information:

Three (3) lists of elected Barangay officials were used as reference, namely: COMELEC list; DILG
list and Caloocan City list.

According to the COMELEC listing, of the 188 barangays in Kalookan City, there should have been
1,692 members of the PRA. However, one barangay, Barangay 94, did not elect an SK Chairman,
thus, there are of record, 1,691 elected barangay officials of Kalookan City, broken down as follows:

Punong Barangay — 188

Barangay Kagawads — 1,316
SK Chairmen — 187
(One Barangay, Barangay
94 did not elect its
SK Chairman).

The DILG registry is incomplete, showing only a listing of 1,390 barangay officials. The Kalookan
City Talaan ng mga Barangay tallies with the COMELEC List. From the records, the following data is
found: Of the 1,691 barangay officials, forty (40) had resigned. In the stead of twenty-eight (28)
resignees, replacements were appointed. Twelve (12) positions however, remained vacant, there
being no successors named therein. Twenty-two (22) barangay officials are deceased. Twelve (12)
vacancies caused by such death were filled up by appointing replacements. Ten (10) vacant
positions were however not filled up. There being twenty-two (22) unfilled posts, the total number of
Barangay officials of Kalookan City at the time of the constitution of the Preparatory Recall Assembly
was initiated is 1,669.

ERSD reported that there were a total of 1,927 notices sent, some members being served two or
three notices. The Notices were sent in three modes; Personal, registered mail and by courier and
they were in the name of the PRA member, and addressed at his residence or office of record.
In its initial report, the Department stated that six persons listed in the COMELEC record as
barangay officials were not duly notified. These were: Jose de Chavez, listed as Barangay kagawad
of Barangay; 6; Enrico Marasigan, listed as Barangay kagawad of Barangay 65; Pablo Musngi, listed
as Barangay kagawad of Barangay 119; Rolando Ang, listed as Barangay kagawad of Barangay
109; and Pilar Pilares, Barangay Kagawad of Barangay 162 and Teresita Calayo, listed as kagawad
of Barangay 182. Respondents explained the absence of notice to these persons thus:

1. Jose de Chavez has been removed from office as Barangay kagawad of Barangay
6 by virtue of Resolution No. 95-011 passed on July 16, 1995, and has been
replaced by Corazon Obusan by virtue of Resolution No. 95-016 passed on August
198
1995, both promulgated by the Barangay Council of said barangay. In view of the
fact that it is Corazon Obusan who is the recognized Barangay kagawad of the
aforementioned barangay, as it appears in the official roster of the Department of
Interior and Local Government (DILG) the notice of the July 7, 1996 PRA session
was duly served on her and not on Mr. de Chavez.

2. Enrico Marasigan has resigned as Barangay kagawad of Barangay 65 as

evidenced by his resignation letter dated March 24, 1995. He was replaced by Ronio
de la Cruz, by virtue of a Resolution passed by the Barangay Council of Barangay 65
dated August 10, 1995. Accordingly, the notice of the July 7, 1996 PRA session was
duly served on Mr. de la Cruz and not on Mr. Marasigan.

3. Pablo Musngi ceased to be a Barangay kagawad of Barangay 119 by reason of

his death on April 12, 1996. He has been replaced by Sylvia Saberola on whom
notice of the July 7, 1996 PRA session has been duly served.

4. Notices, both by personal delivery and by registered mail, were served on Mr.
Rolando Ang at his official address at Barangay 109 Zone 10 East Grace Park,
Caloocan City. The returns of the said service of notice, however, disclosed that he
can no longer be located in the said address. He has, however, not informed the
DILG of any change in his official address.

5. Pilar Pilares had been served notice by personal delivery but refused to sign
acknowledgment receipt. She has likewise been served notice by registered mail as
evidenced by the receipt in her behalf by a certain Ricardo Pilares III. (Respondents'
Comment, dated October 14, 1996.

As to Teresita Calayo, respondent defends lack of notice to her, thus:

Teresita Calayo is not a duly elected kagawad of Barangay 182, Zone 16.

Per certification issued by the Board of Election Tellers, Ms. Calayo did not win in the
May 1994 Barangay Election. Records would show that it should be Kagawad
Fermin Quintos who should be recognized as legitimate barangay kagawad of the
said barangay having placed no. 7 in the election and not Ms. Calayo who appears to
be a loser/9th place. There appears to be an apparent oversight in placing the name
of Calayo in the subject PRA Resolution for signature, wherein it shows that both the
names of Fermin Quintos and Teresita Calayo are included. (Respondents'
Compliance dated November 13, 1996, p. 6).

In the ERSD's final and complete report, two (2) additional names were reflected as not having been
served notices and these were Line Ramos and Teodulfo Abenoja, listed as kagawads of Barangay
174.

Commenting on this report, respondents stated:

1. As regards Tomas Daep and Teodulfo Abenoja (not Agenoja);.

Notice by registered mail was served on, and acknowledged by Tomas Daep, who personally signed
the return card.

There was actually an error committed by the ERSD when it concluded that Tomas Daep has
already resigned and was replaced by Ernesto Taupa. Official records would show that Tomas Daep
and Ernesto Taupa are still both presently holding the position of Kagawad of Barangay 174 Zone
15.
 Ernesto Taupa was officially appointed to the position vacated by Teodulfo Abenoja by virtue of the
latter's resignation on 15 March 1996. Teodulfo Abenoja, on the other hand, was appointed to the
position vacated by a Line Ramos and Teodulfo Abenoja — they, having resigned and, the latter,
having been already replaced by Ernesto Taupa.

Ernesto Taupa on the other, as correctly determined by the ERSD, was validly served with the notice
of the PRA session two (2) days before the scheduled PRA meeting.

Respondents' submission, being substantiated by documents. and uncontroverted by Petitioner are

hereby accepted as meritorious. 198

In addition to the aforenamed, three persons, Pablo de Castro, Ruben Ballega, and Jesus Tan
claiming to be the Barangay captains of Barangay 116, Barangay 148 and Barangay 156,
respectively, and therefore members of the Preparatory Recall Assembly, came before the
Commission and manifested that they were not duly notified about the PRA session.

The records in custody of the Commission, however, revealed that there was no truth to their
allegations.

Pablo de Castro was served notice by registered mail on July 1, 1996, and this he received on July
3, 1996, as shown in the return card duly signed in acknowledgment. The same notice was served
on him by courier (LBC) on July 5, 1996.

Ruben Ballega was notified by personal service on July 1, 1996, the receipt of which was duly
acknowledged and by registered mail on July 2, 1996.

Jesus Tan Sr. was served notice personally and by registered mail. The personal service was
completed on July 1, 1996, as shown by the receipt signed by his daughter, one Analiza T. Asque.
The same notice was sent him by registered mail, received by the same daughter on July 2, 1996.

The Commission however regards the sending of notice one thing, and the completion of service
thereof another, for indeed, the requirement of notice can only be fully satisfied, if there was not only
service, but also completion of service thereof. Thus, we were obliged to inquire more closely into
the records and we found:

Personal services were acknowledged by receipts signed, if not by the addressee himself, then, as
indicated thereon, by his or her spouse, nearest relative or a person of sufficient discretion in the
member 's residence or office. Service by registered mail was evinced by the return card duly signed
by the addressee or by persons acting for him. There were instances when notices were served but
were refused, this fact noted in the acknowledgment receipt by the server and his witnesses. The
circumstances being thus, we hold that there was complete service of the notices as contemplated in
Section 8, Rule 13 of the Rules of Court which provides;

Sec. 8 Completeness of Service — Personal service is complete upon delivery.

Service by ordinary mail is complete upon the expiration of five (5) days after mailing,
unless the court otherwise provides; Service by registered mail is complete upon
actual receipt by the addressee; but if he fails to claim his mail from the post office
within five (5) days from the date of first notice of the postmaster, service shall take
effect at the expiration of such time.

That it was Alex David, President of the LIGA ng mga Barangay who sent the notices is of no
moment. We had earlier determined that as member of the PRA, he can legally exercise the
prerogatives attached to his membership in the Preparatory Recall Assembly, sending notices to the
other members of its scheduled convening.

It is evident from the foregoing and, therefore, the Commission so holds that the requirements of
notice had been fully complied with. 6

Needless to state, the issue of propriety of the notices sent to the PRA members is factual in nature, and the
determination of the same is therefore a function of the COMELEC. In the absence of patent error, or serious
inconsistencies in the findings, the Court should not disturb the same. The factual findings of the COMELEC, based
on its own assessments and duly supported by gathered evidence, are conclusive upon the court, more so, in the
absence of a substantiated attack on the validity of the same.

Moreover, to order the COMELEC to repeat the process of determining the notices' propriety would be sanctioning a
recycling of administrative functions, entailing added cost and waste of effort.
Petitioner likewise attacks the COMELEC's ruling on the validity of the proceedings held by the Preparatory Recall
Assembly, in that it allegedly ruled that the LIGA ng mga Barangay is authorized to initiate the recall and convene
the Preparatory Recall Assembly. Petitioner likewise averred that the session held, and the adoption of the recall
resolution, by the recall assembly were tainted with irregularities, violence, graft and corruption.

The pertinent provisions of law, as regards the initiation of the recall process, are Sections 69 and 70 of R.A. 7160:

Sec. 69. By whom Exercised. — The power of recall for loss of confidence shall be exercised by the
registered voters of a local government unit to which the local elective official subject to such recall
belongs. 198

Sec. 70. Initiation of the Recall Process. —

(a) Recall may be initiated by a preparatory recall assembly or by the registered voters of the local
government unit to which the local elective official subject to such recall belongs.

(b) There shall be a preparatory recall assembly in every province, city, district, and municipality
which shall be composed of the following:

xxx xxx xxx

(2) City level. — All punong barangay and sangguniang barangay members in the city;

xxx xxx xxx

(c) A majority of all the preparatory recall assembly members may convene in session in a public
place and initiate a recall proceeding against any elective official in the local government unit
concerned. Recall of provincial, city, or municipal officials shall be validly initiated through a
resolution adopted by a majority of all the members of the preparatory recall assembly concerned
during its session called for the purpose.

(d) Recall of any elective provincial, city, municipal, or barangay official may also be validly initiated
upon petition of at least 25% of the total number of registered voters in the local government unit
concerned during the election in which the local official sought to be recalled was elected.

(1) A written petition for recall duly signed before the election registrar or his representative, and in
the presence of a representative of the petitioner and a representative of the official sought to be
recalled, and in a public place in the province, city, municipality, or barangay, as the case may be,
shall be filed with the COMELEC through its office in the local government unit concerned. The
COMELEC or its duly authorized representative shall cause the publication of the petition in a public
and conspicuous place for a period of not less than ten (10) days nor more than twenty (20) days, for
the purpose of verifying the authenticity and genuineness of the petition and the required percentage
of voters.

(2) Upon the lapse of the aforesaid period, the COMELEC or its duly authorized representative shall
announce the acceptance of candidates to the position and thereafter prepare the list of candidates
which shall include the name of the official sought to be recalled.

Petitioner's insistence, that the initiation of the recall proceedings was infirm since it was convened by the Liga ng
mga Barangays, is misplaced. Petitioner observes that "respondent Liga is an organization of all barangays. It is not
an organization of barangay captains and kagawads. The barangays are represented in the Liga by the barangay
captains as provided under Section 492 of the Local Government Code. It also provides that the Kagawad may
represent the barangay in the absence of the barangay chairman."  The Liga ng mga Barangay is undoubtedly an
7

entity distinct from the Preparatory Recall Assembly. It just so happens that the personalities representing the
barangays in the Liga are the very members of the Preparatory Recall Assembly, the majority of whom met on July
7, 1996, and voted in favor of the resolution calling for the recall of Mayor Malonzo, after deliberation reported in the
record, in accordance with the existing law. Thus, the Punong Barangays and Sangguniang Barangay members
convened and voted as members of the Preparatory Recall Assembly of the City of Caloocan, and not as members
of the Liga ng mga Barangay. The recall proceedings, therefore, cannot be denied merit on this ground.

Any doubt as to the propriety of the proceedings held during the recall assembly should be laid to rest. As the
respondent COMELEC pertinently observes:

The Minutes of the session of the Preparatory Assembly indicated that there was a session held.
Attendees constitute the majority of all the members of the Preparatory Assembly, as we shall later
on establish. Rules of procedure, simple they may be were formulated. Deliberations were
 conducted on the main issue, which was that of petitioner's recall. The members were given the
opportunity to articulate on their resolve about the matter. More importantly, their sentiments were
expressed through their votes signified by their signatures and thumbmarks affixed to the
Resolution. No proof was adduced by Petitioner to substantiate his claim that the signatures
appearing thereon represented a cause other than that of adopting the resolution. The law on recall
did not prescribe an elaborate proceeding. Neither did it demand a specific procedure. What is
fundamental is compliance with the provision that there should be a session called for the purpose of
initiating recall proceedings, attended by a majority of all the members of the preparatory recall
assembly, in a public place and that the resolution resulting from such assembly be adopted by a
majority of all the PRA members. 8

198

The charges of graft and corruption, violence and irregularities, before and during the session of the preparatory
recall assembly are largely uncorroborated, and cannot override the substantiated findings of the respondent
COMELEC.

In cases filed before administrative and quasi-judicial bodies, a fact may be deemed established if it

is supported by substantial evidence, or that amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion. 9

Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a
conclusion.   It means such evidence which affords a substantial basis from which the fact in issue can be
10

reasonably inferred.   To overturn the presumption of validity of performance of official duty, more than a mere
11

scintilla of proof is needed, otherwise, one disgruntled fellow can destroy the foundations laid by the overwhelming
majority, and this is not the scenario envisioned by our democratic system of government.

In sum, we are persuaded strongly by the principle that the findings of fact of administrative bodies charged with
their specific field of expertise, are afforded great weight by the courts, and in the absence of substantial showing
that such findings are made from an erroneous estimation of the evidence presented, they are conclusive, and in
the interest of stability of the governmental structure, should not be disturbed.

ACCORDINGLY, the Court hereby RESOLVED to DISMISS the present petition, for lack of merit. The decision of
the respondent Commission on Elections to GIVE DUE COURSE to PRA Resolution No. 01-96 is hereby
AFFIRMED. The Commission on Elections is hereby ORDERED to set the date of the Election on Recall in the city
of Caloocan, which date shall not be later than thirty days after receipt of notice of this Resolution, which is
immediately executory. SO ORDERED.

G.R. No. 122389 June 19, 1997

MIGUEL SINGSON, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE AIRLINES, INC. (PAL), respondents.

PUNO, J.:

Assailed in the petition for certiorari before us is the Resolution of the public respondent National Labor Relations
Commission  (hereinafter NLRC) reversing the Decision of the Labor Arbiter  in NLRC-NCR Case No. 00-10- 05750-
1 2

91 finding the dismissal of petitioner Miguel Singson illegal and ordering his reinstatement. Petitioner filed a motion
for reconsideration which was denied by the public respondent in an Order dated June 27, 1995.

The antecedent facts reveal that petitioner Singson was employed by private respondent Philippine Airlines, Inc.
(hereinafter PAL) as Traffic Representative Passenger, Handling Division. His duty consisted of checking in
passengers and baggage for a particular flight. On June 7, 1991, petitioner was assigned to serve the check-in
counter of Japan Air Lines (hereinafter JAL) the for Flight 742. Among the passengers checked in by him was Ms.
Lolita Kondo who was bound for Narita, Japan. After checking in, Ms. Kondo lodged a complaint alleging that
petitioner required her to pay US $200.00 for alleged excess baggage without issuing any receipt. A confrontation
took place where petitioner was asked by the security officer to empty his pockets. The dollars paid by Ms. Kondo
were not found in his possession. However, when the lower panel of the check-in counter he was manning was
searched, the sum of two hundred sixty five dollars (US $265) was found therein consisting of two (2) one hundred
dollar bills, one (1) fifty dollar bill, one (1) ten dollar bill and one (1) five dollar bill. Petitioner was administratively
charged and investigated formed by a committee formed by private respondent PAL. 3
In an affidavit presented to the investigators, Ms. Kondo declared that she was with three (3) Japanese friends when
she checked in on June 7, 1991, for their flight to Narita, Japan. While in line, a man approached her and told her
that she had excess baggage. She denied the allegation since the pieces of baggage did not only belong to her but
also to her Japanese companions. The man did not believe that the Japanese were her companions and he
charged that she just approached them at the airport. To settle the matter, he told her to give him two hundred
dollars (US $200) and he apologized for their argument. She gave him one (1) one hundred dollar bill and two (2)
fifty dollar bills or a total of two hundred dollars (US $200) as excess baggage fee. She placed the money at the side
of his counter desk and he covered it with a piece of paper. He did not issue a receipt. She then reported the matter
to JAL's representative. Ms. Kondo identified the employee who checked her in as the petitioner. 4

198
In his affidavit, petitioner admitted that he was the one who checked in Ms. Kondo and her Japanese companions.
They checked in five (5) pieces of luggage which weighed 80 kilos and within the allowed limit for check-in baggage.
He attached the claim checks to the jacket of their tickets, returned the tickets and passport to Ms. Kondo. He then
heard an altercation involving a woman passenger with excess hand-carried baggage who was being charged for it;
she was insisting she had paid for it in the counter but could not produce a receipt. The passenger turned out to be
Ms. Kondo and she was accusing Cocoy Gabriel as the one who charged her for excess baggage. Mr. Gabriel at
that time was assigned at the THAI Airways counter, hence, it was impossible that a passenger for a JAL flight
would pay him US $200. Petitioner was talking to the JAL's representative when two PAL employees and Ms.
Kondo approached them. He was told of Ms. Kondo's claim that she paid the excess baggage fee to him. Petitioner
was surprised at the accusation since Ms. Kondo had no excess baggage when she checked in. 5

The investigation committee found petitioner guilty of the offense charged and recommended his dismissal. Private
respondent PAL adopted the committee's recommendation and dismissed him from the service effective June 7,
1991. 6

On September 12, 1991, petitioner lodged a complaint against respondent PAL before the NLRC-NCR for illegal
dismissal, attorney's fees and damages. The case was docketed as NLRC-NCR Case No. 00-10-05750-91 and
raffled off to then Labor Arbiter Raul T . Aquino. Aquino found the evidence adduced by private respondent PAL in
terminating petitioner's employment insufficient. Aquino declared petitioner's dismissal illegal and ordered his
reinstatement with backwages. Respondent PAL appealed the decision of the Labor Arbiter. On May 19, 1995, the
Second Division of public respondent NLRC, composed of Commissioners Victoriano R. Calaycay, Rogelio I.
Rayala and Raul T . Aquino as presiding commissioner, promulgated its Resolution reversing the decision of then
Labor Arbiter Aquino and dismissing the complaint against respondent PAL. Petitioner filed on June 5, 1995, a
motion for the reconsideration of the aforementioned Resolution and an Amended Motion for Reconsideration on
June 15, 1995. Public respondent NLRC, thru the Second Division with only two commissioners taking part, namely,
Commissioners Calaycay and Rayala, denied the motion.

Hence, this petition for certiorari under Rule 65 of the Rules of Court where petitioner submits the following
assignment of errors:

I. Public respondent NLRC acted with grave abuse of discretion and/or in excess of jurisdiction when
the Hon. Raul T. Aquino, in his capacity as Presiding Commissioner of the Second Division of the
NLRC and as a member thereof, participated actively in the promulgation of the aforesaid decision
and in the consultation of the members thereof in reaching the conclusion before it was assigned to
the ponente, Hon. Calaycay.

II. Public respondent NLRC gravely abused its discretion as in fact it exceeded its jurisdiction when it
declared the affidavit of Lolita Kondo sufficient to declare his dismissal from employment legal even
without any cross-examination during the investigation conducted by Philippine Air Lines.

III. Public respondent NLRC seriously and gravely erred amounting to abuse of discretion and/or in
excess of its jurisdiction when it declared in the assailed decision that the quantum of evidence
necessary to justify the supreme penalty of dismissal of the petitioner have been complied with, and
in not imposing the burden of proving the legality of the dismissal of the petitioner.

We find merit in this petition.

Petitioner assails the Resolution of the public respondent NLRC on account of Commissioner Raul T. Aquino's
participation in reviewing and reversing on appeal his own decision as labor arbiter in NLRC-NCR Case No. 00-10-
05750-91. Respondents contend that Commissioner Aquino's failure to inhibit himself is a harmless error that will
not infirm the subject resolution. We do not agree. In the case of Ang Tibay v. Court of Industrial Relations,  we laid
7

down the requisites of procedural due process in administrative proceedings, to wit: (1) the right to a hearing, which
includes the right to present one's case and submit evidence in support thereof; (2) the tribunal must consider the
evidence presented; (3) the decision must have something to support itself; (4) the evidence must be substantial; (5)
the decision must be based on the evidence presented at the hearing, or at least contained in the record and
disclosed to the parties affected; (6) the tribunal or body or any of its judges must act on its own independent
consideration of the law and facts of the controversy, and not simply accept the views of a subordinate; (7) the
Board or body should, in all controversial questions, render its decision in such manner that the parties to the
proceeding can know the various issues involved, and the reason for the decision rendered. In addition,
administrative due process includes (a) the right to notice, be it actual or constructive, of the institution of the
proceedings that may affect a person's legal right; (b) reasonable opportunity to appear and defend his rights and to
introduce witnesses and relevant evidence in his favor; (c) a tribunal so constituted as to give him reasonable
assurance of honesty and impartiality, and one of competent jurisdiction; and (d) a finding or decision by that
tribunal supported by substantial evidence presented at the hearing or at least ascertained in the records or
disclosed to the parties.  It is self-evident from the ruling case law that the officer who reviews a case on appeal
8

should not be the same person whose decision is the subject of review. Thus, we have ruled that "the reviewing
officer must perforce be other than the officer whose decision is under review. 9

198

In the case at bar, we hold that petitioner was denied due process when Commissioner Aquino participated, as
presiding commissioner of the Second Division of the NLRC, in reviewing private respondent PAL's appeal. He was
reviewing his own decision as a former labor arbiter. Under Rule VII, Section 2 (b) of the New Rules of Procedure of
the NLRC,   each Division shall consist of one member from the public sector who shall act as the Presiding
10

Commissioner and one member each from the workers and employers sectors, respectively. The composition of the
Division guarantees equal representation and impartiality among its members. Thus, litigants are entitled to a review
of three (3) commissioners who are impartial right from the start of the process of review. Commissioner Aquino can
hardly be considered impartial since he was the arbiter who decided the case under review. He should have
inhibited himself from any participation in this case.

Prescinding from this premise, the May 19, 1995 resolution of the respondent NLRC is  void for the Division that
handed it down was not composed of three impartial commissioners. The infirmity of the resolution was not cured by
the fact that the motion for reconsideration of the petitioner was denied by two commissioners and without the
participation of Commissioner Aquino. The right of petitioner to an impartial review of his appeal starts from the time
he filed his appeal. He is not only entitled to an impartial tribunal in the resolution of his motion for reconsideration.
Moreover, his right is to an impartial review of three commissioners. The denial of petitioner's right to an impartial
review of his appeal is not an innocuous error. It negated his right to due process.

IN VIEW WHEREOF, the Resolution of the Second Division of the NLRC dated May 19, 1995 and its Order dated
June 27, 1995 in NLRC-NCR Case No. 00-10-05750-91 is SET ASIDE. The case is remanded to the NLRC for
further proceedings. No Costs. SO ORDERED.

G.R. No. 110379 November 28, 1997

HON. ARMAND FABELLA, in his capacity as SECRETARY OF THE DEPARTMENT OF EDUCATION,

CULTURE AND SPORTS; John Doe (not his real name), in his capacity as REGIONAL DIRECTOR, DECS-
NCR; DR. BIENVENIDO ICASIANO, in his capacity as the SUPERINTENDENT OF THE QUEZON CITY
SCHOOLS DIVISION; ALMA BELLA O. BAUTISTA, AURORA C. VALENZUELA and TERESITA V.
DIMAGMALIW, petitioners,
vs.
THE COURT OF APPEALS, ROSARITO A. SEPTIMO, ERLINDA B. DE LEON, CLARISSA T. DIMAANO,
WILFREDO N. BACANI, MARINA R. VIVAR, VICTORIA S. UBALDO, JENNIE L. DOGWE, NORMA L.
RONGCALES, EDITA C. SEPTIMO, TERESITA E. EVANGELISTA, CATALINA R. FRAGANTE, REBECCA D.
BAGDOG, MARILYNNA C. KU, MARRISA M. SAMSON, HENEDINA B. CARILLO, NICASIO C. BRAVO, RUTH
F. LACANILAO, MIRASOL C. BALIGOD, FELISA S. VILLACRUEL, MA. VIOLETA ELIZABETH Y. HERNANDEZ,
ANTONIO C. OCAMPO, ADRIANO S. VALENCIA and ELEUTERIO S. VARGAS, respondents.

PANGANIBAN, J.:

Due process of law requires notice and hearing. Hearing, on the other hand, presupposes a competent and
impartial tribunal. The right to be heard and, ultimately, the right to due process of law lose meaning in the absence
of an independent, competent and impartial tribunal.

Statement of the Case

This principium is explained by this Court as it resolves this petition for review on certiorari assailing the May 21,
1993 Decision   of the Court of Appeals   in CA-G.R.. SP No. 29107 which affirmed the trial court's decision,   as
1 2 3

follows:

WHEREFORE, the decision appealed from is AFFIRMED and the appeal is DISMISSED.

The Hon. Armand Fabella is hereby ORDERED substituted as respondent-appellant in place of

former Secretary Isidro Cariño and henceforth this fact should be reflected in the title of this case.
 SO ORDERED. 4

The Antecedent Facts

The facts, as found by Respondent Court, are as follows:

On September 17, 1990, then DECS Secretary Cariño issued a return-to-work order to all public
school teachers who had participated in walk-outs and strikes on various dates during the period
September 26, 1990 to October 18, 1990. The mass action had been staged to demand payment of
13th month differentials, clothing allowances and passage of a debt-cap bill in Congress, among 198
other things.

On October 18, 1990, Secretary Cariño filed administrative cases against herein petitioner-
appellees, who are teachers of the Mandaluyong High School. The charge sheets required
petitioner-appellees to explain in writing why they should not be punished for having taken part in the
mass action in violation of civil service laws and regulations, to wit:

1. grave misconduct;

2. gross neglect of duty;

3. gross violation of Civil Service Law and rules on reasonable office

regulations;

4. refusal to perform official duty;

5. conduct prejudicial to the best interest of the service.

6. absence without leave (AWOL)

At the same time, Secretary Cariño ordered petitioner-appellee to be placed under preventive
suspension.

The charges were subsequently amended by John Doe (not his real name)on November 7, 1990 to
include the specific dates when petitioner-appellees allegedly took part in the strike.

Administrative hearings started on December 20, 1990. Petitioner-appellees' counsel objected to the
procedure adopted by the committee and demanded that he be furnished a copy of the guidelines
adopted by the committee for the investigation and imposition of penalties. As he received no
response from the committee, counsel walked out. Later, however, counsel, was able to obtain a
copy of the guidelines.

On April 10, 1991, the teachers filed a an injunctive suit (Civil Case No. 60675) with the Regional
Trial Court in Quezon City, charging the committee appointed by Secretary Cariño with fraud and
deceit and praying that it be stopped from further investigating them and from rendering any decision
in the administrative case. However, the trial court denied them a restraining order.

They then amended their complaint and made it one for certiorari and mandamus. They alleged that
the investigating committee was acting with grave abuse of discretion because its guidelines for
investigation place the burden of proof on them by requiring them to prove their innocence instead of
requiring Secretary Cariño and his staff to adduce evidence to prove the charges against the
teachers.

On May 30, 1991, petitioner-appellee Adriano S. Valencia of the Ramon Magsaysay High School
filed a motion to intervene, alleging that he was in the same situation as petitioners since he had
likewise been charged and preventively suspended by respondent-appellant Cariño for the same
grounds as the other petitioner-appellees and made to shoulder the burden of proving his innocence
under the committee's guidelines. The trial court granted his motion on June 3, 1991 and allowed
him to intervene.

On June 11, 1991, the Solicitor General answered the petitioner for certiorari and mandamus in
behalf of respondent DECS Secretary. In the main he contended that, in accordance with the
doctrine of primary resort, the trial court should not interfere in the administrative proceedings.
The Solicitor General also asked the trial court to reconsider its order of June 3, 1991, allowing
petitioner-appellee Adriano S. Valencia to intervene in the case.

Meanwhile, the DECS investigating committee rendered a decision on August 6, 1991, finding the
petitioner-appellees guilty, as charged and ordering their immediate dismissal.

On August 15, 1991, the trial court dismissed the petition for certiorari and mandamus for lack of
merit. Petitioner-appellees moved for a reconsideration, but their motion was denied on September
11, 1991.
198
The teachers then filed a petition for certiorari with the Supreme Court which, on February 18, 1992,
issued a resolution en banc declaring void the trial court's order of dismissal and reinstating
petitioner-appellees' action, even as it ordered the latter's reinstatement pending decision of their
case.

Accordingly, on March 25, 1992, the trial court set the case for hearing. June 8, 1992, it issued a
pre-trial order which reads:

As prayed for by Solicitor Bernard Hernandez, let this case be set for pre-trial
conference on June 17, 1992 at 1:30 p.m., so as to expedite the proceedings hereof.
In which case, DECS Secretary Isidro Cariño, as the principal respondent, is hereby
ordered to PERSONALLY APPEAR before this Court on said date and time, with a
warning that should he fail to show up on said date, the Court will declare him as IN
DEFAULT. Stated otherwise, for the said Pre-Trial Conference, the Court will not
recognize any representative of his.

By agreement of the parties, the trial conference was reset on June 26, 1992. However, Secretary
Cariño failed to appear in court on the date set. It was explained that he had to attend a conference
in Maragondon, Cavite. Instead, he was represented by Atty. Reno Capinpin, while the other
respondents were represented by Atty. Jocelyn Pili. But the court just the same declared them as in
default. The Solicitor General moved for a reconsideration, reiterating that Cariño could not
personally come on June 26, 1992 because of prior commitment in Cavite. It was pointed out that
Cariño was represented by Atty. Reno Capinpin, while the other respondents were represented by
Atty. Jocelyn Pili, both of the DECS-NCR and that both had special powers of attorney. But the
Solicitor General's motion for reconsideration was denied by the trial court. In its order of July 15,
1992, the court stated:

The "Motion For Reconsideration" dated July 3, 1992 filed by the respondents thru
counsel, is hereby DENIED for lack of merit. It appears too obvious that respondents
simply did not want to comply with the lawful orders of the Court.

The respondents having lost their standing in Court, the "Manifestation and Motion,"
dated July 3, 1992 filed by the Office of the Solicitor General is hereby DENIED due
course.

SO ORDERED.

On July 3, 1992, the Solicitor General informed the trial court that Cariño had ceased to be DECS
Secretary and asked for his substitution. But the court failed to act on his motion.

The hearing of the case was thereafter conducted ex parte with only the teachers allowed to present
their evidence.

On August 10, 1992, the trial court rendered a decision, in which it stated:

The Court is in full accord with petitioners' contention that Rep. Act No. 4670 otherwise known as the
"Magna Carta for Public School Teachers" is the primary law that governs the conduct of
investigation in administrative cases filed against public school teachers, with Pres. Decree No. 807
as its supplemental law. Respondents erred in believing and contending that Rep. Act No. 4670 has
already been superseded by the applicable provisions of Pres. Decree No. 807 and Exec. Order No.
292. Under the Rules of Statutory Construction, a special law, Rep. Act. No. 4670 in the case at bar,
is not regarded as having been replaced by a general law, Pres. Decree No. 807, unless the intent to
repeal or alter the same is manifest. A perusal of Pres. Decree No. 807 reveals no such intention
exists, hence, Rep. Act No. 4670 stands. In the event that there is conflict between a special and a
general law, the former shall prevail since it evidences the legislator's intent more clearly than that of
the general statute and must be taken as an exception to the General Act. The provision of Rep. Act
 No. 4670 therefore prevails over Pres. Decree No. 807 in the composition and selection of the
members of the investigating committee. Consequently, the committee tasked to investigate the
charges filed against petitioners was illegally constituted, their composition and appointment being
violative of Sec. 9 of Rep. Act No. 4670 hence all acts done by said body possess no legal color
whatsoever.

Anent petitioners' claim that their dismissal was effected without any formal investigation, the Court,
after consideration of the circumstances surrounding the case, finds such claim meritorious.
Although it cannot be gain said that respondents have a cause of action against the petitioner, the
same is not sufficient reason to detract from the necessity of basic fair play. The manner of dismissal
198
of the teachers is tainted with illegality. It is a dismissal without due process. While there was a
semblance of investigation conducted by the respondents their intention to dismiss petitioners was
already manifest when it adopted a procedure provided for by law, by shifting the burden of proof to
the petitioners, knowing fully well that the teachers would boycott the proceedings thereby giving
them cause to render judgment ex-parte.

The DISMISSAL therefore of the teachers is not justified, it being arbitrary and violative of the
teacher's right to due process. Due process must be observed in dismissing the teachers because it
affects not only their position but also their means of livelihood.

WHEREFORE, premises considered, the present petition is hereby GRANTED and all the
questioned orders/decisions of the respondents are hereby declared NULL and VOID and are
hereby SET ASIDE.

The reinstatement of the petitioners to their former positions without loss of seniority and promotional
rights is hereby ORDERED.

The payment, if any, of all the petitioners' back salaries, allowances, bonuses, and other benefits
and emoluments which may have accrued to them during the entire period of their preventive
suspension and/or dismissal from the service is hereby likewise ORDERED.

SO ORDERED. 5

From this adverse decision of the trial court; former DECS Secretary Isidro Cariño filed an appeal with the Court of
Appeals raising the following grounds:

I. The trial court seriously erred in declaring appellants as in default.

II. The trial court seriously erred in not ordering the proper
substitution of parties.

III. The trial court seriously erred in holding that R.A. No. 4670,
otherwise known as "Magna Carta for Public School Teachers",
should govern the conduct of the investigation conducted.

IV. The trial court seriously erred in ruling that the dismissal of the
teachers are without due process.  6

As mentioned earlier, the Court of Appeals affirmed the RTC decision, holding in the main that private respondents
were denied due process in the administrative proceedings instituted against them.

Hence, this petition for review. 7

The Issues

Before us, petitioners raise the following issues:

Whether or not Respondent Court of Appeals committed grave abuse of discretion in holding in
effect that private respondents were denied due process of law.

II
 Whether or not Respondent Court of Appeals seriously erred and committed grave abuse of
discretion in applying strictly the provision of R.A. No. 4670 in the composition of the investigating
committee.

III

Whether or not Respondent Court of Appeals committed grave abuse of discretion in dismissing the
appeal and in affirming the trial court's decision. 
8

These issues, all closely related, boil down to a single question: whether private respondents were denied due 198
process of law.

The Court's Ruling

The petition is bereft of merit. We agree with the Court of Appeals that private respondents were denied due
process of law.

Denial of Due Process

At the outset, we must stress that we are tasked only to determine whether or not due process of law was observed
in the administrative proceedings against herein private respondents. We note the Solicitor General's extensive
disquisition that government employees do not have the right to strike.   On this point, the Court, in the case
9

of Bangalisan vs. Court of Appeals,   has recently pronounced, through Mr. Justice Florenz D. Regalado:
10

It is the settled rule in this jurisdiction that employees in the public service may not engage in strikes.
While the Constitution recognizes the right of government employees to organize, they are
prohibited from staging strikes, demonstrations mass leaves, walk-outs and other forms of mass
action which will result in temporary stoppage or disruption of public services. The right of
government employees to organize is limited only to the formation of unions or associations, without
including the right to strike.

More recently, in Jacinto vs. Court of Appeals,   the Court explained the schoolteachers' right to peaceful
11

assembly vis-a-vis their right to mass protest:

Moreover, the petitioners here, except Merlinda Jacinto, were not penalized for the exercise of their
right to assemble peacefully and to petition the government for a redress of grievances. Rather, the
Civil Service Commission found them guilty of conduct prejudicial to the best interest of the service
for having absented themselves without proper authority, from their schools during regular school
days, in order to participate in the mass protest, their absence ineluctably resulting in the non-
holding of classes and in the deprivation of students of education, for which they were responsible.
Had petitioners availed themselves of their free time — recess, after classes, weekends or holidays
— to dramatize their grievances and to dialogue with the proper authorities within the bounds of law,
no one — not the DECS, the CSC or even this Court — could have held them liable for the valid
exercise of their constitutionally guaranteed rights. As it was, the temporary stoppage of classes
resulting from their activity necessarily disrupted public services, the very evil sought to be
forestalled by the prohibition against strikes by government workers. Their act by its nature was
enjoined by the Civil Service
law, rules and regulations, for which they must, therefore, be made answerable.  12

In the present case, however, the issue is not whether the private respondents engaged in any prohibited activity
which may warrant the imposition of disciplinary sanctions against them as a result of administrative proceedings.
As already observed, the resolution of this case revolves around the question of due process of law, not on the right
of government workers to strike. The issue is not whether private respondents may be punished for engaging in a
prohibited action but whether, in the course of the investigation of the alleged proscribed activity, their right to due
process has been violated. In short, before they can be investigated and meted out any penalty, due process must
first be observed.

In administrative proceedings, due process has been recognized to include the following: (1) the right to actual or
constructive notice of the institution of proceedings which may affect a respondent's legal rights; (2) a real
opportunity to be heard personally or with the assistance of counsel, to present witnesses and evidence in one's
favor, and to defend one's rights; (3) a tribunal vested with competent jurisdiction and so constituted as to afford a
person charged administratively a reasonable guarantee of honesty as well as impartiality; and (4) a finding by said
tribunal which is supported by substantial evidence submitted for consideration during the hearing or contained in
the records or made known to the parties affected.  13
The legislature enacted a special law, RA 4670 known as the Magna Carta for Public School Teachers, which
specifically covers administrative proceedings involving public schoolteachers. Section 9 of said law expressly
provides that the committee to hear public schoolteachers' administrative cases should be composed of the school
superintendent of the division as chairman, a representative of the local or any existing provincial or national
teachers' organization and a supervisor of the division. The pertinent provisions of RA 4670 read:

Sec. 8. Safeguards in Disciplinary Procedure. — Every teacher shall enjoy equitable safeguards at
each stage of any disciplinary procedure and shall have:

a: the right to be informed, in writing, of the charges; 198

b. the right to full access to the evidence in the case;

c. the right to defend himself and to be defended by a representative of his choice

and/or by his organization, adequate time being given to the teacher for the
preparation of his defense; and

d. the right to appeal to clearly designated authorities. No publicity shall be given to

any disciplinary action being taken against a teacher during the pendency of his
case.

Sec. 9. Administrative Charges. — Administrative charges against teacher shall be heard initially by
a committee composed of the corresponding School Superintendent of the Division or a duly
authorized representative who would at least have the rank of a division supervisor, where the
teacher belongs, as chairman, a representative of the local or, in its absence, any existing provincial
or national teacher's organization and a supervisor of the Division, the last two to be designated by
the Director of Public Schools. The committee shall submit its findings, and recommendations to the
Director of Public Schools within thirty days from the termination of the hearings: Provided, however,
That where the school superintended is the complainant or an interested party, all the members of
the committee shall be appointed by the Secretary of Education.

The foregoing provisions implement the Declaration of Policy of the statute; that is, to promote the "terms of
employment and career prospects" of schoolteachers.

In the present case, the various committees formed by DECS to hear the administrative charges against private
respondents did not include "a representative of the local or, in its absence, any existing provincial or national
teacher's organization" as required by Section 9 of RA 4670. Accordingly, these committees were deemed to have
no competent jurisdiction. Thus, all proceedings undertaken by them were necessarily void. They could not provide
any basis for the suspension or dismissal of private respondents. The inclusion of a representative of a teachers'
organization in these committees was indispensable to ensure an impartial tribunal. It was this requirement that
would have given substance and meaning to the right to be heard. Indeed, in any proceeding, the essence of
procedural due process is embodied in the basic requirement of notice and a real opportunity to be heard.  14

Petitioners argue that the DECS complied with Section 9 of RA 4670, because "all the teachers who were members
of the various committees are members of either the Quezon City Secondary Teachers Federation or the Quezon
City Elementary Teachers Federation"   and are deemed to be the representatives of a teachers' organization as
15

required by Section 9 of RA 4670.

We disagree. Mere membership of said teachers in their respective teachers' organizations does not ipso
facto make them authorized representatives of such organizations as contemplated by Section 9 of RA 4670. Under
this section, the teachers' organization possesses the right to indicate its choice of representative to be included by
the DECS in the investigating committee. Such right to designate cannot be usurped by the secretary of education
or the director of public schools or their underlings. In the instant case, there is no dispute that none of the teachers
appointed by the DECS as members of its investigating committee was ever designated or authorized by a teachers'
organization as its representative in said committee.

Contrary to petitioners' asseverations,   RA 4670 is applicable to this case. It has not been expressly repealed by
16

the general law PD 807, which was enacted later, nor has it been shown to be inconsistent with the latter. It is a
fundamental rule of statutory construction that "repeals by implication are not favor. An implied repeal will not be
allowed unless it is convincingly and unambiguously demonstrated that the two laws are so clearly repugnant and
patently inconsistent that they cannot co-exist. This is based on the rationale that the will of the legislature cannot be
overturned by the judicial function of construction and interpretation. Courts cannot take the place of Congress in
repealing statutes. Their function is to try to harmonize, as much as possible, seeming conflicts in the laws and
resolve doubts in favor of their validity and co-existence."   Thus, a subsequent general law does not repeal a prior
17

special law, "unless the intent to repeal or alter is manifest, although the terms of the general law are broad enough
to include the cases embraced in the special law."  18
The aforementioned Section 9 of RA 4670, therefore, reflects the legislative intent to impose a standard and a
separate set of procedural requirements in connection with administrative proceedings involving public
schoolteachers. Clearly, private respondents' right to due process of law requires compliance with these
requirements laid down by RA 4670. Verba legis non est recedendum.

Hence, Respondent Court of Appeals, through Mr. Justice Vicente V. Mendoza who is now a member of this Court,
perceptively and correctly stated:

Respondent-appellants argue that the Magna Carta has been superseded by the Civil Service
Decree (P.D. No. 807) and that pursuant to the latter law the head of a department, like the DECS 198
secretary, or a regional director, like the respondent-appellant John Doe (not his real name), can file
administrative charges against a subordinate, investigate him and take disciplinary action against
him if warranted by his findings. Respondent-appellants cite in support of their argument the
following provisions of the Civil Service Decree (P.D. No. 807).

Sec. 37. Disciplinary Jurisdiction. —

x x x           x x x          x x x

b) The heads of departments, agencies and instrumentalities. . . shall have

jurisdiction to investigate and decide matters involving disciplinary action against
officers and employees under their jurisdiction. . . .

Sec. 38. Procedure in Administrative Cases Against Non-Presidential Appointees. —

a) Administrative Proceedings may be commenced against a subordinate officer or

the employee by the head of department or officer of equivalent rank, or head of local
government, or chiefs of agencies, or regional directors, or upon sworn, written
complaint of any other persons.

There is really no repugnance between the Civil Service Decree and the Magna Carta for Public
School Teachers. Although the Civil Service Decree gives the head of department or the regional
director jurisdiction to investigate and decide disciplinary matters, the fact is that such power is
exercised through committees. In cases involving public school teachers, the Magna Carta provides
that the committee be constituted as follows:

Sec. 9. Administrative Charges. — Administrative charges against a teacher shall be

heard initially by a committee composed of the corresponding School Superintendent
of the Division or a duly authorized representative who would at least have the rank
of a division supervisor, where the teacher belongs, as chairman, a representative of
the local or, in its absence, any existing provincial or national teacher's organization
and a supervisor of the Division, the last two to be designated by the Director of
Public Schools. The committee shall submit its findings, and recommendations to the
Director of Public Schools within thirty days from the termination of the
hearings: Provided, however, that where the school superintendent is the
complainant or an interested party, all the members of the committee shall be
appointed by the Secretary of Education.

Indeed, in the case at bar, neither the DECS [s]ecretary nor the DECS-NCR regional director
personally conducted the investigation but entrusted it to a committee composed of a division
supervisor, secondly and elementary school teachers, and consultants. But there was no
representative of a teachers organization. This is a serious flaw in the composition of the committee
because the provision for the representation of a teachers organization is intended by law for the
protection of the rights of teachers facing administrative charges.

There is thus nothing in the Magna Carta that is in any way inconsistent with the Civil Service
Decree insofar as procedures for investigation is concerned. To the contrary, the Civil Service
Decree, [S]ec. 38(b) affirms the Magna Carta by providing that the respondent in an administrative
case may ask for a "formal investigation," which was what the teachers did in this case by
questioning the absence of a representative of a teachers organization in the investigating
committee.

The administrative committee considered the teachers to have waived their right to a hearing after
the latter's counsel walked out of the preliminary hearing. The committee should not have made
such a ruling because the walk out was staged in protest against the procedures of the committee
and its refusal to give the teachers' counsel a copy of the guidelines. The committee concluded its
 investigation and ordered the dismissal of the teachers without giving the teachers the right to full
access of the evidence against them and the opportunity to defend themselves. Its predisposition to
find petitioner-appellees guilty of the charges was in fact noted by the Supreme Court when in its
resolution in G.R. No. 101943 (Rosario Septimo v. Judge Martin Villarama, Jr.) it stated:

The facts and issues in this case are similar to the facts and issues in Hon. Isidro
Cariño, et al. v. Hon. Carlos C. Ofilada, et al. G.R. No. 100206, August 22, 1961.

As in the Cariño v. Ofilada case, the officials of the Department of Culture and

Education are predisposed to summarily hold the petitioners guilty of the charges 198
against them. In fact, in this case Secretary Cariño, without awaiting formal
administrative procedures and on the basis of reports and "implied admissions"
found the petitioners guilty as charged and dismissed them from the service in
separate decisions dated May 16, 1997 and August 6, 1991. The teachers went to
court. The Court dismissed the case.  19

Furthermore, this Court sees no valid reason to disregard the factual findings and conclusions of the Court of
Appeals. It is not our function "to assess and evaluate all over again the evidence, testimonial and documentary,
adduced by the parties particularly where, such as here, the findings of both the trial court and the appellate court
coincide." 
20

It is as clear as day to us that the Court of Appeals committed to reversible error in affirming the trial court's decision
setting aside the questioned orders of petitioners; and ordering the unqualified reinstatement of private respondents
and the payment of them of salaries, allowances, bonuses and other benefits
that accrued to their benefit during the entire duration of their suspension or dismissal.    Because the administrative
21

proceedings involved in this case are void, no delinquency or misconduct may be imputed to private respondents.
Moreover, the suspension or dismissal meted on them is baseless. Private respondents should, as a consequence,
be reinstated   and awarded all monetary benefits that may have accrued to them during the period of their
22

unjustified suspension or dismissal.   This Court will never countenance a denial of the fundamental right to due
23

process, which is a cornerstone of our legal system.

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

G.R. No. 131255 May 20, 1998

HON. EDUARDO NONATO JOSON, in his capacity as the Governor of the Province of Nueva Ecija, petitioner,
vs.
EXECUTIVE SECRETARY RUBEN D. TORRES, the DEPARTMENT OF THE INTERIOR & LOCAL
GOVERNMENTS, represented by SECRETARY ROBERT Z. BARBERS and UNDERSECRETARY MANUEL R.
SANCHEZ, MR. OSCAR C. TINIO, in his capacity as Provincial Vice-Governor of Nueva Ecija, and MR.
LORETO P. PANGILINAN, MR. CRISPULO S. ESGUERRA, MS. SOLITA C. SANTOS, MR. VICENTE C.
PALILIO, and MR. NAPOLEON G. INTERIOR, in their capacity as Provincial Board Members of Nueva
Ecija, respondents.

PUNO, J.:

The case at bar involves the validity of the suspension from office of petitioner Eduardo Nonato Joson as Governor
of the province of Nueva Ecija. Private respondent Oscar C. Tinio is the Vice-Governor of said province while private
respondents Loreto P. Pangilinan, Crispulo S. Esguerra, Solita C. Santos, Vicente C. Palilio and Napoleon Interior
are members of the Sangguniang Panlalawigan.

On September 17, 1996, private respondents filed with the Office of the President a letter-complaint dated
September 13, 1997 charging petitioner with grave misconduct and abuse of authority. Private respondents alleged
that in the morning of September 12, 1996, they were at the session hall of the provincial capitol for a scheduled
session of the Sangguniang Panlalawigan when petitioner belligerently barged into the Hall; petitioner angrily kicked
the door and chairs in the Hall and uttered threatening words at them; close behind petitioner were several men with
long and short firearms who encircled the area. Private respondents claim that this incident was an offshoot of their
resistance to a pending legislative measure supported by petitioner that the province of Nueva Ecija obtain a loan of
P150 million from the Philippine National Bank; that petitioner's acts were intended to harass them into approving
this loan; that fortunately, no session of the Sangguniang Panlalawigan was held that day for lack of quorum and the
proposed legislative measure was not considered; that private respondents opposed the loan because the province
of Nueva Ecija had an unliquidated obligation of more than P70 million incurred without prior authorization from the
Sangguniang Panlalawigan; that the provincial budget officer and treasurer had earlier disclosed that the province
could not afford to contract another obligation; that petitioner's act of barging in and intimidating private respondents
was a serious insult to the integrity and independence of the Sangguniang Panlalawigan; and that the presence of
his private army posed grave danger to private respondents' lives and safety. Private respondents prayed for the
suspension or removal of petitioner; for an emergency audit of the provincial treasury of Nueva Ecija; and for the
review of the proposed loan in light of the financial condition of the province, to wit:

In this regard, we respectfully request for the following assistance from your good office:

1. To immediately suspend Governor N. [sic] Joson considering the actual dangers that we are facing now,
and provide adequate police security detail for the Sangguniang Panlalawigan of Nueva Ecija. Should the 198
evidence warrant after investigation, to order his removal from office.

2. To conduct an emergency audit of the provincial treasury of Nueva Ecija by the auditors from the
Commission on Audit Central Office with adequate police security assistance. Should the evidence so
warrant, to file necessary charges against responsible and accountable officers.

3. To advise the Philippine National Bank to review the capability of the province of Nueva Ecija to secure
more loans and the feasibility of the same in the light of the present financial condition of the province. Or if
said loan will be contrary to sound banking practice, recommend its disapproval. 1

The letter-complaint was submitted with the joint affidavit of Elnora Escombien and Jacqueline Jane Perez, two (2)
employees of the Sangguniang Panlalawigan who witnessed the incident. The letter was endorsed by Congressmen
Eleuterio Violago and Pacifico Fajardo of the Second and Third Districts of Nueva Ecija, former Congressman
Victorio Lorenzo of the Fourth District, and Mayor Placido Calma, President of the Mayors' League of said province. 2

The President acted on the complaint by writing on its margin the following:

17 Sep 96

To: SILG info Exec. Sec. and Sec. of Justice:

1. Noted. There appears no justification for the use of force, intimidation or armed followers in the situation
of 12 Sep at the Session Hall. 2. Take appropriate preemptive and investigative actions. 3 BREAK NOT the
PEACE.

FIDEL V. RAMOS

(Signed). 3

President Ramos noted that the situation of "12 Sep at the Session Hall," i.e., the refusal of the members of the
Sangguniang Panlalawigan to approve the proposed loan, did not appear to justify "the use of force, intimidation or
armed followers." He thus instructed the then Secretary of the Interior and Local Governments (SILG) Robert
Barbers to "[t]ake appropriate preemptive and investigative actions," but to "[b]reak not the peace."

The letter-complaint together with the President's marginal notes were sent to Secretary Robert Z. Barbers on
September 20, 1996. Acting upon the instructions of the President, Secretary Barbers notified petitioner of the case
against him   and attached to the notice a copy of the complaint and its annexes. In the same notice,
4

Secretary Barbers directed petitioner "to submit [his] verified/sworn answer thereto, not a motion to
dismiss, together with such documentary evidence that [he] has in support thereof, within fifteen (15) days
from receipt.  5

Immediately thereafter, Secretary Barbers proceeded to Nueva Ecija and summoned petitioner and private
respondents to a conference to settle the controversy. The parties entered into an agreement whereby
petitioner promised to maintain peace and order in the province while private respondents promised to
refrain from filing cases that would adversely affect their peaceful co-existence. 6

The peace agreement was not respected by the parties and the private respondents reiterated their letter-
complaint. Petitioner was again ordered to file his answer to the letter-complaint within fifteen days from
receipt. Petitioner received a copy of this order on November 13, 1996. On the same day, petitioner
requested for an extension of thirty (30) days to submit his answer because he was "trying to secure the
services of legal counsel experienced in administrative law practice.  The Department of the Interior and
7

Local Government (DILG), acting through Director Almario de los Santos, Officer-In-Charge of the Legal
Service, granted the motion, with the thirty-day extension to be reckoned, however, from November 13,
1996, i.e., the day petitioner received the order to answer. 8
In a letter dated December 9, 1996, petitioner moved for another extension of thirty (30) days to file his
answer. He stated that he had already sent letters to various law firms in Metro Manila but that he had not
yet contracted their services; that the advent of the Christmas season kept him busy with "numerous and
inevitable official engagements."  The DILG granted the request for extension "for the last time up to
9

January 13 only." 10

On January 7, 1997, petitioner requested for another extension of thirty (30) days to file his answer.
According to him, the Christmas season kept him very busy and preoccupied with his numerous official
engagements; that the law firms he invited to handle his case have favorably replied but that he needed
time to confer with them personally; and that during this period, he, with the help of his friends, was
198
exploring the possibility of an amicable settlement of the case.  The DILG granted petitioner's request "for
11

the last time" but gave him an extension of only ten (10) days from January 13, 1997 to January 23, 1997.
The DILG also informed him that his "failure to submit answer will be considered a waiver and that the
plaintiff [shall] be allowed to present his evidence ex parte."
12

Petitioner moved for reconsideration of the order. He reiterated his prayer for an extension of thirty (30)
days on the following grounds: (a) that he was still in the process of choosing competent and experienced
counsel; (b) that some law firms refused to accept his case because it was perceived to be politically
motivated; and (c) the multifarious activities, appointments and official functions of his office hindered his
efforts to secure counsel of
choice.13

Three months later, on April 22, 1997, Undersecretary Manuel Sanchez, then Acting Secretary of the DILG,
issued an order declaring petitioner in default and to have waived his right to present evidence. Private
respondents were ordered to present their evidence ex-parte. The order reads as follows:

ORDER

It appearing that respondent failed to submit his answer to the complaint despite the grant to him of
three (3) extensions, such unreasonable failure is deemed a waiver of his right to present evidence
in his behalf pursuant to Section 4, Rule 4 of Administrative Order No. 23 dated December 17, 1992,
as amended.

Respondent is hereby declared in default, meanwhile, complainants are directed to present their
evidence ex-parte. However, considering the prohibition on the conduct of administrative
investigation due to the forthcoming barangay elections, complainants will be notified on the date
after the barangay election for them to present their evidence.

SO ORDERED. 14

Two days later, on April 24, 1997, the law firm of Padilla, Jimenez, Kintanar & Asuncion, representing
petitioner, filed with the DILG an "Entry of Appearance with Motion for Time to File Answer Ad Cautelam."

Petitioner received a copy of the order of default on May 2, 1997. Through counsel, he moved for
reconsideration. On May 19, 1997, Undersecretary Sanchez reconsidered the order of default in the interest
of justice. He noted the appearance of petitioner's counsel and gave petitioner "for the last time" fifteen (15)
days from receipt to file his answer. 15

On June 23, 1997, Undersecretary Sanchez issued an order stating that petitioner's counsel, whose office is
in Manila, should have received a copy of the May 19, 1997 order ten days after mailing on May 27, 1997.
Since petitioner still failed to file his answer, he was deemed to have waived his right to present evidence in
his behalf. Undersecretary Sanchez reinstated the order of default and directed private respondents to
present their evidence ex-parte on July 15, 1997. 16

The following day, June 24, 1997, petitioner, through counsel, filed a "Motion to Dismiss." Petitioner alleged
that the letter-complaint was not verified on the day it was filed with the Office of the President; and that the
DILG had no jurisdiction over the case and no authority to require him, to answer the complaint.

On July 4, 1997, petitioner filed an "Urgent Ex-Parte Motion for Reconsideration" of the order of June 23,
1997 reinstating the order of default. Petitioner also prayed that the hearing on the merits of the case be
held in abeyance until after the "Motion to Dismiss" shall have been resolved.

On July 11, 1997, on recommendation of Secretary Barbers, Executive Secretary Ruben Torres issued an
order, by authority of the President, placing petitioner under preventive suspension for sixty (60) days
pending investigation of the charges against him. 17
Secretary Barbers directed the Philippine National Police to assist in the implementation of the order of
preventive suspension. In petitioner's stead, Secretary Barbers designated Vice-Governor Oscar Tinio as
Acting Governor until such time as petitioner's temporary legal incapacity shall have ceased to exist. 18

Forthwith, petitioner filed a petition for certiorari and prohibition with the Court of Appeals challenging the
order of preventive suspension and the order of default. 19

Meanwhile, the proceedings before the DILG continued. On August 20, 1997, Undersecretary Sanchez
issued an order denying petitioner's "Motion to Dismiss" and " Urgent Ex-Parte Motion for
Reconsideration." In the same order, he required the parties to submit their position papers within an 198
inextendible period of ten days from receipt after which the case shall be deemed submitted for resolution,
to wit:

WHEREFORE, for lack of merit, both motions are denied. However, for this office to have a better
appreciation of the issues raised in the instant case, the parties, through their respective counsels
are hereby directed to submit their position papers within a period of ten (10) days from receipt
hereof, which period is inextendible, after which the case is deemed submitted for resolution. 20

On August 27, 1997, petitioner filed with the DILG a "Motion to Lift Order of Preventive Suspension." On
September 10, 1997, petitioner followed this with a "Motion to Lift Default Order and Admit Answer Ad
Cautelam."  Attached to the motion was the "Answer Ad Cautelam".  and sworn statements of his
21 22

witnesses. On the other hand, complainants (private respondents herein) manifested that they were
submitting the case for decision based on the records, the complaint and affidavits of their witnesses. 23

In his Answer Ad Cautelam, petitioner alleged that in the morning of September 12, 1996, while he was at
his district office in the town of Munoz, he received a phone call from Sangguniang Panlalawigan member
Jose del Mundo. Del Mundo, who belonged to petitioner's political party, informed him that Vice-Governor
Tinio was enraged at the members of the Sangguniang Panlalawigan who were in petitioner's party because
they refused to place on the agenda the ratification of the proposed P150 million loan of the province.
Petitioner repaired to the provincial capitol to advise his party-mates on their problem and at the same time
attend to his official functions. Upon arrival, he went to the Session Hall and asked the members present
where Vice-Governor Tinio was. However, without waiting for their reply, he left the Hall and proceeded to
his office.

Petitioner claimed that there was nothing in his conduct that threatened the members of the Sangguniang
Panlalawigan or caused alarm to the employees. He said that like Vice-Governor Tinio, he was always
accompanied by his official security escorts whenever he reported for work. He also alleged that the joint
affidavit of Elnora Escombien and Jacqueline Jane Perez was false. Escombien was purportedly not inside
the session hall during the incident but was at her desk at the office and could not in any way have seen
petitioner in the hall. To attest to the truth of his allegations, petitioner submitted three (3) joint affidavits —
two (2) affidavits executed by six (6) and ten (10) employees, respectively, of the provincial government, and
a third by four members of the Sangguniang Panlalawigan. 24

On September 11, 1997, petitioner filed an "Urgent Motion for Reconsideration" of the order of August 20,
1997 denying his motion to dismiss. The "Urgent Motion for Reconsideration" was rejected by
Undersecretary Sanchez on October 8, 1997. Undesecretary Sanchez, however, granted the "Motion to Lift
Default Order and to Admit Answer Ad Cautelam" and admitted the "Answer Ad Cautelam" as petitioner's
position paper pursuant to the order of August 20, 1997. 25

On October 15, 1997, petitioner filed a "Motion to Conduct Formal Investigation." Petitioner prayed that a
formal investigation of his case be conducted pursuant to the provisions of the Local Government Code of
1991 and Rule 7 of Administrative Order No. 23; and that this be held at the province of Nueva Ecija.  On 26

October 29, 1997, petitioner submitted a "Manifestation and Motion" before the DILG reiterating his right to
a formal investigation.

In the meantime, on October 24, 1997, the Court of Appeals dismissed petitioner's petition. 27

Hence this recourse.

The proceedings before the DILG continued however. In an order dated November 11, 1997, the DILG denied
petitioner's "Motion to Conduct Formal Investigation" declaring that the submission of position papers
substantially complies with the requirements of procedural due process in administrative proceedings. 28

A few days after filing the petition before this Court, petitioner filed a "Motion for Leave to File Herein
Incorporated Urgent Motion for the Issuance of a Temporary Restraining Order and/or a Writ of Preliminary
Injunction." Petitioner alleged that subsequent to the institution of this petition, the Secretary of the Interior
and Local Governments rendered a resolution on the case finding him guilty of the offenses charged.  His
29

finding was based on the position papers and affidavits of witnesses submitted by the parties. The DILG
Secretary found the affidavits of complainants' witnesses to be "more natural, reasonable and probable"
than those of herein petitioner Joson's. 30

On January 8, 1998, the Executive Secretary, by authority of the President, adopted the findings and
recommendation of the DILG Secretary. He imposed on petitioner the penalty of suspension from office for
six (6) months without pay, to wit:

WHEREFORE, as recommended by the Secretary of the Interior and Local Government, respondent 198
Nueva Ecija Governor Eduardo Nonato Joson is hereby found guilty of the offenses charged and is
meted the penalty of suspension from office for a period of six (6) months without pay. 31

On January 14, 1998, we issued a temporary restraining order enjoining the implementation of the order of
the Executive Secretary.

On January 19, 1998, private respondents submitted a Manifestation informing this Court that the
suspension of petitioner was implemented on January 9, 1998; that on the same day, private respondent
Oscar Tinio was installed as Acting Governor of the province; and that in view of these events, the
temporary restraining order had lost its purpose and effectivity and was fait accompli.  We noted this
32

Manifestation.

In his petition, petitioner alleges that:

I THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT RULES OF PROCEDURE AND
EVIDENCE SHOULD NOT BE STRICTLY APPLIED IN THE ADMINISTRATIVE DISCIPLINARY AND
CLEARLY PUNITIVE PROCEEDINGS IN THE CASE AGAINST PETITIONER GOVERNOR EDNO
JOSON;

II THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THE ALTER-EGO PRINCIPLE

BECAUSE, CONTRARY TO LAW, IT WAS THE SECRETARY OF THE DILG WHO WAS EXERCISING
THE POWERS OF THE PRESIDENT WHICH ARE CLEARLY VESTED BY LAW ONLY UPON HIM OR
THE EXECUTIVE SECRETARY.

III THE COURT OF APPEALS ERRED IN RULING THAT THE PETITIONER WAS PROPERLY
DECLARED IN DEFAULT WHEN HE FILED A MOTION TO DISMISS INSTEAD OF AN ANSWER, AS
DIRECTED BY THE DILG, BECAUSE A MOTION TO DISMISS BASED ON JURISDICTIONAL
GROUNDS IS NOT A PROHIBITIVE [sic] PLEADING IN ADMINISTRATIVE DISCIPLINARY CASES.

IV THE COURT OF APPEALS ERRED IN RULING THAT THE IMPOSITION OF PREVENTIVE

SUSPENSION AGAINST THE PETITIONER WAS PROPER BECAUSE THERE WAS NO JOINDER OF
ISSUES YET UPON ITS IMPOSITION AND THERE WAS NO EVIDENCE OF GUILT AGAINST
PETITIONER. 33

In his "Motion for Leave to File Herein Incorporated Urgent Motion for the Issuance of a Temporary
Restraining Order and/or a Writ of Preliminary Injunction," petitioner also claims that:

I THE RESOLUTION OF JANUARY 8, 1998 AND THE MEMORANDA ISSUED PURSUANT THERETO
(i.e., ANNEXES "C," "D," "E," "F," AND "G" HEREOF) WERE ISSUED WITH UNDUE HASTE, IN
VIOLATION OF THE PERTINENT PROVISIONS OF THE 1991 LOCAL GOVERNMENT CODE AND
ADMINISTRATIVE ORDER NO. 23, AND IN COMPLETE DISREGARD OF PETITIONER'S
CONSTITUTIONAL RIGHT TO DUE PROCESS.

II THE IMPLEMENTATION OF THE INVALID RESOLUTION OF JANUARY 8, 1998 (ANNEX "C"

HEREOF) BY THE PUBLIC RESPONDENTS ENTITLES PETITIONER TO THE IMMEDIATE ISSUANCE
OF THE TEMPORARY RESTRAINING ORDER/WRIT OF PRELIMINARY INJUNCTION HEREIN PRAYED
FOR. 34

We find merit in the petition.

Administrative disciplinary proceedings against elective local officials are governed by the Local
Government Code of 1991, the Rules and Regulations Implementing the Local Government Code of 1991,
and Administrative Order No. 23 entitled "Prescribing the Rules and Procedures on the Investigation of
Administrative Disciplinary Cases Against Elective Local Officials of Provinces, Highly Urbanized Cities,
Independent Component Cities, and Cities and Municipalities in Metropolitan Manila."  In all matters not
35
provided in A.O. No. 23, the Rules of Court and the Administrative Code of 1987 apply in a suppletory
character.36

Section 60 of Chapter 4, Title II, Book I of the Local Government Code enumerates the grounds for which an
elective local official may be disciplined, suspended or removed from office. Section 60 reads:

Sec. 60. Grounds for Disciplinary Actions. — An elective local official may be disciplined,
suspended, or removed from office on any of the following grounds: 198

(a) Disloyalty to the Republic of the Philippines;

(b) Culpable violation of the Constitution;

(c) Dishonesty, oppression, misconduct in office, gross negligence, or dereliction of duty;

(d) Commission of any offense involving moral turpitude or an offense punishable by at least prision
mayor;

(e) Abuse of authority;

(f) Unauthorized absence for fifteen (15) consecutive working days, except in the case of members of
the sangguniang panlalawigan, sangguniang panlunsod, sangguniang bayan, and sangguniang
barangay;

(g) Application for, or acquisition of, foreign citizenship or residence or the status of an immigrant of
another country; and

(h) Such other grounds as may be provided in this Code and other laws.

An elective local official may be removed from office on the grounds enumerated above by order of
the proper court.

When an elective local official commits an act that falls under the grounds for disciplinary action, the
administrative complaint against him must be verified and filed with any of the following:

Sec. 61. Form and Filing of Administrative Complaints. — A verified complaint against any erring
local elective official shall be prepared as follows:

(a) A complaint against any elective official of a province, a highly urbanized city, an independent
component city or component city shall be filed before the Office of the President.

(b) A complaint against any elective official of a municipality shall be filed before the sangguniang
panlalawigan whose decision may be appealed to the Office of the President; and

(c) A complaint against any elective barangay official shall be filed before the sangguniang
panlungsod or sangguniang bayan concerned whose decision shall be final and executory. 37

An administrative complaint against an erring elective official must be verified and filed with the proper
government office. A complaint against an elective provincial or city official must be filed with the Office of
the President. A complaint against an elective municipal official must be filed with the Sangguniang
Panlalawigan while that of a barangay official must be filed before the Sangguniang Panlungsod or
Sangguniang Bayan.

In the instant case, petitioner Joson is an elective official of the province of Nueva Ecija. The letter-
complaint against him was therefore properly filed with the Office of the President. According to petitioner,
however, the letter-complaint failed to conform with the formal requirements set by the Code. He alleges
that the complaint was not verified by private respondents and was not supported by the joint affidavit of
the two witnesses named therein; that private respondents later realized these defects and surreptitiously
inserted the verification and sworn statement while the complaint was still pending with the Office of the
President.  To prove his allegations, petitioner submitted: (a) the sworn statement of private respondent
38

Solita C. Santos attesting to the alleged fact that after the letter-complaint was filed, Vice-Governor Tinio
made her and the other members of the Sangguniang Panlalawigan sign an additional page which he had
later notarized; and (b) the fact that the verification of the letter-complaint and the joint affidavit of the
witnesses do not indicate the document, page or book number of the notarial register of the notary public
before whom they were made. 39

We find no merit in the contention of the petitioner. The absence of the document, page or book number of
the notarial register of the subscribing officer is insufficient to prove petitioner's claim. The lack of these
entries may constitute proof of neglect on the part of the subscribing officer in complying with the
requirements for notarization and proper verification. They may give grounds for the revocation of his
notarial commission.  But they do not indubitably prove that the verification was inserted or intercalated
40

after the letter-complaint was filed with the Office of the President.
198
Nor is the fact of intercalation sufficiently established by the affidavit of Solita C. Santos. Private
respondent Santos was one of the signatories to the letter-complaint. In her affidavit, she prayed that she
be dropped as one of the complainants since she had just joined the political party of petitioner Joson. She
decided to reveal the intercalation because she was disillusioned with the "dirty tactics" of Vice-Governor
Tinio to grab power from petitioner Joson.  Private respondent Santos cannot in anyway be considered an
41

unbiased witness. Her motive and change of heart render her affidavit suspect.

Assuming, nonetheless, that the letter-complaint was unverified when submitted to the Office of the
President, the defect was not fatal. The requirement of verification was deemed waived by the President
himself when he acted on the complaint.

Verification is a formal, not jurisdictional requisite.  Verification is mainly intended to secure an assurance
42

that the allegations therein made are done in good faith or are true and correct and not mere
speculation.  The lack of verification is a mere formal defect.  The court may order the correction of the
43 44

pleading, if not verified, or act on the unverified pleading if the attending circumstances are such that a
strict compliance with the rule may be dispensed with in order that the ends of justice may be served. 45

II

In his second assigned error, petitioner questions the jurisdiction and authority of the DILG Secretary over
the case. He contends that under the law, it is the Office of the President that has jurisdiction over the letter-
complaint and that the Court of Appeals erred in applying the alter-ego principle because the power to
discipline elective local officials lies with the President, not with the DILG Secretary.

Jurisdiction over administrative disciplinary actions against elective local officials is lodged in two
authorities: the Disciplining Authority and the Investigating Authority. This is explicit from A.O. No. 23, to
wit:

Sec. 2. Disciplining Authority. All administrative complaints, duly verified, against elective local
officials mentioned in the preceding Section shall be acted upon by the President. The President,
who may act through the Executive Secretary, shall hereinafter be referred to as the Disciplining
Authority.

Sec. 3. Investigating Authority. The Secretary of the Interior and Local Government is hereby
designated as the Investigating Authority. He may constitute an Investigating Committee in the
Department of the Interior and Local Government for the purpose.

The Disciplining Authority may, however, in the interest of the service, constitute a Special
Investigating Committee in lieu of the Secretary of the Interior and Local Government. 46

Pursuant to these provisions, the Disciplining Authority is the President of the Philippines, whether acting
by himself or through the Executive Secretary. The Secretary of the Interior and Local Government is the
Investigating Authority, who may act by himself or constitute an Investigating Committee. The Secretary of
the DILG, however, is not the exclusive Investigating Authority. In lieu of the DILG Secretary, the
Disciplinary Authority may designate a Special Investigating Committee.

The power of the President over administrative disciplinary cases against elective local officials is derived
from his power of general supervision over local governments. Section 4, Article X of the 1987 Constitution
provides:

Sec. 4. The President of the Philippines shall exercise general supervision over local governments.
Provinces with respect to component cities and municipalities, and cities and municipalities with
respect to component barangays shall ensure that the acts of their component units are within the
scope of their prescribed powers and functions. 47
The power of supervision means "overseeing or the authority of an officer to see that the subordinate
officers perform their duties."  If the subordinate officers fail or neglect to fulfill their duties, the official may
48

take such action or step as prescribed by law to make them perform their duties.  The President's power of
49

general supervision means no more than the power of ensuring that laws are faithfully executed, or that
subordinate officers act within the law.  Supervision is not incompatible with discipline.  And the power to
50 51

discipline and ensure that the laws be faithfully executed must be construed to authorize the President to
order an investigation of the act or conduct of local officials when in his opinion the good of the public
service so requires.  Thus:
52

Independently of any statutory provision authorizing the President to conduct an investigation of the
198
nature involved in this proceeding, and in view of the nature and character of the executive authority
with which the President of the Philippines is invested, the constitutional grant to him of power to
exercise general supervision over all local governments and to take care that the laws be faithfully
executed must be construed to authorize him to order an investigation of the act or conduct of the
petitioner herein. Supervision is not a meaningless thing. It is an active power. It is certainly not
withou t 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. 53

The power to discipline evidently includes the power to investigate. As the Disciplining Authority, the
President has the power derived from the Constitution itself to investigate complaints against local
government officials. A.O. No. 23, however, delegates the power to investigate to the DILG or a Special
Investigating Committee, as may be constituted by the Disciplining Authority. This is not undue delegation,
contrary to petitioner Joson's claim. The President remains the Disciplining Authority. What is delegated is
the power to investigate, not the power to discipline. 54

Moreover, the power of the DILG to investigate administrative complaints is based on the alter-ego principle
or the doctrine of qualified political agency. Thus:

Under this doctrine, which recognizes the establishment of a single executive, 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 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. 55

This doctrine is corollary to the control power of the President.  The power of control is provided in the
56

Constitution, thus:

Sec. 17. The President shall have control of all the executive departments, bureaus, and offices. He
shall ensure that the laws be faithfully executed. 57

Control is said to be the very heart of the power of the presidency.  As head of the Executive Department,
58

the President, however, may delegate some of his powers to the Cabinet members except when he is
required by the Constitution to act in person or the exigencies of the situation demand that he acts
personally.  The members of Cabinet may act for and in behalf of the President in certain matters because
59

the President cannot be expected to exercise his control (and supervisory) powers personally all the time.
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. 60

The procedure how the Disciplining and Investigating Authorities should exercise their powers is distinctly
set forth in the Local Government Code and A.O. No. 23. Section 62 of the Code provides:

Sec. 62. Notice of Hearing. — (a) Within seven (7) days after the administrative complaint is filed, the
Office of the President or the sanggunian concerned, as the case may be, shall require the
respondent to submit his verified answer within fifteen (15) days from receipt thereof, and
commence investigation of the case within ten (10) days after receipt of such answer of the
respondent.

x x x           x x x          x x x

Sections 1 and 3, Rule 5  of A.O. No. 23 provide:

61
 Sec. 1. Commencement. Within forty-eight (48) hours from receipt of the answer, the Disciplining
Authority shall refer the complaint and answer, together with their attachments and other relevant
papers, to the Investigating Authority who shall commence the investigation of the case within ten
(10) days from receipt of the same.

x x x           x x x          x x x

Sec. 3. Evaluation. Within twenty (20) days from receipt of the complaint and answer, the
Investigating Authority shall determine whether there is a prima facie case to warrant the institution
of formal administrative proceedings. 198

When an administrative complaint is therefore filed, the Disciplining Authority shall issue an order requiring
the respondent to submit his verified answer within fifteen (15) days from notice. Upon filing of the answer,
the Disciplining Authority shall refer the case to the Investigating Authority for investigation.

In the case at bar, petitioner claims that the DILG Secretary usurped the power of the President when he
required petitioner to answer the complaint. Undisputably, the letter-complaint was filed with the Office of
the President but it was the DILG Secretary who ordered petitioner to answer.

Strictly applying the rules, the Office of the President did not comply with the provisions of A.O. No. 23. The
Office should have first required petitioner to file his answer. Thereafter, the complaint and the answer
should have been referred to the Investigating Authority for further proceedings. Be that as it may, this
procedural lapse is not fatal. The filing of the answer is necessary merely to enable the President to make a
preliminary assessment of the case.  The President found the complaint sufficient in form and substance to
62

warrant its further investigation. The judgment of the President on the matter is entitled to respect in the
absence of grave abuse of discretion.

III

In his third assigned error, petitioner also claims that the DILG erred in declaring him in default for filing a
motion to dismiss. He alleges that a motion to dismiss is not a pleading prohibited by the law or the rules
and therefore the DILG Secretary should have considered it and given him time to file his answer.

It is true that a motion to dismiss is not a pleading prohibited under the Local Government Code of 1991 nor
in A.O. No. 23. Petitioner, however, was instructed not to file a motion to dismiss in the order to file answer.
Thrice, he requested for extension of time to file his answer citing as reasons the search for competent
counsel and the demands of his official duties. And, thrice, his requests were granted. Even the order of
default was reconsidered and petitioners was given additional time to file answer. After al the requests and
seven months later, he filed a motion to dismiss!

Petitioner should know that the formal investigation of the case is required by law to be finished within one
hundred twenty (120) days from the time of formal notice to the respondent. The extensions petitioners
requested consumed fifty-five (55) days of this period.  Petitioner, in fact, filed his answer nine (9) months
63

after the first notice. Indeed, this was more than sufficient time for petitioner to comply with the order to file
answer.

The speedy disposition of administrative complaints is required by public service. The efficiency of officials
under investigation is impaired when a case hangs over their heads. Officials deserve to be cleared
expeditiously if they are innocent, also expeditiously if guilty, so that the business of government will not
be prejudiced. 64

IV

In view of petitioner's inexcusable failure to file answer, the DILG did not err in recommending to the
Disciplining Authority his preventive suspension during the investigation. Preventive suspension is
authorized under Section 63 of the Local Government Code, viz:

Sec. 63. Preventive Suspension. — (a) Preventive suspension may be imposed:

(1) By the President, if the respondent is an elective official of a province, a highly urbanized or an
independent component city;

x x x           x x x          x x x
 (b) Preventive suspension may be imposed at any time after the issues are joined, when the
evidence of guilt is strong, and 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; Provided, That, any single preventive suspension of
local elective officials shall not extend beyond sixty (60) days: Provided, further, That in the event
that several administrative cases are filed against an elective official, he cannot be preventively
suspended for more than ninety (90) days within a single year on the same ground or grounds
existing and known at the time of the first suspension.

x x x           x x x          x x x
198

In sum, preventive suspension may be imposed by the Disciplining Authority at any time (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 respondent, who continues to hold office, could influence the witnesses or pose a threat
to the safety and integrity of the records and other evidence.

Executive Secretary Torres, on behalf of the President, imposed preventive suspension on petitioner Joson
after finding that:

x x x           x x x          x x x

DILG Secretary Robert Z. Barbers, in a memorandum for the President, dated 23 June 1997,
recommends that respondent be placed under preventive suspension considering that all the
requisites to justify the same are present. He stated therein that:

"Preventive suspension may be imposed at any time after the issues are joined, that
is, after respondent has answered the complaint, when the evidence of guilt is strong
and, given the gravity of the offense, there is a great possibility 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 (Sec. 3, Rule 6 of Administrative Order
No. 23).

The failure of respondent to file his answer despite several opportunities given him is
construed as a waiver of his right to present evidence in his behalf (Sec. 4, Rule 4 of
Administrative Order No. 23). The requisite of joinder of issues is squarely met with
respondent's waiver of right to submit his answer. The act of respondent in allegedly
barging violently into the session hall of the Sangguniang Panlalawigan in the
company of armed men constitutes grave misconduct. The allegations of
complainants are bolstered by the joint-affidavit of two (2) employees of the
Sangguniang Panlalawigan. Respondent who is the chief executive of the province is
in a position to influence the witnesses. Further, the history of violent confrontational
politics in the province dictates that extreme precautionary measures be taken."

Upon scrutiny of the records and the facts and circumstances attendant to this case, we concur with
the findings of the Secretary of the Interior and Local Government and find merit in the aforesaid
recommendation.

WHEREFORE, and as recommended by the Department of the Interior and Local Government,
respondent EDUARDO N. JOSON, Governor of Nueva Ecija, is hereby placed under PREVENTIVE
SUSPENSION FOR A PERIOD OF SIXTY (60) DAYS, effective 11 July 1997, pending investigation of
the charges filed against him.

SO ORDERED. 65

Executive Secretary Torres found that all the requisites for the imposition of preventive suspension had
been complied with. Petitioner's failure to file his answer despite several opportunities given him was
construed as a waiver of his right to file answer and present evidence; and as a result of this waiver, the
issues were deemed to have been joined. The Executive Secretary also found that the evidence of petitioner
Joson's guilt was strong and that his continuance in office during the pendency of the case could influence
the witnesses and pose a threat to the safety and integrity of the evidence against him.

We now come to the validity of the January 8, 1998 Resolution of the Executive Secretary finding petitioner
guilty as charged and imposing on him the penalty of suspension from office for six (6) months from office
without pay.
Petitioner claims that the suspension was made without formal investigation pursuant to the provisions of
Rule 7 of A.O. No. 23. Petitioner filed a "Motion To Conduct Formal Investigation" three months before the
issuance of the order of suspension and this motion was denied by the DILG for the following reasons:

On November 19, 1997, complainants, through counsel, filed a Manifestation calling our attention to
the Decision dated October 24, 1997 of the Court of Appeals, Fifth Division in CA-G.R. SP No. 44694,
entitled "Eduardo Nonato Joson versus Executive Secretary Ruben D. Torres, et. al." In the
aforestated decision, the Court of Appeals resolved to sustain the authority of this Department to
investigate this administrative case and has likewise validated the order of default as well as the
order of preventive suspension of the respondent.
198

We offer no objection and concur with the assertion of respondent that he has the right for the
conduct of formal investigation. However, before there shall be a formal investigation, joinder of
issues must already be present or respondent's answer has already been filed. In the case at bar, the
admission of respondent's answer after having been declared in default was conditioned on the fact
of submission of position papers by the parties, after which, the case shall be deemed submitted for
resolution. Respondent, instead of submitting his position paper filed his subject motion while
complainants manifested to forego the submission of position paper and submit the case for
resolution on the basis of the pleadings on hand.

Settled is the rule that in administrative proceedings, technical rules of procedure and evidence are
not strictly applied (Concerned Officials of the Metropolitan Waterworks and Sewerage System v.
Vasquez, 240 SCRA 502). The essence of due process is to be found in the reasonable opportunity
to be heard and to submit evidence one may have in support of one's defense (Tajonera v.
Lamaroza, 110 SCRA 438). To be heard does not only mean verbal arguments in court; one may be
heard also through pleadings. Where opportunity to be heard, either through oral arguments or
pleadings, is accorded, there is no denial of procedural due process (Juanita Y. Say, et. al; vs. IAC,
G.R. No. 73451). Thus, when respondent failed to submit his position paper as directed and insisted
for the conduct of formal investigation, he was not denied of his right of procedural process.

WHEREFORE, the Motion for the Conduct of Formal Investigation, for lack of merit, is DENIED.

SO ORDERED. 66

The denial of petitioner's Motion to Conduct Formal Investigation is erroneous. Petitioner's right to a formal
investigation is spelled out in the following provisions of A.O. No. 23, viz:

Sec. 3 Evaluation. Within twenty (20) days from receipt of the complaint and answer, the
Investigating Authority shall determine whether there is a prima facie case to warrant the institution
of formal administrative proceedings.

Sec. 4. Dismissal motu proprio. If the Investigating Authority determines that there is no prima
facie case to warrant the institution of formal administrative proceedings, it shall, within the same
period prescribed under the preceding Section, submit its recommendation to the Disciplining
Authority for the motu proprio dismissal of the case, together with the recommended decision,
resolution, and order.

Sec. 5. Preliminary conference. If the Investigating Authority determines that there is prima
facie case to warrant the institution of formal administrative proceedings, it shall, within the same
period prescribed under the preceding Section, summon the parties to a preliminary conference to
consider the following:

a) whether the parties desire a formal investigation or are willing to submit the case
for resolution on the basis of the evidence on record; and

b) If the parties desire a formal investigation, to consider the simplification of issues,

the possibility of obtaining stipulation or admission of facts and of documents,
specifically affidavits and depositions, to avoid unnecessary proof, the limitation of
number of witnesses, and such other matters as may be aid the prompt disposition of
the case.

The Investigating Authority shall encourage the parties and their counsels to enter, at any stage of
the proceedings, into amicable settlement, compromise and arbitration, the terms and conditions of
which shall be subject to the approval of the Disciplining Authority.
 After the preliminary conference, the Investigating Authority shall issue an order reciting the matters
taken up thereon, including the facts stipulated and the evidences marked, if any. Such order shall
limit the issues for hearing to those not disposed of by agreement or admission of the parties, and
shall schedule the formal investigation within ten (10) days from its issuance, unless a later date is
mutually agreed in writing by the parties concerned. 67

The records show that on August 27, 1997, petitioner submitted his Answer Ad Cautelam where he disputed
the truth of the allegations that he barged into the session hall of the capitol and committed physical
violence to harass the private respondents who were opposed to any move for the province to contract a
P150 million loan from PNB. In his Order of October 8, 1997, Undersecretary Sanchez admitted petitioner's
198
Answer Ad Cautelam but treated it as a position paper. On October 15, 1997, petitioner filed a Motion to
Conduct Formal Investigation. Petitioner reiterated this motion on October 29, 1997. Petitioner's motion was
denied on November 11, 1997. Secretary Barbers found petitioner guilty as charged on the basis of the
parties' position papers. On January 8, 1998, Executive Secretary Torres adopted Secretary Barbers'
findings and recommendations and imposed on petitioner the penalty of six (6) months suspension without
pay.

The rejection of petitioner's right to a formal investigation denied him procedural due process. Section 5 of
A.O. No. 23 provides that at the preliminary conference, the Investigating Authority shall summon the
parties to consider whether they desire a formal investigation. This provision does not give the
Investigating Authority the discretion to determine whether a formal investigation would be conducted. The
records show that petitioner filed a motion for formal investigation. As respondent, he is accorded several
rights under the law, to wit:

Sec. 65. Rights of Respondent. — The respondent shall be accorded full opportunity to appear and
defend himself in person or by counsel, to confront and cross-examine the witnesses against him,
and to require the attendance of witnesses and the production of documentary evidence in his favor
through compulsory process of subpoena or subpoena duces tecum.

An erring elective local official has rights akin to the constitutional rights of an accused.  These rights are
68

essentially part of procedural due process.  The local elective official has the (1) the right to appear and
69

defend himself in person or by counsel; (2) the right to confront and cross-examine the witnesses against
him; and (3) the right to compulsory attendance of witness and the production of documentary evidence.
These rights are reiterated in the Rules Implementing the Local Government Code  and in A.O. No.
70

23.   Well to note, petitioner, formally claimed his right to a formal investigation after his Answer Ad
71

Cautelam has been admitted by Undersecretary Sanchez.

Petitioner's right to a formal investigation was not satisfied when the complaint against him was decided on
the basis of position papers. There is nothing in the Local Government Code and its Implementing Rules
and Regulations nor in A.O. No. 23 that provide that administrative cases against elective local officials can
be decided on the basis of position papers. A.O. No. 23 states that the Investigating Authority may require
the parties to submit their respective memoranda but this is only after formal investigation and
hearing.  A.O. No. 23 does not authorize the Investigating Authority to dispense with a hearing especially in
72

cases involving allegations of fact which are not only in contrast but contradictory to each other. These
contradictions are best settled by allowing the examination and cross-examination of witnesses. Position
papers are often-times prepared with the assistance of lawyers and their artful preparation can make the
discovery of truth difficult. The jurisprudence cited by the DILG in its order denying petitioner's motion for a
formal investigation applies to appointive officials and employees. Administrative disciplinary proceedings
against elective government officials are not exactly similar to those against appointive officials. In fact, the
provisions that apply to elective local officials are separate and distinct from appointive government
officers and employees. This can be gleaned from the Local Government Code itself.

In the Local Government Code, the entire Title II of Book I of the Code is devoted to elective officials. It
provides for their qualifications and
election,  vacancies
73
and succession,  local
74
legislation,  disciplinary
75

actions,  and recall.  Appointive officers and employees are covered in Title III of Book I of the Code entitled
76 77

"Human Resources and Development." All matters pertinent to human resources and development in local
government units are regulated by "the civil service law and such rules and regulations and other
issuances promulgated thereto, unless otherwise provided in the Code."   The "investigation and
78

adjudication of administrative complaints against appointive local officials and employees as well as their
suspension and removal" are "in accordance with the civil service law and rules and other pertinent laws,"
the results of which "shall be reported to the Civil Service Commission." 79

It is the Administrative Code of 1987, specifically Book V on the Civil Service, that primarily governs
appointive officials and employees. Their qualifications are set forth in the Omnibus Rules Implementing
Book V of the said Code. The grounds for administrative disciplinary action in Book V are much more in
number and are specific than those enumerated in the Local Government Code against elective local
officials.  The disciplining authority in such actions is the Civil Service Commission. 81 although the
80

Secretaries and heads of agencies and instrumentalities, provinces, cities and municipalities are also given the
power to investigate and decide disciplinary actions against officers and employees under their
jurisdiction.82 When a complaint is filed and the respondent answers, he must "indicate whether or not he elects a
formal investigation if his answer is not considered satisfactory." 83 If the officer or employee elects a formal
investigation, the direct evidence for the complainant and the respondent "consist[s] of the sworn statement and
documents submitted in support of the complaint and answer, as the case may be, without prejudice to the
presentation of additional evidence deemed necessary . . ., upon which the cross-examination by respondent and
the complainant, respectively, is based."84 The investigation is conducted without adhering to the technical rules
applicable in judicial proceedings."85 Moreover, the appointive official or employee may be removed or dismissed
summarily if (1) the charge is serious and the evidence of guilt is strong; (2) when the respondent is a recidivist; 198
and (3) when the respondent is notoriously undesirable.86

The provisions for administrative disciplinary actions against elective local officials are markedly different
from appointive officials.87 The rules on the removal and suspension of elective local officials are more
stringent. The procedure of requiring position papers in lieu of a hearing in administrative cases is expressly
allowed with respect to appointive officials but not to those elected. An elective official, elected by popular vote,
is directly responsible to the community that elected him. The official has a definite term of office fixed by law
which is relatively of short duration. Suspension and removal from office definitely affects and shortens this term
of office. When an elective official is suspended or removed, the people are deprived of the services of the man
they had elected. Implicit in the right of suffrage is that the people are entitled to the services of the elective
official of their choice.88 Suspension and removal are thus imposed only after the elective official is accorded his
rights and the evidence against him strongly dictates their imposition.

IN VIEW WHEREOF, the Resolution of January 8, 1998 of the public respondent Executive Secretary is
declared null and void and is set aside. No Cost.

SO ORDERED.

G.R. No. 124966 June 16, 1998

ALMA COSEP, MARILOU COQUIA, DULCEVITA SORIANO and MARY JANE RABORAR, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and PREMIERE DEVELOPMENT BANK, respondents.

MARTINEZ, J.:

The antecedents of this labor case are sufficiently and faithfully summarized in the Comment of the Office of the
Solicitor General, quoted as follows: 
1

Petitioners Alma Cosep, Dulcevita Soriano, Marilou Coquia and Mary Jane Raborar were regular
employees of private respondent Premiere Development Bank at its Guadalupe Branch, then
headed by area manager Gloria Doplito. Cosep began working with private respondent on October
11, 1989, Coquia, on March 7, 1994, Soriano, on April of 1992, and Raborar, on March 4, 1994.

On November 17, 1994, private respondent suspended Doplito for alleged malversation of money
belonging to its clients. Commiserating with Doplito, petitioners wrote an open letter which criticized
private respondent's handling of the case of Doplito. The open letter, which was disseminated to the
employees of private respondents various branches, stated:

The transfer of assignment of Mrs. Gloria Doplito and subsequently her suspension
have tremendously affected us, the officers and staff of Guadalupe and the branch
as a whole. Guadalupe will not be the same without Ate Oyah around because
whatever success it has attained, no one can take credit for it but only one person —
with a heart as big as she is — the person we've mentioned above. We felt that the
Management's decision was very inconsiderate, unfair, biased, even inhuman. For
the past 26 years, her loyalty to the bank was unquestionable, her integrity has been
intact for those long years and worth mentioning here is her love to the bank which
we think no officers (sic) or staff can surpass. Whatever she did that management
compelled (sic) to suspend her — that — we cannot question. We cannot just say
Forgive and Forget. What we're saying is to give her another chance because we felt
the accusations hurled against her were all peanuts' compared to Girlie Rocco's of
Concepcion branch who admitted having committed the crime of stealing other
 people's money and yet remained scot-free. What you've become to tolerate this
decision, you yourself can only answer. Its very scary working under this system
wherein there is no justice. If they want to throw you out even if you're innocent, they
can. If this can happen to the officers of the bank how much more the security of the
rank and file (sic)? Let's put some decency to the bank and most importantly, to
ourselves. If we cannot do this, we're not worth to be called educated bank
employees who can carry on any tasks courageously — but ROBOTS.

Whatever may come out of this, we've ready to face the consequences — for the
love of Ate Oyah. We've grown attached to her for all the kindness and love she has
198
shown us. Her many friends and supporters can attest to this. The clients she has
unselfishly served and given enough accommodation (sic) to the extent of sacrificing
a part of herself, specifically her career, will always be grateful to her. WE ALL ARE.

Before we end, we want to make it clear that nobody forced us to do this. We did this
on our own free will to show Ate Oyah how much we love her. Please give her a
chance, that's what we're only asking (sic).

Thank You,

Guadalupe Staff

Private respondent required petitioners to explain what they meant by issuing the "open letter." It
also suspended petitioner and did not pay their 13th month pay and wages in the meantime.

Petitioners filed an answer, explaining that the "open letter" was just an exercise of their right to
freedom of speech.

On January 20, 1995, private respondent sent to each petitioner a memorandum dismissing them
from the service effective immediately, on the ground that they undermined the interest of the bank.
However, on January 23, 1995, private respondent issued to each petitioner a "transfer of
assignment" temporarily suspending the effects of the previous memorandum ordering their
dismissal. Petitioners ignored the memorandum transferring them to other branches and, instead,
filed a complaint before the Labor Arbiter against private respondent for illegal dismissal and unpaid
wages and 13th month pay. They asked for separation pay and the award of moral and exemplary
damages.

Despite the filing of the complaint, private respondent again instructed petitioners in separate letters
dated February 8, 1995 that they should report to their new assignments, warning that "their
continued failure and/or refusals to do so shall leave" the bank "without any option but (to) take such
action as may be warranted under the circumstances" to protect its interest.

Petitioners subsequently wrote a letter to private respondent dated February 9, 1995, informing the
bank that as of January 20, 1995, they considered themselves dismissed from the service, and that
they have already filed a complaint with public respondent.

At the time of the filing of the complaint, Cosep was a cashier with a monthly salary of P5,440.00.
Coquia, a teller, was earning P3,900.00 a month. Soriano, an accounting clerk, was receiving
P4,500.00 monthly. On the other hand, Raborar, a new accounts clerk, was being paid P3,900.00 a
month.

On June 23, 1995, Labor Arbiter Manuel P. Asuncion issued his decision, the decretal part of which
states:

WHEREFORE, all the foregoing considered, judgment is hereby rendered declaring

complainants to have been illegally dismissed and ordering the respondent to pay
the former the following:

xxx xxx xxx  2

SO ORDERED. (citations omitted)

Private respondents appealed the judgment to public respondent National Labor Relations Commission (NLRC)
which rendered a decision reversing that of the Labor Arbiter. The dispositive part of the NLRC decision provides:
 WHEREFORE, premises considered, the appealed decision is modified by deleting the awards of
separation pay, backwages, moral and exemplary damages. Respondent is ordered to pay
complainants their unpaid wages and 13th month pay as computed in the Labor Arbiter's decision.  3

When its motion for reconsideration was denied, petitioners elevated the case to this Court via petition
for certiorari and imputed grave abuse of discretion to respondent NLRC in reversing the labor arbiter's finding that
petitioners were illegally dismissed. The issues raised are:

I
198
Public respondent committed grave abuse of discretion in declaring that petitioners' "temporary
suspension" of termination resulted in the lifting of their termination.

II

Public respondent committed grave abuse of discretion in finding that there were just causes for
petitioners' dismissal i.e., insubordination and for signing the "open letter"

III

Public respondent committed grave abuse of discretion in declaring that petitioners were validly
dismissed despite private respondent's assertion that they were merely being reassigned.

IV

Public respondent committed grave abuse of discretion in omitting to make a finding whether or not
procedural due process requirements were complied with.  4

The petition is impressed with merit.

In the assailed Decision, respondent NLRC declared that:

While there is no dispute that the complainants were notified of their termination effective January
20, 1995, it also appears clear that the respondent lifted the effects of that termination by so
informing them that effective January 23, 1995, they are being reassigned to different branches of
bank. As January 20, 1995 is a Friday and January 23, 1995 is a Monday, the two-day gap are non-
working days in the bank. This is the basis of respondent in saying that the complainants were not
dismissed. Respondent may have realized the severity of the earlier decision.

Under such circumstances, We believe that there was no illegal dismissal of the complainants.

Complainants, consistent with the stand that they have been dismissed, remained adamant in their
refusal to report for work. The acts of the complainants in refusing to obey the transfer order issued
to them constitute valid and lawful basis for their termination due to insubordination. They should be
answerable by their very acts. Even if they believe that the order is unreasonable, it did not give the
complainants the prerogative not to comply.  5

According to respondent NLRC, petitioners were dismissed for insubordination which corresponds to willful
disobedience under par. (a) of Article 282 of the Labor Code. We ruled in Gold City Integrated Port Services, Inc.
vs. NLRC   that willful disobedience of the employer's lawful orders, as a just cause for dismissal of an
6

employee, envisages the concurrence of at least two (2) requisites: the employee's assailed conduct must
have been willful or intentional, the willfulness being characterized by a wrongful and perverse attitude; and
the order violated must have been reasonable, lawful, made known to the employee and must pertain to the
duties which he had been engaged to discharge.

It appears from the record, however, that the earlier memorandum issued by private respondent dated
January 20, 1995 terminated the services of petitioners on the ground of serious misconduct for violation of
Rule IV of the Bank's Code of Conduct,   where it held as follows:
7

As you are well aware of, Rule IV of the Bank's Code of Conduct strictly prohibits an
employee from undermining the interest of the Bank by issuing malicious, derogatory or
false statements involving the good name of the Bank or its management/stockholders. As
you are likewise aware of such action is considered as a serious misconduct for which the
penalty is outright dismissal.
 By your own admission of your willful and collective authorship of the subject letter as well
as the surreptitious distribution thereof with the other Guadalupe Branch personnel
concerned, and based on the results of the investigation on such other Guadalupe Branch
personnel, you have been determined to have committed a serious misconduct and willfully
violated the lawful order of the Bank as embodied in Rule IV of the Banks' Code of Conduct
which penalizes such offense with dismissal. In accordance with Article 282 of the Labor
Code of the Philippines, you are hereby dismissed from your employment immediately upon
your receipt hereof. 
8

Normally, the factual findings of quasi-judicial agencies, such the NLRC, which have acquired expertise in
198
the matters entrusted to their jurisdiction are accorded by the Supreme Court not only respect but even
finality if they are supported by substantial evidence, or that amount of relevant evidence which a
reasonable man might accept as adequate to justify a conclusion.   But this is true only when they do not
9

come under the established exceptions. One of these is where the findings of the labor arbiter and the
NLRC are contrary to each other. In the instant case, the findings of the NLRC and the labor arbiter are
inconsistent, hence there is a necessity to review the records to determine which of them should be
preferred as more conformable to the evidentiary facts.

Contrary to the findings of the NLRC that there is a valid ground for dismissal, i.e. insubordination, we find
that petitioners were not actually dismissed due to insubordination in refusing to comply with the notices of
transfer of assignment but were dismissed for admitting authorship of the "open-letter," as evidenced by
the memorandum issued to petitioners last January 20, 1995. Thus, for want of substantial basis, in fact or
in law, we cannot give the stamp of finality and conclusiveness normally accorded to the factual findings of
an administrative agency, such as herein public respondent NLRC,   as even decisions of administrative
10

agencies which are declared "final" by law are not exempt from the judicial review when so warranted.  11

Private respondent bank maintains that petitioners violated a company policy. It is a recognized principle
that company policies and regulations are, unless shown to be grossly oppressive or contrary to law,
generally valid and binding on the parties and must be complied with until finally revised or amended,
unilaterally or preferably through negotiation, by competent
authority.   Notwithstanding the company policy violated, the issue is whether or not the infraction
12

committed by them warrants the penalty of dismissal. We believe not.

The fundamental guarantees of security of tenure and due process dictate that no worker shall be
dismissed except for just and authorized cause provided by law and after due process.    Under Article 282
13

of the Labor Code, as amended, an employer may validly terminate the services of an employee on the
following grounds: (a) serious misconduct or willful disobedience by the employee of the lawful orders of
his employer or representative in connection with his work; (b) gross and habitual neglect by the employee
of his duties; (c) fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative; (d) commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized representative; and (e) other causes
analogous to the foregoing.

In termination cases, the burden of proof rests on the employer to show that the dismissal is for just
cause.   When there is no showing of a clear, valid and legal cause for the termination of employment, the
14

law considers the matter a case of illegal dismissal and the burden is on the employer to prove that the
termination was for a valid or authorized cause.  15

In this case, private respondent has not established nor presented sufficient basis for the dismissal of
petitioners from service on the ground of serious misconduct. As correctly found by the Labor Arbiter,
there is nothing wrong with tile petitioners issuance of the open-letter. It does not lay any material claims
upon the bank, nor does it threaten any sanction, nor invoke right to credit, nor preferential treatment. It
merely expressed an opinion. Thus, there was here no prejudice, nor intent to prejudice respondent as a
banking entity.  16

Misconduct is improper or wrong conduct. It is the transgression of some established and definite rule of
action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere
error in judgment. The misconduct to be serious within the meaning of the Act must be of such a grave and
aggravated character and not merely trivial or unimportant. Such misconduct, however serious, must,
nevertheless, be in connection with the employee's work to constitute just cause for his separation.   In this
17

case however, the misconduct has no relation to the work of petitioners; hence, not a valid ground.

On moral and exemplary damages, we found no evidence showing that private respondent's dismissal of
petitioners was in bad faith. Moral damages are recoverable only where the dismissal was attended by bad
faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good
customs or public policy.   A dismissal may be contrary to law but by itself, it does not establish bad
18

faith.   In Primero vs. IAC,   we ruled:

19 20
 . . . if the evidence adduced by the employee before the Labor Arbiter should establish that
the employer did indeed terminate the employee's services without just cause or without
judgment it shall be for the employer to reinstate the employee and pay him his backwages,
or exceptionally, for the employee simply to receive separation pay. These are reliefs
explicitly prescribed by the Labor Code. But any award of moral damages by the Labor
Arbiter obviously cannot be based on the Labor Code but should be grounded on the Civil
Code. Such an award cannot be justified solely upon the premise (otherwise sufficient for
redress under the Labor Code) that the employer fired his employee without just cause or
due process. Additional facts must be pleaded under the Civil Code, these being, to repeat,
that the act of dismissal was attended by bad faith or fraud, or was oppressive to labor, or
done in a manner contrary to morals, good customs, or public policy; and, of course, that 198
social humiliation, wounded feelings, grave anxiety, etc., resulted therefrom.

IN VIEW WHEREOF, the assailed Decision of the NLRC is SET ASIDE and the decision of the Labor Arbiter
is REINSTATED subject to the MODIFICATION that the award of MORAL and EXEMPLARY DAMAGES is
DELETED. SO ORDERED.

G.R. No. 127838 January 21, 1999

CIVIL SERVICE COMMISSION, petitioner,

vs.
JOSE J. LUCAS, respondent.

PARDO, J.:

The petition for review on certiorari before the Court assails the decision of the Court of Appeals  which set aside the
1

resolution of the Civil Service Commission  and reinstated that of the Board of Personnel Inquiry (BOPI for brevity),
2

Office of the Secretary, Department of Agriculture,  suspending respondent for one month, for simple misconduct.
3

To provide a factual backdrop of the case, a recital of the facts is necessary.

On May 26, 1992, Raquel P. Linatok, an assistant information officer at the Agricultural Information Division,
Department of Agriculture (DA for brevity), filed with the office of the Secretary, DA, an affidavit-complaint against
respondent Jose J. Lucas, a photographer of the same agency, for misconduct.

Raquel described the incident in the following manner:

While standing before a mirror, near the office door of Jose J. Lucas, Raquel noticed a chair at her
right side which Mr. Jose Lucas, at that very instant used to sit upon. Thereafter, Mr. Lucas bent to
reach for his shoe. At that moment she felt Mr. Lucas' hand touching her thigh and running down his
palm up to her ankle. She was shocked and suddenly faced Mr. Lucas and admonished him not to
do it again or she will kick him. But Lucas touched her again and so she hit Mr. Lucas. Suddenly Mr.
Lucas shouted at her saying "lumabas ka na at huwag na huwag ka nang papasok dito kahit kailan"
A verbal exchange then ensued and respondent Lucas grabbed Raquel by the arm and shoved her
towards the door causing her to stumble, her both hands protected her face from smashing upon the
door.

Mr. Lucas, bent on literally throwing the affiant out of the office, grabbed her the second time while
she attempted to regain her posture after being pushed the first time. . . . while doing all this, Mr.
Lucas shouted at the affiant, saying, "labas, huwag ka nang papasok dito kahit kailan". 4

On June 8, 1992, the Board of Personnel Inquiry, DA, issued a summons requiring respondent to answer the
complaint, not to file a motion to dismiss, within five (5) days from receipt. On June 17, 1992, respondent Lucas
submitted a letter to Jose P. Nitullano, assistant head, BOPI, denying the charges. According to Lucas, he did not
touch the thigh of complainant Linatok, that what transpired was that he accidentally brushed Linatok's leg when he
reached for his shoes and that the same was merely accidental and he did not intend nor was there malice when his
hand got in contact with Linatok's leg.

On May 31, 1993, after a formal investigation by the BOPI, DA, the board issued a resolution finding respondent
guilty of simple misconduct  and recommending a penalty of suspension for one (1) month and one (1) day. The
5

Secretary of Agriculture approved the recommendation.

In due time, respondent appealed the decision to the Civil Service Commission (CSC). On July 7, 1994, the CSC
issued a resolution finding respondent guilty of grave misconduct and imposing on him the penalty of dismissal from
the service.  Respondent moved for reconsideration but the CSC denied the motion.
6

Then, respondent appealed to the Court of Appeals. On October 29, 1996, the Court of Appeals promulgated its
decision setting aside the resolution of the CSC and reinstating the resolution of the BOPI, DA, stating thus: "It is
true that the Civil Service Act does not define grave and simple misconduct. There is, however, no question that
these offenses fall under different categories. This is clear from a perusal of memorandum circular No. 49-89 dated
August 3, 1989 (also known as the guidelines in the application of penalties in administrative cases) itself which
classifies administrative offenses into three: grave, less grave and light offenses. The charge of grave misconduct
198
falls under the classification of grave offenses while simple misconduct is classified as a less grave offense. The
former is punishable by dismissal while the latter is punishable either by suspension (one month and one day to six
months), if it is the first offense; or by dismissal, if it is the second. Thus, they should be treated as separate and
distinct offenses. 7

The Court of Appeals further ruled that "a basic requirement of due process on the other hand is that a person must
be duly informed of the charges against him (Felicito Sajonas vs. National Labor Relations Commission, 183 SCRA
182). In the instant case however, Lucas came to know of the modification of the charge against him only when he
received notice of the resolution dismissing him from the service. 8

Hence, this petition.

The issues are (a) whether respondent Lucas was denied due process when the CSC found him guilty of grave
misconduct on a charge of simple misconduct, and (b) whether the act complained of constitutes grave misconduct.

Petitioner anchors its position on the view that "the formal charge against a respondent in an administrative case
need not be drafted with the precision of an information in a criminal prosecution. It is sufficient that he is apprised of
the substance of the charge against him; what is controlling is the allegation of the acts complained of, and not the
designation of the offense. 9

We deny the petition.

As well stated by the Court of Appeals, there is an existing guideline of the CSC distinguishing simple and grave
misconduct. In the case of Landrito vs. Civil Service Commission, we held that "in grave misconduct as
distinguished from simple misconduct, the elements of corruption, clear intent to violate the law or flagrant disregard
of established rule, must be manifest,  which is obviously lacking in respondent's case. Respondent maintains that
10

as he was charged with simple misconduct, the CSC deprived him of his right to due process by convicting him of
grave misconduct.

We sustain the ruling of the Court of Appeals  that: (a) a basic requirement of due process is that a person must be
11

duly informed of the charges against him  and that (b) a person can not be convicted of a crime with which he was
12

not charged. 13

Administrative proceedings are not exempt from basic and fundamental procedural principles, such as the right to
due process in investigations and hearings. 14

The right to substantive and procedural due process is applicable in administrative proceedings. 15

Of course, we do not in any way condone respondent's act. Even in jest, he had no right to touch complainant's leg.
However, under the circumstances, such act is not constitutive of grave misconduct, in the absence of proof that
respondent was maliciously motivated. We note that respondent has been in the service for twenty (20) years and
this is his first offense.

IN VIEW WHEREOF, the Court hereby DENIES the petition for review on certiorari and AFFIRMS the decision of
the Court of Appeals in CA-G.R. SP No. 37137. 1âwphi1.nêt

No cost. SO ORDERED.

G.R. No. 127139 February 19, 1999

JAIME C. LOPEZ, petitioner,
vs.
CITY OF MANILA and HON. BENJAMIN A.G. VEGA, Presiding Judge, RTC, Manila, Branch 39, respondent.

 
QUISUMBING, J.:

This petition for review on certiorari, assails the Order   of the Regional Trial Court of Manila, Branch 39,
1

promulgated on October 24, 1996, dismissing Civil Case No. 96-77510 which sought the declaration of nullity of City
of Manila Ordinance No. 7894, fled by petitioner Jaime C. Lopez.

The facts as found by the trial court are as follows:

Sec. 219 of Republic Act 7160 (R.A. 7160) or the Local Government Code of 1991 requires the conduct of the
general revision of real property as follows: 198

General Revision of Assessment  2 and Property Classification — The provincial, city or municipal assessor shall undertake a
general revision of real property assessments within two (2) years after the effectivity of this Code and every three (3) years thereafter.

Although R.A. 7160 took effect on January 1, 1992, the revision of real property assessments prescribed therein
was not yet enforced in the City of Manila. However, the process of real property valuation had already been started
and done by the former city assessor.

In 1992, the schedule of real property values in the city was prepared and submitted to the City Council of Manila,
but for unknown reason, was not acted upon. Nevertheless, despite the inaction of the City Council, there was a
continuous update of the fair market values of the real properties within the city.

Until the year 1995, the basis for collection of real estate taxes in the City of Manila was the old, year-1979, real
estate market values.

Mrs. Lourdes Laderas, the newly appointed City Assessor of Manila, received Memorandum Circular No. 04-95
dated March 20, 1995, from the Bureau of Local Government Finance, Department of Finance. This memorandum
relates to the failure of most of the cities and municipalities of Metropolitan Manila, including the City of Manila, to
conduct the general revision of real property. For this purpose, Mrs. Laderas embarked in a working dialogue with
the Office of the City Mayor and the City Council for the completion of the task.

After obtaining the necessary funds from the City Council, the City Assessor began the process of general revision
based on the updated fair market values of the real properties.

In the year 1995, the increase in valuation of real properties compared to the year-1979 market values ranges from
600% to 3,330%, but the City Assessor's office initially fixed the general average of increase to 1,700%. Mrs.
Laderas felt that the increase may have adverse reactions from the public, hence, she ended up reducing the
increase in the valuation of real properties to 1,020%.

In September 1995, the City Assessor's Office submitted the proposed schedule of fair market values to the City
Council for its appropriate action. The Council acting on the proposed schedule, conducted public hearings as
required by law. The proposed ordinance was subjected to the regular process in the enactment of ordinances
pursuant to the City Charter of Manila. The first reading was held on September 12, 1995, the second on October
28, 1995, and the third on December 12, 1995. In between these dates, public hearings on the general revision,
which included the schedule of values of real properties, were had, viz.; on September 28, 1995, October 5, 12 and
19, 1995 and November 27 and 29, 1995.

The proposed ordinance with the schedule of fair market values of real properties was published in the Manila
Standard on October 28, 1995, and the Balita on November 1, 1995. On December 12, 1995, the City Council
enacted Manila Ordinance No. 7894, entitled: "An Ordinance Prescribed as the Revised Schedule of Fair Market
Values of Real Properties the City of Manila." The ordinance was approved by the City Mayor on December 27,
1995, and made effective on Jan. 01, 1996. Thereafter, notices of the revised assessments were distributed to the
real property owners of Manila pursuant to Sec. 223 of R.A. 7160. 3

With the implementation of Manila Ordinance No. 7894, the tax on the land owned by the petitioner was increased
by five hundred eighty percent (580%). With respect to the improvement on petitioner's property, the tax increased
by two hundred fifty percent (250%).

As a consequence of these increases, petitioner Jaime C. Lopez, filed on March 18, 1996, a special proceeding for
the declaration of nullity of the City of Manila Ordinance No. 7894 with preliminary injunction and prayer for
temporary restraining order (TRO). The petition alleged that Manila Ordinance No. 7894 appears to be "unjust,
excessive, oppressive or confiscatory." The case was originally raffled to the Regional Trial Court of Manila, Branch
5, which issued the TRO on April 10, 1996.
On the same date, Manila Ordinance No. 7905   took effect, reducing by fifty percent (50%) the assessment
4

levels   (depending on the use of property, e.g., residential, commercial) for the computation of tax due. The new
5

ordinance amended the assessment levels provided by Section 74,   paragraph (A) of Manila Ordinance No. 7794.
6

Moreover, Section 2 of Manila Ordinance No. 7905   provides that the amendment embodied therein shall take
7

effect retroactively to January 1, 1996. The same provision indicates the, maximum realty tax increases, as follows:

Sec. 2 — . . . Provided, however, that the tax increase on residential lands and improvements shall
in no case exceed by two hundred percent (200%) of the levied thereon in calendar year 1995 and
the tax increase on commercial and industrial land, building and other structures shall not exceed by 198
three hundred percent (300%) of the tax imposed thereon in calendar year 1995; Provided further,
that the tax on all lands and improvements shall in no case be lower than tax imposed thereon in
calendar year 1995.

As a result, Manila Ordinance No. 7905 reduced the tax increase of petitioner's residential land to one hundred fifty-
five percent (155%), while the tax increase for residential improvement was eighty-two percent (82%).

The maximum tax increase on classified commercial estates is three hundred percent (300%) but the tax increase
on commercial land was only, two hundred eighty-eight percent (288%), and seventy-two percent (72%) on
commercial portion of the improvement.

On April 12, 1996, respondent filed a motion for inhibition of the presiding judge of RTC, Branch 5, alleging that
Judge Amelia Andrade had shown "markedly indulgent attitude towards the petitioner." Hence, Judge Andrade
inhibited herself and directed the forwarding of the case record to the Clerk of Court for its re-raffle to another
branch of the court.

Despite the amendment brought about by Manila Ordinance No. 7905, the controversy proceeded and the case was
re-raffled to Branch 39 of the court which acted on the motions submitted by the parties for resolution, viz.: 1)
application for preliminary injunction by the petitioner, and 2) motion to dismiss by the respondent. The reason relied
upon by the City of Manila for the dismissal of the petition was for failure of the petitioner to exhaust administrative
remedies.

On May 9, 1996, the court directed the issuance of a writ of injunction and denied, in the meanwhile, the motion to
dismiss by the respondent. The reason for the denial of the respondent's motion to dismiss was not detailed to avoid
a repetition of the unfortunate situation in RTC-Manila, Branch 5, wherein the counsel for the respondent assumed
bias on the part of Judge Andrade.

On May 22, 1996, the respondent filed the instant motion for reconsideration on the denial of its motion to dismiss.
The movant-respondent aside from reiterating the basic ground alleged in its motion to dismiss underscored the
additional premise, which is the happening of a supervising event, i.e., the enactment and approval of the City
Mayor of Manila Ordinance No. 7905.

On October 24, 1996, the trial court granted the motion to dismiss filed by the respondent. The dismissal order was
justified by petitioner's failure to exhaust the administrative remedies and that the petition had become moot and
academic when Manila Ordinance No. 7894 was repealed by Manila Ordinance No. 7905. Notwithstanding, the trial
court likewise revolved all other interlocking issues.

The dispositive portion of the trial court's order is as follows:

WHEREFORE, finding the motion dated May 19, 1996 filed by the here in respondent on May 22,
1996 sufficiently well-taken, the order dated May 9, 1996 is hereby set aside. Let the petition filed by
the herein petitioner on March 8, 1996 be, as it is, hereby DISMISSED. The order of preliminary
injunction dated May 9, 1996, is also set aside and the writ of injunction likewise issued pursuant
thereto, dissolved.

SO ORDERED.  8

The petitioner filed a motion for reconsideration, but it was denied for lack of merit.

Hence, the petitioner now comes before this Court raising in his petition the following issues:

I DID THE RESPONDENT TRIAL COURT IN CIVIL CASE NO. 96-77510 ERR IN
HOLDING THAT THE PETITIONER FAILED TO EXHAUST ALL ADMINISTRATIVE
REMEDIES, AND THEREFORE, THE PETITION OUGHT TO BE DISMISSED?
AND;
 II DID THE RESPONDENT COURT ERR IN FAILING TO CORRECTLY APPLY
SECTIONS 212 AND 221 OF THE LOCAL GOVERNMENT CODE OF 1991?

Petitioner contends that when the trial court ruled that it has jurisdiction over the case, the question of whether he
needs to resort to the exhaustion of administrative remedies becomes moot and academic. He claims that resort to
administrative remedies on constitutionality of law merely permissive as provided by Sec. 187 of R.A. 7160, viz.:

. . . Provided, further, That any question on the constitutionality or legality of tax ordinances or

revenue measures may be raised on appeal within thirty (30) days from the effectivity thereof to the
Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the 198
appeal. . . . (emphasis supplied)

Petitioner further asserts that the question of the constitutionality of the city ordinance may be raised on appeal,
either to the Secretary of Justice or the Regional Trial Court, both having concurrent jurisdiction over the case, in
accordance with Batas Pambansa Blg. 129. He states that at the time he instituted this complaint, it was premature
to resort to the remedies provided by R.A. 7160 because he has not received the formal notice of assessment yet,
hence, he could not be expected to pay under protest and elevate the exorbitant assessment to the Board of
Assessment Appeals.

On the other hand, respondent argues that the adjustment of the fair market values of real properties in the City of
Manila was long overdue, being updated only after fifteen (15) years. According to the respondent, petitioner filed
the case, merely to take advantage of the situation to gain political mileage and help advance his mayoralty bid.

As a general rule, where the law provides for the remedies against the action of an administrative board, body, or
officer, relief to courts can be sought only after exhausting all remedies provided. The reason rests upon the
presumption that the administrative body, if given the chance to correct its mistake or error, may amend its decision
on a given matter and decide it properly. Therefore, where a remedy is available within the administrative
machinery, this should be resorted to before resort can be made to the courts, not only to give the administrative
agency the opportunity to decide the matter by itself correctly, but also to prevent unnecessary and premature resort
to courts.  This rule, however, admits certain exceptions.
9 10

With regard to question on the legality of a tax ordinance, the remedies available to the taxpayers are provided
under Section 187, 226, and 252 of R.A. 7160.

Sec. 187 of R.A. 7160 provides, that the taxpayer may question the constitutionality or legality of tax ordinance on
appeal within thirty (30) days from effectivity thereof, to the Secretary of Justice. The petitioner after finding that his
assessment is unjust, confiscatory, or excessive, must have brought the case before the Secretary of Justice for
question of legality or constitutionality of the city ordinance.

Under Section 226 of R.A. 7160, an owner of real property who in not satisfied with the assessment of his property
may, within sixty (60) days from notice of assessment, appeal to the Board of Assessment Appeals.  11

Should the taxpayers question the excessiveness of the amount of tax, he must first pay the amount due, in
accordance with Section 252 of R.A. 7160. Then, he must request the annotation of the phrase "paid under protest"
and accordingly appeal to the Board of Assessment Appeals by filing a petition under oath together with copies of
the tax declarations and affidavits or documents to support his appeal. 12

The rule is well-settled that courts will not interfere in matters which addressed to the sound discretion of
government agencies entrusted with the regulations of activities coming under the special technical knowledge and
training of such agencies.  Furthermore, the crux of petitioner's cause of action is the determination of whether or
13

not the tax is excessive, oppressive or confiscatory. This issue is essentially a question of fact and thereby,
precludes this Court from reviewing the same.  14

We have carefully scrutinized the record of this case and we found no cogent reason to depart from the findings
made by the trial court on this point. As correctly found by the trial court, the petition does not fall under any of the
exceptions to excuse compliance with the rule on exhaustion of administrative remedies, to wit:

One of the reasons for the doctrine of exhaustion is the separation of powers which enjoins upon the
judiciary a becoming policy of non-interference with matters coming primarily within the competence
of other department. . . .

There are however a number of instances when the doctrine may be dispensed with and judicial
action validly resorted to immediately. Among these exceptional cases are: (1) when the question
raised is purely legal, (2) when the administrative body is in estoppel; (3) when the act complained of
is patently illegal; (4) when there is urgent need for judicial intervention; (5) when the claim involved
is small; (6) when irreparable damage will be suffered, (7) when there is no other plain, speedy and
 adequate remedy, (8) when strong public interest is involved; (9) when the subject of controversy is
private land; and (10) in quo-warranto proceeding (citation omitted).

In the court's opinion, however, the instant petition does not fall within any of the exceptions above
mentioned. . . .

. . . Instant petition involves not only questions of law but more importantly the questions of facts
which therefore needed the reception of evidence contrary to the position of the respondent before
the hearing of its motion for reconsideration
198
Now, on the second exception on the rule of exhaustion of administrative remedies, supra, there: is
no showing that administrative bodies, viz., The Secretary of Justice, the City Treasurer, Board of
Assessment Appeals, and the Central Board of Assessment Appeals are in estoppel. On the third
exception, it does not appear that Ordinance No. 7894 or the amendatory Ordinance No. 7905 are
patently illegal. Re the fourth exception, in the light of circumstances as pointed elsewhere herein,
the matter does not need a compelling judicial intervention. On the fifth exception, the claim of the
petitioner is not small. Re the sixth exception, the court does not see any irreparable damage that
the petitioner will suffer if he had paid or will pay under protest as per the ordinance. He could
always ask for a refund of the excess amount he paid under protest or be credited thereof if the
administrative bodies mentioned in the law (R.A. 7180 ) will find that his position is meritorious. Re
15

the seventh exception, the court is of the opinion that administrative relief provided for in the law are
plain, speedy and adequate. On the eight exception, while the controversy involves public interest,
judicial intervention as the petitioner would like this court to do should be avoided as demonstrated
herein below in the discussion of the third issue. The ninth and tenth exception obviously are not
applicable in the instant case. 
16

Proceeding to the second issue, petitioner contends that the respondent court failed to apply correctly Sections 212
and 221 of R.A. 7160. The pertinent provisions are set forth below:

Sec. 212. Preparation of Schedule of Fair Market Values — Before any general revision of property
assessment is made pursuant to the provisions of this Title, there shall be prepared a schedule of
fair market values by the provincial, city and the municipal assessors of the municipalities within the
Metropolitan Manila Area for the different classes of real property situated in their respective local
government units [LGU] for enactment by ordinance of the sanggunian concerned. The schedule of
fair market values shall be published in a newspaper of general circulation in the province, city or
municipality concerned, or in the absence thereof, shall be posted in the provincial capitol, city or
municipal hall and in two other conspicuous public places therein.

Sec. 221. Date of Effectivity of Assessment of Reassessment — All assessments or reassessments

made after the first (1st) day of January of any year shall take effect on the first (1st) day of January
of the succeeding year: Provided, however, That the reassessment of real property due to its partial
or total destruction, or to a major change in its actual use, or to any great and sudden inflation or
deflation of real property values, or to the gross illegality of the assessment when made or to any
other abnormal causes, shall be made within ninety (90) days from the date any such cause or
causes occurred, and shall take effect at the beginning of the quarter next following assessment.

The petitioner claims that the effectivity date of Manila Ordinance No. 7894 and the schedule of the fair market
values is January 1, 1996. He contends that Sec. 212 of the R.A. 7160 prohibits the general revision of real property
assessment before the approval of the schedule of the fair market values. Thus, the alleged revision of real property
assessment in 1995 is illegal.

Based on the evidence presented by the parties, the steps to be followed for the mandatory conduct of General
Revision of Real Property assessments, pursuant to the provision of Sec. 219, of R.A. No. 7160 are as follows:

1. The preparation of Schedule of Fair Market Values.

2. The enactment of Ordinances:

a) levying an annual "ad valorem" tax on real property and an

additional tax accruing to the SEF.

b) fixing the assessment levels to be applied to the market values of

real properties;

c) providing necessary appropriation to defray expenses incident to

general revision of real property assessments; and
 d) adopting the Schedule of Fair Market Values prepared by the
assessors.17

The preparation of fair market values as a preliminary step in the conduct of general revision was set forth in Section
212 of R.A. 7160, to wit: (1) The city or municipal assessor shall prepare a schedule of fair market values for the
different classes of real property situated in their respective Local Government Units for the enactment of an
ordinance by the sanggunian concerned. (2) The schedule of fair market values shall be published in a newspaper
of general circulation in the province, city or municipality concerned or the posting in the provincial capitol or other
places as required by law.
198
It was clear from the records that Mrs. Lourdes Laderas, the incumbent City Assessor, prepared the fair market
values of real properties and in preparation thereof, she considered the fair market values prepared in the calendar
year 1992. Upon that basis, the City Assessor's Office updated the schedule for the year 1995. In fact, the initial
schedule of fair market values of real properties showed an increase in real estate costs, which rages from 600% —
3,330 % over the values determined in the year 1979. However, after a careful study on the movement of prices,
Mrs. Laderas eventually lowered the average increase to 1,020%. Thereafter, the proposed ordinance with the
schedule of the fair market values of real properties was published in the Manila Standard on October 28, 1995 and
Balita on November 1, 1995.  Under the circumstances of this case, was compliance with the requirement provided
18

under Sec. 212 of R.A. 7160.

Thereafter, on January 1, 1996, the Sanggunian approved Manila Ordinance No. 7894. The schedule of values of
real properties in the City of Manila, which formed an integral part of the ordinance, was likewise approved on the
same date.

When Manila Ordinance No. 7894 took effect on January 1, 1996, the existing assessment levels to be multiplied by
the market value of the property in computing the assessed value (taxable value) subject to tax were those
enumerated in Section 74 paragraph (A) of Manila Ordinance Number 7794.

Coming down to specifics, we find it desirable to lay down the procedure in computing the real property tax. With the
introduction of assessment levels, tax rates could be maintained, although tax payments can be made either higher
or lower depending on their percentage (assessment level) applied to the fair market value of property to derive
its assessed value which is subject to tax. Moreover, classes and values of real properties can be given proper
consideration, like assigning lower assessment levels to residential properties and higher levels to properties used
in business.  The procedural steps in computing the real property tax are as follows:
19

1) Ascertain the assessment level of the property

2) Multiply the market value by the applicable assessment level of the property

3) Find the tax rate which corresponds to the class (use) of the property and multiply
the assessed value by the applicable tax
rates. 
20

For easy reference, the computation of real property tax is cited below:

Market Value P x x x

Multiplied by Assessment Level (x %)

Assessed Value P x x x

Multiplied by Rate of Tax (x %)

Real Property Tax P x x

=====

On April 10, 1996, Manila Ordinance No. 7905 was enacted and approved to take effect, retroactively to January 1,
1996. As a result of this new ordinance, the assessment levels applicable to the market values of real properties
were lowered into half. A comparative evaluation between the old and the new assessment levels is as follows:

Assessment Levels

Ordinance 7794 Ordinance 7905

——————— ———————

Old New

—— ——

(1) On Lands:

Class
198
Residential 20% 10%

Commercial 50% 25%

Industrial 50% 25%

(2) On Buildings and other structures:

(a) Residential Fair Market Value

Over Not Over

P 175,000.00 0% 0%

175,000.00 P 300,000.00 10% 5%

300,000.00 500,000.00 20% 10%

500,000.00 750,000.00 25% 12.5%

750,000.00 1,000,000.00 30% 15%

1,000,000.00 2,000,000.00 35% 17.5%

2,000,000.00 5,000,000.00 40% 20%

5,000,000.00 10,000,000.00 50% 25%

10,000,000.00 60% 30%

(b) Commercial/IndustriaI Fair Market Value

Over Not Over

300,000.00 30% 15%

300,000.00 500,000.00 35% 17.5%

500,000.00 750,000.00 40% 20%

750,000.00 1,000,000.00 50% 25%

1,000,000.00 2,000,000.00 60% 30%

2,000,000.00 5,000,000.00 70% 35%

5,000,000.00 10,000,000.00 75% 37.5%

10,000,000.00 80% 40%

(3) On Machineries:

Class
 Residential 50% 25%

Commercial 80% 40%

Industrial 66% 40%

(4) On special classes — The assessment levels for all lands, buildings, machineries
and other improvements shall be as follows:

Actual Use 198

Cultural 15% 7.5%

Scientific 15% 7.5%

Hospital 15% 7.5%

Local Water Districts 15% 7.5%

GOCC engaged in the supply and

and distribution of water and/or

degeneration and transmission of

electric power 10% 5%

Despite the favorable outcome of Manila Ordinance No. 7905, the petitioner insists that since it was approved on
April 10, 1996, it cannot be implemented in the year 1996. Using Section 221 of R.A. 7160 as basis for his
argument, petitioner claims that the assessments or reassessments made after the first (1st) day of January of any
year shall take effect on the first (1st) day of January of the succeeding year.

Contrarily, the trial court viewed that Manila Ordinance No. 7905 affects the resulting tax imposed on the market
values of real properties as specified in Manila Ordinance No. 7894. Therefore, this supervening circumstance has
rendered the petition, moot and academic, for failure of the petitioner to amend his cause of action. The trial court
said:

A mere cursory reading of his petition that he questioned fair market values and the assessment
levels and the resulting tax based thereon as imposed by Ordinance No. 7894. The petitioner,
however, failed to amend his petition. Thus, it is clear that the petition has become moot and
academic. As correctly stated by the respondent, the facts, viz., the tax rates on level prescribed by
Ordinance 7894 upon which the petition was anchored no longer exist because the tax rates in
Ordinance No. 7894 have been amended, otherwise, impliedly repealed by Ordinance No. 7905. If
only for this, the petition could be dismissed but this court followed the advice of the Supreme Court
in the case of National Housing Authority vs. Court of Appeals, et. al. (121 SCRA 777) that the case
may be decided in its totality resolving all interlocking issues in order to render justice to all
concerned and end litigation once and for all. 21

Although, we are in full accord with the ruling of the trial court, it is likewise necessary to stress that Manila
Ordinance No. 7905 is favorable to the taxpayers when it specifically states that the reduced assessment levels
shall be applied retroactively to January 1, 1996. The reduced assessment levels multiplied by the schedule of fair
market values of real properties, provided by Manila Ordinance No. 7894, resulted to decrease in taxes. To that
extent, the ordinance is likewise, a social legislation intended to soften the impact of the tremendous increase in the
value of the real properties subject to tax. The lower taxes will ease, in part, the economic predicament of the low
and middle-income groups of taxpayers. In enacting this ordinance, the due process of law was considered by the
City of Manila so that the increase in realty tax will not amount to the confiscation of the property.

WHEREFORE, the instant petition is hereby DENIED, and the assailed Order of Regional Trial Court of Manila,
Branch 39 in Civil Case No. 96-77510 is hereby AFFIRMED. COSTS against the petitioner.

SO ORDERED.

G.R. No. 112941 February 18, 1999

NEUGENE MARKETING INC., LEONCIO TAN, NICANOR MARTIN, SONNY MORENO, JOHNSON LEE and
SECURITIES AND EXCHANGE COMMISSION, petitioners,
vs.
COURT OF APPEALS, ARSENIO YANG, JR., CHARLES O. SY, LOK CHUN SUEN, BAN HUA U. FLORES, BAN
HA U. CHUA and ROGER REYES, respondents.

PURISIMA, J.:
198
At bar is a petition for review of the decision  of the Special Fifth Division of the Court of Appeals which reversed the
1

decision of the Securities and Exchange Commission (SEC) annulling the dissolution of Neugene Marketing, Inc.
(NEUGENE, for short).

The SEC Hearing Panel gathered the facts, as follows:

On January 27, 1978, NEUGENE was duly registered with this Commission to engage in trading
business for a term of fifty (50) years with the following as incorporators/directors, namely:

1. Johnson Lee (one of the petitioners);

2. Lok Chun Suen (one of the respondents);

3. Charles O. Sy (one of the respondents);

4. Eugenio Flores, Jr. (husband of respondent Ban Hua U. Flores)

5. Arsenio Yang, Jr. (one of the respondents)

The authorized capital stock of NEUGENE is THREE MILLION PESOS (P3,000.000.00) divided into
THIRTY THOUSAND (P30,000) shares with a par value of ONE HUNDRED PESOS (P100.00)
each. Out of this authorized capital stock, SIX HUNDRED THOUSAND PESOS (P600.000.00) had
been subscribed by the following subscribers, namely:

NAME NO. OF AMOUNT

———

SHARES SUBSCRIBED

————— ———————

Johnson Lee 600 P 60,000.00

Lok Chun Suen 1,200 120,000.00

Charles O. Sy 1,800 180,000.00

Eugenio Flores, Jr. 2,100 210,000.00

Arsenio Yang, Jr. 300 30,000.00

——————————————

TOTAL 6,000.00 P600,000.00

====== ==========

Out of the aforesaid subscription, ONE HUNDRED FIFTY THOUSAND PESOS (P150,000.00) had
been paid by the following subscribers as follows:

NAME AMOUNT PAID UP

——— ——————————
 Johnson Lee P15,000.00

Lok Chun Suen 30,000.00

Charles O. Sy 45,000.00

Eugenio Flores, Jr. 52,500.00

Arsenio Yang, Jr. 7,500.00

198
——————

TOTAL P150,000.00

===========

The original shareholdings of the incorporators/stockholders of NEUGENE were increased by ten

percent (10%) each by virtue of stock dividend declaration in the amount of SIXTY THOUSAND
PESOS (P60,000.00) made by its board of directors in a special meeting held on June 7, 1980. . . .

Again, on May 2, 1981, the Board of directors of NEUGENE declared a stock dividend in the amount
of FORTY THOUSAND PESOS (P40,000.00) in proportion to the shareholdings of the stockholders
of record of NEUGENE as of April 30, 1981. . . .

xxx xxx xxx

The outstanding capital stock of NEUGENE became, SEVEN HUNDRED THOUSAND PESOS
(P700,000.00) represented by SEVEN THOUSAND (7,000) shares.

On May 15, 1986, Eugenio Flores, Jr. assigned transferred and conveyed his entire shareholdings of
TWO THOUSAND FOUR HUNDRED FIFTY (2,450) shares in NEUGENE to the following, to wit.

Pet. Sonny Moreno 1,050 shares (Exh. "B")

Resp. Arsenio Yang, Jr., 700 shares (Exh. "C")

Resp. Charles O. Sy 700 shares (Exh. "D")

—————————

TOTAL 2,450

====

Thus, immediately after the assignment of the entire shareholdings of Egenio Flores, Jr, to petitioner
Sonny Moreno and respondents Arsenio Yang, Jr., and Charles O. Sy, the stockholders of record of
NEUGENE, as appearing in the Stock and Transfer Book (Exhibit, "A"), particularly Exhihits "A-8 " to
"A-12 " thereof were as follows:

NAME NO. OF SHARES

——— ————————

Johnson Lee. 700

Lok Chun Suen 1,400

Sonny Moreno 1,050

Charles O. Sy 2,800

Arsenio Yang, Jr. 1,050

————
 TOTAL 7,000  2

======

On October 24, 1987, the private respondents, Charles O. Sy, Arsenio Yang, Jr. and Lok Chun Suen, holders of
5,250 shares of NEUGENE (representing at least two-thirds (2/3) of the outstanding capital stock of 7,000 shares)
sent notice to the directors of NEUGENE for a board meeting to be held on November 30, 1987. They also sent
notice for a special stockholders' meeting on the same day, November 30, 1987, to consider the dissolution of
NEUGENE.
198
At the said meetings held on November 30, 1987, the private respondents, Charles O. Sy, Arsenio Yang, Jr. and
Lok Chun Suen, the directors and stockholders then present, voted for and approved a resolution dissolving
NEUGENE.

On March 1, 1988, acting upon private respondents's Petition for Dissolution, SEC issued a Certificate of Dissolution
of NEUGENE.

On March 22, 1988, the petitioners brought an action to annul or set aside the said SEC Certification on the
Dissolution of Neugene. In their Amended Petition, petitioners stated, among others, that they are the majority
stockholders of NEUGENE, owning eighty percent (80%) of its outstanding capital stock, at the time of the adoption
and approval of the Resolution for the Dissolution of NEUGENE, on November 30, 1987; that prior thereto or on July
1, 1987, to be precise, the private respondents had divested themselves of their stockholdings when they endorsed
their stock certificates in blank and delivered the same to the Uy Family, the beneficial owners of NEUGENE; that at
the meetings held on February 11, 12 and 13, 1987, in order to settle family squabbles, the Uy family agreed to
award NEUGENE's stock certificates to Johnny K. H. Uy, who, in turn, authorized Johnson Lee to dispose of the
same; and that Johnson Lee sold the said shares of stock to the petitioners, Leoncio Tan and Nicanor Martin, such
that, as reflected in the Stock and Transfer Book of NEUGENE, respondent Lok Chun Suen had assigned all of his
1,400 shares of stock to petitioner Nicanor Martin, respondent Charles O. SY assigned 2,100 shares out of his
2,800 shares of stock to petitioner Leoncio Tan, and respondent Arsenio Yang, Jr. assigned 350 shares of his 1,050
shares of stock to petitioner Leoncio Tan; that in view of the said transfers of shares of stock, private respondents
Arsenio Yang, Jr., and Charles O. Sy (each the holder of only 700 shares or 10% each of the outstanding capital
stock of NEUGENE) and Lok Chun Suen (who had ceased to be a stockholder as July 1, 1987) could no longer
validly vote for the dissolution of EUGENE on November 30, 1987, under Section 118 of the Corporation Code, and
all the proceedings of the meetings held on November 30, 1987, which were improperly called and held without a
quorum, are null void.3

On the other hand, the private respondents, Charles O. Sy, Arsenio Yang, Jr. and Lok Chun Suen, theorized that
the alleged assignments of shares of stock in favor of petitioners were simulated and fraudulently effected, as there
never was any agreement entered into by the Uy family to award NEUGENE'S stock certificates to Johnny K. H. Uy,
because subject stock certificates of the private respondents covering their shares of stock were endorsed in blank
by them and delivered to the Uy family, who were the beneficial owners of NEUGENE, for safe keeping and the said
certificates of stock were kept inside the confidential vault of the Uy family at 225 D. Tuazon St., Quezon City, but
the same were stolen by the spouses, Johnny K. H. Uy and Magdalena Go-Uy, without the knowledge and authority
of the Uy family; that petitioner Sonny Moreno, a co-conspirator in such fraudulent transfer of stocks in question,
recorded the Simulated and fraudulent assignments in the Stock and Transfer Book of the corporation, which book
he obtained from Johnny K. H. Uy and Magdalena Go-Uy, together with other corporate records of NEUGENE,
including the stock certificates endorsed in blank by petitioner Johnson Lee and respondents Arsenio Yang, Jr.,
Charles O. Sy and Lok Chun Suen; that the petitioners, Nicanor Martin and Leoncio Tan, are co-conspirators of
Johnson Lee and Sonny Moreno in effecting the said simulated and fraudulent transfers of shares of stock; that the
private respondents never sold their shares of stock in NEUGENE to any of the petitioners or other stockholders of
record, prior to the dissolution of the corporation, so that they (private respondents) represented at least two-thirds
(2/3) of the outstanding capital stock of NEUGENE when they voted to dissolve NEUGENE, on November 30, 1987. 4

In its decision of June 19, 1990, the SEC Panel of Hearing Officers nullified the Certification on the Dissolution of
NEUGENE issued by SEC, holding that the private respondents were no longer holders of at least two-thirds (2/3) of
the outstanding capital stock of NEUGENE at the time they presented the petition for dissolution, as required under
Section 118 of the Corporation Code. (Annex "O"). The said decision of the SEC Panel of Hearing Officers was
affirmed in toto by the SEC En Banc in a Decision promulgated on January 14, 1993.  Portions of the decision of the
5

SEC Hearing Panel read:

The resolution to dissolve NEUGENE was adopted by only two (2) of its incumbent directors,
namely: respondent Charles O. Sy and Arsenio Yang, Jr. Respondent Lok Chun Suen had already
ceased to be a stockholder of NEUGENE as of July 1, 1987, by the endorsement and delivery and
cancellation of his stock certificates (Exhs. "E", "F", and "G") and the entries in the Stock and
Transfer Book (Exhs. "A", "A-1" to "A-24"). Hence, there was no quorum at said board of directors'
meeting on November 30, 1987. There was no quorum also at the November 30, 1987 meeting of
the stockholders of NEUGENE since only the following stockholders, namely: respondent Charles O.
 Sy and Arsenio Yang, Jr., who own 10% each of the stockholding of NEUGENE, could be
considered officially present at said meeting. On this score alone, the case for the petitioners should
be upheld.

xxx xxx xxx

WHEREFORE, judgement is hereby rendered:

1. Declaring as null and void the Certificate of Filing of Resolution of Voluntary Dissolution of
NEUGENE MARKETING, INC. issued by this Commission on March 1, 1988 for violation of Section 198
118 of the Corporate Code of the Philippines;

2. Ordering the respondents, particularly respondent Roger Z. Reyes or any other persons acting as
trustees of NEUGENE from representing himself/themeselves from acting as such;

3. Directing the respondents, particularly respondents Ban Ha U. Chua, Ban Hua U. Flores, Charles
O. Sy and Arsenio Yang, Jr., or whoever is in possession of the corporate books and records of
NEUGENE, to turn over the same to its Secretary, petitioner Sonny Moreno, within ten (10) days
from the finality of this Decision; and to revert back NEUGENE the Cash on Hand appearing in the
Balance Sheet as of November 30, 1987 in the amount of P860,591.98;

4. Ordering the respondents to pay attorney's fees to the petitioners in the amount of FOUR
HUNDRED THOUSAND PESOS (P400,000.00). 6

x x x           x x x          x x x

On June 10, 1993, the aforesaid judgment of SEC was reversed by the Court of Appeals. Upholding the validity of
NEUGENE's dissolution, the Court of Appeals found that at the time of dissolution of NEUGENE on November 30,
1987, the private respondents owned at least two-thirds (2/3) of NEUGENE's stocks, it appearing that the
certificates of stock of private respondents, which were endorsed in blank, as earlier mentioned, were not validly
transferred to petitioners herein.

The Court of Appeals ratiocinated and concluded:

xxx xxx xxx

The constitute a valid transfer, a stock certificate must be delivered and its delivery must be coupled
with an intention of constituting the person to whom the stock is delivered the transferred ( sic)
thereof. (Fetcher Cyc Corp., Sec. 5484)

Furthermore, in order that there is a valid transfer, the person to whom the stock certificates are
endrosed (sic) must be a bona fide transferee and for value.

In the case at bar, Nicanor Martin and Leoncio Tan were not bona fide trasferees for value and in
good faith. Private respondent alleged that petitioners Sy, Lok and Yang, Jr. indorsed and delivered
their stock certificates to Nicanor Martin and Leoncio Tan. However, private respondent Johnson
Lee testified that he acquired his shares of stock from Johnny Uy, who in turn sold them to Nocanor
Martin and Leoncio Tan (tsn, pp., 49-50, July 18, 1989). Likewise, evidence shows that no
consideration was paid by Leoncio Tan and Nicanor Martin when they allegedly acquired the stock
certificates from the Uy Family. Johnson Lee failed to produce any document evidencing the
transaction or a receipt showing his payment for the stocks. Therefore, it is clear that they were not
bona fide transferees for value and in good faith. Consequently, they cannot be considered
stockholders for the purpose of determining the 2/3 votes of the outstanding capital stock required to
dissolve Neugene, in accordance with Sec. 118 of the Corporate Code.

xxx xxx xxx

After a careful examination of the documentary evidence, We find that the supposed document
evidencing the partition and division of the properties of the Uy Family (Exh. "A"), is a mere xerox
copy whose original copy was never produced before the hearing panel. Moreover, it contained
erasures and/or insertions, and it is written in the Chinese Language, with no official translation
submitted. Consequently, We find no basis for the respondent Commission's finding that Neugene
belongs to Johnny K. H. Uy.
 Considering the above findings, there is likewise no basis for the Commission's ruling that the
amount of P60,591.98 should be returned by the petitioners to Neugene. Lastly, the award of
attorney's fees has no basis, considering Our findings that private respondent have no cause of
action against the petitioners, hence, they are not entitled to attorney's fees.

WHEREFORE, the decision dated January 14, 1992 of the respondent Commission is hereby
REVERSED and SET ASIDE. No
costs. 7

In Its Resolution dated December 9, 1993, the Court of Appeals denied petitioners' motion for reconsideration, and 198
further ruled that the transfers of stock in question could not be valid and effective for the simple reason that there is
a complete absence of proof that the alleged transfers were recorded in the books of the corporation. It relied on
Section 63 of the Corporation Code of the Philippines which provides that no transfer shall be valid except as
between the parties, until the transfer is recorded in the books of the corporation. 8

In the Petition under scrutiny, petitioners contend that the Court of Appeals: "(1) misapprehended the facts of the
case and (2) failed to consider the evidence on record showing that the private respondents were no longer holders
of the necessary number of shares of stock at the time of the dissolution of NEUGENE. 9

The pivot of inquiry here is whether or not the private respondents lacked the requisite number of shares of stock or
had divested themselves of their stockholdings as of November 30, 1987 when they voted for the resolution
dissolving NEUGENE.

After a careful study, a finding in favor of private respondents is indicated. In short, the Petition is barren of merit.

Entries in the Stock and Transfer Book of NEUGENE, particularly on the right hand portion of Exhibits "A-9", "A-10"
and "A-12", support the disquisition and conclusion arrived at by the Court of Appeals that at the time of dissolution
of NEUGENE on November 30, 1987, the private respondents, Lok Chun Suen, Charles O. Sy and Arsenio Yang,
Jr., owned at least two-thirds (2/3) of NEUGENE's outstanding capital stock, in sufficient compliance with the
germane provision of Section 118 of the Corporation Code of the Philippines.

As shown in the Stock and Transfer Book of NEUGENE, the right hand portion of Exhibit "A-9", under the column
"Certificates Issued", private respondent Lok Chun Suen is the holder of a total of 1,400 shares of stock, issued on
February 23, 1979, October 1, 1980 and May 2, 1981, respectively. (Records, p. 662) Exhibit "A-10", on its right
hand portion and under the column "Certificates Issued" reflects private respondent Charles O. Sy as the holder of a
total of 2,800 shares of stock, issued on the abovementioned dates except those acquired from Eugenio Flores, Jr.
which were issued on May 15, 1986. (Records, p. 663) While the right hand portion of Exhibit "A-12", under the
column "Certificates Issued", shows that private respondent Arsenio Yang, Jr. is the holder of 1,050 shares, issued
on the abovementioned dates, except those acquired from Eugenio Flores, Jr. which were issued on May 15, 1986.
(Records, p. 665)

Therefore, the entries on the right hand portion of NEUGENE'S Stock and Transfer Book, under the column
"Certificates Issued", indubitably record the private respondents as the holders of 5,250 shares, constituting at least
two-thirds (2/3) of NEUGENE's outstanding capital stock of 7,000 shares.

Petitioners introduced in evidence the very same exhibits pertaining to the Stock and Transfer Book of NEUGENE
(more specifically Exhibits "A-9", "A-10", and "A-12") to prove that the private respondents were no longer the
majority stockholders at the time of the dissolution of NEUGENE. It should be noted, however, that on the left hand
portion of the said exhibits, under the colum "Certificates Cancelled", entries on July 1, 1987 disclose that all of Lok
Chun Suen's 1,400 certificates of stock were cancelled, Charles O. Sy's 2, 100 shares out of 2,800 shares were
cancelled, and Arsenio Yang, Jr.'s 350 shares out of his 1,050 shares were likewise cancelled, thereby leaving
Arsenio Yang, Jr. and Charles O. Sy the holders of only 700 shares each or 10 % of the outstanding capital stock of
NEUGENE when its dissolution was approved and voted for.

In light of the foregoing and after a careful examination of the evidence on record, and a judicious study of the
provisions of law and jurisprudence in point, we are with the Court of Appeals on the finding and conclusion that the
certificates of stock of the private respondents were stolen and therefore not validly transferred, and the transfers of
stock relied upon by petitioners were fraudulently recorded in the Stock and Transfer Book of NEUGENE under the
column "Certificates Cancelled".

Although well-established is the rule that the appellate court will not generally disturb the factual findings by the trial
court for the reason that the trial court heard the testimonies of the witnesses and observed their deportment and
manner of testifying during the trial and was afforded the singular chance to assess the probative value of the
evidence. The rule does not apply where, as in this case, the SEC overlooked certain facts of substance and value
which if considered would affect the result of the case. (Tomas vs. CA, 185 SCRA 627 [1990]; People vs. Alforte,
219 SCRA 458 [1993])
In the case under consideration, records reveal that the SEC En Banc and its Panel Of Hearing Officers
misappreciated the true nature of the relationship between the stockholders of NEUGENE and the Uy family, who
had the understanding that the beneficial ownership of NEUGENE would remain with the Uy family, such that
subject shares of stock were, immediately upon issuance, endorsed in blank by the shareholders and entrusted to
the Uy family, through Ban Ha Chua, for safekeeping. Such beneficial ownership of the Uy family is admitted not
only in the testimonies of private respondents but also of the petitioners, Sonny Moreno and Johnson Lee. 10

Both the petitioners Johnson Lee (a member of the Uy family himself), and Sony Moreno, the corporate secretary,
were aware of the real import or significance of the indorsements in blank on the stock certificates of the private
respondent. Obviously, then, they (Lee and Moreno) acted in bad faith in assigning subject certificates of stock to
198
the petitioners, Nicanor Martin and Leoncio Tan, and in recording the said transfers in dispute in the Stock and
Transfer book of NEUGENE.

Then, too, as nominees of the Uy family, the approval by the private respondents, Charles O. Sy, Lok Chun Suen
and Arsenio Yang, Jr., Jr., was necessary for the validity and effectivity of the transfer of the stock certificates
registered under their (private respondents) names. In the case under consideration, not only did the transfers of
stock in question lack the requisite approval, the private respondents categorically declared under oath that subject
certificates of stock of theirs were stolen from the confidential vault of the Uy family and illegally transferred to the
names of petitioners in the Stock and Transfer Book of NEUGENE.

As stressed by the Court of Appeals, there is no reliable showing of any valuable consideration for the supposed
transfer of subject stocks to petitioners. Fundamental and crucial is the rule that if a contract has no cause, it does
not produce any effect whatsoever and is inexistent or void from the beginning. The complete absence of a cause or
consideration renders the contract absolutely void and inexistent. (Robleza vs. Court of Appeals, 174 SCRA 362
[1989]), citing Arts. 1352 and 1409 of the New Civil Code)

All things studiedly evaluated in proper perspective, we are of the irresistible conclusion that the private respondents
herein are the legitimate holders and owners of at least-two-thirds (2/3) of the outstanding capital stock of
NEUGENE, with the corresponding right to vote for its dissolution, in accordance with Section 118 of the
Corporation Code of the Philippines.

WHEREFORE, the Petition is DISMISSED for lack of merit and the Decision of the Court of Appeals AFFIRMED, in
its entirety, No pronouncement as to costs. SO ORDERED.

G.R. No. 121587 March 9, 1999

SOLEDAD DY, doing business under the name and style RONWOOD LUMBER, petitioner,
vs.
COURT OF APPEALS and ODEL BERNARDO LAUSA, respondent.

MENDOZA, J.:

This is a petition for review of the decision   of the Court of Appeals in CA G.R. SP 33099 setting aside two orders of
1

the Regional Trial Court of Butuan City (Branch 5) and the appeallate court's resolution denying petitioner's motion
for reconsideration.

The facts are as follows.

On May 31, 1993, the Mayor of Butuan City issued Executive Order No. 93-01 creating Task Force Kalikasan to
combat "illegal logging, log smuggling or possession of and/or transport of illegally cut or produced logs, lumber,
flitches and other forest products" in that city.   The team was composed of personnel of the Philippine Army
2

Philippine National Police (PNP), the Department of Natural Resources (DENR), and the Office of the City Mayor of
Butuan. Respondent Odel Bernardo Lausa, who was the acting chief of civilian security in the mayor's office, was a
member of the team.

On July 1, 1993, the members of the task force received confidential information that two truckloads of illegally cut
lumber would be brought to Butuan City from the Ampayon-Taguibe-Tiniwisan area. Accordingly, the team set up a
check-point along kilometer 4 in Baan, Butuan City.   What happened thereafter is summarized in the following
3

portion of the decision of the Court of Appeals: 4

 At around 10:00 p.m., two trucks with Plate Nos. KAK-542 and KBL-214 and loaded with lumber
approached the checkpoint. They were flagged down by the operatives but instead of stopping, they
accelerated their speed hence, the task gave chase. They finally caught up with the two vehicles ar
the compound of Young Metalcraft and Peterwood Agro-Forest Industries at Baan, Butuan City,
about two kilometers from the checkpoint. When requested by the operatives, Pulcita Lucero,
caretaker/in charge of the a compound could not produce any document as proof of the legality of
the origin/possession of the forest products.

Forester Resurrection Maxilom of the DENR issued a temporary seizure order and a seizure receipt for the two
vehicles and their cargo consisting of several pieces of lumber of different sizes and dimensions, but Lucero, the
198
caretaker of the compound where they were seized, refused to accept them. The seized lumber and vehicles were
then taken to the City motorpol and placed in the custody of respondent Lausa.

The next day, July 2, 1993, Maxilom submitted a memorandum-report to the Community Environment and Natural
Resources Officer (CENRO) of Butuan City on the seizure of the lumber and the two vehicles.  On July 6, the
5

CENRO issued a notice of confiscation which was duly posted for three days.

For lack of claimants, DENR Regional Technical Director Raoul Geollegue recommended to the Secretary on July
29, 1993 the forfeiture of the lumber and the two vehicles.  Accordingly, on July 30, 1993, DENR Regional Director
6

De la Rosa ordered the CENRO of Butuan City to issue the requisite forfeiture orders,  which CENRO Angelita
7

Orcasitas issued on August 15, 1993. 8

On October 20, 1993, more than two months after the lumber had been forfeited, petitioner, claiming to be the
owner of the lumber, filed a suit for replevin in the Regional Trial Court of Butuan City (Branch 5) for its recovery.
The next day, October 21, 1993, the trial court issued a preliminary writ of replevin.

On October 29, 1993, respondent Lausa filed a motion for the approval of a counterbond. Before the court could act
on his motion, he moved to dismiss and/or quash the writ of replevin on the ground that the lumber in question,
having been seized and forfeited by the DENR pursuant to P.D. No. 705, as amended (Revised Forestry Code), was
under its custody and, therefore, resort should first be made to the DENR.

On November 29, 1993, the trial court denied respondent Lausa's application for the approval of the counterbond as
well as his motion to dismiss and/or quash the suit for replevin. For his reason, respondent filed a petition
for certiorari in the Court of Appeals in which he sought the approval of his counterbond and the nullification of two
orders, dated October 21, 1993, and November 29, 1993, granting petitioner's prayer for a preliminary writ of
replevin and denying his Motion to Dismiss Case and/or Quash Writ of Replevin.

On January 19, 1995, the Court of Appeals rendered a decision, the dispositive portion of which reads:

WHEREFORE, the petition is hereby GRANTED, and

a. The Orders dated 21 October 1993 and 29 November 1993 are SET ASIDE.

b. Respondent judge is directed to approve a duly qualified counterbond to be filed by petitioner,

even with a period of at least one year.

No pronouncements as to costs.

SO ORDERED  9

Petitioner's subsequent motion for reconsideration was denied in a resolution, dated July 26, 1995. Hence, this
petition. Petitioner alleges that:

FIRST ERROR

WITH DUE RESPECT RESPONDENT COURT OF APPEALS ERRED IN RULING THAT THE
VERIFICATION MADE BY LORENCIO DY AND NOT BY PETITIONER SOLEDAD Y. DY WAS
INSUFFICIENT TO JUSTIFY THE ISSUANCE OF THE REPLEVIN WRIT  10

SECOND ERROR

THE RESPONDENT COURT OF APPEALS ERRED IN RULING THAT A COUNTERBOND IN

REPLEVIN WHICH IS EFFECTIVE FOR ONLY ONE YEAR IS VALID TO CAUSE THE RETURN
OF THE PROPERTY TO DEFENDANT  11
 THIRD ERROR

THE RESPONDENT COURT OF APPEALS ERRED IN GIVING DUE COURSE TO PRIVATE

RESPONDENT'S PETITION FOR CERTIORARI. 12

The appeal is without merit. The threshold question is whether the Regional Trial Court could in fact take
cognizance of the replevin suit, considering that the object was the recovery of lumber seized and forfeited by law
enforcement agents of the DENR pursuant to P.D. No. 705 (Revised Forestry Code), as amended by Executive
Order No. 277.
198
The rule is that a party must exhaust all administrative remedies before he can resort to the courts. In a long line of
cases, we have consistently held that before a party may be allowed to seek the intervention of the court, it is a pre-
condition that he should have availed himself of all the means afforded by the administrative processes. Hence, if a
remedy within the administrative machinery can still be resorted to by giving the administrative officer concerned
even opportunity to decide on a matter that comes within his jurisdiction then such remedy should be exhausted first
before a court's judicial power can be sought. The premature invocation is fatal to one's cause of action.
Accordingly, absent any finding of waiver or estoppel, the case is susceptible of dismissal for lack of cause of
action. 
13

Sec. 8 of P.D. No. 705, as amended, provides:

Sec. 8. Review. — All actions and decisions of the Director are subject to review, motu propio or
upon appeal of any person aggrieved thereby, by the Department Head whose decision shall be final
and executory after the lapse of thirty (30) days from receipt by the aggrieved party of said decision,
unless appealed to the President in accordance Executive Order No. 19, series of 1966. The
Decision of the Department Head may not be reviewed by the courts except through a special civil
action for certiorari or prohibition.

In Paat v. Court of Appeals,   where, as in the case at bar, the trial court issued a writ of replevin against the DENR,
14

thus allowing the claimant to obtain possession of the conveyance used in transporting undocumented forest
products, this Court stated:

Dismissal of the replevin suit for lack of cause of action in view of the private respondents' failure to
exhaust administrative remedies should have been the proper cause of action by the lower court
instead of assuming jurisdiction over the case and consequently issuing the writ ordering the return
of the truck. Exhaustion of the remedies in the administrative forum, being a condition precedent
prior to one's recourse to the courts and more importantly, being an element of private respondents'
rights of action is too significant to be waylaid by the lower court. 
15

As petitioner clearly failed to exhaust available administrative remedies, the Court of Appeals correctly set aside the
assailed orders of the trial court granting petitioner's application for a replevin writ and denying private respondent's
motion to dismiss. Having been forfeited pursuant to P.D. No. 705, as amended, the lumber properly came under
the custody of the DENR and all actions seeking to recover possession thereof should be directed to that agency.

The appellate court's directive to the trial court judge to allow the respondent agent of the DENR to file a
counterbond in order to recover custody of the lumber should be disregarded as being contrary to its order to
dismiss the replevin suit of petitioner. For, indeed, what it should have done was to dismiss the case without
prejudice to petitioner filing her claim before the Department of Natural Resources (DENR).

In view of the conclusion reached in this case, it is unnecessary to discuss the errors assigned by petitioner. These
pertain to the questions whether petitioner's complaint below was properly verified and whether private respondent's
counterbond should be approved. Both are based on the premise that the trial court can take cognizance over the
case. As shown above, however, such is not the case.

WHEREFORE, the decision of the Court of Appeals, dated January 19, 1995, and its Resolution, dared July 26,
1995, in CA-G.R. SP 33099 are AFFIRMED with the modification that the complaint for recovery of personal
property is DISMISSED. SO ORDERED.

G.R. No. 135805 April 29, 1999

CIVIL SERVICE COMMISSION, petitioner,

vs.
PEDRO O. DACOYCOY, respondent.
 

PARDO, J

The case before us is an appeal via certiorari interposed by the Civil Service Commission from a decision of the
Court of Appeals ruling that respondent Pedro O. Dacoycoy was not guilty of nepotism and declaring null and void
the Civil Service Commission's resolution dismissing him from the service as Vocational School Administrator,
Balicuatro College of Arts and Trade, Allen, Northern Samar.

The facts may be succinctly related as follows: 198

On November 29, 1995, George P. Suan, a Citizens Crime Watch Vice-President, Allen Chapter, Northern Samar,
filed with the Civil Service Commission, Quezon City, a complaint against Pedro O. Dacoycoy, for habitual
drunkenness, misconduct and nepotism. 1

After a fact-finding investigation, the Civil Service Regional Office No. 8, Tacloban City, found a prima facie case
against respondent, and, on March 5, 1996, issued the corresponding formal charge against him.  Accordingly, the
2

Civil Service Commission conducted a formal investigation, and, on January 28, 1997, the Civil Service Commission
promulgated its resolution finding no substantial evidence to support the charge of habitual drunkenness and
misconduct. However, the Civil Service Commission found respondent Pedro O. Dacoycoy guilty of nepotism on two
counts as a result of the appointment of his two sons, Rito and Ped Dacoycoy, as driver and utility worker,
respectively, and their assignment under his immediate supervision and control as the Vocational School
Administrator as Balicuatro College of Arts and Trades, and imposed on him the penalty of dismissal from the
service.
3

On February 25, 1997, respondent Dacoycoy filed a motion for reconsideration;   however, on May 20, 1997, the
4

Civil Service Commission denied the motion.  5

On July 18, 1997, respondent Dacoycoy filed with the Court of Appeals a special civil action for  certiorari with
preliminary injunction  to set aside the Civil Service Commission's resolutions.
6

On July 29, 1998, the Court of Appeals promulgated its decision reversing and setting aside the decision of the Civil
Service Commission, ruling that respondent did not appoint or recommend his two sons Rito and Ped, and, hence,
was not guilty of nepotism. The Court further held that it is "the person who recommends or appoints who should be
sanctioned, as it is he who performs the prohibited act." 
7

Hence, this appeal.

On November 17, 1998, we required respondent to comment on the petition within ten (10) days from notice.  On 8

December 11, 1998, respondent filed his comment.

We give due course to the petition.

The basic issue raised is the scope of the ban on nepotism.

We agree with the Civil Service Commission that respondent Pedro O. Dacoycoy was guilty of nepotism and
correctly meted out the penalty of dismissal from the service.

The law defines nepotism  as follows:

9

Sec. 59. Nepotism. — (1) All appointments to the national, provincial, city and municipal
governments or in any branch or instrumentality thereof, including government owned or controlled
corporations, made in favor of a relative of the appointing or recommending authority, or of the chief
of the bureau or office, or of the persons exercising immediate supervision over him, are hereby
prohibited.

As used in this Section, the word "relative" and members of the family referred to are those related
within the third degree either of consanguinity or of affinity.

(2) The following are exempted from the operations of the rules on nepotism: (a) persons employed
in a confidential capacity, (b) teachers, (c) physicians, and (d) members of the Armed Forces of the
Philippines: Provided, however, That in each particular instance full report of such appointment shall
be made to the Commission.
Under the definition of nepotism, one is guilty of nepotism if an appointment is issued in favor of a relative within the
third civil degree of consanguinity or affinity of any of the following:

a) appointing authority;

b) recommending authority;

c) chief of the bureau or office, and

d) person exercising immediate supervision over the appointee. 198

Clearly, there are four situations covered. In the last two mentioned situations, it is immaterial who the appointing or
recommending authority is. To constitute a violation of the law, it suffices that an appointment is extended or issued
in favor of a relative within the third civil degree of consanguinity or affinity of the chief of the bureau or office, or the
person exercising immediate supervision over the appointee.

Respondent Dacoycoy is the Vocational School Administrator, Balicuatro College of Arts and Trades, Allen,
Northern Samar. It is true that he did not appoint or recommend his two sons to the positions of driver and utility
worker in the Balicuatro College of Arts and Trades. In fact, it was Mr. Jaime Daclag, Head of the Vocational
Department of the BCAT, who recommended the appointment of Rito. Mr. Daclag's authority to recommend the
appointment of first level positions such as watchmen, security guards, drivers, utility workers, and casuals and
emergency laborers for short durations of three to six months was recommended by respondent Dacoycoy and
approved by DECS Regional Director Eladio C. Dioko, with the provision that such positions shall be under Mr.
Daclag's immediate supervision. On July 1, 1992, Atty. Victorino B. Tirol II, Director III, DECS Regional Office VIII,
Palo, Leyte, appointed Rito Dacoycoy driver of the school. On January 3, 1993, Mr. Daclag also appointed Ped
Dacoycoy casual utility worker. However, it was respondent Dacoycoy who certified that "funds are available for the
proposed appointment of Rito Dacoycoy" and even rated his performance as "very satisfactory". On the other hand,
his son Ped stated in his position description form that his father was "his next higher supervisor". The
circumvention of the ban on nepotism is quite obvious. Unquestionably, Mr. Daclag was a subordinate of
respondent Pedro O. Dacoycoy, who was the school administrator. He authorized Mr. Daclag to recommend the
appointment of first level employees under his immediate supervision. Then Mr. Daclag recommended the
appointment of respondent's two sons and placed them under respondent's immediate supervision serving as driver
and utility worker of the school. Both positions are career positions.

To our mind, the unseen but obvious hand of respondent Dacoycoy was behind the appointing or recommending
authority in the appointment of his two sons. Clearly, he is guilty of nepotism.

At this point, we have necessarily to resolve the question of the party adversely affected who may take an appeal
from an adverse decision of the appellate court in an administrative civil service disciplinary case. There is no
question that respondent Dacoycoy may appeal to the Court of Appeals from the decision of the Civil Service
Commission adverse to him.   He was the respondent official meted out the penalty of dismissal from the service.
10

On appeal to the Court of Appeals the court required the petitioner therein, here respondent Dacoycoy, to implead
the Civil Service Commission as public respondent  as the government agency tasked with the duty to enforce the
11

constitutional and statutory provisions on the civil service. 12

Subsequently, the Court of Appeals reversed the decision of the Civil Service Commission and held respondent not
guilty of nepotism. Who now may appeal the decision of the Court of Appeals to the Supreme Court? Certainly not
the respondent, who was declared not guilty of the charge. Nor the complainant George P. Suan, who was merely a
witness for the government.  Consequently, the Civil Service Commission has become the party adversely affected
13

by such ruling, which seriously prejudices the civil service system. Hence, as an aggrieved party, it may appeal the
decision of the Court of Appeals to the Supreme Court.  By this ruling, we now expressly abandon and overrule
14

extant jurisprudence that "the phrase 'party adversely affected by the decision' refers to the government employee
against whom the administrative case is filed for the purpose of disciplinary action which, may take the form of
suspension, demotion in rank or salary, transfer, removal or dismissal from office"  and not included are "cases
15

where the penalty imposed is suspension for not more than thirty (30) days or fine in an amount not exceeding thirty
days salary"  or "when the respondent is exonerated of the charges, there is no occasion for appeal."  In other
16 17

words, we overrule prior decisions holding that the Civil Service Law "does not contemplate a review of decisions
exonerating officers or employees from administrative charges" enunciated in Paredes v. Civil Service
Commission;   Mendez v. Civil Service Commission;  Magpale v. Civil Service Commission;  Navarro v. Civil
18 19 20

Service Commission and Export Processing Zone Authority   and more recently Del Castillo v. Civil Service
21

Commission.  22

The Court of Appeals' reliance on Debulgado vs. Civil Service Commission,  to support its ruling is misplaced. The
23

issues in Debulgado are whether a promotional appointment is covered by the prohibition against nepotism or the
prohibition applies only to original appointments to the civil service, and whether the Commission had gravely
abused its discretion in recalling and disapproving the promotional appointment given to petitioner after the
Commission had earlier approved that appointment. Debulgado never even impliedly limited the coverage of the
ban on nepotism to only the appointing or recommending authority for appointing a relative. Precisely, in Debulgado,
the Court emphasized that Section 59 "means exactly what it says in plain and ordinary language: . . . The public
policy embodied in Section 59 is clearly fundamental in importance, and the Court has neither authority nor
inclination to dilute that important public policy by introducing a qualification here or a distinction there. 
24

Nepotism is one pernicious evil impeding the civil service and the efficiency of its personnel. In Debulgado, we
stressed that "[T]the basic purpose or objective of the prohibition against nepotism also strongly indicates that the
prohibition was intended to be a comprehensive one."  "The Court was unwilling to restrict and limit the scope of the
25

prohibition which is textually very broad and comprehensive."  If not within the exceptions, it is a form of corruption
26

198
that must be nipped in the bud or abated whenever or wherever it raises its ugly head. As we said in an earlier case
"what we need now is not only to punish the wrongdoers or reward the "outstanding" civil servants, but also to plug
the hidden gaps and potholes of corruption as well as to insist on strict compliance with existing legal procedures in
order to abate any occasion for graft or circumvention of the law."  27

WHEREFORE, the Court hereby GRANTS the petition and REVERSES the decision of the Court of Appeals in CA-
G.R. SP No. 44711.

ACCORDINGLY, the Court REVIVES and AFFIRMS the resolutions of the Civil Service Commission dated January
28, 1998 and September 30, 1998, dismissing respondent Pedro O. Dacoycoy from the service.

No costs. SO ORDERED.

G.R. No. 139043 September 10, 1999

MAYOR ALVIN B. GARCIA, petitioner,

vs.
HON. ARTURO C. MOJICA, in his capacity as Deputy Ombudsman for the Visayas, VIRGINIA PALANCA-
SANTIAGO, in his capacity as Director, Office of the Ombudsman (Visayas), ALAN FRANCISCO S. GARCIANO, in
his capacity as Graft Investigation Officer I, Office of the Ombudsman (Visayas), and JESUS RODRIGO T.
TAGAAN, respondents.

QUISUMBING, J.:

The present controversy involves the preventive suspension order issued June 25, 1999, by the Office of the Ombudsman
(Visayas) in OMB-VIS-ADM-99-0452, against petitioner Cebu City Mayor Alvin B. Garcia and eight other city officials.
Under the said order, petitioner was placed under preventive suspension without pay for the maximum period of six
months and told to cease and desist from holding office immediately.

The factual antecedents are as follows:

On May 7, 1998, petitioner, in his capacity as Cebu City mayor, signed a contract with F.E. Zuellig for the supply of
asphalt to the city. The contract covers the period 1998-2001, which period was to commence on September 1998 when
the first delivery should have been made by F.E. Zuellig.

Sometime in March 1999, news reports came out regarding the alleged anomalous purchase of asphalt by Cebu City,
through the contract signed by petitioner. This prompted the Office of the Ombudsman (Visayas) to conduct an inquiry into
the matter.1

Respondent Jesus Rodrigo T. Tagaan, special prosecution officer of the Office of the Ombudsman, was assigned to
conduct the inquiry, docketed as INQ-VIS-99-0132. After his investigation, he recommended that the said inquiry be
upgraded to criminal and administrative  cases against petitioner and the other city officials involved. Respondent Arturo
C. Mojica, Deputy Ombudsman for the Visayas, approved this recommendation.

In a memorandum dated June 22, 1999, respondent Allan Francisco S. Garciano, the graft investigating officer to whom
the case was raffled for investigation, recommended the preventive suspension of petitioner and the others. Two days
later, or on June 24, 1999, the affidavit-complaint against petitioner was filed. The following day, on June 25, 1999, the
Office of the Ombudsman issued the questioned preventive suspension order. On June 29, 1999, petitioner filed a motion
for reconsideration of said order, which motion was denied in an order dated July 5, 1999.

Petitioner is now before this Court assailing the validity of the said order. He pleads for immediate relief through the
present petition for certiorari and prohibition with a prayer for temporary restraining order and/or writ of preliminary
injunction. Petitioner contends that:

I
 THE RESPONDENTS ACTED WITH GRAVE ABUSE OF DISCRETION, AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN ASSUMING JURISDICTION OVER OMB-VIS-ADM-99-0452 AND
ISSUING THE PREVENTIVE SUSPENSION ORDER, THE OFFICE OF THE OMBUDSMAN BEING
WITHOUT JURISDICTION OVER THE ADMINISTRATIVE CASE, CONSIDERING THAT THE ALLEGED
ACT CONSTITUTING THE CHARGE AGAINST PETITIONER HEREIN WAS COMMITTED DURING HIS
PREVIOUS TERM, AND PETITIONER HAVING BEEN REELECTED TO THE SAME POSITION.

II

ASSUMING, ARGUENDO, THAT THE OFFICE OF THE OMBUDSMAN HAS JURISDICTION OVER

OMB-VIS-ADM-99-0452, THE PREVENTIVE SUSPENSION FOR SIX MONTHS WAS WITH GRAVE 198
ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION, AND IN GROSS
VIOLATION OF THE PROVISIONS OF SECTION 63 OF THE LOCAL GOVERNMENT CODE WHICH
MANDATES THAT THE PREVENTIVE SUSPENSION OF LOCAL ELECTIVE OFFICIALS BE
ORDERED ONLY AFTER THE ISSUES HAVE BEEN JOINED, AND ONLY FOR A PERIOD NOT IN
EXCESS OF SIXTY (60) DAYS.

III

ASSUMING, ARGUENDO, THAT THE OFFICE OF THE OMBUDSMAN HAS JURISDICTION OVER

OMB-VIS-ADM-99-0452, THE PREVENTIVE SUSPENSION WAS ISSUED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION, AND IN GROSS VIOLATION
OF SECTION 26(2) OF THE OMBUDSMAN LAW.

IV

ASSUMING, ARGUENDO, THAT THE OFFICE OF THE OMBUDSMAN HAS JURISDICTION, THE

RESPONDENTS COMMITTED GRAVE ABUSE OF DISCRETION, AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN CONCLUDING THAT THE EVIDENCE AGAINST PETITIONER WAS
"STRONG", THE LITTLE EVIDENCE ON RECORD CONSISTING SOLELY OF A HEARSAY
AFFIDAVIT, AND INADMISSIBLE NEWSPAPER REPORTS.

On July 19, 1999, we directed the parties to maintain the status quo  until further orders from this Court. It appears that on
the same day, petitioner issued a memorandum informing employees and officials of the Office of the City Mayor that he
was assuming the post of mayor effective immediately. On July 23, 1999, respondents filed a motion seeking clarification
of our status quo order. Respondents claimed that the status quo referred to in the order should be that where petitioner is
already and vice mayor Renato Osmeña is the acting city mayor.

Petitioner, in reply, argued that the status quo  refers to "the last actual peaceable uncontested status which preceded the
pending controversy." 2 Thus, status quo  could not be that where petitioner is preventively suspended since the
suspension did not precede the present controversy; it is the controversy.

We agree with petitioner in this regard. As explained by Justice Florenz D. Regalado, an authority on remedial law:

There have been instances when the Supreme Court has issued a status quo  order which, as the very
term connotes, is merely intended to maintain the last, actual, peaceable and uncontested state of things
which preceded the controversy. This was resorted to when the projected proceedings in the case made
the conservation of the status quo  desirable or essential, but the affected party neither sought such relief
or the allegations in his pleading did not sufficiently make out a case for a temporary restraining order.
The status quo order was thus issued motu proprio on equitable considerations. Also, unlike a temporary
restraining order or a preliminary injunction, a status quo order is more in the nature of a cease and desist
order, since it neither directs the doing or undoing of acts as in the case of prohibitory or mandatory
injunctive relief. The further distinction is provided by the present amendment in the sense that, unlike the
amended rule on restraining orders, a status quo order does not require the posting of a bond.3

On July 28, 1999, we heard the parties' oral arguments on the following issues:

1. What is the effect of the reelection of petitioner on the investigation of acts done before his reelection?
Did the Ombudsman for Visayas gravely abuse his discretion in conducting the investigation of petitioner
and ordering his preventive suspension?

2. Assuming that the Ombudsman properly took cognizance of the case, what law should apply to the
investigation being conducted by him, the Local Government Code (R.A. 7160) or the Ombudsman Law
(R.A. 6770)? Was the procedure in the law properly observed?

3. Assuming further that the Ombudsman has jurisdiction, is the preventive suspension of petitioner
based on "strong evidence" as required by law?
We will now address these issues together, for the proper resolution on the merits of the present controversy.

Petitioner contends that, per our ruling in Aguinaldo v. Santos, 4 his reelection has rendered the administrative case filed
against him moot and academic. This is because reelection operates as a condonation by the electorate of the
misconduct committed by an elective official during his previous term. Petitioner further cites the ruling of this Court
in Pascual v. Hon.  Provincial Board of Nueva Ecija,5 that

. . . When the people have elected a man to office, it must be assumed that they did this with knowledge
of his life and character, and that they disregarded or forgave his faults or misconduct, if he had been
guilty of any. It is not for the court, by reason of such faults or misconduct to practically overrule the will of
the people. 198

Respondents, on the other hand, contend that while the contract in question was signed during the previous term of
petitioner, it was to commence or be effective only on September 1998 or during his current term. It is the respondents'
submission that petitioner "went beyond the protective confines"6 of jurisprudence when he "agreed to extend his act to
his current term of
office." 7 Aguinaldo cannot apply, according to respondents, because what is involved in this case is a misconduct
committed during a previous term but to be effective during the current term.

Respondents maintain that,

. . . petitioner performed two acts with respect to the contract: he provided for a suspensive period making
the supply contract commence or be effective during his succeeding or current term and during his
current term of office he acceded to the suspensive period making the contract effective during his current
term by causing the implementation of the contract. 8

Hence, petitioner cannot take refuge in the fact of his reelection, according to respondents.

Further, respondents point out that the contract in question was signed just four days before the date of the 1998 election
and so it could not be presumed that when the people of Cebu City voted petitioner to office, they did so with full
knowledge of petitioner's character.

On this point, petitioner responds that knowledge of an official's previous acts is presumed and the court need not inquire
whether, in reelecting him, the electorate was actually aware of his prior misdeeds.

Petitioner cites our ruling in Salalima v. Guingona,9 wherein we absolved Albay governor Romeo R. Salalima of his
administrative liability as regards a retainer agreement he signed in favor of a law firm during his previous term, although
disbursements of public funds to cover payments under the agreement were still being done during his subsequent term.
Petitioner argues that, following Salalima, the doctrine in Aguinaldo applies even where the effects of the act complained
of are still evident during the subsequent term of the reelected official. The implementation of the contract is a mere
incident of its execution. Besides, according to petitioner, the "sole act" for which he has been administratively charged is
the signing of the contract with F.E. Zuellig. The charge, in his view, excludes the contract's execution or implementation,
or any act subsequent to the perfection of the contract.

In Salalima, we recall that the Solicitor General maintained that Aguinaldo did not apply to that case because the
administrative case against Governor Rodolfo Aguinaldo of Cagayan was already pending when he filed his certificate of
candidacy for his reelection bid. Nevertheless, in Salalima, the Court applied the Aguinaldo doctrine, even if the
administrative case against Governor Salalima was filed after his reelection.

Worth stressing, to resolve the present controversy, we must recall that the authority of the Ombudsman to conduct
administrative investigations is mandated by no less than the Constitution. Under Article XI, Section 13[1], the
Ombudsman has the power to:

investigate on its own, or on complaint by any person, any act or omission of any public official,
employee, office or agency, when such act omission appears to be illegal, unjust, improper, or inefficient.

R.A. 6770, the Ombudsman Law, further grants the Office of the Ombudsman the statutory power to conduct
administrative investigations. Thus, Section 19 of said law provides:

Sec. 19. Administrative Complaints. — The Ombudsman shall act on all complaints relating, but not
limited to acts or omissions which:

(1) Are contrary to law or regulation;

(2) Are unreasonable, unfair, oppressive or discriminatory;

(3) Are inconsistent with the general course of an agency's functions, though in
accordance with law;
 (4) Proceed from a mistake of law or an arbitrary ascertainment of facts;

(5) Are in the exercise of discretionary powers but for an improper purpose; or

(6) Are otherwise irregular, immoral or devoid of justification.

Sec. 21 of R.A. 6770 names the officials subject to the Ombudsman's disciplinary authority:

Sec. 21. Officials Subject To Disciplinary Authority; Exceptions. — The Office of the Ombudsman shall
have disciplinary authority over all elective and appointive officials of the Government and its 198
subdivisions, instrumentalities and agencies, including Members of the Cabinet, local government,
government-owned or controlled corporations and their subsidiaries, except over officials who may be
removed only by impeachment or over Members of Congress, and the Judiciary. (Emphasis supplied.)

Petitioner is an elective local official accused of grave misconduct and dishonesty. 10 That the Office of the Ombudsman
may conduct an administrative investigation into the acts complained of, appears clear from the foregoing provisions of
R.A. 6770.

However, the question of whether or not the Ombudsman may conduct an investigation over a particular act or omission,
is different from the question of whether or not petitioner, after investigation, may be held administratively liable. This
distinction ought here to be kept in mind, even as we must also take note that the power to investigation is distinct from
the power to suspend preventively an erring public officer.

Likewise worthy of note, the power of the Office of the Ombudsman to preventively suspend an official subject to its
administrative investigation is provided by specific provision of law. Under Section 24 of R.A. 6770 —

Sec. 24. Preventive Suspension. — The Ombudsman or his Deputy may preventively suspend any officer
or employee under his authority pending an investigation, if in his judgment the evidence of guilt is strong,
and (a) the charge against such officer or employee involves dishonesty, oppression or grave misconduct
or neglect in the performance of duty; (b) the charges would warrant removal from the service; or (c) the
respondent's continued stay in office may prejudice the case filed against him.

The preventive suspension shall continue until the case is terminated by the Office of the Ombudsman
but not more than six months, without pay, except when the delay in the disposition of the case by the
Office of the Ombudsman is due to the fault, negligence or petition of the respondent, in which case the
period of such delay shall not be counted in computing the period of suspension herein provided.
(Emphasis supplied.)

We have previously interpreted the phrase "under his authority" to mean that the Ombudsman can preventively suspend
all officials under investigation by his office, regardless of the branch of government in which they are
employed,11 excepting of course those removable by impeachment, members of Congress and the Judiciary.

The power to preventively suspend is available not only to the Ombudsman but also to the Deputy Ombudsman. This is
the clear import of Section 24 or R.A. 6770 abovecited.

There can be no question in this case as to the power and authority of respondent Deputy Ombudsman to issue an order
of preventive suspension against an official like the petitioner, to prevent that official from using his office to intimidate or
influence witnesses 12 or to tamper with records that might be vital to the prosecution of the case against him.  13 In our
view, the present controversy simply boils down to this pivotal question: Given the purpose of preventive suspension and
the circumstances of this case, did respondent Deputy Ombudsman commit a grave abuse of discretion when he set the
period of preventive suspension at six months?

Preventive suspension under Sec. 24, R.A. 6770, to repeat, may be imposed when, among other factors, the evidence of
guilt is strong. The period for which an official may be preventively suspended must not exceed six months. In this case,
petitioner was preventively suspended and ordered to cease and desist from holding office for the entire period of six
months, which is the maximum provided by law.

Sec. 24. Preventive Suspension. —

x x x           x x x          x x x

The preventive suspension shall continue until the case is terminated by the Office of the Ombudsman
but not more than six months, without pay, except when the delay in the disposition of the case by the
Office of the Ombudsman is due to the fault, negligence or petition of the respondent, in which case the
period of such delay shall not be counted in computing the period of suspension herein provided.
(Emphasis supplied.)
The determination of whether or not the evidence of guilt is strong as to warrant preventive suspension rests with the
Ombudsman. 14 The discretion as regards the period of such suspension also necessarily belongs to the Ombudsman,
except that he cannot extend the period of suspension beyond that provided by law. 15 But, in our view, both the strength
of the evidence to warrant said suspension and the propriety of the length or period of suspension imposed on petitioner
are properly raised in this petition for certiorari and prohibition. These equitable remedies under Rule 65 of the Rules of
Court precisely exist to provide prompt relief where an "officer exercising judicial or quasi-judicial functions has acted . . .
with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal, or any plain, speedy,
and adequate remedy in the ordinary course of law." (See  Rule 65, Sec. 1).

It is pertinent to note here that the inquiry that preceded the filing of an administrative case against petitioner was
prompted by newspaper reports regarding the allegedly anomalous contract entered into by petitioner, on behalf of Cebu 198
City, with F.E. Zuellig. 16 In the memorandum to respondent Mojica, 17 respondent Garciano recommended that petitioner
be preventively suspended, based on an initial investigation purportedly showing: (1) the contract for supply of asphalt to
Cebu City was designed to favor F.E. Zuellig, (2) the amount quoted in the contract was too expensive compared to the
amount for which asphalt may be bought from local suppliers such as Shell and Petron, particularly considering that the
amount was fixed in dollars and was payable in pesos, thus exposing the city government to the risks attendant to a
fluctuating exchange rate, and (3) the interest of the city under the contract is not protected by adequate security. These
findings were based on the contract itself and on letters from Bitumex and Credit Lyonnais. There were also letters from
Shell and Petron that were replies to the Office of the Ombudsman's (Visayas) inquiry on whether or not they could supply
Cebu City with asphalt and on what terms.

Given these findings, we cannot say now that there is no evidence sufficiently strong to justify the imposition of preventive
suspension against petitioner. But considering its purpose and the circumstances in the case brought before us, it does
appear to us that the imposition of the maximum period of six months is unwarranted.

On behalf of respondents, the Solicitor General stated during his oral argument at the hearing that the documents
mentioned in respondents' comment (such as purchase orders, purchase requests, and disbursement vouchers),
documents that show petitioner's guilt, were obtained after petitioner had been suspended. Even if an afterthought, he
claimed they strengthen the evidence of respondents against petitioner. If the purpose of the preventive suspension was
to enable the investigating authority to gather documents without intervention from petitioner, then, from respondents'
submission, we can only conclude that this purpose was already achieved, during the nearly month-long suspension of
petitioner from June 25 to July 19, 1999. Granting that now the evidence against petitioner is already strong, even without
conceding that initially it was weak, it is clear to us that the maximum six-month period is excessive and definitely longer
than necessary for the Ombudsman to make its legitimate case against petitioner. We must conclude that the period
during which petitioner was already preventively suspended, has been sufficient for the lawful purpose of preventing
petitioner from hiding and destroying needed documents, or harassing and preventing witnesses who wish to appear
against him.

We reach the foregoing conclusion, however, without necessarily subscribing to petitioner's claim that the Local
Government Code, which he averred should apply to this case of an elective local official, has been violated. True, under
said Code, preventive suspension may only be imposed after the issues are joined, and only for a maximum period of
sixty days. Here, petitioner was suspended without having had the chance to refute first the charges against him, and for
the maximum period of six months provided by the Ombudsman Law. But as respondents argue, administrative
complaints commenced under the Ombudsman Law are distinct from those initiated under the Local Government Code.
Respondents point out that the shorter period of suspension under the Local Government Code is intended to limit the
period of suspension that may be imposed by a mayor, a governor, or the President, who may be motivated by partisan
political considerations. In contrast the Ombudsman, who can impose a longer period of preventive suspension, is not
likely to be similarly motivated because it is a constitutional body. The distinction is valid but not decisive, in our view, of
whether there has been grave abuse of discretion in a specific case of preventive suspension.

Respondents base their argument on the deliberations of the Senate on Senate Bill No. 155, which became the Local
Government Code. Senator Aquilino Pimentel, Jr., commenting on the preservation in the proposed Code of the power of
the Office of the President to suspend local officials, said:

Senator Pimentel. Now, as far as we are concerned, the Senate Committee is ready to adopt a more
stringent rule regarding the power of removal and suspension by the Office of the President over local
government officials, Mr. President. We would only wish to point out that in a subsequent section, we
have provided for the power of suspension of local government officials to be limited only to 60 days and
not more than 90 days in any one year, regardless of the number of administrative charges that may be
filed against a local government official. We, in fact, had in mind the case of Mayor Ganzon of Iloilo where
the Secretary of Local Government sort of serialized the filing of charges against him so that he can be
continuously suspended when one case is filed right after the other, Mr. President.18

Respondents may be correct in pointing out the reason for the shorter period of preventive suspension imposable under
the Local Government Code. Political color could taint the exercise of the power to suspend local officials by the mayor,
governor, or President's office. In contrast the Ombudsman, considering the constitutional origin of his Office, always
ought to be insulated from the vagaries of politics, as respondents would have us believe.

In Hagad v. Gozo-Dagole, 19 on the matter of whether or not the Ombudsman has been stripped of his power to
investigate local elective officials by virtue of the Local Government Code, we said:
 Indeed, there is nothing in the Local Government Code to indicate that it has repealed, whether expressly
or impliedly, the pertinent provisions of the Ombudsman Act. The two statutes on the specific matter in
question are not so inconsistent, let alone irreconcilable, as to compel us to only uphold one and strike
down the other.20

It was also argued in Hagad, that the six-month preventive suspension under the Ombudsman Law is "much too
repugnant" to the 60-day period that may be imposed under the Local Government Code. But per J. Vitug, "the two
provisions govern differently. 21

However, petitioner now contends that Hagad did not settle the question of whether a local elective official may be
preventively suspended even before the issues could be joined. Indeed it did not, but we have held in other cases that 198
there could be preventive suspension even before the charges against the official are heard, or before the official is given
an opportunity to prove his innocence.22 Preventive suspension is merely a preliminary step in an administrative
investigation and is not in any way the final determination of the guilt of the official concerned.

Petitioner also avers that the suspension order against him was issued in violation of Section 26(2) of the Ombudsman
Law, which provides:

Sec. 26. Inquiries. — . . .

(2) The Office of the Ombudsman shall receive complaints from any source in whatever form concerning
an official act or omission. It shall act on the complaint immediately and if it finds the same entirely
baseless, it shall dismiss the same and inform the complainant of such dismissal citing the reasons
therefor. If it finds a reasonable ground to investigate further, it shall first furnish the respondent public
officer or employee with a summary of the complaint and require him to submit a written answer within
seventy-two hours from receipt thereof. . .

Petitioner argues that before an inquiry may be converted into a full-blown administrative investigation, the official
concerned must be given 72 hours to answer the charges against him. In his case, petitioner says the inquiry was
converted into an administrative investigation without him being given the required number of hours to answer.

Indeed, it does not appear that petitioner was given the requisite 72 hours to submit a written answer to the complaint
against him. This, however, does not make invalid the preventive suspension order issued against him. As we have earlier
stated, a preventive suspension order may be issued even before the charges against the official concerned is heard.

Moreover, respondents state that petitioner was given 10 days to submit his counter-affidavit to the complaint filed by
respondent Tagaan. We find this 10-day period is in keeping with Section 5(a) of the Rules of Procedure of the Office of
the Ombudsman,23 which provides:

Sec. 5. Administrative adjudication. How conducted. —

(a) If the complaint is not dismissed for any of the causes enumerated in Section 20 of Republic Act No.
6770, the respondent shall be furnished with copy of the affidavits and other evidences submitted by the
complainant, and shall be ordered to file his counter-affidavits and other evidences in support of his
defense, within ten (10) days from receipt from, together with proof of service of the same on the
complainant who may file reply affidavits within ten (10) days from receipt of the counter-affidavits of the
respondent.

We now come to the concluding inquiry. Granting that the Office of the Ombudsman may investigate, for purposes
provided for by law, the acts of petitioner committed prior to his present term of office; and that it may preventively
suspend him for a reasonable period, can that office hold him administratively liable for said acts?

In a number of cases, we have repeatedly held that a reelected local official may not be held administratively accountable
for misconduct committed during his prior term of office. 24 The rationale for this holding is that when the electorate put him
back into office, it is presumed that it did so with full knowledge of his life and character, including his past misconduct. If,
armed with such knowledge, it still reelects him, then such reelection is considered a condonation of his past misdeeds.

However, in the present case, respondents point out that the contract entered into by petitioner with F.E. Zuellig was
signed just four days before the date of the elections. It was not made an issue during the election, and so the electorate
could not be said to have voted for petitioner with knowledge of this particular aspect of his life and character.

For his part, petitioner that "the only conclusive determining factor" 25 as regards the people's thinking on the matter is an
election. On this point, we agree with petitioner. That the people voted for an official with knowledge of his character is
presumed, precisely to eliminate the need to determine, in factual terms, the extent of this knowledge. Such an
undertaking will obviously be impossible. Our rulings on the matter do not distinguish the precise timing or period when
the misconduct was committed, reckoned from the date of the official's reelection, except that it must be prior to said date.

As held in Salalima.
 The rule adopted in Pascual, qualified in Aguinaldo insofar as criminal cases are concerned, is still a good
law. Such a rule is not only founded on the theory that an official's reelection expresses the sovereign will
of the electorate to forgive or condone any act or omission constituting a ground for administrative
discipline which was committed during his previous term. We may add that sound policy dictates it. To
rule otherwise would open the floodgates to exacerbating endless partisan contests between the
reelected official and his political enemies, who may not stop hound the former during his new term with
administrative cases for acts alleged to have been committed during his previous term. His second term
may thus be devoted to defending himself in the said cases to the detriment of public service. . . .
Emphasis added.26

The above ruling in Salalima applies to this case. Petitioner cannot anymore be held administratively liable for an act done 198
during his previous term, that is, his signing of the contract with F.E. Zuellig.

The assailed retainer agreement in  Salalima was executed sometime in 1990. Governor Salalima was reelected in 1992
and payments for the retainer continued to be made during his succeeding term. This situation is no different from the one
in the present case, wherein deliveries of the asphalt under the contract with F.E. Zuellig and the payments therefor were
supposed to have commenced on September 1998, during petitioner's second term.

However, respondents argue that the contract, although signed on May 7, 1998, during petitioner's prior term, is to be
made effective only during his present term.

We fail to see any difference to justify a valid distinction in the result. The agreement between petitioner (representing
Cebu City) and F.E. Zuellig was perfected on the date the contract was signed, during petitioner's prior term. At that
moment, petitioner already acceded to the terms of the contract, including stipulations now alleged to be prejudicial to the
city government. Thus, any culpability petitioner may have in signing the contract already became extent on the day the
contract was signed. It hardly matters that the deliveries under the contract are supposed to have been made months
later.

While petitioner can no longer be held administratively liable for signing the contract with F.E. Zuellig, however, this
should not prejudice the filing of any case other than administrative against petitioner. Our ruling, in this case, may not be
taken to mean the total exoneration of petitioner for whatever wrongdoing, if any, might have been committed in signing
the subject contract. The ruling now is limited to the question of whether or not he may be held administratively liable
therefor, and it is our considered view that he may not.

WHEREFORE, the petition is hereby DENIED insofar as it seeks to declare at respondents committed grave abuse of
discretion in conducting an inquiry on complaints against petitioner, and ordering their investigation pursuant to
respondents' mandate under the Constitution and the Ombudsman Law. But the petition is hereby GRANTED insofar as it
seeks to declare that respondents committed grave abuse of discretion concerning the period of preventive suspension
imposed on petitioner, which is the maximum of six months, it appearing that 24 days — the number of days from the date
petitioner was suspended on June 25, 1999, to the date of our status quo order on July 19, 1999 — were sufficient for the
purpose. Accordingly, petitioner's preventive suspension, embodied in the order of respondent Deputy Ombudsman,
dated June 25, 1999, should now be, as it is hereby, LIFTED immediately.

SO ORDERED.